Preview
Filed 12 August 15 P4:25
Chris Daniel - District Clerk
Harris Coun!
ED101) 017027046
By: daunshae n. willrich
No. 2011-76724
Harris County, Texas, Plaintiff, IN THE DISTRICT COURT OF
The State of Texas, acting by and through
the Texas Commission on Environmental
Quality, 4 Necessary and Indispensible
Party
vs. HARRIS COUNTY, TEXAS
International Paper Company,
McGinnes Industrial Maintenance
Corporation, Waste Management, Inc.
and Waste Management of Texas, Inc.
Defendants 295th JUDICIAL DISTRICT
PLAINTIFF HARRIS COUNTY’S
FIRST AMENDED PETITION
TO THE HONORABLE JUDGE OF SAID COURT:
Plaintiff Harris County, Texas (“Harris County”) files this First Amended Petition
and in support thereof, Harris County would show this Court as follows:
I Introduction
1 The citizens of Harris County no longer feel secure while swimming in the
San Jacinto River. The citizens of Harris County no longer trust that the fish they catch
from the San Jacinto River are safe to eat. The citizens of Harris County can no longer
enjoy camping, picnicking or eating fish or blue crabs in the San Jacinto River free from
fear. As a result of Defendants’ actions, inactions, and silence in connection with the San
Jacinto waste pits, the people of Harris County have been unknowingly exposed to the
harmful effects of dioxin— and to seafood contaminated with that dioxin — widely
regarded as the most toxic chemical ever made by man.
2 The harm to Harris County and its residents is the direct result of the
actions and inactions of Waste Management, Inc. (“Waste Management”), Waste
Management of Texas, Inc. (“Waste Management of Texas”), McGinnes Industrial
Maintenance Corporation (“MIMC”) and International Paper Company (“International
Paper”) in causing, allowing and permitting the releases of dioxin waste, toxic “black
liquor” and other wastes and pollutants disposed in pits by the river, and the conscious
and intentional abandonment of the waste and pollutants into the environment and food
chain being consumed by the people of Harris County. Unbelievably, the responsible
companies purposefully walked away from their poisonous waste without a backward
glance and remained silent for decades — content to let it become someone else’s
problem. And it did. It became the problem of the people of Harris County, everyone
who used the river for recreation, swam and fished in the San Jacinto River, and every
man, woman or child who ate seafood from the river that contained dioxin from the San
Jacinto pits.
3 The corporate officials of Defendants do not live near the waste site that
they created or are responsible for — nor do they need to fish for food from the waters that
they allowed to be polluted in order to feed their families. Those companies responsible
for the dioxin were content to say nothing about the poisonous legacy left behind to
release silently into the environment because they were not affected by it. But the Harris
County residents who do live there are affected by it. On their own, however, they are
among the least able to obtain justice and hold those responsible for the dioxin
accountable. To do so, they need help. The citizens have asked Harris County to stand
up and help them, and Harris County has filed this lawsuit on behalf of its citizens who
have been the unknowing victims of an insidious public health threat.
4 Harris County has embraced industry to build this great city in which we
all live. Harris County is proud to be the center of the largest petrochemical complex in
the entire United States. It is proud of the role this industry played in building the
nation’s economy, proud of the fuels and products produced by the Houston
petrochemical and other industries, proud of the men and women who work in those
industries, and proud of the responsible companies that bring jobs to the County. It is
also a recognized reality that because of the concentration of the petrochemical industry
and other plants along the waterways in Harris County, it is even more important for
companies in the community to act responsibly and to warn, not remain silent, about
dangers that may or have been created in the course of industrial operations. As much
goodwill and economic benefit as industry contributes to the County, industries that do
not act as responsible environmental stewards for the communities in which they operate
create the opposite effect, damaging the public’s support for industry and impeding
further economic development and opportunities for its residents.
5 In the case of the San Jacinto waste pits, Harris County and its citizens
have been harmed. At a time when Harris County has been forced to reduce budgets and
benefits or lay off constables, sheriff deputies, and other workers important to the
protection of the citizens, it has had to devote taxpayer resources to address the legacy of
dioxin contamination left by the companies responsible for the San Jacinto waste pits.
The County has had to spend resources investigating, addressing and taking steps to
protect its citizens in connection with this public health threat, while jobs and economic
opportunities for development in County precincts are harmed by the presence of toxic
waste pits in the midst of the community. Many residents fear living, working and
recreating in Harris County because of the presence of such danger.
6 The U.S. Department of Health and Human Services has determined that
2,3,7,8-Tetrachlorodibenzo-p-dioxin (referred to as 2,3,7,8-TCDD, which is the type of
dioxin Defendants caused and allowed to be released into the San Jacinto River) may
reasonably be anticipated to cause cancer, and the World Health Organization has
determined that 2,3,7,8-TCDD is a human carcinogen. In humans, the most common
health effect from 2,3,7,8-TCDD is chloracne, a severe skin disease, with studies also
showing that the dioxin may cause changes to blood and urine that may indicate liver
damage, alter glucose metabolism, and change hormone levels. In certain animal species,
2,3,7,8-TCDD is especially harmful and can cause death after a single exposure, in
addition to immune system disorders, liver damage, reproductive damage, and birth
defects in animals. Ecological health from the dioxin in the San Jacinto River is
documented as being threatened at every level of the food chain. Because of these health
risks, the State of Texas has issued a consumption advisory for crab and all species of
fish from the San Jacinto River Site area, warning women who are nursing, pregnant or
who may become pregnant and children under 12 not to consume any fish or blue crab
from the area. All others are advised to consume no more than 8 ounces of certain fish
within any given month. Adults and children are also advised to avoid the risk of
exposure through skin contact by not camping, fishing or picnicking near the San Jacinto
River area.
7 Because of the impacts to the residents of Harris County, the Harris
County Commissioners Court has unanimously voted to authorize this lawsuit, finding
that since the 1960s, this most toxic form of dioxin has been continuously released into
the environment from the Site, leaving Harris County and the public to deal with it, and
that the County should be compensated for the damage caused by the pollution and to
ensure a continuing climate of environmental compliance and responsibility.
8 Section II of this First Amended Petition explains the reasons why Harris
County has brought this lawsuit against the Defendants responsible for causing and
allowing the harm to the residents and the poisoning of the San Jacinto River.' Section
III provides a chronology and timeline of Defendants’ actions and inactions that have
caused, permitted and allowed dioxin to be released to the San Jacinto River and exposed
the men, women, children and unborn children of Harris County to harm. Section IV
identifies the parties and Section V provides a discussion of the various laws that
Defendants have violated. Section VI sets forth the various causes of action applicable to
each Defendant.
I. Defendants Leave a Legacy of Dioxin to the People of Harris County.
A Evidence shows that the dioxin in the River was not an accident.
9 As Harris County has now discovered, the presence of poisonous waste in
the community was not an accident. On the contrary, the placement of the waste in pits
' Defendants have demanded that the Court order Plaintiff Harris County to file an Amended Petition to
provide more information regarding Harris County’s specific claims against them. Defendants have
claimed that they were unable to determine why they were being sued, why they should be subject to civil
penalties, and they professed ignorance of any harm that they had caused the people of Harris County. As
one of their attorneys stated in Court: “There is absolutely no way to understand from their current petition
who is liable for what, what the allegations are as a particular company, . what they caused, suffered or
allowed.” Defendants asked the Court to order Harris County to replead; Harris County agreed, and the
Court so ordered. This First Amended Petition responds to Defendants’ claimed ignorance of their
wrongful conduct.
jutting into the San Jacinto River was intentional and the abandonment of the
deteriorating and leaking dioxin waste pits was purposeful and intentional. Evidence
being uncovered shows that the corporate entities responsible for the dioxin knowingly
and intentionally meant to simply walk away from the poisonous waste they generated,
despite the far-reaching and foreseeable consequences to the men, women and children of
Harris County. In essence, these entities “caused, suffered, allowed and permitted” the
waste to be released into the waters of the State on a daily basis. In fact, internal
documents long in the possession of Defendants MIMC and Waste Management of Texas
reveal that the MIMC Board of Directors responsible for the dioxin pits deliberately
called a “Special Meeting” to address the poor physical condition of their “worthless”
waste pits and to vote to abandon them as dump sites.”
