PALMETTO — As early as 2008, the U.S. Army Corps of Engineers was predicting possible disaster at the old Piney Point phosphate plant in Manatee County if a plan to use the site for dredging went forward.
The “worst case scenario,” the Army Corps cautioned, would be a tear in the plastic liner that engineers were counting on to hold back water perched atop dangerous waste material. Another worry the Army Corps raised: What if the private company in charge went bankrupt?
Army Corps officials warned the Manatee County Port Authority, which was counting on the increase in business. They warned the Florida Department of Environmental Protection, which stood to show it could transform a costly mess into an asset. And those warnings reached HRK Holdings, the private company that bought the site and planned to make millions from storing dredge material.
All of them pushed back. And then the worst happened. The liner failed almost immediately after dredging began. Now, 10 years later, it has happened again.
This month, a leak at Piney Point drove Manatee County to the nervous edge of catastrophe. Fearing a flood would rip through the surrounding community, authorities ordered the evacuation of more than 300 homes. More than 200 million gallons of wastewater have been pumped into Tampa Bay, the environmental impact of which is still unknown.
Under a spotlight in the aftermath, the Florida Department of Environmental Protection is pledging to hold HRK accountable. But the agency isn’t a minor actor in the story of what went wrong at Piney Point. Florida’s environmental regulator agreed to a plan that put a group of New York financiers in charge of what was arguably the state’s biggest ecological risk. The agency questioned warnings from engineers who sounded the alarm that a major leak could happen. And the state knew HRK was behind on its goal to get rid of the polluted water.
Even the agency’s top official is bewildered by how Piney Point was ever allowed to become a dump site run by an inexperienced private company.
“The more I learn, the less I understand,” said Department of Environmental Protection Secretary Noah Valenstein during a news conference with the governor this week.
The state had money to close Piney Point for good before but chose to leave the site open for future business interests, the secretary told lawmakers April 7. That has left “the property still there as a risk,” Valenstein said.
Since the latest leak was first noticed, a familiar pattern has emerged. Everyone involved is pointing fingers elsewhere. But records show officials at all levels — the state, the company, the county — had a hand in what Piney Point became. The county backed an idea to put more waste at Piney Point, the company looked at an environmental risk and saw a chance to profit, and the state stood by as a looming environmental danger festered on its watch.
Dredging Port Manatee
Port Manatee was looking to dredge a new berth, becoming an attractive destination for huge freighter ships sailing through the Panama Canal. It needed a place to put all the muck.
In Piney Point, port officials saw opportunity.
The Port Authority, made up of Manatee County commissioners, approached the Florida Department of Environmental Protection about the idea, the Bradenton Herald reported in 2005.
The state was on board, seeing a chance to make something useful out of an industrial site with a troubled history. It had spent years trying to drain acidic wastewater from Piney Point’s radioactive phosphogypsum stacks, replacing the ponds with plastic-lined reservoirs.
Port records show that department officials and a consultant engineer, Ardaman & Associates, met with the Port Authority’s governing board in October 2005. They touted the strength and longevity of the liner, saying it was a material that would “survive the elements well past our lifetimes.”
Former commissioner and Port Authority board member Joe McClash said board members were given samples to touch.
“There was a high degree of confidence because it was the same material used for landfills,” said McClash.
A private company saw opportunity, too. Despite the contamination, industrial land close to a seaport made Piney Point an enticing real estate investment for HRK, which purchased the roughly 700-acre site in 2006. In a dredging agreement with the port, HRK could quickly make millions of dollars and fill in some of the old gypsum stacks.
But in 2008, the Army Corps of Engineers released a 72-page study calling the idea a risk.
“I got through 5 pages of this utter nonsense from the (Army Corps of Engineers) before my blood pressure hit the red zone,” HRK representative Art Roth wrote after reading the report, according to an email filed in court records. “Obviously, facts, experience and expert opinion don’t matter.”
HRK executives didn’t have first-hand experience in dealing with the complex geology of a gypsum stack, but they did have something else working in their favor: the Florida Department of Environmental Protection and its engineering consultants at Ardaman.
HRK, with the agency’s approval, tapped Ardaman to rebut the Army Corps. The engineer had a long history with Piney Point, having worked with the state on closure efforts for years.
