Allied Waste

The Cayman Connection

Republic Services claims no environmental woes to snare a billion-dollar-plus loan with the help of its offshore insurer. 

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Republic Services, owner of the radioactively-contaminated West Lake Landfill in St. Louis County, scored a $1.2 billion loan from a consortium of the world’s largest banks in 2014 by assuring its lenders that the company had no environmental problems that would effect its bottom line, StlReporter has learned.

Under the terms of the agreement signed on June 30, 2014, Republic claims that “existing environmental laws and existing environmental claims” could not reasonably be expected to a have a  “material adverse effect” on the company’s operations.  “Material adverse effect” is defined in the agreement as being a change that would negatively impact “operations, business, properties, assets or conditions, financial or otherwise, of the borrower and its subsidiaries taken as a whole.”

“No Problemo”

The assurances that the company has no notable environmental headaches came despite public controversy surrounding the environmental and health hazards posed by the company’s West Lake property, an EPA Superfund site, and corresponding calls for the buyout of nearby homeowners.

To qualify for the 2014 loan, the banks required Republic to assume liability for potential environmental issues and indemnify them against claims. Republic complied to the terms by designating an offshore subsidiary — the Bom Ambiente Insurance Co. of the Cayman Islands — as the company’s insurer. Unlike most of its other subsidiaries Bom Ambiente is exempted from the terms of the loan agreement.

Aon Insurance Management, a leading captive and reinsurance company, represents Bom Ambiente Insurance through its offices in the Cayman Islands, which are located in the same posh office building as a major offshore law firm.

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Spokespersons for Republic and Aon declined to comment.

So-called “captive insurance” companies are set up by their parent corporations as a means of providing affordable risk management services based on the concept of self insurance. Many risk-prone businesses locate their in-house insurance operations in the Cayman Islands to take advantage of favorable governmental regulations and the absence of income and capital gains taxes.

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Republic Services,  one of three parties liable for the EPA-mandated cleanup, opposes removing the West Lake waste. Instead, the company favors the terms of the original 2008 record of decision calling for capping the materials in place. That proposal is being reconsidered due to public opposition.  The cost of removal is estimated at $400 million or ten times the original plan.  But there seems to be more riding on the final decision than the cost of the clean up.

The future of the company may be at stake.

The banks that signed off on the five-year loan are among the most prominent financial institutions in the world. They include: Bank of America, JPMorgan Chase, Wells Fargo, Barclays, BNP Paribas, Union Bank and SunTrust. Bank of the America, the lead lender, has committed $87 million.

The loan agreement spells out how Republic can borrow the money over the course of the agreement through regular loans, advances on credit, or so-called, short-term “swing-line” loans. The agreement does not stipulate the purposes for which the Republic uses the borrowed money. But Bridgeton Landfill and Rock Road Industries, two Republic Services-owned companies connected to the troubled West Lake property, are among the hundreds of Republic subsidiaries that are a party to the loan agreement.

In Schedule 5.12 of the loan agreement, Republic says it has no issues to report related to environmental matters. But the company’s February 2016 Security and Exchange Commission 10-K report discloses that for 2014 Republic accrued more than $227 million in costs coping with environmental matters at its troubled West Lake property.

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In short, the company readily acknowledged the high cost of addressing environmental matters at West Lake to the SEC earlier this year, but denied any problems would have a “material adverse effect” in paying back its debt in the 2014 loan agreement. To do otherwise would be a breach of the loan agreement and could be considered a default.

A Slow-Motion Train Wreck

Republic Services acquired the environmentally-troubled Bridgeton and West Lake Landfills in 2008 when it merged with Allied Waste Services. The impacted landfills are now closed, but Republic continues to operate a transfer station at the same location, which has been an EPA Superfund site since 1990.

The history of radioactive contamination at West Lake dates back to 1973, when the waste was illegally dumped. Federal, state and local regulatory authorities have been aware of the problem for more than 40 years, but failed to act.

The inaction made matters worse.

In December 2010, Republic told the Missouri Department of Natural Resources that an underground fire was burning at the Bridgeton Landfill, which is directly next to the West Lake Landfill and part of the same Superfund site. The stench from the fire raised dormant public concerns.

By February 2013, MDNR had cited Republic for noxious odors. The next month the Missouri Attorney General sued the company for violations of state environmental laws. That case is still pending. A negotiated agreement between the state and Republic Services to build a barrier to stop the fire from advancing closer to the radioactive waste is also stalled, as is federal legislation that would hand the cleanup over to the U.S. Army Corps of Engineers.