10. Disturbingly, these internal documents from MIMC and Waste
Management of Texas also show that when the MIMC Board of Directors in control
intentionally voted to abandon their pits full of dioxin waste, they voted at the same time
to reward themselves with huge bonuses.’ See Exhibit A. The corporate priorities were
strikingly clear — “abandon” the toxic waste pits with no further action or attention — and
quickly distribute the company’s money to the corporate executives. As one of the
MIMC Board members later admitted in connection with the investigation of the
widespread pollution from the San Jacinto Waste Pits, “...Mr. McGinnes, he was a pro at
? Defendants have refused to produce any of their historical documents to Harris County despite the
County’s numerous requests. While Defendants continue to withhold all evidence in their possession from
the County, the historical documents that are publicly available paint a disturbing picture and show why the
statutory penalty provisions are appropriate in this case.
* August 19, 1968 Minutes of Special Meeting of the Board of Directors of McGinnes Industrial
Maintenance Corporation (MIMC) — now a Waste Management Company. By today’s standards, the
bonus amounts the Directors voted to themselves would amount to hundreds of thousands of dollars. In
addition to abandoning the waste pits and granting themselves bonuses, the MIMC Board of Directors
admitted that they had not set forth or adequately reserved for the liabilities associated with their waste
disposal activities on the San Jacinto River in the Company’s Audited Financial Statements.
making money.”* The people of Harris County do not think it is acceptable for the
companies responsible for the dioxin to reward themselves financially for their misdeeds,
devise and execute a plan to wash their hands of their pollution, and allow it to wash
instead into Harris County’s waterways to become the responsibility of the taxpayers and
a danger to the community.
11. As Harris County learns more about Defendants’ actions and inaction in
connection with the San Jacinto waste pits, the enormity of the consequences of their
decisions to intentionally and consciously abandon their poisonous waste and to
subsequently remain silent about what they knew becomes apparent. Because of
Defendants’ actions and inactions, they have left the dioxin they created and decided to
store in waste ponds they operated or controlled to freely release to the environment and
contaminate the food consumed by the unknowing citizens of Harris County. The
evidence shows that when the State and County sought information that was already
known to Defendants and contained in their own corporate records, they did not disclose
the information that they knew or take any action to stem the tide of further human
exposure to the dioxin they had intentionally left behind Instead, those corporations
benefited financially from simply walking away and leaving the dioxin to release silently
into the waters of the San Jacinto River, poisoning it and the marine life being fished by
recreational, commercial and other fisherman for public consumption.
12. While the corporate entities benefited and parlayed their businesses into
ever-larger and more profitable corporate entities, their waste materials continued to
release silently into the environment exposing people to risk from the dioxin that became
* Statement of MIMC Corporate Officer George Lowrey.
more widespread throughout the San Jacinto River, the Upper and Lower Galveston Bay
and increasingly distributed throughout the food chain for more than 40 years.
B Government officials discover “astronomical” and unexplainable
amounts of dioxin in the San Jacinto River.
13. Eventually, officials from the State of Texas began to uncover clues of the
hidden corporate legacy left by the corporations, although it would be many years before
they could put together all the pieces of the puzzle and identify those responsible for the
ever-growing public health threat to the unsuspecting populace that released and spread
beneath the waters of the San Jacinto River. Although Defendants knew of the existence
of the dioxin pits in the San Jacinto River, State officials were mystified to discover what
they described as “astronomical” and unexplainable amounts of dioxin in the San Jacinto
River.
14. Years went by as the state and local governments continued to search in
vain to try to find the source of the dioxin so that they could protect the citizens from this
public health threat. Unfortunately for the citizens of Harris County, the corporations
with information about the massive quantities of dioxin that had been placed in pits in the
San Jacinto River kept silent. They did nothing to warn the public or act to stop the
dangerous pollution they caused. Because of their actions and inactions, the people of
Harris County could not take steps to protect themselves, their children and their unborn
children from dioxin exposure. Ultimately, the corporations responsible for the dioxin
pits in the San Jacinto River were identified by the authorities, but it was too late for the
residents of Harris County who had been recreating in the river and eating dioxin-
contaminated seafood for decades.
Cc. While Government Officials continue to search for the source of the
dioxin, Defendants continue their conspiracy of silence.
15. Defendants had the knowledge, information, power, money and ability to
take steps to stop the dioxin releases into the San Jacinto River and to warn the Harris
County residents of the harm they were facing. Instead, they decided to remain silent.
By the time that Harris County, state agencies and area public officials finally figured out
the information that Defendants possessed and kept to themselves, it was already too late
to warn the citizens who, for many years, had unwittingly eaten the fish and crabs from
the river, who had unknowingly sent their children swimming in poisonous waters, and
who did not know of the threat to the local food chain and threats to public health from
Defendants’ dioxin. The innocent Harris County residents and visitors could not protect
themselves and their families because they just did not know. But the Defendants
responsible for the poisonous legacy in the San Jacinto River and the companies that they
later merged with knew about it. They just chose not to tell anyone.
MIMC continues its silence to the detriment of the people of Harris County.
16. Defendant MIMC remained silent in 1968 when it abandoned the pits
and its responsibilities to the people of Harris County. It remained silent throughout the
70s, 80s, 90s, and in the years after the turn of the century even as it continued to
represent to the public that it was a responsible corporate citizen that should be awarded
permits to operate still other hazardous waste pits downstream of the one it had
intentionally abandoned years before. It remained silent before and after it merged with
Waste Management of Texas and continued to exist and/or operate as an empty corporate
shell in an effort to hide Waste Management and Waste Management of Texas’
involvement and control over the site. It remained in existence after the turn of the
century even as State officials continued their efforts to locate the source of the ongoing
dioxin contamination.
International Paper also remained silent and chose not to alert the public of
the dangers from the Champion Paper Mill.
17. Defendant International Paper merged with Champion International Paper
(“Champion”) to become the world’s largest paper company. In doing so, it willingly
and intentionally accepted all of Champion’s environmental responsibilities. As
Champion’s corporate successor, it remained silent as the toxic waste ponds containing
its dioxin waste were engulfed by the San Jacinto River. It remained silent even as it
continued to release contaminated wastewater from its mill in Pasadena, Texas, allowing
its contamination to pollute other communities. It chose not to alert the public, the
government or the people fishing of the dangers to women and children that its paper mill
had created because speaking up would have required it to clean up the contamination
that it had caused, lowering the company’s profits.
18. International Paper remained silent even after its merger with Champion in
2000 when as a company it knew all too well the devastating effects of dioxin on rivers
and fish in the food chain because it had been sued by governments and people for
polluting rivers in a variety of states in which it operated paper mills — with 43 lawsuits
charging International Paper with dumping chemically contaminated waste in three
different rivers in one state alone.
* United Paperworkers Intern. Union y. International Paper Co., 985 F.2d 1190 (1993).
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International Paper brought its pattern and _ practice of silence,
misrepresentations and intentional omissions to Harris County.
19. The San Jacinto River case is not the first time that International Paper has
failed to tell the public what it needed to know in connection with dioxin contamination
in rivers, and Harris County is not the first victim of International Paper’s failure to
provide relevant environmental information in its possession to the public. In a case
brought against International Paper by the Presbyterian Church of Louisville, Kentucky
and the Sisters of Saint Dominic of Blauvelt, New York, who were shareholders that had
invested Church funds to buy stock in International Paper, the United States District
Court for the Southern District of New York and the Second Circuit Court of Appeals
both found that International Paper had misled its own shareholders with regard to the
Company’s environmental compliance and that its omissions in connection with
environmental violations were misleading and deceptive. The Second Circuit found
that International Paper’s representations “that it had a longstanding commitment to the
protection of the environment, that it was a leader in environmental protection, that it had
a vigorous compliance program and that it had addressed such issues appropriately,
conveyed an impression that was entirely false.” (emphasis added).
20. International Paper’s Board was found to have acted with requisite
knowledge and intent in making misstatements and omissions to its investors regarding
° Td. 1n that case, the Church and the Sisters sought to have International Paper’s shareholders adopt a
resolution designed to facilitate corporate accountability for issues concerning the environment, including a
commitment to public environmental accountability. In its Proxy Statement, International Paper opposed
the resolution, representing that the Company had already addressed environmental matters “in an
appropriate and timely manner,” and representing to its shareholders that “environmental stewardship has
always been an important part of International Paper’s business”, that its Company principles “are
consistent with International Paper’s long-standing policies on environment, health and safety”, and that the
Company had a “strong environmental compliance program.” The Court found that these statements were
misleading and “palpably without merit” and “to put it charitably, inconsistent with the serious and ongoing
environmental challenges the Company has endured.”