Ardaman tamped down fears in a report, professing confidence and repeatedly calling a leak “unlikely.”
The Army Corps continued to oppose the project.
An Army Corps official wrote to the executive director of the port in 2009 saying that even if the risk of failure was low, “the consequences could be great.” He noted HRK could go bankrupt, like prior owners who operated the phosphate plant on the site. That would put the state in a jam. More to the point, the risks were unnecessary because a cheaper, safer option existed to dump the dredge material miles offshore into the Gulf of Mexico.
The Florida Department of Environmental Protection threw its weight behind Piney Point, too. Then-Secretary Michael Sole wrote to an Army Corps leader that the state had “previously identified several benefits to the local environment and community” from disposing of dredge spoils there.
An official under him at the agency noted the department had spent more than $100 million cleaning Piney Point and continued to hope the new reservoirs would be useful for a project such as dredging. The agency gave assurances that the Army Corps would be shielded from litigation if something went wrong.
The Army Corps was still worried, records show, almost right up until the 2011 dredge operation began. A high-ranking Army Corps official in Washington, D.C., wrote the port saying the plan was needlessly risky.
The Army Corps would not agree to an interview for this story. Ultimately, it let the dredging go forward.
Disposal began that April. In May, there were signs of a leak, which an expert eventually traced to a tear in the liner. The Department of Environmental Protection, fearing the leak would disrupt the gypsum stacks, issued an emergency order letting crews send about 170 million gallons of potentially contaminated water toward Tampa Bay.
HRK has since sued Ardaman saying the company relied on the engineering firm’s assurances and expertise that the plastic liner system would hold. That litigation has been tied up in court for eight years. Ardaman’s attorney did not answer emails for comment. The company did not reply to a request for comment submitted through a contact form.
Now, with another breach to answer for, HRK is again arguing it was misled by Ardaman.
A recent warning
The liner that kept water in the large reservoir at Piney Point, stopping it from leaking, is about 0.08 inches thick. That’s equal to 76 Hefty strong trash bags.
After the 2011 leak, and subsequent fixes, officials continued to trust the plastic liner. But fears did not subside, and the state required HRK to make routine inspections.
As recently as March 2020, an independent engineer brought on to evaluate Piney Point warned of a looming disaster.
The potential for “catastrophic damage to the public and the environment is considered unacceptable,” two engineers for the firm, Wood, declared in a letter to HRK and the Department of Environmental Protection.
The engineers described liner tears above the water level, the “unknown and likely compromised condition” below the surface and possible lingering trouble from the 2011 incident. They suggested the reservoir “should immediately be drained” and kept stable until the gypsum stack system could be closed.
State regulators were taken aback. The letter contained “several factually incorrect statements,” according to the state.
In response, John Coates, the manager for the Department of Environmental Protection’s mining and mitigation program, questioned what proof Wood could have for some of the letter’s assertions. The engineers had only looked at part of the liner that was above water, which would be more worn from the sun, he wrote. Coates had been involved with oversight at Piney Point for years.
If the Wood engineers had qualms about lingering issues from the 2011 leak, Coates wrote, they could have spoken up earlier, in previous years working at the site. The agency did not make Coates available for an interview.
Dee Ann Miller, a spokesperson for the Department of Environmental Protection, said the state did not receive a reply to Coates’ letter. But it did receive an annual inspection report dated June 2020 in which the same engineering firm described the phosphogypsum stack system as “generally in good condition based on Wood’s visual inspection.”
A Wood representative declined to comment.
Throughout the rest of 2020, records show, HRK staffers continued to document small cracks or potential flaws above the water line.
“HRK routinely inspects, notifies FDEP, and corrects synthetic liner flaws identified above the water line of the water storage compartments,” the company said in a statement this week. Valenstein, the department secretary, has said “that’s the ongoing process with a liner system.”
About a year after Wood’s warning, residents around the old plant property would flee their homes on the recent Easter weekend, as authorities warned that a leak from a liner tear could cause the collapse of Piney Point.
Then, the blame began.
Signs of trouble
HRK Holdings has two main responsibilities at Piney Point, according to a presentation Coates, of the Department of Environmental Protection, gave to Manatee commissioners in January 2019.
