Flint residents sue banks, accuse them of helping to create water crisis

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Residents of Flint seeking water crisis damages accuse three investment banks of contributing to tens of thousands of residents being exposed to toxic water when the city shut down changed its water source over six years ago.

Filed on behalf of 2,600 children in federal court in Detroit on Wednesday, the lawsuit against JPMorgan Chase & Co., Wells Fargo and Stifel, Nicolaus & Co. claims that by funding the town of Flint’s participation in a sale of $ 220 million municipal bond for the construction of a new water line, the riverbanks knowingly put Flint on the way to rely on the corrosive Flint River as a temporary water source and a bad water plant equipped to treat water.

“All three of them knew 100% that if they participated in the bond sale, the children would be hurt, the children would be brain damaged and people’s lives would be changed forever,” said Corey Stern, lawyer at Levy. Konigsberg LLP who filed the complaint.

“But rather than doing the right thing, the ethical thing, the moral thing, they participated with the government accused in creating this situation for the children of Flint because of the money they could make.”

The plaintiffs seek pecuniary damages, a potential compensation that Stern assesses could be worth at least $ 2 billion.

Wednesday’s filing comes after residents of Flint joined several other water crisis lawsuits that lobbied and led to a $ 600 million settlement two months ago with the state of Michigan for its role in the public health disaster that potentially exposed thousands of children to toxic levels of lead.

According to Stern, the case centers on children under the age of 19 because of the level of damage he believes the children have suffered and because of Michigan’s statute of limitations laws that allow minors to file accrued claims. when they were children until they came of age. from 19.

JPMorgan Chase declined to comment. Wells Fargo and Stifel, Nicolaus & Co. could not immediately be reached for comment on Wednesday.

The water crisis in Flint began in April 2014, when the city began using the Flint River as a temporary water source to cut costs so it could modernize its water treatment plant and connect to the new water pipe once it is built. For decades, the city bought already treated water from the Detroit Water and Sewerage Department, but ended the relationship in April 2013 after deciding to enter into a long-term customer contract with the Karegnondi Water Authority.

The bonds at the center of the lawsuit were issued in the spring of 2014 by the KWA, backed by Genesee County and Flint, to pay for the construction of a $ 300 million pipeline from Lake Huron into Sanilac County that would transport water 70 miles inland to Genesee. county and town of Flint. The water authority was formed by officials from the counties of Genesee, Sanilac and Lapeer several years ago with the goal of providing a new alternative water supply from the Detroit water supply system.

At the time, the city was at its debt limit, as regulated by the state constitution, and could not afford to participate in the bond sale. As a workaround, Flint and KWA’s bond attorney, an outside environmental attorney, and the Michigan Department of Environmental Quality developed an environmental consent order to clean up a toxic sludge pit linked to the treatment plant. the water.

The ordinance granted the city access to additional funding and also included a stipulation regarding the city’s participation in the KWA project as part of the compliance program for the violation. The order allowed Flint to participate in the offering of securities and was included in the official declaration of the obligation, which allowed the sale of the bonds to proceed as planned in April 2014. This helped fund the pipeline project in time for the construction season that year, but the money was used to pay for the KWA, not to help Flint pay to clean up the sludge pit.

Flint’s total share in the project was around $ 85 million, and within weeks of the initial bond issuance, the city sought to quickly commission its water treatment plant to begin distribute water from the Flint River.

But the plant was not ready to distribute drinking water to residents, a Genesee County drain official said during a preliminary criminal hearing of four Michigan Department of Environmental Quality employees in 2016. David Jansen , a senior deputy director of the Genesee County Drain Commission, said at the time, the water was not treated with anti-corrosion chemicals and was leaching lead from aging pipes into the city’s drinking water.

According to the lawsuit, without JPMorgan Chase, Wells Fargo and Stifel, with Nicolaus & Co. subscribing to the bond sale, the city would have been forced to continue buying water from Detroit because it did not have the funds to pay for modernization. the plant after the pipeline is built or use the Flint River in the meantime.

“JP Morgan Chase, Wells Fargo and Stifel have taken up arms with the town of Flint. They’ve locked the guns with the Treasury Department. They locked the guns with DEQ. They squeezed their arms so tight it was impossible to tell them apart, ”Stern said. “And in doing so, they violated the right of every citizen of Flint to bodily integrity.”

Christine Chung, a professor at Albany Law School, said that typically in municipal bond or bankruptcy cases, residents lack standing, with elected officials or city administrators representing those interests.

But she noted the effort of Federal Judge Steven Rhodes, a retired federal judge who oversaw Detroit’s bankruptcy, to hear from city residents during bankruptcy proceedings.

“This is where it’s new,” said Chung, who is co-director of the Law School’s Institute for Financial Market Regulation. “It is in a way a sad and defining characteristic of these cases, namely what is the place of the voice of the residents in the legal proceedings involving these questions of public finances and public governance? ”

Lee anne walters

LeeAnne Walters, a resident of Flint and a mother who is one of the plaintiffs named in the case on behalf of her children, said she was cautiously optimistic about the lawsuit and believed filing a lawsuit against the banks was an important step .

“All actors have been involved, must be held accountable,” said Wednesday Walters, one of the first whistleblowers during the water crisis and now environmental activist. “Banks that put profit before safety must be held on par with everyone else and they deserve to pay for the lives of the lives they have devastated.

Walters, whose twin children were three years old at the time of the crisis, says she sees the emotional and physical toll of the water crisis reflected in her children every day, from problems with hand-eye coordination to impaired speech and continued refusal to drink tap water.

“It took a while, but good things are happening to those who wait,” she said. “I hope that as we move forward in this area the good guys continue to be the good guys and the bad guys learn that it’s not okay to be bad guys. “

Arthur Woodson of Flint uses a megaphone to sing along with the crowd outside the Capitol as part of a protest against the water crisis in Flint in 2016.

Upon learning of the trial on Wednesday, Flint community activist Arthur Woodson was taken aback by the news and felt it would bring a welcome spotlight to the six-year saga.

“I’m thrilled because they’re getting more attention now and showing people that it’s all about making money, not saving money,” Woodson said of the lawsuit. .

Woodson said the addition of financial institutions looks like the start of a new phase in the water crisis litigation. “For them to attack the bank is for real, you are preparing to fight,” he said.

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