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McWane Executives' Statements at 2005 Sentencing Hearing

In May 2004, after a joint EPA/FBI investigation at McWane's flagship plant in Birmingham, Ala., federal prosecutors charged the company and four managers and executives in a multi-count indictment. The government accused them of conspiracy, making false statements to investigators and violations of the Clean Water Act. A jury convicted McWane and three of the individuals on 48 counts. One defendant, plant engineer Donald Bills, was acquitted of the single charge against him.

In 2007, the 11th Circuit Court of Appeals reversed the convictions after considering a Supreme Court decision interpreting the Clean Water Act. The court ordered that McWane be acquitted of one count of making a false statement to the EPA and ordered a new trial on all other charges. Both sides, hoping to avoid a new trial, have asked the appeals court to review the case again. The court is currently considering those requests.

At the December 2005 sentencing hearing, Chairman Phillip McWane, who was not charged in the case, read a statement in which he apologized to the community for his company's conduct. "In a way, I was found guilty, also," he said. McWane President Ruffner Page also spoke at the hearing. Here are the transcripts of their statements

Ruffner Page (photo credit: from a McWane publication)

My name is Ruffner Page, and I'm the President of McWane and I report to Phillip McWane, the Chairman of the company. I was raised in Memphis, Tenn., and my father is a retired physician who taught me that I was to take responsibility for both my successes and my failures, and that's what I'm here to do today.

I'm here first and foremost today to apologize to the Birmingham community and to the government for our failures. I, personally, and we as an organization, are truly sorry for the errors that we've made.

You have heard and will hear further about the many people, systems and financial efforts put forth over the last five years at McWane to ensure environmental, health and safety compliance.

However, I stand here today and recognize that even earlier efforts were called for, as well. I was asked to explain to the court in connection with our sentencing what McWane's attitude is about the conviction.

THE COURT: Please repeat that. I missed it.

MR. PAGE: I was asked to explain to the court in connection with this sentencing what McWane, our attitude is, about this conviction and where we've come as a company, what you can expect from us in the future. And I hope that our record of improvements and community involvement, will speak in that regard.

The fundamental error we made, Your Honor, that has brought us here today is we did not adjust our management of compliance for a larger more complex organization. Over the course of five short years, 1995 through 1999, the company grew threefold. The number of operating facilities increased from 11 to 30 across North America and Australia. The number of employees more than doubled, from 3,000 to over 7,000, during this time. Approximately 2,000 worked in Birmingham and Anniston, alone.

Historically, McWane has been run in a very decentralized way with a very small corporate staff of seven or eight people. The lack of depth that we had [in] environmental, health and safety staff at the corporate level and at the traditional level during this surge in growth that we had, strained our ability to remain in compliance and to keep up with it and know what was going on throughout the whole situation.

THE COURT: I have earlier suggested that some of the people that worked below your level, Mr. [James] Delk and Mr. [Michael] Devine, I have suggested that they perhaps just came into a situation that was, to some extent, beyond their control. Would you agree with that or not?

MR. PAGE: Absolutely. Yes, sir.

THE COURT: All right. I didn't come over here not knowing anything or not thinking anything. I guess if I read something and don't think, that's kind of a questionable approach.

I'll have to acknowledge and we'll get more into it when we get into the sentencing phase, but I'm not here to create a statistic. I'm here to try to accomplish what I'm supposed to do and that's to impose a fair and reasonable sentence.

And as I've indicated, some of what I've seen here just somewhat substantiates some judgments that I formed during the course of the trial. And that is -- and you very candidly admitted it, and I think it's commendable that you've done so -- you have very candidly admitted that things just were not right out there earlier; is that correct?

MR. PAGE: Yes, sir.

THE COURT: And were those created by Mr. Devine and Mr. Delk?

MR. PAGE: I don't work in the plant. I wasn't there on a regular basis. My estimation is that the circumstances they inherited were very difficult in a very complicated manufacturing operation.

THE COURT: And you said the fast growth had contributed.

MR. PAGE: The fast growth -- we also had, at the same time, Your Honor, we had a generational turnover. And so it stretched the organization in terms of its management talent here throughout the ranks of the entire company.

THE COURT: Well, during the course of the trial, there was somebody there that had been there earlier as the plant manager over a period of time, and the suggestion seemed to be [that he was] just kind of running out of his pocket. I don't remember his name. I'm not saying he was good or bad. Who was the predecessor that was there for a number of years?

MR. GALE: Mr. Luna.

THE COURT: Yes.

MR. PAGE: Mac Luna. He ran it for 20 years, and when he retired, many of the people that were with him for all of those years left also. So you had a brain drain, so to speak, in that instance in particular.

But with generational changes that took place and also the operating philosophies that Mr. McWane and I imposed on the company, some retired and some were asked to leave, and I will get into that if I can proceed.