11
its environmental compliance to mislead its shareholders and induce them to cast a
negative vote against proposals that would require International Paper to implement a
corporate policy of environmental accountability. It was also found that, among other
things, International Paper’s investors were not told of information that the Company had
pled guilty to five criminal felony charges of environmental laws, engaged in knowingly
illegal conduct, and engaged in the falsification of required environmental reports that
International Paper knew about and should have disclosed to them.’ Similarly, in the San
Jacinto waste pits case, the citizens of Harris County were not told of information
International Paper knew about and should have disclosed to them many years earlier
regarding what Champion knew about the waste pits submerged into the San Jacinto
River, what International Paper knew based upon its being sued for poisoning other rivers
with dioxin, and what a responsible company would have revealed about the site of its
previous pollution long ago.
International Paper is now getting hundreds of millions of dollars in tax
credits for producing and burning the same “black liquor” that poisoned the
San Jacinto River.
21. International Paper’s corporate attitude and misrepresentations about
environmental compliance cited above are appalling, but there is yet a more egregious
aspect of International Paper’s refusal to be accountable to the taxpayers of Harris
County for its company’s practices of dumping its toxic “black liquor” byproduct into the
San Jacinto River. At the same time that International Paper is denying that it owes the
7The Court opinion stated that International Paper’s $2.2. million criminal fine was the second largest fine
ever assessed for violation of the hazardous waste laws. The Court also cited to International Paper’s
breach of its settlement agreement with the State of Maine and the Maine Board of Environmental
Protection for violations of state environmental laws, noting that the State had returned to court seeking
substantial penalties for noncompliance, among other examples of the Company’s omissions designed and
intended to mislead shareholders.
12
citizens of Harris County one dollar for decades of pollution, it is grabbing tens if not
hundreds of millions of dollars in tax credits for the same “black liquor” with which it
contaminated the San Jacinto River.
22. International Paper has found a way to receive a multi-million tax credit
for “black liquor.” Through what is described as a “tax loophole” for paper mills, a tax
credit worth hundreds of millions of dollars every year is currently available (but under
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attack) to companies like International Paper for producing and burning “black liquor.
23, While Harris County was expending local taxpayer dollars and resources
to warn citizens and investigate the dangerous legacy left by the paper company’s
disposal of black liquor and other pollutants into the San Jacinto River, International
Paper issued a press release trumpeting its receipt of a $71.6 million cash payment from
the U.S. Treasury for tax breaks for the paper mill byproduct of black liquor. That huge
amount of “found money” was just a small portion of the cash that International Paper
would receive from the government, as its very first cash payment of $71.6 million
represented a tax break for a single one-month period of operation in 2008.° A Goldman
Sachs report estimated that International Paper could receive as much as $1.06 billion in
tax benefits in 2009 alone and J.P. Morgan said International Paper could reap as much as
$3.7 billion in benefits.'° As the J.P. Morgan analyst report said, the paper companies
were “burning black liquor into gold.”
24, For International Paper, its black liquor turned into gold. But in Harris
County, International Paper’s black liquor turned into a poison in its waterways. It has
long been known that the black liquor that MIMC and Champion were caught dumping
® New York Times, July 20, 2012, “Tax Loopholes Block Efforts to Close Gaping U.S. Deficit.”
° Washington Post, March 28, 2009, “Papermakers Dig Deep in Highway Bill to Hit Gold.”
"Td.
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into the San Jacinto River many decades ago is highly toxic to marine life, and that the
people of Harris County have and continue to consume marine life impacted with wastes
from the Defendants’ paper production and disposal Rather than be rewarded for the
intentional dumping of black liquor into the San Jacinto River and allowing it to get into
the food chain for humans, International Paper should be required to disgorge its
hundreds of millions in profits to Harris County residents and others who have been
damaged by the toxic effects of its paper mill operations.
25 Given black liquor’s legacy in Harris County, it is wildly inappropriate for
International Paper to receive millions in tax credits, permitting it to obtain checks back
from taxpayers to put that money back into its pocket. Rewarding International Paper in
that way is simply untenable, and the first use of any tax credits received by International
Paper for black liquor subsidies should be used to pay the people of Harris County
26 Fortunately, the propriety of the controversial and highly criticized black
liquor tax credit that International Paper currently enjoys is again being raised before
Congress. As recently as July 20, 2012, a front-page New York Times article highlighted
what many budget experts characterize as a loophole, criticizing the black liquor tax
break “as a tax dodge because it allows the sludge to qualify for an energy subsidy
created to wean the country off imported oil for vehicles, which the black liquor does not
11 See Material Safety Data Sheet (“MSDS”) for Black Liquor published by Temple Inland (a paper
company acquired by International Paper in 2012 for a reported $4.4 billion) in 1999. The MSDS describes
black liquor as a substance of highly variable alkaline composition produced when wood chips are cooked
in the kraft pulping process, containing excess pulping chemicals. The MSDS identifies black liquor as a
reactive material, noting that contact with acids can result in release of potentially lethal concentrations of
hydrogen sulfide gas. Ingestion is noted to cause serious damage to mouth, throat and stomach if
accidentally ingested, and contact with unprotected skin or eyes may cause severe burns and possible
blindness. The MSDS instructions advise that proper authori ies should be notified if water pollution
occurs and that protective clothing is a must if remediation is initiated. Under Health Hazards, it is noted
that “runoff from dilution may cause pollution.
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do.” The New York Times reports that “[fJor tax aides in both [political] parties, black
liquor falls into the category of the hard to defend.” It will be particularly hard to
defend a tax break for black liquor that does not require International Paper — who is
receiving millions and/or billions in cash for “black liquor” tax breaks — to use that
“found money” to pay penalties to the citizens of Harris County for the company’s
decades of polluting the San Jacinto River.
Waste Management of Texas remains silent as dioxin seeps into its own
community,
27. Finally, and perhaps most inexplicably of all, Waste Management of
Texas also remained silent even as the dioxin continued to seep into the very community
that it calls home. Waste Management of Texas remained silent after it acquired MIMC
and its records that document the abandonment of the San Jacinto River waste pits. It
remained silent for years, while the contaminated waste pits continued to release into the
waters of the San Jacinto River and while people in the County where Waste
Management’s corporate headquarters are located continued to fish and swim in the
contaminated waters.
28. Waste Management of Texas and Waste Management claim ignorance of
the fact that they bought a company that had a hidden toxic waste site submerged into a
river. The public record reveals Waste Management purchased dozens if not hundreds of
companies that, in turn, owned and operated hundreds if not thousands of waste sites
located throughout the country. It did so to claim the economic benefits from those
companies and to gain a larger share of the nation’s industrial and hazardous waste
business. It pursued this strategy presumably to maximize its profits and its shareholder
2 New York Times, July 20, 2012, “Tax Loopholes Block Efforts to Close Gaping U.S. Deficit.”
8d.
15
value. Having undertaken a deliberate course of rolling up the industrial and hazardous
waste business, Waste Management cannot credibly claim ignorance of what it
purchased. The Waste Management companies have claimed that they have no duty with
regard to this site — in essence, that they have no responsibility to investigate the location
of toxic waste sites in companies they have purchased and no responsibility to warn the
public about the health and environmental effects from those sites. Defendants’ positions
in this matter demonstrate the alarming need for this suit. Waste Management’s real or
feigned ignorance of the toxic waste sites that it owns directly or through the dozens of
corporate affiliates it has created does not excuse the responsibility that Waste
Management bears for contamination of the San Jacinto River and for endangering the
public’s health.
29. Waste Management of Texas is responsible because government
documents reveal that it actually entered into a merger with MIMC and became MIMC.
In addition, both Waste Management Defendants have liability for the independent
reason that they chose to remain silent for years as the pollution and danger to Harris
County residents continued.
Defendants should pay penalties to compensate Harris County and its
residents for the consequences of their choices, actions, inactions and the
conspiracy of silence in the face of grave harm to humans and _ the
environment.
