The rusty stains on Shirley Carter's home are a permanent reminder of her fight with the local steel mill, just down U.S. Highway 17 near the boat docks. No matter how many cans of industrial-strength acid she went through, the red tint on her property never seemed to go away.
The rusty stains on Shirley Carter’s home are a permanent reminder of her fight with the local steel mill, just down U.S. Highway 17 near the boat docks. No matter how many cans of industrial-strength acid she went through, the red tint on her property never seemed to go away.
In 1998, Carter and her neighbors sued Georgetown Steel, then owned by the company Republican presidential candidate Mitt Romney co-founded, Bain Capital. They sought millions in cleanup costs and accused the mill’s owners of leaving their historic Southern neighborhood looking like it had been hit by a “chemical bomb.”
State officials determined the mill was largely to blame for the pollution. As the lawsuit dragged on for years, the steel mill filed for bankruptcy and the plant ultimately settled with the residents.
In the end, Bain walked away with more than $30 million in profits. Carter got $800.
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“That wasn’t even enough to paint the house,” said Carter, who is a Romney supporter this election.
As a presidential candidate, Romney has pledged to roll back environmental regulations as a way to spur growth. Under President Barack Obama, he recently quipped, “a regulator would have shut down the Wright Brothers for their `dust pollution.'”
But the story of Georgetown Steel shows how Romney’s company thrived under conditions that largely allowed the emissions to continue for years, leaving locals to clean up the mess after Bain left town.
Asked to comment on the Bain legacy in Georgetown, the Romney campaign instead criticized Obama on unemployment and green energy projects. A Bain spokeswoman did not directly address the impact of the plant’s emissions but instead said the firm “undertook an ambitious plan” to turn around GS Industries and invested millions of dollars into the company.
The Georgetown saga surfaced in the mid-1990s, when South Carolina environmental officials received complaints from a local resident asking why his boat kept turning red-orange. The phenomenon was more than a nuisance, like ash from a fire, as dust aggressively stained not only nearby boats but cars and homes as well.
The Georgetown residents’ complaints came a few years after Bain Capital purchased the Georgetown mill and its sister plant in Kansas City, Mo., as part of a $24.5 million buyout deal. The parent company was later called GS Industries and became one of the largest producers of wire rods.
Bain Capital, a private-equity firm Romney co-founded in 1984, had an impressive track record by then. It would eventually buy dozens of troubled companies and help make them profitable, a skill Romney has trumpeted on the campaign trail as making him more suited to lead the country than Obama.
But amid Bain’s profitable ownership of GS Industries, the plant’s production had created unsightly byproducts. By the late 1990s, the red dust was so was so ubiquitous that those who lived in rustic, two-story homes near Georgetown’s waterfront took to calling it “The Stuff” – a mineral called goethite that’s used to make steel.
“Everybody talked about the red dust, The Stuff,” said Marilyn Burkhardt, who owned a seven-room bed and breakfast with her husband before leaving town in 2000.
“My husband scrubbed the house probably every other week with a pressure hose,” Burkhardt said. It was often difficult for guests to eat breakfast on the deck. “We had to work like crazy. And for what? Just to keep the outsides of our houses clean.”
South Carolina regulators placed monitoring sensors around town and compared air-quality results with similar sites in the state capital, Columbia, and in Alabama. In turn, officials wanted to see improvements at the mill and at times cited the plant during Bain’s ownership for environmental violations, records show.
They also asked that the mill’s emissions “be minimized” and that management review its steel-making process to reduce staining. Indeed, the plant paved its dirt roadways, installed a truck wash and sealed gaps in its buildings to prevent The Stuff from leaking out.
The state report, made available to The Associated Press through a public-records request, said the mill was largely responsible for goethite emissions. Yet the staining continued.
So Georgetown neighbors took the mill to court, with the case growing into a class-action lawsuit covering those who lived within a few miles of the steel mill. At one point, the plaintiffs sought millions of dollars in at least three civil cases, civil filings show.
The federal government has declared goethite a hazardous substance for workers exposed to large quantities each day. It’s generally not toxic like arsenic and it doesn’t cause cancer like benzene, two pollutants that are regulated by the U.S. Environmental Protection Agency.
In 1999, just as the mill’s lawyers asked a local judge to force the plaintiffs to turn over more documents, Romney announced he was leaving Bain to organize the Salt Lake City Olympics. Romney’s federal presidential financial disclosures report that he had no active role in Bain after 1999. Several Romney associates recently told the AP that Romney made no managerial decisions after that date, but they also said he kept his formal CEO position and continued to meet with Bain partners. And an AP analysis of regulatory documents between 1999 and 2001 also showed Romney kept up an active role in overseeing Bain-related investments.
Romney stood to benefit financially from his company’s investments. And his departure from Bain also came as the balance sheets at GS Industries began to look bleak. Despite Bain’s reputation for turning around troubled companies like Staples and Domino’s Pizza, the Georgetown plant was in trouble.
In February 2001, the company filed for bankruptcy protection with more than $500 million in debt. Romney has blamed cheap steel from China for the plant’s demise, telling Fox News in December that he remembered a few dozen steel mills also foundered.
But as soon as the bankruptcy documents were filed, company lawyers told the Georgetown neighbors that the settlement was on hold. To see any money, they’d have to get in line behind everyone else – including Bain, with its majority ownership share. The steel mill offered to settle the case for $870,000.
By September 2003, as GS Industries was emerging from bankruptcy and after Bain sold the company, a local judge ordered that Georgetown homeowners in the lawsuit receive their money. After attorney’s fees, that came to about $113,000, split dozens of ways.
And it certainly wasn’t enough to repair the damage, some residents said.
“I had the house cleaned and pressure-washed all the time,” said Paul Skoko, who was among those who sued. “Within two years, it needed to be done again. That’s when I said, `That’s it. I’m not doing this anymore. It simply costs too much.”
Skoko opted to let his house turn a hue of burnt orange-red.
Links to documents at http://apne.ws/NRjdLb
Contact the Washington investigative team at DCInvestigations(at)ap.org
Follow Jack Gillum on Twitter at http://twitter.com/jackgillum