THE COURT: All right.

MR. PAGE: We had this generational turnover and it took place throughout the whole company. And at the same time, the company tripled in size. So you can imagine the strain in terms of just the talent that we had just trying to draw. These plants were fairly specialized, so you can't go hire an MBA that knows how to run a foundry. Most of them are grown within the industry.

While it has been my intention, since I became president in 1999, to bring our company in full compliance, I realize now that all of these events led us to fail in some of our responsibilities. I say this not as an excuse but as background to the efforts we've been making. Today we're committed not only to meet our responsibilities but to become the best in our industry.

I truly hope that our record, not just following the publicity of these proceedings but even before, confirms this commitment. What we have done, Your Honor, is to address these deficiencies in a systematic and a long-term and permanent way, as opposed to a quick fix that will break again in six months from now.

Briefly, let me go over what we did. Management changes: From 1999 through 2000, we retired, terminated or demoted, 70 percent of the United States general managers in our company. Just had to make changes. Some of them were natural retirements, but some of them we changed because they were inexperienced, not up to the job or didn't get it. I believe we now have a well-trained and outstanding group of managers that place value on compliance.

In addition, we have created -- we've taken 44 positions. Out of the top 150 positions in our company, 44 existing positions have new managers in them, and we've established another 62 new environmental, health and safety positions that did not exist before in the management ranks and at the plants. So out of a total of 153 positions, 106 are new people and new positions.

THE COURT: When did you come [to work] with the company?

MR. PAGE: '99.

THE COURT: You heard -- is it -- I'm not good on names. Mr. [Michael] Keel [vice president for compliance and corporate affairs]? Is that his name?

MR. PAGE: Yes, sir.

THE COURT: I have asked him several times when that project that was depicted on the screen, when that significantly got underway. Could you put a date on it?

MR. PAGE: Which project?

THE COURT: Were you here when Mr. Keel --

MR. PAGE: Yes, sir.

THE COURT: When I say project, I don't mean necessarily a project. I guess maybe I mean more of a philosophy or a policy. The steps that were taken, not just with regard to physical improvements out at the plant, but also the general compliance procedures that were put into effect. When did that significantly start?

MR. PAGE: I'll go back to the first environmental managers compliance meeting that we had, company-wide, that I addressed, and that was the first year I was president. And I told them that we needed -- we had a series of NOVs [notices of violations] and some fines across --

THE COURT: Was that '99?

MR. PAGE: Yes, sir. And I told them they needed to raise their hand in the plants, they need to step up and speak to the general managers and point out issues of deficiencies, address them. Let's raise them up. Because I was concerned we didn't know what we had because of the lack of depth of corporate compliance structure that existed in the organization.

Then in 2001 was when I believe we hired KERAMIDA [Environmental, Inc.], who is the organization that Jeet Radia, who is currently now our vice president of environmental affairs. He came from there. We hired them to come in and do external audits of our plants and help us understand what type of a system we could install that would be effective so that we could monitor what was going on out there.

THE COURT: Well, as I recall from the trial, the only somewhat halfway significant plant improvement that had been undertaken during the period of time that the trial was involved, was that traverse system. And I got the impression that that was not necessarily a proactive environmental move [so much] as it was just to try to get rid of some leaks.

But, apparently, from what Mr. Keel presented, at some point there came to be some significant physical improvements.

MR. PAGE: At McWane [Cast Iron] Pipe [in Birmingham]?

THE COURT: Right. When did that more significant step start taking place?

MR. PAGE: The first water tank -- there are two out there now -- the first water tank was installed in 2001, and the second one was installed a year later. There has been a progression of events in us getting our arms around, not just McWane Pipe, but systematically.

THE COURT: When, if ever, was it brought to your attention -- two of the foci of the trial was the creek clarifier not working and that sludge scrubber not working. Were you ever familiar with that?

MR. PAGE: When it was brought to our attention, when ADEM [Alabama Department of Environmental Management] was involved, and the attorneys got involved, that's when I found out about it and we came up with a solution to fix it, is how it was explained to me. Now, I don't recall what year that was. 1999?

THE COURT: But I don't think they got fixed during that time frame but whatever. Okay. Excuse me. Go ahead.

MR. PAGE: In addition for capital expenditures and environmental [and] health operating spending, it grew from just over $20 million a year in the late '90s and progressed steadily up to about $75 million a year.

During the last five years, Your Honor, we have spent in excess of a quarter of a billion dollars company-wide on both capital and expense projects relating to environmental, health and safety. So we tried to address the personnel piece, had to get projects scheduled to get the money spent.

THE COURT: When you say a quarter of a billion dollars, are you talking about in various plants?

MR. PAGE: Yes, sir. Company-wide, North America.

THE COURT: All right.

