A Matter of Trust

Page 9 of 10

Nearly all of the settlors got stuck with an orphan share, which represents the amount of money owed by bankrupt or financially insolvent companies whose liabilities had to be divvied up among everybody else.

All in all, Denver and Waste Management collected nearly $110 million from the 166 entities. Included in this total was approximately $53 million for the basic remediation costs, another $38 million in premiums and approximately $18 million in orphan shares. The Adoph Coors Company was the largest settlor, anteing up $14,824,928 for remediation costs, $4,100,512 for the cost overrun/risk premium, and another $4,731,360 orphan share. Other large contributors:

• Syntex Chemicals: $14,826,324 in basic costs; $3,706,581 orphan share.

• S.W. Shattuck Chemical Co.: $8,765,081 in basic costs; $2,191,270 orphan share.

• Conoco: $4,323,185 in basic costs; $1,080,796 orphan share.

• AMAX Extractive Research and Development: $2,354,544 remediation costs; $588,636 orphan share.

These large settlors also have varying "reopener percentages" in their contracts that require them to kick in more money if costs exceed certain targeted estimates.

Denver, Waste Management and/or the Lowry trust get to pocket the premiums until the event the premium covers is triggered. Explained Finesilver in another ruling: "By offering to assume or absorb certain risks in return for the premiums, plaintiffs are effectively acting like an insurance company. They are performing a task that an outside insurance company could just as well do, and the fact that it is plaintiffs who are doing the insuring does not somehow tie the premiums to environmental cleanup costs. Indeed, it would be unjust to require plaintiffs to put the premiums -- the consideration for plaintiffs' assumption of risk -- toward cleanup, only to have plaintiffs later spend a like sum in meeting the obligations it assumed in return for the premiums. Simply put, plaintiffs are entitled to the premiums because plaintiffs have agreed to assume risks."

It's not clear exactly how the City of Denver and Waste Management divided either the premiums or the ensuing liability; a master settlement document on file in the city attorney's office apparently spells out these issues. One document indicates that Waste Management indemnified the mid-tier settlors against potential toxic tort and natural-resource damage claims and kept those premiums. It's also possible that the trust itself is the legal entity that is indemnifying other polluters against future claims.

Coon will only say that the "city did not indemnify the parties."

Exactly how much money is in the Lowry trust has been a closely guarded secret for nearly seven years. Between 1992 and 2000, approximately $60 million was expended on actual remediation efforts and monitoring programs, with nearly $3.6 million going toward the trust management alone, one budget document shows. The expenditures are expected to dramatically decline in future years, now that all of the construction projects designed to contain the contaminants are in place. Offsetting these costs are potential gains made by the trust funds in the stock market.

"I don't know how much is in the trust, and couldn't even tell you if I did know," says Theresa Donahue, who directs the city's Department of Environmental Health and was closely involved with the Lowry cleanup effort.

The trust operates much like any large corporation -- hiring staff, buying and selling property, and undertaking multimillion-dollar construction projects. But unlike large city contracts, which are signed by the mayor and approved by city council, the trust's financial activities are overseen only by two co-trustees: Cheryl Cohen, the city's manager of revenue, and Steven Richtel of Waste Management.

Cohen, citing the confidential nature of the trust's activities, referred all questions to assistant city attorneys Coon and Sullivan. But beyond appointing one of the trustees, Coon says, the city has no input into the trust. "The trust is really a private entity," he adds.

Donahue says the trust funds are audited every year by a private firm to make sure everything is being done in a fiscally sound manner. "This is not a city trust," she points out. "It's not public funds."

But the city certainly keeps an eye on those funds. In fact, with the bulk of the cleanup behind them, Denver and Waste Management even began thinking about distributing management fees to themselves from the trust. It's not known whether this plan ever went into effect, but records suggest that such fees could total millions. The actual amount would be based on several factors, including how much the funds have earned in the stock market and how much money was saved during the cleanup.

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Eileen Welsome