30. Unfortunately, the citizens of Harris County will continue to bear the
burdens and risks associated with Defendants’ persistent toxin and their actions, inactions
and silence for many more years to come. Fortunately, the Texas Legislature has
specifically authorized Harris County to act on behalf of its citizens to recover penalties
under state law against persons who caused, suffered or allowed pollution in violation of
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the Texas Water Code (“Water Code”), and the Texas Health and Safety Code (“Health
& Safety Code”) as Defendants have done, and penalties awarded in this matter will be
shared between Harris County and the Texas Commission on Environmental Quality
(“TCEQ”). The law allows Defendants to be held accountable to the residents of Harris
County in the form of penalties to compensate the County and the State and deter future
misconduct.
31. Because Defendants chose to cause and allow dioxin to continuously
release into the San Jacinto River for many decades putting the public at risk, Harris
County has been forced to expend many man hours, resources and taxpayer dollars to try
to protect its citizens from this threat. The County’s already limited resources have been
further strained by the need to address the dioxin waste left behind by Defendants, These
companies achieved a tremendous economic benefit by leaving Harris County and the
public holding their waste while they pocketed the profits saved from not having to pay
for proper disposal, putting them at a competitive advantage over other responsible
companies. The companies who profited from this behavior should be accountable for
and penalized for the damages and risks they have caused.
32. Defendants continued to be culpable even when they were ultimately
identified by the authorities as they tried to disavow their actions, their impacts and each
other. Waste Management tried to distance itself from MIMC and MIMC publicly
blamed International Paper, pronouncing it responsible for the waste disposal practices of
Champion. Despite the fish advisories, the science and the great weight of evidence of
human health and ecological risks, Defendants tried to minimize the impacts of the dioxin
to which they exposed the public. Instead, Defendants took the disingenuous position
17
that there are “minimal health effects from dioxin” and that “dioxin is not bad for human
consumption.” While Defendants may believe it is fine for the residents of Harris County
and their visitors to eat fish poisoned with dioxin, the people of Harris County disagree.
33. The overwhelming scientific evidence long ago established that dioxin is
bad for human consumption, and Defendants should be held accountable to those people
who have unknowingly eaten their dioxin. Thus far, Defendants have gained a
substantial economic benefit by failing to address this human health and environmental
threat for 40-plus years at the expense of others. In 2011 alone, Defendant International
Paper reported in its public filings that it had profits in excess of $1,341,000,000. During
the same year, Waste Management told its investors and the public that it had
$961,000,000 in profits. From 1995 through the end of 2011, International Paper had
revenues of $384,000,000,000, and Waste Management reported $209,000,000,000 in
revenues during the same time. When International Paper merged with Champion in
2000, it consumed a company that had revenues of over $29,000,000,000 for the previous
five years and profits of $671,000,000 during that time. Despite profits and revenues in
the hundreds of millions and even billions of dollars, Defendants claim that they owe the
people of Harris County nothing for the toxic consequences of their profit-making
ventures and the decades-long pollution of the San Jacinto River.'*
34. Because Defendants have left a legacy of pollution in Harris County by
causing and allowing dioxin to be released into the San Jacinto River instead of spending
the money to properly dispose of their dangerous chemicals, it is appropriate that they
now compensate Harris County for the consequence of their choices, actions and
Despite acquiring and controlling MIMC, counsel for the Waste Management Defendants has told the
Court that they are “strangers to the property” and have “no duty” to the people of Harris County.
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inaction, and the conspiracy of silence that have put the public health and environment at
risk.
iil. Dioxin in the River — A Timeline
A MIMC and Champion act in concert to dispose of, and then abandon,
dioxin waste in ponds jutting out into the San Jacinto River.
35. On September 3, 1965, MIMC was formed. Ten days later, MIMC (now
merged into Waste Management of Texas and doing business in Texas as Waste
Management) acquired an exclusive waste disposal contract to dispose of waste from the
Champion paper mill. (“Champion Mill”). While Champion (now merged into
International Paper) made money by selling its paper, its paper mill generated wastewater
that was contaminated with 2,3,7,8-TCDD (dioxin) and other types of dioxin.
36. Champion’s paper mill produced tens of thousands of gallons of
contaminated wastewater per day and millions of gallons per year that it disposed of
either in waste ponds that ultimately were drained in the waterways or by discharging the
wastewater directly into the waterways, including Galveston Bay.
37. Champion also chose to have some of its dioxin waste dumped into ponds
built for it by MIMC. The dioxin waste pits were built separately in an area of Harris
County near where the Interstate Highway 10 Bridge crosses over the San Jacinto River,
east of the City of Houston between the areas known as Channelview and Highlands,
Texas (the “Site”). See Exhibit B. MIMC constructed the waste ponds for Champion,
selecting for this purpose approximately 20 acres on a narrow peninsula of land jutting
out into the San Jacinto River. The Site was frequently inundated by the river water, and
MIMC only separated the dioxin-contaminated wastewater and sludge from the waters of
19
the San Jacinto River by erecting earthen embankments, which leaked and deteriorated
rapidly, permitting wastewater and wastes to discharge into the river.
38. Prior to MIMC’s construction of these waste ponds for Champion,
Champion stored its contaminated wastewater and the resulting sludge on impoundments
south of the highway (“the Southern Impoundments”). MIMC assumed operation over
the Southern Impoundments after it constructed the waste ponds on the north of the
highway. During the period of time relevant to this lawsuit, wastewater, sludge, and
other contaminants from the Southern Impoundments continuously released and
discharged into the San Jacinto River, polluting it with dioxin and other chemicals.
39. From 1965 through the end of 1967, Champion continued to send
contaminated wastewater to MIMC’s unlined ponds, where the wastewater was stored
until it was released untreated into the San Jacinto River or returned to the Champion
Mill where it would eventually also be released into the river. According to reports at the
time, MIMC and Champion planned to store the wastewater from the Champion Mill for
a year before discharging it into the San Jacinto River.
40. Champion and MIMC had no plan for handling the solid waste residue
from Champion’s paper manufacturing, and the hundreds of thousands of cubic yards of
that residue that was contaminated with dioxin and other pollutants. MIMC and
Champion left the residue in waste pits at the Site where it still remains spread out over
acres, some of it just above the water line and some of it having been submerged below
the San Jacinto river waters decades ago where MIMC and Champion chose to abandon
it.
20
41. In addition to dioxin waste seeping and releasing from the ponds into the
San Jacinto River, records show that liquid waste was also intentionally pumped out of
the ponds at the Site, directly into the San Jacinto River. In one documented example of
this intentional illegal pumping in 1965, government officials caught MIMC pumping
toxic “black liquor” waste out of one of the ponds on the Site. As a result of this
incident, the Harris County Health Department documented this intentional release and
specifically informed MIMC and Champion in writing that the liquid waste they were
caught pumping into the San Jacinto River “still contains considerable amounts of black
liquor which is highly toxic to marine life.”'® Dr. Quebedeaux, a Director at the Harris
County Health Department, also informed MIMC that the earthen dikes used to contain
the wastes should be repaired. MIMC and Champion were ordered to stop discharging
waste from the ponds into the San Jacinto River, though wastes continued to seep and
release from the ponds and the pond levees deteriorated, causing continuous releases of
dioxin over the following decades.
42. In April 1966, the State Department of Health investigated the Site and
determined that MIMC and Champion did not have a permit from the Texas Water
Pollution Control Board to discharge their wastewater and that prior to their discharging
wastewater into the San Jacinto River, MIMC would be required to obtain a permit from
that state agency. Defendants have not produced any records of their obtaining a permit
as required from the Texas Water Pollution Control Board for discharging their
wastewater into the San Jacinto River, and yet they continued to discharge the wastewater
throughout the operation of the Site into 1968.
' December 28, 1965 letter to McGinnes Industrial Maintenance Company, with a copy to Champion
Paper Co., from Harris County Health Unit advising of highly toxic nature of black liquor.
21
43. In 1966, MIMC began planning to construct a new set of wastewater
ponds located further down the San Jacinto River near Hitchcock, Texas (“the Hitchcock
waste ponds”). From August 1966 forward, MIMC and Champion were involved in a
contentious public relations and legal battle with the local community and local
government in Hitchcock, who vigorously opposed those companies’ efforts to construct
waste ponds near their community. In 1966-67, the City of Hitchcock even attempted to
incorporate the land where the ponds were going to be built in an attempt to stop MIMC
and Champion, so great were their concerns about the environmental and health impacts
from those companies’ operations. The City of Hitchcock and others contested MIMC’s
construction of the new waste ponds because of their concerns about the damaging effect
the wastewater would have on the environment and possible effects on human health.
