The chemical giant DuPont deliberately saddled its "fraudulent" spinoff company Chemours with billions of dollars in debt and environmental liabilities in an attempt to shed its expensive toxic cleanups, such as one in Pompton Lakes, New Jersey officials allege in recently filed court papers.

The new claims by the state attorney general's office were quietly added as amendments to a lawsuit filed against DuPont and Chemours seeking financial damages for widespread pollution in Pompton Lakes

This includes a neighborhood where residents have had to endure cancer-causing solvents that migrated for decades beneath their homes from a now-shuttered DuPont explosives factory.

Like dozens of sites across the U.S., the cleanup in Pompton Lakes had long been DuPont's responsibility. That changed in July 2015, when DuPont created Chemours as a spinoff company that took over the bulk of the DuPont's environmental liabilities.

But two separate lawsuits against DuPont — one by New Jersey officials and another by Chemours itself — allege what many in Pompton Lakes feared at the time of the spinoff: DuPont created Chemours to insulate itself from future cleanup and natural resource damage claims, and left Chemours vulnerable to financial problems that could put cleanup efforts at risk in New Jersey and across the country.

"We warned everybody of this," said Lisa Riggiola, a longtime community activist whose mother still lives in the Pompton Lakes neighborhood. "What we predicted is unfolding and coming true."

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The lawsuits allege that DuPont saddled Chemours with almost $4 billion in debt, refused cash advances and grossly undervalued how much liability Chemours would take on from all the former DuPont toxic sites.

Dan Turner, a DuPont spokesman, would not comment on the New Jersey lawsuit. He referenced a statement DuPont issued last month in response to the Chemours lawsuit.

"We have no reason to believe Chemours is insolvent or otherwise unable to manage the liabilities allocated to it in the Separation Agreement — either today or at any point since it became an independent company," the statement reads.

In its lawsuit, New Jersey officials said they are concerned over the solvency of Chemours and its ability to carry out the monitoring and cleanup in Pompton Lakes as well as its ability to possibly pay damages from the state's lawsuit.

Tayler Covington, a spokeswoman for the U.S. Environmental Protection Agency, would not comment on the pending litigation but said her agency would ensure the companies live up to their environmental responsibilities. The site is covered by an EPA permit and New Jersey consent order, "both of which include financial assurance requirements," she said.

Lee Moore, a spokesman for the New Jersey attorney general's office, said the agency would not comment on the legal proceedings.

The language in New Jersey's amended lawsuit is not as restrained. A new section dealing with the creation of Chemours is titled, "The Fraudulent Spinoff of DuPont's Specialty Chemical Business."

Creating Chemours

While New Jersey's amended lawsuit delves deeply into how Chemours was created, Chemours' 64-page lawsuit provides even more details on how its executives argue it was set up to fail by DuPont.

DuPont had fought to keep the lawsuit sealed from public view before a Delaware judge ruled otherwise. The suit was made public last month.

The genesis of Chemours dates back to 2013, when DuPont began an initiative code named “Project Beta” that focused on what to do with the company's performance chemicals unit, according to the Chemours lawsuit.

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That unit manufactured industrial chemicals and was responsible for much of DuPont’s widespread pollution across the nation. DuPont figured no one wanted to buy the division with such significant environmental liabilities, so it began toying with the idea of a spinoff, the lawsuit states.

At the time, DuPont was facing criticism from a New York hedge fund, Trian Fund Management, which had taken a stake in the Delaware company. DuPont planned a $5 billion stock buyback to appease shareholders.

To cover the cost of the buyback, DuPont arranged to have Chemours pay DuPont a dividend of $3.9 billion when the spinoff was completed.

The management team assembled to lead Chemours was meanwhile kept in the dark about the new company’s financial situation, the Chemours suit alleges.

In June 2015, just weeks before the spinoff was finalized, Chemours' CFO sent an email saying he needed $200 million to $300 million in cash reserves to operate on Day One. DuPont rejected the request, and castigated the Chemours CFO for putting the request in an email, creating a paper trail, according to the Chemours lawsuit.

Chemours received 19 percent of DuPont’s business lines, but was saddled with two-thirds of its environmental liabilities and 90 percent of DuPont’s pending litigation, according to the Chemours lawsuit. Liabilities exceeded earnings by 5.5 to 1 at the time of the spinoff.

Furthermore, the lawsuit said DuPont’s estimates for what Chemours would have to pay in environmental damages and lawsuits “were systematically and spectacularly wrong.”

For instance, DuPont estimated that three lawsuits against it over contamination from the toxic chemical PFOA would cost no more than $128 million. They were settled by Chemours for $671 million less than two years later.