• Clean up and manage the site.
• Provide financial assurance that the property will be cared for decades into the future.
It was the department’s job to make sure they did that, Coates said. “They have to be held accountable, and they are being accountable.”
But HRK has struggled to meet its obligations, records show.
Engineers working at the site repeatedly documented how the company was not disposing of polluted water fast enough to meet a Feb. 15, 2019, deadline in an agreement with the state. HRK did not have the technology or equipment needed to finish the job on time, the independent engineers said.
The company said this week it “has continuously and diligently relayed concern to all who would listen of the impending problems and risks” at Piney Point and “has proposed numerous solutions to” state and local government without getting approval or funding. HRK pushed for a deep well to inject wastewater underground, among other solutions.
Rain has continued to fill the site. Jeff Barath, HRK’s manager at Piney Point, recently told elected officials in Manatee that without help, wastewater could soon overwhelm the ponds.
To assure the state that Piney Point will be managed into the future, the company has had to keep money in a trust. HRK says it has to get state approval to pay for at least some repairs on the property.
The fund gives the Department of Environmental Protection money in case HRK goes out of business and the state has to step in to manage Piney Point again. That’s what happened when the plant’s last private owner, Mulberry Corp., failed two decades ago. Coates said the acidic wastewater ponds would have overflowed without state intervention.
But, Coates told commissioners in early 2019, the money HRK held with the state was not enough to take care of all the waste at Piney Point in the event the company went out of business.
As of March 31, about the time this leak was reported, a financial report provided by the Department of Environmental Protection showed that HRK had less than $2.5 million in a fund overseen by the Florida Department of Financial Services.
Lawmakers are now talking about spending as much as $200 million to close the place for good.
The money men
HRK Holdings was an unusual choice to take over an abandoned phosphate plant.
Valenstein, the state’s top environmental official, has said other sites like Piney Point are run by active mining companies.
HRK was created by a group of three Wall Street financiers: William “Mickey” F. Harley III, Scott Rosenzweig and Gary Kania. The firm, set up as a limited liability corporation, took its name from their initials with Harley and Rosenzweig each owning 40 percent and Kania 20.
Kania later left HRK and Rosenzweig died in 2012.
Harley had a reputation for buying companies in financial trouble. A 2004 profile in Forbes described him as a “vulture” who learned about distressed firms while working at investment bank Allen & Co., before he moved on to manage Mellon HBV’s $1.2 billion hedge fund. It catered to affluent investors who could afford the $1 million minimum investment.
Harley declined to comment for this story.
A graduate of the Yale School of Management, Harley at one time owned a handful of Hooters franchises and held $6 million in stock in Frederick’s of Hollywood, the lingerie retailer, where he also served on the board of directors. He sat on the board of a Canadian-based energy firm that mined for uranium in Namibia. Later, he invested in a pecan farm.
The Bradenton Herald reported that the investors learned of Piney Point from Roth, a fertilizer consultant, who was then hired by HRK.
But records show that in 2001 Kania was following the bankruptcy of Mulberry Corp. closely. He was a vice president at a New York-based bank and was listed as its contact in a claim made in bankruptcy filings that Mulberry owed the bank $36.6 million.
Tampa attorney Herb Donica was hired by Mulberry Corp bankruptcy trustee John Brook after Piney Point closed. He visited the site off U.S. Hwy. 41 so often, paint began to peel from his silver Mercedes, the result of acid from an abandoned pond on the site drifting through the air, he said.
The job of the trustee was to get the best deal for Mulberry’s many creditors, but it wasn’t like a normal bankruptcy since the site was under the control of the Florida Department of Environmental Protection, Donica told the Tampa Bay Times.
Manatee commissioners declined the chance to buy the site for $4 million, saying it was too polluted even for that bargain price.
Other companies were interested in acquiring Piney Point, but Kania’s familiarity with the site gave HRK an advantage, Donica said this week.
Around the time of the sale, he told the Sarasota Herald-Tribune: “They satisfied us that they knew what they were getting into. We were never going to turn it loose to someone who wasn’t aware of the managing and monitoring that is required.”
Brook, the trustee, said last week that the Department of Environmental Protection vetted HRK and approved the sale.