44. MIMC prevailed in its fight to construct the Hitchcock waste ponds that
began taking Champion’s contaminated wastewater. Throughout this time, Champion
and MIMC were well aware of the public’s concern with the health and environmental
effects of the contaminated wastewater and sludge from Champion’s Pasadena plant.
They had also been informed about the toxic effects from the black liquor — a byproduct
of the wastewater that they had transported and stored at the Site.'®
45. In August 1968, the Board of Directors of MIMC held their annual board
meeting. First, the Board of Directors determined that MIMC did not have enough
capital to operate effectively, and therefo
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Filed 12 August 15 P4:25 Chris Daniel - District Clerk Harris Coun! ED101) 017027046 By: daunshae n. willrich No. 2011-76724 Harris County, Texas, Plaintiff, IN THE DISTRICT COURT OF The State of Texas, acting by and through the Texas Commission on Environmental Quality, 4 Necessary and Indispensible Party vs. HARRIS COUNTY, TEXAS International Paper Company, McGinnes Industrial Maintenance Corporation, Waste Management, Inc. and Waste Management of Texas, Inc. Defendants 295th JUDICIAL DISTRICT PLAINTIFF HARRIS COUNTY’S FIRST AMENDED PETITION TO THE HONORABLE JUDGE OF SAID COURT: Plaintiff Harris County, Texas (“Harris County”) files this First Amended Petition and in support thereof, Harris County would show this Court as follows: I Introduction 1 The citizens of Harris County no longer feel secure while swimming in the San Jacinto River. The citizens of Harris County no longer trust that the fish they catch from the San Jacinto River are safe to eat. The citizens of Harris County can no longer enjoy camping, picnicking or eating fish or blue crabs in the San Jacinto River free from fear. As a result of Defendants’ actions, inactions, and silence in connection with the San Jacinto waste pits, the people of Harris County have been unknowingly exposed to the harmful effects of dioxin— and to seafood contaminated with that dioxin — widely regarded as the most toxic chemical ever made by man. 2 The harm to Harris County and its residents is the direct result of the actions and inactions of Waste Management, Inc. (“Waste Management”), Waste Management of Texas, Inc. (“Waste Management of Texas”), McGinnes Industrial Maintenance Corporation (“MIMC”) and International Paper Company (“International Paper”) in causing, allowing and permitting the releases of dioxin waste, toxic “black liquor” and other wastes and pollutants disposed in pits by the river, and the conscious and intentional abandonment of the waste and pollutants into the environment and food chain being consumed by the people of Harris County. Unbelievably, the responsible companies purposefully walked away from their poisonous waste without a backward glance and remained silent for decades — content to let it become someone else’s problem. And it did. It became the problem of the people of Harris County, everyone who used the river for recreation, swam and fished in the San Jacinto River, and every man, woman or child who ate seafood from the river that contained dioxin from the San Jacinto pits. 3 The corporate officials of Defendants do not live near the waste site that they created or are responsible for — nor do they need to fish for food from the waters that they allowed to be polluted in order to feed their families. Those companies responsible for the dioxin were content to say nothing about the poisonous legacy left behind to release silently into the environment because they were not affected by it. But the Harris County residents who do live there are affected by it. On their own, however, they are among the least able to obtain justice and hold those responsible for the dioxin accountable. To do so, they need help. The citizens have asked Harris County to stand up and help them, and Harris County has filed this lawsuit on behalf of its citizens who have been the unknowing victims of an insidious public health threat. 4 Harris County has embraced industry to build this great city in which we all live. Harris County is proud to be the center of the largest petrochemical complex in the entire United States. It is proud of the role this industry played in building the nation’s economy, proud of the fuels and products produced by the Houston petrochemical and other industries, proud of the men and women who work in those industries, and proud of the responsible companies that bring jobs to the County. It is also a recognized reality that because of the concentration of the petrochemical industry and other plants along the waterways in Harris County, it is even more important for companies in the community to act responsibly and to warn, not remain silent, about dangers that may or have been created in the course of industrial operations. As much goodwill and economic benefit as industry contributes to the County, industries that do not act as responsible environmental stewards for the communities in which they operate create the opposite effect, damaging the public’s support for industry and impeding further economic development and opportunities for its residents. 5 In the case of the San Jacinto waste pits, Harris County and its citizens have been harmed. At a time when Harris County has been forced to reduce budgets and benefits or lay off constables, sheriff deputies, and other workers important to the protection of the citizens, it has had to devote taxpayer resources to address the legacy of dioxin contamination left by the companies responsible for the San Jacinto waste pits. The County has had to spend resources investigating, addressing and taking steps to protect its citizens in connection with this public health threat, while jobs and economic opportunities for development in County precincts are harmed by the presence of toxic waste pits in the midst of the community. Many residents fear living, working and recreating in Harris County because of the presence of such danger. 6 The U.S. Department of Health and Human Services has determined that 2,3,7,8-Tetrachlorodibenzo-p-dioxin (referred to as 2,3,7,8-TCDD, which is the type of dioxin Defendants caused and allowed to be released into the San Jacinto River) may reasonably be anticipated to cause cancer, and the World Health Organization has determined that 2,3,7,8-TCDD is a human carcinogen. In humans, the most common health effect from 2,3,7,8-TCDD is chloracne, a severe skin disease, with studies also showing that the dioxin may cause changes to blood and urine that may indicate liver damage, alter glucose metabolism, and change hormone levels. In certain animal species, 2,3,7,8-TCDD is especially harmful and can cause death after a single exposure, in addition to immune system disorders, liver damage, reproductive damage, and birth defects in animals. Ecological health from the dioxin in the San Jacinto River is documented as being threatened at every level of the food chain. Because of these health risks, the State of Texas has issued a consumption advisory for crab and all species of fish from the San Jacinto River Site area, warning women who are nursing, pregnant or who may become pregnant and children under 12 not to consume any fish or blue crab from the area. All others are advised to consume no more than 8 ounces of certain fish within any given month. Adults and children are also advised to avoid the risk of exposure through skin contact by not camping, fishing or picnicking near the San Jacinto River area. 7 Because of the impacts to the residents of Harris County, the Harris County Commissioners Court has unanimously voted to authorize this lawsuit, finding that since the 1960s, this most toxic form of dioxin has been continuously released into the environment from the Site, leaving Harris County and the public to deal with it, and that the County should be compensated for the damage caused by the pollution and to ensure a continuing climate of environmental compliance and responsibility. 8 Section II of this First Amended Petition explains the reasons why Harris County has brought this lawsuit against the Defendants responsible for causing and allowing the harm to the residents and the poisoning of the San Jacinto River.' Section III provides a chronology and timeline of Defendants’ actions and inactions that have caused, permitted and allowed dioxin to be released to the San Jacinto River and exposed the men, women, children and unborn children of Harris County to harm. Section IV identifies the parties and Section V provides a discussion of the various laws that Defendants have violated. Section VI sets forth the various causes of action applicable to each Defendant. I. Defendants Leave a Legacy of Dioxin to the People of Harris County. A Evidence shows that the dioxin in the River was not an accident. 9 As Harris County has now discovered, the presence of poisonous waste in the community was not an accident. On the contrary, the placement of the waste in pits ' Defendants have demanded that the Court order Plaintiff Harris County to file an Amended Petition to provide more information regarding Harris County’s specific claims against them. Defendants have claimed that they were unable to determine why they were being sued, why they should be subject to civil penalties, and they professed ignorance of any harm that they had caused the people of Harris County. As one of their attorneys stated in Court: “There is absolutely no way to understand from their current petition who is liable for what, what the allegations are as a particular company, . what they caused, suffered or allowed.” Defendants asked the Court to order Harris County to replead; Harris County agreed, and the Court so ordered. This First Amended Petition responds to Defendants’ claimed ignorance of their wrongful conduct. jutting into the San Jacinto River was intentional and the abandonment of the deteriorating and leaking dioxin waste pits was purposeful and intentional. Evidence being uncovered shows that the corporate entities responsible for the dioxin knowingly and intentionally meant to simply walk away from the poisonous waste they generated, despite the far-reaching and foreseeable consequences to the men, women and children of Harris County. In essence, these entities “caused, suffered, allowed and permitted” the waste to be released into the waters of the State on a daily basis. In fact, internal documents long in the possession of Defendants MIMC and Waste Management of Texas reveal that the MIMC Board of Directors responsible for the dioxin pits deliberately called a “Special Meeting” to address the poor physical condition of their “worthless” waste pits and to vote to abandon them as dump sites.” 