Lac-Mégantic; Rail company attempts to hide behind bankruptcy


AFP/Getty Images
AFP/Getty Images

In the latest chapter of the Lac-Mégantic tragedy, I’ve lost count but it would appropriately be Chapter 11, Montreal Maine and Atlantic Ltd. (MMA) has filed for bankruptcy protection in both Canada and the United States. You may recall that on July 6 of this year a MMA train carrying fuel oil broke loose and rolled into Lac-Mégantic where it exploded. At least 47 people lost their lives and the town was leveled.

Because not only will creditors be knocking at the door, but lawyers – armies of them – seeking payment for damages in Lac-Mégantic

MMA’s parent company is a private giant, Rail World, that owns railway concerns in many countries.

Now MMA is seeking creditor protection as its liabilities far outweigh its assets. A monitor has been appointed who will attempt to negotiate with MMA’s creditors for lesser paybacks. This sort of thing is common in the business world, but in this case it seems MMA is passing the buck to Rail World which in turn  will deny any responsibility for the actions of a subsidiary.  Because not only will creditors be knocking at the door, but lawyers – armies of them – seeking payment for damages in Lac-Mégantic.

“They’re not going to get away with it. I mean this case is too huge and too tragic for them to be able to get away with it”

According to Edward Jazlowiecki, a Connecticut-based lawyer who is representing several families in Lac-Mégantic, “They’re not going to get away with it. I mean this case is too huge and too tragic for them to be able to get away with it. We see it in all kinds of cases – bus cases, train, plane cases, pharmaceutical cases that we do. You know everybody tries to point the figure at the other subsidiary and it just doesn’t work.”

David Vilder/Bloomberg
Edward Burkhardt
David Vilder/Bloomberg

In fact not only does this move come as no surprise, but it may help the very public case said Jazlowiecki: “It’ll actually help in a lot of ways because we’ll get to see the man behind the curtain. We’ll get to see all his assets, see his insurance information. And MM&A is such a small part of the cog.”

In this case MMA is seeking protection not only from creditors, but from potential lawsuits in the wake of the Lac-Mégantic tragedy

This move illustrates the ugly side of business as usual. Filing for Chapter 11 creditor protection, or bankruptcy protection, is a way for companies to get a little wiggle room and try to get their affairs in order when they find themselves in over their heads through poor management or market conditions. The protection afforded the company in question is from investors and people to whom money is owed. In this case MMA is seeking protection not only from creditors, but from potential lawsuits in the wake of the Lac-Mégantic tragedy.

“It’ll actually help in a lot of ways because we’ll get to see the man behind the curtain. We’ll get to see all his assets, see his insurance information”

I’ve said it before, and I’ll say it again: It’s time for Ed Burkhardt and the MMA directors to man-up and not hide behind legal curtains. But that’s not good business practice.

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