Monsanto, Solutia to Pay $600 Million PCB Settlement

Aug. 22, 2003
The experience of Monsanto Co. is a stark illustration that compliance with existing environmental rules may not be enough to protect a company from devastating liabilities.

Monsanto president Hugh Grant announced Aug. 21 that the company and its former chemical subsidiary Solutia Inc. have agreed to a $600 million global settlement of current and pending claims brought by thousands of Anniston, Ala. residents over the dumping of toxic polychlorinated biphenyls (PCBs).

Monsanto broke no laws when it discharged PCBs into the land and water of Anniston, but the chemical is now banned and is considered by EPA to be a probable carcinogen.

Residents did not learn of the pollution until 1996, although plaintiffs have charged Monsanto was aware of the problem far earlier. Monsanto lost an Alabama court case last year, and was found liable for PCB pollution in Anniston.

The settlement, expected to be made final later this month, would conclude lengthy litigation involving 20,000 plaintiffs who sued over ground and water contamination. The company faced state and federal civil litigation involving property, personal injury and punitive damages.

During a question-and-answer briefing, Grant explained that allowing Solutia to declare bankruptcy was one option considered, and ultimately rejected, by the company as a way to handle the enormous unknown liability of the Anniston situation.

Monsanto will be responsible for $550 million of the settlement; Solutia will pay an additional $50 million. In addition to community projects, clean-up costs and other expenses, the total cost of the settlement could rise to over $700 million. However, during questioning Grant said these additional costs would fall to Pfizer Inc.'s subsidiary Pharmacia, another party to the settlement.

"This was a tough decision," said Grant, "but given the options in front of us I think this was the right one for our shareholders."

Shareholders appeared to agree, as Monsanto's share price rose sharply on news of the settlement.

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