Cleaning up DuPont discharges into North Carolina’s Cape Fear River was estimated to cost no more than $2 million. Costs now stand at $200 million, according to the Chemours lawsuit.

DuPont “dumped the maximum possible environmental liability” on Chemours while “extracting the pre-ordained $4 billion payment,” the lawsuit states.

NJ goes after DuPont, Chemours

Among the 80 toxic sites inherited by Chemours was the former Pompton Lakes munitions plant where for decades DuPont workers disposed of solvents used to clean machine parts by dumping them into unlined lagoons on the company's 600-acre campus.

The plant closed in 1994 after almost a century of manufacturing. The solvents that had been dumped into the lagoons migrated into groundwater, which carried the cancer-causing pollutants under an adjacent neighborhood of 450 homes just south of the plant. Elevated rates of kidney cancer and lymphoma have been found in the neighborhood.

An award-winning 2018 series by NorthJersey.com and the USA TODAY NETWORK New Jersey showed how DuPont worked behind the scenes for more than three decades to keep secret and then downplay the extent of overall contamination from the site and the potential health risks they posed to neighboring residents.

The series was credited by state Attorney General Gurbir Grewal in March for his decision to file four lawsuits against DuPont, Chemours and 3M to recover damages to the state's air, soil and water by DuPont pollution at four sites across the state.

The lawsuit was amended on May 31, around the same time that Chemours filed its lawsuit. New Jersey's lawsuit detailed how DuPont executives since at least 2000 were concerned about liability from the toxic chemical PFOA, used to make one of DuPont's signature products, Teflon, for non-stick pans and other products.

It was the wave of lawsuits, fines and investigations over widespread PFOA contamination that led DuPont to create Chemours to "protect its assets," the New Jersey lawsuit states.

DuPont underestimated the amount Chemours would have to shell out to cover environmental lawsuits, cleanup costs and fines, the New Jersey lawsuit states, echoing the same argument as Chemours.

How will this affect Pompton Lakes?

Even though PFOA is not a contaminant at Pompton Lakes, its affect on Chemours' finances has led New Jersey officials to question the company's ability to carry out the monitoring and cleanup of Pompton Lakes.

Chemours' initial stock price of $21 in July 2015 dropped to $11.48 within a month, and then plummeted to $3.16 in six months — an 85 percent decline. That forced Chemours to lay off 1,000 employees, close manufacturing plants, undertake two corporate restructurings and amend its credit agreements, according to Chemours' lawsuit.

Concerns about Chemours’ financial position were raised as far back as 2016, when well-known short-seller Andrew Left of Citron Research published a report calling Chemours a “bankruptcy waiting to happen.”

Chemours' stock price roared back up to more than $57 a share in October 2017. It has since fallen to about $20, as of last week. Still, Chemours CEO Mark Vergnano said in a January speech that "no way" was Chemours set up to fail — despite the allegations in his company's lawsuit months later.

Chemours executives did not answer questions about its lawsuit or whether the company will be able to monitor and remediate the Pompton Lakes site, which includes the 600-acre former campus, the plume of contaminated groundwater under 450 nearby homes and a lake that had been contaminated with mercury and lead from the site and which was recently dredged to remove contaminated sediment.

In a statement, the company said it has spent $100 million on cleanup efforts in New Jersey since Chemours was formed in 2015 and has "worked with developers to revitalize several of these sites for commercial use, creating New Jersey jobs."

Despite assurances from EPA officials, other spinoffs have failed under the burden of a parent company’s environmental liabilities, leading to lengthy litigation — and slowing cleanups.

Some measures are in place — from policies to case law — that can help the government secure cleanup money from a bankrupt polluter, but the process is still prone to onerous litigation that can go on for years, delaying cleanups.

Residents have said little has changed since Chemours took over the DuPont site in Pompton Lakes, considering the site is still overseen by former DuPont employees, and many of the same questionable practices and controversial clean up methods continued.

State environmental regulators last year shot down a Chemours plan originated under DuPont to pump clean water into the ground in hopes of providing a protective barrier between Pompton Lakes homes and contamination. And residents have criticized the $50 million project that ended last year after 130,000 cubic yards of contaminated sediment was dredged from Pompton Lake, saying the project left too much polluton in the lake.

Recent zoning changes to make the Pompton Lakes site a hybrid industrial district were criticized by many current and former residents, who say the changes allow Chemours to conduct a less comprehensive cleanup because the standards are not nearly as strict.

The state Department of Environmental Protection says levels of the cancer-causing TCE and PCE are decreasing in the groundwater beneath the affected homes and has not required Chemours to do a more aggressive cleanup.

"Where does this leave the people living in Pompton Lakes?" Riggiola asked. "They're still there with their elevated rates of cancer. And what happens to all the other sites across New Jersey and the U.S.?"