10. Disturbingly, these internal documents from MIMC and Waste Management of Texas also show that when the MIMC Board of Directors in control intentionally voted to abandon their pits full of dioxin waste, they voted at the same time to reward themselves with huge bonuses.’ See Exhibit A. The corporate priorities were strikingly clear — “abandon” the toxic waste pits with no further action or attention — and quickly distribute the company’s money to the corporate executives. As one of the MIMC Board members later admitted in connection with the investigation of the widespread pollution from the San Jacinto Waste Pits, “...Mr. McGinnes, he was a pro at ? Defendants have refused to produce any of their historical documents to Harris County despite the County’s numerous requests. While Defendants continue to withhold all evidence in their possession from the County, the historical documents that are publicly available paint a disturbing picture and show why the statutory penalty provisions are appropriate in this case. * August 19, 1968 Minutes of Special Meeting of the Board of Directors of McGinnes Industrial Maintenance Corporation (MIMC) — now a Waste Management Company. By today’s standards, the bonus amounts the Directors voted to themselves would amount to hundreds of thousands of dollars. In addition to abandoning the waste pits and granting themselves bonuses, the MIMC Board of Directors admitted that they had not set forth or adequately reserved for the liabilities associated with their waste disposal activities on the San Jacinto River in the Company’s Audited Financial Statements. making money.”* The people of Harris County do not think it is acceptable for the companies responsible for the dioxin to reward themselves financially for their misdeeds, devise and execute a plan to wash their hands of their pollution, and allow it to wash instead into Harris County’s waterways to become the responsibility of the taxpayers and a danger to the community. 11. As Harris County learns more about Defendants’ actions and inaction in connection with the San Jacinto waste pits, the enormity of the consequences of their decisions to intentionally and consciously abandon their poisonous waste and to subsequently remain silent about what they knew becomes apparent. Because of Defendants’ actions and inactions, they have left the dioxin they created and decided to store in waste ponds they operated or controlled to freely release to the environment and contaminate the food consumed by the unknowing citizens of Harris County. The evidence shows that when the State and County sought information that was already known to Defendants and contained in their own corporate records, they did not disclose the information that they knew or take any action to stem the tide of further human exposure to the dioxin they had intentionally left behind Instead, those corporations benefited financially from simply walking away and leaving the dioxin to release silently into the waters of the San Jacinto River, poisoning it and the marine life being fished by recreational, commercial and other fisherman for public consumption. 12. While the corporate entities benefited and parlayed their businesses into ever-larger and more profitable corporate entities, their waste materials continued to release silently into the environment exposing people to risk from the dioxin that became * Statement of MIMC Corporate Officer George Lowrey. more widespread throughout the San Jacinto River, the Upper and Lower Galveston Bay and increasingly distributed throughout the food chain for more than 40 years. B Government officials discover “astronomical” and unexplainable amounts of dioxin in the San Jacinto River. 13. Eventually, officials from the State of Texas began to uncover clues of the hidden corporate legacy left by the corporations, although it would be many years before they could put together all the pieces of the puzzle and identify those responsible for the ever-growing public health threat to the unsuspecting populace that released and spread beneath the waters of the San Jacinto River. Although Defendants knew of the existence of the dioxin pits in the San Jacinto River, State officials were mystified to discover what they described as “astronomical” and unexplainable amounts of dioxin in the San Jacinto River. 14. Years went by as the state and local governments continued to search in vain to try to find the source of the dioxin so that they could protect the citizens from this public health threat. Unfortunately for the citizens of Harris County, the corporations with information about the massive quantities of dioxin that had been placed in pits in the San Jacinto River kept silent. They did nothing to warn the public or act to stop the dangerous pollution they caused. Because of their actions and inactions, the people of Harris County could not take steps to protect themselves, their children and their unborn children from dioxin exposure. Ultimately, the corporations responsible for the dioxin pits in the San Jacinto River were identified by the authorities, but it was too late for the residents of Harris County who had been recreating in the river and eating dioxin- contaminated seafood for decades. Cc. While Government Officials continue to search for the source of the dioxin, Defendants continue their conspiracy of silence. 15. Defendants had the knowledge, information, power, money and ability to take steps to stop the dioxin releases into the San Jacinto River and to warn the Harris County residents of the harm they were facing. Instead, they decided to remain silent. By the time that Harris County, state agencies and area public officials finally figured out the information that Defendants possessed and kept to themselves, it was already too late to warn the citizens who, for many years, had unwittingly eaten the fish and crabs from the river, who had unknowingly sent their children swimming in poisonous waters, and who did not know of the threat to the local food chain and threats to public health from Defendants’ dioxin. The innocent Harris County residents and visitors could not protect themselves and their families because they just did not know. But the Defendants responsible for the poisonous legacy in the San Jacinto River and the companies that they later merged with knew about it. They just chose not to tell anyone. MIMC continues its silence to the detriment of the people of Harris County. 16. Defendant MIMC remained silent in 1968 when it abandoned the pits and its responsibilities to the people of Harris County. It remained silent throughout the 70s, 80s, 90s, and in the years after the turn of the century even as it continued to represent to the public that it was a responsible corporate citizen that should be awarded permits to operate still other hazardous waste pits downstream of the one it had intentionally abandoned years before. It remained silent before and after it merged with Waste Management of Texas and continued to exist and/or operate as an empty corporate shell in an effort to hide Waste Management and Waste Management of Texas’ involvement and control over the site. It remained in existence after the turn of the century even as State officials continued their efforts to locate the source of the ongoing dioxin contamination. International Paper also remained silent and chose not to alert the public of the dangers from the Champion Paper Mill. 17. Defendant International Paper merged with Champion International Paper (“Champion”) to become the world’s largest paper company. In doing so, it willingly and intentionally accepted all of Champion’s environmental responsibilities. As Champion’s corporate successor, it remained silent as the toxic waste ponds containing its dioxin waste were engulfed by the San Jacinto River. It remained silent even as it continued to release contaminated wastewater from its mill in Pasadena, Texas, allowing its contamination to pollute other communities. It chose not to alert the public, the government or the people fishing of the dangers to women and children that its paper mill had created because speaking up would have required it to clean up the contamination that it had caused, lowering the company’s profits. 18. International Paper remained silent even after its merger with Champion in 2000 when as a company it knew all too well the devastating effects of dioxin on rivers and fish in the food chain because it had been sued by governments and people for polluting rivers in a variety of states in which it operated paper mills — with 43 lawsuits charging International Paper with dumping chemically contaminated waste in three different rivers in one state alone. * United Paperworkers Intern. Union y. International Paper Co., 985 F.2d 1190 (1993). 10 International Paper brought its pattern and _ practice of silence, misrepresentations and intentional omissions to Harris County. 19. The San Jacinto River case is not the first time that International Paper has failed to tell the public what it needed to know in connection with dioxin contamination in rivers, and Harris County is not the first victim of International Paper’s failure to provide relevant environmental information in its possession to the public. In a case brought against International Paper by the Presbyterian Church of Louisville, Kentucky and the Sisters of Saint Dominic of Blauvelt, New York, who were shareholders that had invested Church funds to buy stock in International Paper, the United States District Court for the Southern District of New York and the Second Circuit Court of Appeals both found that International Paper had misled its own shareholders with regard to the Company’s environmental compliance and that its omissions in connection with environmental violations were misleading and deceptive. The Second Circuit found that International Paper’s representations “that it had a longstanding commitment to the protection of the environment, that it was a leader in environmental protection, that it had a vigorous compliance program and that it had addressed such issues appropriately, conveyed an impression that was entirely false.” (emphasis added). 20. International Paper’s Board was found to have acted with requisite knowledge and intent in making misstatements and omissions to its investors regarding ° Td. 1n that case, the Church and the Sisters sought to have International Paper’s shareholders adopt a resolution designed to facilitate corporate accountability for issues concerning the environment, including a commitment to public environmental accountability. In its Proxy Statement, International Paper opposed the resolution, representing that the Company had already addressed environmental matters “in an appropriate and timely manner,” and representing to its shareholders that “environmental stewardship has always been an important part of International Paper’s business”, that its Company principles “are consistent with International Paper’s long-standing policies on environment, health and safety”, and that the Company had a “strong environmental compliance program.” The Court found that these statements were misleading and “palpably without merit” and “to put it charitably, inconsistent with the serious and ongoing environmental challenges the Company has endured.” 