Unfinished, dirty work at Spolana spawns Kč 550 mln lawsuit against Czech state

BCD fears exiting the chemicals plant as ‘eco-tender’ bidder Geosan hasn’t detoxified its site, putting BCD’s work and the Elbe River at risk

Spolana, now part of Poland’s PKN Orlen, produced chemicals used by the US military to make ‘Agent Orange,’ a defoliant that killed countless Vietnamese and left 500,000 children with birth defects. At least 80 Spolana workers fell seriously ill due to exposure to the chlorine herbicide 2,4,5-T; decades later, the building where it was poduced was still among the most contaminated places on Earth. foto: © ČTKČeská pozice

Spolana, now part of Poland’s PKN Orlen, produced chemicals used by the US military to make ‘Agent Orange,’ a defoliant that killed countless Vietnamese and left 500,000 children with birth defects. At least 80 Spolana workers fell seriously ill due to e

Half an hour’s drive north of Prague, on the banks of the Elbe River and in the middle of a flood zone, sits the sprawling Spolana chemical plant that from 1965 to 1968 produced the chlorine herbicide “2, 4, 5-T,” half of the toxic mix (along with the common weedkiller “2,4-D”) used by the U.S. military to create “Agent Orange” — the most infamous defoliant in history.

At the height of the Vietnam War, the former Czechoslovak communist regime quietly shipped 2, 4, 5-T to the “imperialist” Americans through various trade corporations. The U.S. Air Force sprayed some 19 million gallons of Agent Orange over the dense jungles of the southeast Asian country to deny tree and plant cover to the Viet Cong, who were fighting a guerrilla war against the anti-communists.

To this day, huge areas of Vietnam remain highly contaminated with dioxins, and millions of people exposed to Agent Orange —  including babies harmed while in the womb — are disfigured for life. Before the Czechoslovak government stopped production of 2,4,5-T in 1968, some 80 Spolana workers had fallen ill; 55 were eventually hospitalized. Many later developed brain dysfunction disorders and lifelong diseases, according to Dr. Miroslav Suta, a physician with the environmental pressure group Greenpeace Czech Republic.

And now, after years of painstaking work by the British firm BCD CZ to decontaminate some of the most toxic sites at the chemical plant (the 2, 4, 5-T residue included), the British firm is still owed Kč 353.6 million (the 10 percent “retention” portion of an original Kč 3.536 billion contract sum). Over the past eight years, BCD CZ cleaned two dioxin-contaminated sites (buildings “A1040” and “A1030”) under a 2002 contract, and a third site contaminated with lindane (building “A1400”) under a 2008 contract. Dioxins are carcinogens harmful to the immune system. Lindane is an insecticide that is also used to treat infestations of lice and scabies.

Apart from the that base amount of Kč 353.6 million, BCD CZ is also seeking damages of Kč 10 million per month (going on 19 months since its contract finished) — the cost of keeping its high-tech equipment at Spolana and in working order. Jo Weaver of JWA Prague, the agency that handles public relations for the firm, told Czech Position that the company is concerned that if it pulls up stakes before getting the 10 percent “retention money” it is owed, BCD CZ might leave itself open to a breach-of-contract charges.

“The Ministry of Finance said ‘your contract is at an end, now leave.’ [But] they refused to pay the retention money because the ministry, on its own, is not able to legally say that the contract is at an end. The Ministry of the Environment and various environmental agencies, like the Czech Environmental Inspectorate (ČIŽP), have to clear it,” Weaver said. “So, if BCD CZ had packed up and gone ... the company wouldn’t have a leg to stand on. Plus everyone concerned, except for the Ministry of Finance, was keen for them to stay put.”

But there is another, more compelling reason why BCD CZ hasn’t left Spolana.

Since being told by the Finance Ministry to cease its work — ostensibly because any remaining Spolana cleanup efforts would be handled by the eventual winner of a proposed “eco-tender” — the nearby A1400 site BCD CZ worked on, and the nearby “SAE building” (after the Czech acronymn for “old amalgam electrolysis”) threaten to recontaminate ground beneath the A1040 and A1030 buildings, and perhaps worse.

The surrounding soil and groundwater are, in some areas, still highly contaminated with a mixture of mercury, dioxins, and other persistent organic pollutants (POPs). The release of POPs became pronounced at Spolana in the 1960s when production focused on agricultural chemicals, polyvinyl chloride (PVC), and components for Agent Orange. Apart from money, there is another, more compelling reason why BCD CZ hasn’t left Spolana: the recontamination threat

“And what [BCD CZ] is now worried about — and they know it’s happening — is that because of the constant wet and horrible winters we’ve had since they’ve stopped work, the soil from the third [A1400] building, where the contaminant is leading into the soil, is now going down through into the ground, back into the soil that has already been cleaned,” Weaver said. “And the potential now is that soil can leak back into the [Elbe] river, and if it’s left for much longer then all of the work will be for nothing because the problem will still be there.”

According to the Finance Ministry, proceeds from the privatization of state assets are alocated for the removal of “ecological burdens” in Spolana through funds held in the so-called privatization account (extra-budgetary resources). “For example, in 2005, approximately 270 million [was spent on the clean-up at Spolana], in 2006 approximately 1.5 billion, in 2007 0.9 billion, and in 2008 approximately 600 million,” the ministry said in October 2010. “Part of repairs included flood protection measures , such as the 2002 flood wall covering the dioxin-contaminated object A1030.”

