Green gavel: Judge says EPA can sue former owner of South Bend site for cleanup costs

By Eric Freedman
Great Lakes Echo

What seemed like a good idea at the time could prove to be costly nightmare for an investor being sued for the cost of cleaning up contaminated manufacturing property in northern Indiana.

A federal judge is allowing the U.S. Environmental Protection Agency to continue its effort to hold Norbert Toubes personally liable for clean-up expenses at the former industrial site in South Bend.

“Toubes thought that he was getting a great deal when his company, ARG Corp., bought the site and sold it to the city of South Bend,” U.S. District Judge Philip Simon wrote in his ruling. “Instead he bought himself a mountain of legal trouble.”

The federal government wants to hold Toubes personally responsible because the corporation has no assets or insurance.

Under the city’s Studebaker Corridor development plan, South Bend intended to acquire the 15 acres that originally belonged to Studebaker Corp. and then to South Bend Lathe. Environmental evaluations estimated the cleanup costs as high as $6 million, according to court documents.

The site was part of a total of 84 acres of former Studebaker land that the city acquired for what is now called “Ignition Park,” said Ann Kolata, a consultant to the city and its Department of Community Investment.

The South Bend Lathe building and all but one of the other buildings have been demolished, and some redevelopment has begun, she said. The city’s goal is to attract high-tech and data businesses.

In 2000, ARG bought the South Bend Lathe property and its 440,000-square-foot building for $315,000. In 2006, the company sold it to the city’s redevelopment commission for $663,072. Under the sales contact, the city accepted financial liability for any environmental damage not covered by ARG’s insurance policies, according to legal documents.

After the purchase, the city suspected that hazardous materials there endangered public health and notified the EPA. The agency investigated, found an “imminent danger to the public” and spent more than $840,000 for cleanup, including removal of contaminated soil and underground storage tanks.

In court papers, the EPA says it continues to incur expenses, including enforcement costs, “as a result of the continued release and/or threatened release of hazardous substances at the site.”

As of yet, the federal government hasn’t recovered any of the money it spent to clean up the property.

The government filed a Superfund suit against ARG to recoup its money.

But the company didn’t have assets to pay, so the government added Toubes as a co-defendant.

Assistant U.S. Attorney Wayne Ault said, “We know he has some assets because he told us about them in depositions. Some of them we think were paid for by the corporation.”

Those assets may include condos in Florida that Ault bought with corporate funds, said Ault, who is based in Hammond., Ind.

Ault described the Superfund law as “very broad. It stretches against owners, former owners, operators, former operators and generators who arrange for disposal on the site.”

The government says ARG and Toubes are responsible because of releases while ARG owned the property, regardless of the contractual agreement between the company and the city.

However, ARG and Toubes argue there is no factual basis to hold them liable because there is no evidence that any hazardous materials were released into the environment while the company owned the property.

“ARG “bought a building, never operated it and sold it,” said South Bend attorney Robert Mysliwiec, who represents Toubes and the company.

“The primary issue is whether, during the ownership of ARG, any hazardous material actually got into the environment,” Mysliwiec said. The defendants deny that happened.

He also noted that contamination of the former Studebaker property dates back to 1850 when the company started building wooden wagons there.

Toubes asked Simon to dismiss the claim against him personally.

The judge refused, noting that Toubes had made only a “token” $1,000 capital investment in ARG and was the company’s president and sole shareholder. It had no other officers, directors or employees.

Simon also cited evidence that Toubes had comingled his personal and corporate assets, used corporate money to pay a “personal obligation” and failed to keep proper business records or follow corporate procedures.

Normally, individual shareholders and officers aren’t personally liable for corporate debts.

Under the judge’s ruling, the federal government would still need to prove at trial that Toubes “ignored the corporate formalities” and misused corporate money for personal purposes.

The federal government didn’t sue South Bend, but Toubes brought the city into the case, arguing that it is liable for cleaning up any hazardous materials released into the environment after it bought the property.

Simon has not yet ruled on South Bend’s request to be dismissed from the suit.