HRK financed the $4.3 million purchase through a $10 million loan secured by a mortgage on Piney Point from AmSouth Bank, which later merged with Regions Bank. It was also required to pay $3.8 million to the department toward the ongoing cleanup of the site.
Court records show that the company struggled even as it borrowed more money from Regions. By 2008, liens were being filed against the Piney Point property, and HRK was sued for $1.7 million because it failed to pay a construction company to demolish old phosphate factory equipment.
By 2010, Regions agreed to consolidate the firm’s debt into a single promissory note of $17.5 million.
There was some money coming in. The firm leased land to a salt company that wanted storage. A warehouse for keeping fertilizer was built and the start of the pumping of dredging material from Port Manatee’s Berth 12 project promised more revenue. Port records show HRK was paid $3 million through 2011.
The company’s finances nosedived after the first leak.
Barely more than a year later, it filed for Chapter 11 bankruptcy protection in Tampa federal court. Claims from creditors reached $33 million. That included a $12 million lien from Port Manatee, which had been sued by the dredging company claiming that the delay caused by the leak had cost it $4.7 million.
Harley, HRK’s principal owner, was also hit with a lawsuit filed a few months later by the Claude Worthington Benedum Foundation. The wealthy Pittsburgh nonprofit accused Harley of misusing its $2 million investment to make payments to companies he owned, including HRK, through his hedge fund.
Soon after, regular reports showed the value of the nonprofit’s investment was plummeting. By April 2008, its $2 million investment had dwindled to $306,000, the lawsuit claims.
Around June 2009, Harley closed the hedge fund’s offices, the lawsuit states, and started operating the fund out of a Hooters basement.
The lawsuit alleged that he transferred the remaining investment funds into a company he owned called the Arsenal Group. Arsenal sent hundreds of thousands of dollars to HRK during its bankruptcy, court records show. The lawsuit was closed after the two sides agreed to a settlement. The terms were not disclosed.
HRK emerged from bankruptcy in 2017, although it remained millions of dollars in debt to Regions Bank.
The state is vowing this will be Piney Point’s “last chapter.”
How that will happen is unclear. Gov. Ron DeSantis has directed the Department of Environmental Protection’s scientists and engineers to draw up a plan. Valenstein, the department’s secretary, said closure will mean draining and filling the ponds to make sure water can no longer be stored at Piney Point.
The governor has redirected about $15 million toward treating water at the site. State lawmakers say they could greenlight up to $200 million for closure.
The leaking reservoir today, according to state regulators, contains a mix of old seawater from the dredging, rainwater and polluted water related to the fertilizer industry.
Manatee County administrator Scott Hopes says what happened isn’t the county’s fault and points out that Piney Point was the responsibility of a private landowner that was overseen by the state.
“Certainly, the county did not have the resources to do what’s being done right now,” he said.
Valenstein told lawmakers this month that he is interested in ordering a report detailing his agency’s actions at Piney Point.
Already, another business is circling the property.
In September, Regions Bank assigned HRK’s outstanding debt to Fortress 2020 Landco. Soon after, Fortress sued HRK seeking to foreclose on several debts and lines of credit that HRK has failed to repay. The loans total $25 million, according to the lawsuit.
It’s unclear what investor or company is behind Fortress. The company was registered in August in Delaware, a state that draws hundreds of thousands of business registrations because of laws that keep executives’ names confidential.
Records filed with Florida’s Division of Corporations, also in August, list a business address in Fort Worth, Texas. Orla Drilling, which works with oil and mining companies, is listed as operating from that site. HRK has filed motions seeking to have the Fortress lawsuit dismissed.
This new legal battle could complicate the governor’s plan for the state to clean up the site permanently and hold HRK accountable.
Glenn Compton, who is chairperson of the local environmental group ManaSota-88, doubts the state will be able to get much money from HRK. He has long criticized what he sees as mismanagement and poor regulation of Piney Point. He considers it a “historic mistake” that will be difficult to bring to a close, the culmination of decades of poor choices and the lasting fallout of Florida’s fertilizer industry.
“What we’ve learned is there’s no such thing as a future beneficial use of a phosphogypsum stack. These are wastelands, and they’ll be wastelands for generations to come,” Compton said. “The price is being paid by the taxpayers and the environment.”