NY AG Reaches Environmental Fine/Reimbursement Settlement With HSBC

In one of the nation’s first Superfund cases against a bank, Attorney General Andrew M. Cuomo and HSBC Bank USA, N.A. have reached a settlement with the bank paying penalties and reimbursing the state for costs incurred while responding to an abandoned chemical manufacturing facility in Wallkill.

HSBC Bank USA, N.A., will pay $850,000 in civil penalties and reimburse the State for approximately $68,000 in costs incurred as a result of the abandonment of hundreds of drums, tanks and containers at the Westwood Chemical Company, located on Tower Drive in the Orange County town of Wallkill.

“Protecting the environment is paramount to the bottom line,” said Attorney General Cuomo. “This settlement is groundbreaking in that it sends a strong message that lenders cannot ignore toxic cleanup laws by simply seizing a company’s operating funds and leaving it without the financial ability to be in compliance with environmental laws and ensure public safety. It also ensures that the threat posed to the public by HSBC’s insensitivity to the environment does not happen again.”

Department of Environmental Conservation Commissioner (DEC) Alexander Pete Grannis said, “I am proud of the combined efforts of the DEC first responders and remedial staff in their work to ensure that the health and safety of the people and the environment at this site was secured. DEC is pleased with the rapid response to this potential environmental crisis and welcome the settlement reached today by the Office of the Attorney General and HSBC. We believe this agreement will raise awareness among the lending community that they are partners with their clients in the responsibility for environmental stewardship.”

Westwood manufactured and marketed chemicals for the cosmetics and water treatment industries, resulting in significant quantities of hazardous laboratory waste, chemical products and wastewater. The Attorney General’s lawsuit alleged that after HSBC seized Westwood’s operating funds in 2004, Westwood was forced to close its doors, leaving behind hundreds of containers of abandoned chemicals and products within and outside the company’s buildings. Since heat inside the building was not maintained during winter, pipes froze and the fire suppression system broke. This left numerous chemical containers to freeze and leak and created a substantial fire and explosion risk. The Attorney General’s suit alleged that HSBC knew of the abandoned chemicals, the frozen pipes and the lack of a fire suppression system but did not contact the DEC or any state or local emergency responder to report the threat, as required by New York law.

In February 2005, a routine inspection by a Wallkill building inspector revealed the serious environmental and safety threats posed by the abandoned facility. Town officials immediately contacted DEC, who, along with the Environmental Protection Agency, removed the chemicals and secured the facility. The matter was then referred to the Attorney General’s Office, which culminated in today’s agreement.

To prevent similar environmental hazards from occurring, HSBC has agreed to implement a new internal environmental training program to educate its employees on environmental compliance obligations of companies facing financial difficulty and of the lenders’ responsibilities. As was the case with Westwood, the program will illustrate how facilities shut down without an opportunity to perform appropriate wind-down and environmental compliance measures can present significant hazards. The training will focus on New York State and federal laws that require anyone with knowledge of the release or threat of release of hazardous substances, to report the matter to the DEC.

The case was handled by Assistant Attorneys General Maureen F. Leary and David A. Munro; and by G. Stephen Hamilton, enforcement attorney for DEC.