11 its environmental compliance to mislead its shareholders and induce them to cast a negative vote against proposals that would require International Paper to implement a corporate policy of environmental accountability. It was also found that, among other things, International Paper’s investors were not told of information that the Company had pled guilty to five criminal felony charges of environmental laws, engaged in knowingly illegal conduct, and engaged in the falsification of required environmental reports that International Paper knew about and should have disclosed to them.’ Similarly, in the San Jacinto waste pits case, the citizens of Harris County were not told of information International Paper knew about and should have disclosed to them many years earlier regarding what Champion knew about the waste pits submerged into the San Jacinto River, what International Paper knew based upon its being sued for poisoning other rivers with dioxin, and what a responsible company would have revealed about the site of its previous pollution long ago. International Paper is now getting hundreds of millions of dollars in tax credits for producing and burning the same “black liquor” that poisoned the San Jacinto River. 21. International Paper’s corporate attitude and misrepresentations about environmental compliance cited above are appalling, but there is yet a more egregious aspect of International Paper’s refusal to be accountable to the taxpayers of Harris County for its company’s practices of dumping its toxic “black liquor” byproduct into the San Jacinto River. At the same time that International Paper is denying that it owes the 7The Court opinion stated that International Paper’s $2.2. million criminal fine was the second largest fine ever assessed for violation of the hazardous waste laws. The Court also cited to International Paper’s breach of its settlement agreement with the State of Maine and the Maine Board of Environmental Protection for violations of state environmental laws, noting that the State had returned to court seeking substantial penalties for noncompliance, among other examples of the Company’s omissions designed and intended to mislead shareholders. 12 citizens of Harris County one dollar for decades of pollution, it is grabbing tens if not hundreds of millions of dollars in tax credits for the same “black liquor” with which it contaminated the San Jacinto River. 22. International Paper has found a way to receive a multi-million tax credit for “black liquor.” Through what is described as a “tax loophole” for paper mills, a tax credit worth hundreds of millions of dollars every year is currently available (but under 38 attack) to companies like International Paper for producing and burning “black liquor. 23, While Harris County was expending local taxpayer dollars and resources to warn citizens and investigate the dangerous legacy left by the paper company’s disposal of black liquor and other pollutants into the San Jacinto River, International Paper issued a press release trumpeting its receipt of a $71.6 million cash payment from the U.S. Treasury for tax breaks for the paper mill byproduct of black liquor. That huge amount of “found money” was just a small portion of the cash that International Paper would receive from the government, as its very first cash payment of $71.6 million represented a tax break for a single one-month period of operation in 2008.° A Goldman Sachs report estimated that International Paper could receive as much as $1.06 billion in tax benefits in 2009 alone and J.P. Morgan said International Paper could reap as much as $3.7 billion in benefits.'° As the J.P. Morgan analyst report said, the paper companies were “burning black liquor into gold.” 24, For International Paper, its black liquor turned into gold. But in Harris County, International Paper’s black liquor turned into a poison in its waterways. It has long been known that the black liquor that MIMC and Champion were caught dumping ® New York Times, July 20, 2012, “Tax Loopholes Block Efforts to Close Gaping U.S. Deficit.” ° Washington Post, March 28, 2009, “Papermakers Dig Deep in Highway Bill to Hit Gold.” "Td. 13 into the San Jacinto River many decades ago is highly toxic to marine life, and that the people of Harris County have and continue to consume marine life impacted with wastes from the Defendants’ paper production and disposal Rather than be rewarded for the intentional dumping of black liquor into the San Jacinto River and allowing it to get into the food chain for humans, International Paper should be required to disgorge its hundreds of millions in profits to Harris County residents and others who have been damaged by the toxic effects of its paper mill operations. 25 Given black liquor’s legacy in Harris County, it is wildly inappropriate for International Paper to receive millions in tax credits, permitting it to obtain checks back from taxpayers to put that money back into its pocket. Rewarding International Paper in that way is simply untenable, and the first use of any tax credits received by International Paper for black liquor subsidies should be used to pay the people of Harris County 26 Fortunately, the propriety of the controversial and highly criticized black liquor tax credit that International Paper currently enjoys is again being raised before Congress. As recently as July 20, 2012, a front-page New York Times article highlighted what many budget experts characterize as a loophole, criticizing the black liquor tax break “as a tax dodge because it allows the sludge to qualify for an energy subsidy created to wean the country off imported oil for vehicles, which the black liquor does not 11 See Material Safety Data Sheet (“MSDS”) for Black Liquor published by Temple Inland (a paper company acquired by International Paper in 2012 for a reported $4.4 billion) in 1999. The MSDS describes black liquor as a substance of highly variable alkaline composition produced when wood chips are cooked in the kraft pulping process, containing excess pulping chemicals. The MSDS identifies black liquor as a reactive material, noting that contact with acids can result in release of potentially lethal concentrations of hydrogen sulfide gas. Ingestion is noted to cause serious damage to mouth, throat and stomach if accidentally ingested, and contact with unprotected skin or eyes may cause severe burns and possible blindness. The MSDS instructions advise that proper authori ies should be notified if water pollution occurs and that protective clothing is a must if remediation is initiated. Under Health Hazards, it is noted that “runoff from dilution may cause pollution. 14 do.” The New York Times reports that “[fJor tax aides in both [political] parties, black liquor falls into the category of the hard to defend.” It will be particularly hard to defend a tax break for black liquor that does not require International Paper — who is receiving millions and/or billions in cash for “black liquor” tax breaks — to use that “found money” to pay penalties to the citizens of Harris County for the company’s decades of polluting the San Jacinto River. Waste Management of Texas remains silent as dioxin seeps into its own community, 27. Finally, and perhaps most inexplicably of all, Waste Management of Texas also remained silent even as the dioxin continued to seep into the very community that it calls home. Waste Management of Texas remained silent after it acquired MIMC and its records that document the abandonment of the San Jacinto River waste pits. It remained silent for years, while the contaminated waste pits continued to release into the waters of the San Jacinto River and while people in the County where Waste Management’s corporate headquarters are located continued to fish and swim in the contaminated waters. 28. Waste Management of Texas and Waste Management claim ignorance of the fact that they bought a company that had a hidden toxic waste site submerged into a river. The public record reveals Waste Management purchased dozens if not hundreds of companies that, in turn, owned and operated hundreds if not thousands of waste sites located throughout the country. It did so to claim the economic benefits from those companies and to gain a larger share of the nation’s industrial and hazardous waste business. It pursued this strategy presumably to maximize its profits and its shareholder 2 New York Times, July 20, 2012, “Tax Loopholes Block Efforts to Close Gaping U.S. Deficit.” 8d. 15 value. Having undertaken a deliberate course of rolling up the industrial and hazardous waste business, Waste Management cannot credibly claim ignorance of what it purchased. The Waste Management companies have claimed that they have no duty with regard to this site — in essence, that they have no responsibility to investigate the location of toxic waste sites in companies they have purchased and no responsibility to warn the public about the health and environmental effects from those sites. Defendants’ positions in this matter demonstrate the alarming need for this suit. Waste Management’s real or feigned ignorance of the toxic waste sites that it owns directly or through the dozens of corporate affiliates it has created does not excuse the responsibility that Waste Management bears for contamination of the San Jacinto River and for endangering the public’s health. 29. Waste Management of Texas is responsible because government documents reveal that it actually entered into a merger with MIMC and became MIMC. In addition, both Waste Management Defendants have liability for the independent reason that they chose to remain silent for years as the pollution and danger to Harris County residents continued. Defendants should pay penalties to compensate Harris County and its residents for the consequences of their choices, actions, inactions and the conspiracy of silence in the face of grave harm to humans and _ the environment. 