During these delays, the fire has moved closer to the radioactive material.

Meantime, the MDNR and the EPA have confirmed that radioactive materials are known to have migrated off site, further contaminating air, soil and water. Private lawsuits have also been filed against the company.

To those unfamiliar with the world of high finance, the reporting discrepancies and ongoing issues at West Lake would seem enough to raise eyebrows among Republic’s individual and institutional investors, including  firms tied to billionaires Bill Gates and Warren Buffett.

But that hasn’t happened.

Apparently, Republic’s word is its bond among stock market traders. From a business perspective, environmental stewardship and standard accounting practices are based on the letter of the law. West Lake be damned. After all, the five-year, $1.2 billion loan is a fraction of  Republic’s long-term debt, which stands at $7.5 billion and counting.

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You’ve Got Trash

A millionaire landlord from Ladue ditches the city’s refuse service in favor of Republic Services. There’s only one problem: the private company isn’t picking up the trash. 

first published in the Journal of Decomposition, Aug. 20, 2012

“They need to get them cans out of the alley,” said the city worker, who sat behind the wheel of the big orange trash truck. The “cans” to which he referred are the blue dumpsters that now compete not only for space but also business with the St. Louis Refuse Division.

Two years ago, the city began charging property owners for trash pick up. The fee is $11 a month per unit. That amounts to $462 a year in additional expenses for the owners of four-family apartments. Under the ordinance, property owners can cancel the service if they show proof that they are having a private company haul the trash instead of using the city service.

After permitting private trash pick up, the law stipulates that the city will “inspect the property thereafter to confirm that the waste in fact is being collected.” But that’s not what’s happening in the 6300 block of Sutherland Avenue in the St. Louis Hills neighborhood, where trash has been accumulating for months. Plastic bags of rotting garbage have been festering all summer. The trash is now overflowing and spilling into the alley.

When contacted on Wednesday,  Aug. 15, 16th-Ward Alderwoman Donna Baringer advised Chris Howard,  the city’s neighborhood stabilization officer, to contact Allied Waste about emptying the neglected dumpsters. Allied Waste is owned by Republic Services.

In response to a constituent’s email, Howard promised to act swiftly. “This appears to be a serious problem  and I will do my best to rectify this asap,” wrote Howard.

Since the issue was brought to the attention of Baringer and Howard, the city refuse division has emptied its dumpsters twice, according to its regular schedule. But the Allied dumpsters remain full. The continued neglect of Allied Waste to collect the trash is attracting rodents and creating a public health problem in the immediate vicinity of the dumpsters.

Spokespersons for the mayor’s office and the Street Department could not be reached for comment. Allied Waste also could not be reached for comment. The introduction of competing privatized trash services without sufficient oversight or regulation has thrown a monkey wrench into the city’s otherwise efficient trash disposal service.

The overloaded dumpsters are located behind 6325-6327 Sutherland Avenue. That building is owned by a trust in the name of G. David Voges. Voges, 64,  is the heir to a St. Louis real estate fortune. He lives at 20 Log Cabin Lane in Ladue. Voges has participated in the past in a real estate awards program sponsored with the Regional Commerce and Growth Association. The program was implemented to spur positive publicity for the St. Louis real estate market. Voges’ late father, George F. Voges, was a longtime member of the Missouri Athletic Club, the exclusive businessmen’s organization.

No one answered the phone at Voges’ Ladue residence when an effort was made to contact him.

In 1998, the city cited a rental property owned by Voges because one of his tenants was living with 56 cats. The stench from the cat feces prompted neighbors to alert the city to the problem. Voges was quoted in the St. Louis Post-Dispatch as saying that the renter was a good tenant.

Voges also owns an a four-unit apartment at 6445 Nottingham Avenue, a few blocks from his building on Sutherland. Allied Waste has a dumpster at that location, too.  The alley is shared with single-family homeowners on adjacent Murdoch Avenue, including Ald. Barginer. Unlike the mess over on Sutherland, however, Allied Waste appears to pick up the trash regularly at the Nottingham address.

Back in the alley on Sutherland, the city trash man used the controls inside the truck to grab a city recycling bin, hoist it in the air and dump it into the back of the trash truck. He then vowed to tell his supervisor about Allied Waste’s neglected dumpsters. But he expressed little confidence that the issue would be resolved in a timely manner.

“The city isn’t going to do anything,” he said. Then he drove slowly away.