Another contractor, the Geosan Group — a bidder in the controversial giant Kč 40–115 billion eco-tender to clean up toxic sites throughout the whole of the Czech Republic — is responsible for the SAE building, which is contaminated with mercury and dioxins. In 2006 it took over a Kč 634 million contract that the Finance Ministry had awarded in a 2003 tender to the Ostrava building company TCHAS.

BCD CZ owner and director Grahame Hamilton, while traveling in Asia for work earlier this month, told Czech Position via email that Geosan Group has not only failed to properly clean the site but is further proposing a clean-up solution that contravenes European Union and national law.

“They have been unable to provide the technology to treat the combined mercury/dioxin contamination found in the soil and the building structure,” Hamilton said. “Nothing has been done for some years. Geosan are trying to get the MoE to adopt a low-technology solution by demolishing the building and burying the rubble and the contaminated soil into an underground sarcophagus. This would be against EU and Czech law, as the containment structure would be in a flood plain.”

Geosan and the ‘eco-tender’

In December 2008, the Ministry of Finance (MoF) launched the eco-tender, seeking a company or consortium to undertake the cleanup of all the toxic environmental sites in the Czech Republic with stated aim of accelerating the process. It set the tender’s maximum value at Kč 115 billion. Miroslav Kalousek (TOP 09), the current Finance Minister installed in the post on July 13, 2010, also headed the MoF from January 9, 2007 through May 8, 2009 (when he was affliated with the Christian Democratic party, or KDU-ČSL).

The Czech branch of anti-corruption watchdog Transparency International filed a complaint to the Czech Anti-Monopoly Office (ÚOHS) saying the tender was vague in its scope and inflated the cost estimates put forth by the Ministry of Environment and ČIŽP. Prime Minister Petr Nečas (Civic Democrats, ODS), who is at odds with Kalousek over the massive eco-tender, reportedly threatened to step down if the coalition government approves it and names a winner.

Geosan Group, a Czech general building contractor that has a small environmental division, is one of three finalists in the eco-tender, agreed by the government of Mirek Topolánek (ODS). The other short-listed bidders are Marius Pedersen Engineering (part of Veolia Environnement) and Environmental Services (owned by Czech-Slovak equity group J&T).

Of the eco-tender finalists, “the most mysterious of all is Geosan Group,” the business daily Hospodářské noviny wrote last month, noting that two companies with “unknown shareholders” took stakes in the group in 2008 — the same year the controversial tender was called.

Cyprus-registered Duplessa Investment Limited now owns a 49.9 percent stake and UK-registered firm Britten Developments Ltd. a 14.7 percent stake, Hospodářské noviny reported, with the remaining 35.4 percent in the hands of Luděk Kostka, the Geosan Group board chairman and CEO. Kostka, long an ODS reprentative for the town of Velim, was acquited in 2008 by the Regional Court in Prague on charges of bribery filed against him and some 17 others back in 1999 over alleged payments to win a bid to reconstruct a Kutná Hora hospital. 

Spolana ‘quicksilver’

Ownership issues and allegations of corruption aside, the Environmental Services Division (ESD) of Geosan Group, which according to the company website “specializes in corrective measures leading to the removal of environmentally damaged structures” and is “equipped with special technology” to clean soils and structures contaminated with mercury, has failed to tackle that very problem at Spolana.

According to the Labor Law, companies must inform employees about inherent risks at the workplace. A draft internal document June 2009 titled “Information about Risks at Spolana” warns chemical plant workers that the SAE buildings (B116 A,B; B1150; A1510), now under Geosan Group’s care, are still highly contaminated with mercury. Risk analysis proves there exists a real health risk (mercury contamination). Also, the technical condition of the buildings long-term encasement in the case of entry brings a high risk of dangerous injury,” the document says.

The ESD’s director, Miloš Valeš, did not respond to Czech Position’s requests for information on the status of Geosan Group’s work at the SAE site (as characterized in charges by BCD CZ owner Hamilton), or on its plans for the contaminated site. However, Vlasta Končelová, the group’s public relations manager, said the project “remains in the preparatory phase” as Geosan Group is still looking to obtain permits and is preparing documentation for an Environmental Impact Assessment (EIA).

“At present, the project has been submitted for approval, which means that until we know the answers to your questions we cannot answer them,” Končelová said in an email.

Against the tide

And therein lies the rub — and the grounds for BCD CZ’s lawsuit of Kč 543.6 million (and counting) against the Czech state. On the one hand, the British firm wants to be paid in full for the work it has already done. At the same time, BCD CZ is reluctant to exit Spolana, as there is important work to do: the lindane at the A1400 site and mercury leakage at the Geosan Group’s site could recontaminate the grounds.

“There is still some Kč 70 milllion worth of work to do, which leaves Kč 283 million outstanding — this is work that is certified but not yet paid as, theoretically, we can’t be paid until we have ‘completed’, i.e. removed, the plant,” Hamilton told Czech Position. “As to the migration of mercury from the ‘SAE building’ into the general surrounding groundwater, this was known when the earliest risk analyses were done in the late 1990s and early 2000s.”

The clear and present danger posed by the presence of toxins like mercury on the Spolana grounds, some 150 meters from the Elbe River, was abundantly clear to those living downstream from the plant; it was the German environmental authorities, says Greenpeace, who pressured their Czech neighbors to quickly to contain the threat and award a tender for the cleanup.