MR. PAGE: Predominantly in the United States. We hired outside experts like Mr. [Hank] Habicht, and this is when we developed this centralized web-based compliance system that allows our corporate compliance group to look into the plants and verify and know that the compliance efforts are being carried out in a way that they should.

We just didn't have enough people on those jobs, and we didn't have the appropriate level of talent in those jobs. And once we beefed that up and installed this web-based system, then we had the ability to actually perform compliance internally.

We had to go through a cultural transformation as well. It's a big company, and it's very spread out, and it takes years of hard work. We modeled our approach on environmental compliance through consultation with the EPA. I went into every region of the EPA to make presentations with Mr. Keel in which we have operating facilities. That's four of the eight. More than once. If they made a suggestion, I've implemented it.

We're currently seeking [EPA] Performance Track status in a couple of our better facilities. But, more importantly, whether we're eligible for Performance Track or not because of legal issues, we're committed to achieve Performance Track status, level compliance in all of our facilities.

I believe the past failures that we have experienced can and must serve as a lesson to us and set the stage for success in the future. We believe we are becoming a leader in the foundry industry in compliance, environmental, health and safety.

We are maintaining our commitment to the community where we have plants, not just in Norwood, but Coshocton, Ohio, and Provo, Utah, and Phillipsburg, New Jersey.

With respect to the sentencing you will hand out, I only ask that you allow as much of the money as possible to go to good use here locally in this community, and that sending us a message about what is expected of us going forward is not necessary.

Judge Propst, I assure you I have learned from this experience. I get it. And I will never forget it.

THE COURT: All right.

MR. PAGE: I'll leave you with one quote that I think accurately characterizes the McWane organization. "We may not be able to solve all of your problems overnight, but if we make up our minds we're going to do it right from day to day, as we are given to see the right, everything will work out satisfactory in the end."

These are the founding father, J.R. McWane's spoken words, back in 1982, Phillip McWane's great grandfather. With that, I would like to introduce my boss, the chairman for McWane.

THE COURT: Okay.

MR. PAGE: Thank you.


Phillip McWane (photo credit: from a McWane publication)

MR. MCWANE: Thank you, Ruffner. Thank you, Your Honor. My name is Phillip McWane and I am chairman of McWane Incorporated, the position I've held since 1999. I'm a fourth generation family member to hold this position.

I'm here today to speak not only on behalf of the company, which was found guilty in this case, but also on behalf of myself. In a way, I was found guilty, also. I, and the company, apologize to you, Judge Propst, and the Birmingham community, the company's 7,000 employees and their families, and to the federal and state government.

I never planned or designed for this company to perform in such a manner as to make it necessary to be here today. In the eyes of the jury, the individuals and the company, have been found to be lacking in adhering to the Clean Water Act during a period of time, four or more years ago. For that, I have a hard time finding an adjective or attempting to find an adjective to describe my feelings, and I don't think there is one. But some of them would be regretful, repentant and even ashamed. I, and the company, accept responsibility.

When I look back on that time frame and try to determine what more the company and I could have done when we learned that the plant had fallen into such a state of disrepair, we provided every resource we could have, including expertise in the production area, technical help in the foundry area, legal help on legal matters. And, of course, all of the money needed to carry out all of the necessary --

THE COURT: Would you agree that Mr. Delk and Mr. Devine were brought into a situation that was not totally of their making?

MR. MCWANE: Yes, sir.

THE COURT: All right.

MR. MCWANE: Despite our intentions, I know now what was done was not enough to avoid this unpleasant experience, even though the company and these individuals worked to fix these problems some four to five years before the indictment.

I am not proud of what has happened here. I am proud of how our company has responded and the employees.

As you have heard, we did not simply stop with fixing the water problem at McWane [Cast Iron] Pipe, we have gone further and have undertaken a company-wide transformation that will restore our company to the rights of those which the people admire.

I would like to close by speaking about reputation for just a moment. A man's reputation, I believe, is his most valuable asset, more so than money. It defines who we are.

Four generations, 85 years and tens of thousands of employees have worked to build this company into what it is today. That can't be [un]done by breaking the law.

In this case, we have been found to have broken the law and thus put the company at risk. And it has certainly damaged the company's and the family's reputation.

A man's reputation is his most valuable asset. I intend to continue to rebuild that asset, to earn that asset back for the company and the family. That's my pledge to you today, Judge Propst, to the Birmingham community, and to the 7,000 employees and their families, and to the federal and state government. Thank you for your time.

THE COURT: All right, sir. Okay. Anything else from the Defendant McWane?

MR. JONES: Your Honor, at this time, I think Mr. Page and Mr. McWane have said it all for us.

THE COURT: Okay. Nothing else from you all?

MR. JONES: No, sir.

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posted february 5, 2008

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