30. Unfortunately, the citizens of Harris County will continue to bear the burdens and risks associated with Defendants’ persistent toxin and their actions, inactions and silence for many more years to come. Fortunately, the Texas Legislature has specifically authorized Harris County to act on behalf of its citizens to recover penalties under state law against persons who caused, suffered or allowed pollution in violation of 16 the Texas Water Code (“Water Code”), and the Texas Health and Safety Code (“Health & Safety Code”) as Defendants have done, and penalties awarded in this matter will be shared between Harris County and the Texas Commission on Environmental Quality (“TCEQ”). The law allows Defendants to be held accountable to the residents of Harris County in the form of penalties to compensate the County and the State and deter future misconduct. 31. Because Defendants chose to cause and allow dioxin to continuously release into the San Jacinto River for many decades putting the public at risk, Harris County has been forced to expend many man hours, resources and taxpayer dollars to try to protect its citizens from this threat. The County’s already limited resources have been further strained by the need to address the dioxin waste left behind by Defendants, These companies achieved a tremendous economic benefit by leaving Harris County and the public holding their waste while they pocketed the profits saved from not having to pay for proper disposal, putting them at a competitive advantage over other responsible companies. The companies who profited from this behavior should be accountable for and penalized for the damages and risks they have caused. 32. Defendants continued to be culpable even when they were ultimately identified by the authorities as they tried to disavow their actions, their impacts and each other. Waste Management tried to distance itself from MIMC and MIMC publicly blamed International Paper, pronouncing it responsible for the waste disposal practices of Champion. Despite the fish advisories, the science and the great weight of evidence of human health and ecological risks, Defendants tried to minimize the impacts of the dioxin to which they exposed the public. Instead, Defendants took the disingenuous position 17 that there are “minimal health effects from dioxin” and that “dioxin is not bad for human consumption.” While Defendants may believe it is fine for the residents of Harris County and their visitors to eat fish poisoned with dioxin, the people of Harris County disagree. 33. The overwhelming scientific evidence long ago established that dioxin is bad for human consumption, and Defendants should be held accountable to those people who have unknowingly eaten their dioxin. Thus far, Defendants have gained a substantial economic benefit by failing to address this human health and environmental threat for 40-plus years at the expense of others. In 2011 alone, Defendant International Paper reported in its public filings that it had profits in excess of $1,341,000,000. During the same year, Waste Management told its investors and the public that it had $961,000,000 in profits. From 1995 through the end of 2011, International Paper had revenues of $384,000,000,000, and Waste Management reported $209,000,000,000 in revenues during the same time. When International Paper merged with Champion in 2000, it consumed a company that had revenues of over $29,000,000,000 for the previous five years and profits of $671,000,000 during that time. Despite profits and revenues in the hundreds of millions and even billions of dollars, Defendants claim that they owe the people of Harris County nothing for the toxic consequences of their profit-making ventures and the decades-long pollution of the San Jacinto River.'* 34. Because Defendants have left a legacy of pollution in Harris County by causing and allowing dioxin to be released into the San Jacinto River instead of spending the money to properly dispose of their dangerous chemicals, it is appropriate that they now compensate Harris County for the consequence of their choices, actions and Despite acquiring and controlling MIMC, counsel for the Waste Management Defendants has told the Court that they are “strangers to the property” and have “no duty” to the people of Harris County. 18 inaction, and the conspiracy of silence that have put the public health and environment at risk. iil. Dioxin in the River — A Timeline A MIMC and Champion act in concert to dispose of, and then abandon, dioxin waste in ponds jutting out into the San Jacinto River. 35. On September 3, 1965, MIMC was formed. Ten days later, MIMC (now merged into Waste Management of Texas and doing business in Texas as Waste Management) acquired an exclusive waste disposal contract to dispose of waste from the Champion paper mill. (“Champion Mill”). While Champion (now merged into International Paper) made money by selling its paper, its paper mill generated wastewater that was contaminated with 2,3,7,8-TCDD (dioxin) and other types of dioxin. 36. Champion’s paper mill produced tens of thousands of gallons of contaminated wastewater per day and millions of gallons per year that it disposed of either in waste ponds that ultimately were drained in the waterways or by discharging the wastewater directly into the waterways, including Galveston Bay. 37. Champion also chose to have some of its dioxin waste dumped into ponds built for it by MIMC. The dioxin waste pits were built separately in an area of Harris County near where the Interstate Highway 10 Bridge crosses over the San Jacinto River, east of the City of Houston between the areas known as Channelview and Highlands, Texas (the “Site”). See Exhibit B. MIMC constructed the waste ponds for Champion, selecting for this purpose approximately 20 acres on a narrow peninsula of land jutting out into the San Jacinto River. The Site was frequently inundated by the river water, and MIMC only separated the dioxin-contaminated wastewater and sludge from the waters of 19 the San Jacinto River by erecting earthen embankments, which leaked and deteriorated rapidly, permitting wastewater and wastes to discharge into the river. 38. Prior to MIMC’s construction of these waste ponds for Champion, Champion stored its contaminated wastewater and the resulting sludge on impoundments south of the highway (“the Southern Impoundments”). MIMC assumed operation over the Southern Impoundments after it constructed the waste ponds on the north of the highway. During the period of time relevant to this lawsuit, wastewater, sludge, and other contaminants from the Southern Impoundments continuously released and discharged into the San Jacinto River, polluting it with dioxin and other chemicals. 39. From 1965 through the end of 1967, Champion continued to send contaminated wastewater to MIMC’s unlined ponds, where the wastewater was stored until it was released untreated into the San Jacinto River or returned to the Champion Mill where it would eventually also be released into the river. According to reports at the time, MIMC and Champion planned to store the wastewater from the Champion Mill for a year before discharging it into the San Jacinto River. 40. Champion and MIMC had no plan for handling the solid waste residue from Champion’s paper manufacturing, and the hundreds of thousands of cubic yards of that residue that was contaminated with dioxin and other pollutants. MIMC and Champion left the residue in waste pits at the Site where it still remains spread out over acres, some of it just above the water line and some of it having been submerged below the San Jacinto river waters decades ago where MIMC and Champion chose to abandon it. 20 41. In addition to dioxin waste seeping and releasing from the ponds into the San Jacinto River, records show that liquid waste was also intentionally pumped out of the ponds at the Site, directly into the San Jacinto River. In one documented example of this intentional illegal pumping in 1965, government officials caught MIMC pumping toxic “black liquor” waste out of one of the ponds on the Site. As a result of this incident, the Harris County Health Department documented this intentional release and specifically informed MIMC and Champion in writing that the liquid waste they were caught pumping into the San Jacinto River “still contains considerable amounts of black liquor which is highly toxic to marine life.”'® Dr. Quebedeaux, a Director at the Harris County Health Department, also informed MIMC that the earthen dikes used to contain the wastes should be repaired. MIMC and Champion were ordered to stop discharging waste from the ponds into the San Jacinto River, though wastes continued to seep and release from the ponds and the pond levees deteriorated, causing continuous releases of dioxin over the following decades. 42. In April 1966, the State Department of Health investigated the Site and determined that MIMC and Champion did not have a permit from the Texas Water Pollution Control Board to discharge their wastewater and that prior to their discharging wastewater into the San Jacinto River, MIMC would be required to obtain a permit from that state agency. Defendants have not produced any records of their obtaining a permit as required from the Texas Water Pollution Control Board for discharging their wastewater into the San Jacinto River, and yet they continued to discharge the wastewater throughout the operation of the Site into 1968. ' December 28, 1965 letter to McGinnes Industrial Maintenance Company, with a copy to Champion Paper Co., from Harris County Health Unit advising of highly toxic nature of black liquor. 21 43. In 1966, MIMC began planning to construct a new set of wastewater ponds located further down the San Jacinto River near Hitchcock, Texas (“the Hitchcock waste ponds”). From August 1966 forward, MIMC and Champion were involved in a contentious public relations and legal battle with the local community and local government in Hitchcock, who vigorously opposed those companies’ efforts to construct waste ponds near their community. In 1966-67, the City of Hitchcock even attempted to incorporate the land where the ponds were going to be built in an attempt to stop MIMC and Champion, so great were their concerns about the environmental and health impacts from those companies’ operations. The City of Hitchcock and others contested MIMC’s construction of the new waste ponds because of their concerns about the damaging effect the wastewater would have on the environment and possible effects on human health. 44. MIMC prevailed in its fight to construct the Hitchcock waste ponds that began taking Champion’s contaminated wastewater. Throughout this time, Champion and MIMC were well aware of the public’s concern with the health and environmental effects of the contaminated wastewater and sludge from Champion’s Pasadena plant. They had also been informed about the toxic effects from the black liquor — a byproduct of the wastewater that they had transported and stored at the Site.'® 45. In August 1968, the Board of Directors of MIMC held their annual board meeting. First, the Board of Directors determined that MIMC did not have enough capital to operate effectively, and therefo