Sterigenics funnels $1.3 billion in cash while facing increased legal pressure for causing cancers
Lawsuit amended to show parent company funneled money to shareholders as victims’ claims grow
The group of law firms suing Sterigenics and parent company Sotera for polluting the air in Willowbrook, Illinois with toxic ethylene oxide (EtO) and causing at least 75 cases of cancer, have filed an amended legal complaint showing the company has funneled its assets beginning in 2016. Public documents show these financial transactions moved $1.3 billion dollars out of corporate holdings and into investors’ hands. Those funds will no longer be available to provide justice to the victims in this case. The medical sterilization company exposed innocent neighbors to the airborne carcinogen for decades. In the fall of 2019, the company permanently closed its Willowbrook facility after intense public pressure.
There are now approximately 75 cases pending before the court, which name Sterigenics and other parties responsible for causing leukemia, lymphoma, breast cancer, miscarriages and other medical conditions.
The amended complaint, filed in Cook County on Friday, January 31, 2020, states and alleges that defendants Sterigenics and Sotera played an indispensable role in the carefully orchestrated funneling of nearly $1.3 billion to shareholders in the last 27 months, with the intention of ensuring that these funds will not be available to compensate victims when they secure judgments against them in court. By doing so, Sterigenics and Sotera effectively admit, but hope to avoid accountability for, their culpability in exposing Willowbrook area residents (including plaintiffs) to the extraordinarily dangerous ethylene oxide, which seriously damaged the health of many, and even claimed the lives of some.
Specifically, public records show that during the last 27 months, Sterigenics and Sotera were learning:
- in 2016, that the S. EPA would reclassify EtO as a “known” (from “probable”) human carcinogen, and that the chemical was 30 times more likely to cause cancer than the U.S. EPA had previously recognized;
- in 2018, that this information would be reported to the public, including and especially Willowbrook area residents;
- in 2018, that cancer-stricken plaintiffs had begun to file lawsuits, some of them wrongful death lawsuits; and,
- in 2019, that the first of these plaintiffs had successfully obtained the remand to the court of their lawsuits which had been baselessly removed by defendants to federal court.
Public documents illustrate that Sterigenics and Sotera were working with their corporate parents to make sure that virtually all available cash and other assets would be funneled away from these unsecured creditor-plaintiffs, and instead to the companies’ venture capitalist shareholders in the form of massive cash distributions and to banks in the form of pledged assets, and hundreds of millions in interest payments on borrowings undertaken to fund the payments to shareholders. For example:
- In October, 2016, Sterigenics-Nordion Topco, LLC (“Topco”), a parent of defendants Sterigenics and Sotera, borrowed $350 million, for the purpose of funding a $340 million cash distribution to Topco’s shareholders. Sterigenics and Sotera were necessary to this borrowing, upon information and belief, as they each guaranteed its repayment by granting the lender group a security interest in their tangible and intangible assets, thus making these assets unavailable to plaintiffs, as Sterigenics and Sotera’s unsecured creditors.
- In October, 2017, Sotera Health Holdings, LLC (“Health Holdings”), also a parent of Sterigenics and Sotera, and Topco, together increased their borrowings by some $175 million. They added to these increased borrowings some $28 million in free cash, which together funded a $203 million distribution to their shareholders. As with the borrowing of one year earlier, upon information and belief, the repayment of these borrowings, too, was guaranteed by Sterigenics and Sotera granting the lender group a security interest in their tangible and intangible assets, thus making these assets unavailable to plaintiffs, as Sterigenics’ and Sotera’s unsecured
- In August, 2018, Sotera itself made a $95 million cash distribution to shareholders, thus making this cash unavailable to
- In July, 2019, Health Holdings borrowed an additional $320 million, which was used in its entirety to fund a $320 million cash distribution to shareholders. Upon information and belief, once again, Sterigenics and Sotera each guaranteed the repayment of this borrowing by granting the lender group a security interest in their tangible and intangible assets, thus making these assets unavailable to plaintiffs as Sterigenics and Sotera’s unsecured creditors.
- In December, 2019, Health Holdings completed a refinancing of, inter alia, previous borrowings, obtaining nearly $3.28 billion in new debt financing, or access thereto. This borrowing was used, in part, to fund a $309 cash million distribution to shareholders in December of 2019. As with previous borrowings by their parents, Sterigenics and Sotera guaranteed the repayment of this new borrowing, by granting to the lender group security interests in their tangible and intangible
Sterigenics’ and Sotera’s central role in this orchestrated and intentional effort has not only effectively placed the companies’ cash and other assets out of plaintiffs’ reach, but also dangerously de-stabilized the companies, jeopardizing their very existence, and thus further jeopardizing the likelihood that plaintiffs will receive just compensation for their injuries. As Moody’s credit rating service has observed, after the 2019 transactions noted above, these companies have “a high degree of environmental risk,” and will have “limited ability to absorb unforeseen setbacks or cash demands on the business.”
Antonio Romanucci is the court-appointed Lead Counsel for the legal group suing Sterigenics. Four Co-Lead Counsels were also appointed, including Todd Smith of Power Rogers & Smith L.L.P; Patrick Salvi, II of Salvi, Schostok & Pritchard, P.C.; Steven Hart of Hart McLaughlin & Eldridge, LLC; and Shannon McNulty of the Clifford Law Offices.
The Plaintiffs’ Executive Committee includes Romanucci & Blandin, LLC, Power Rogers & Smith, L.L.P., Salvi Schostok & Pritchard, P.C., Hart McLaughlin & Eldridge, LLC; Clifford Law Offices; Tomasik Kotin & Kasserman, LLC; The Collins Law Firm P.C.; and Miner Barnhill & Galland, P.C. Together the firms are fighting to hold Sterigenics accountable for the reckless negligence that has resulted in the needless and continuous poisoning of men, women and children in Illinois for so many years.