Lawsuit claims lies and potential bribery tied to Marengo plant

(Photo by simpson33 via iStock / Getty Images Plus)

A lawsuit alleges that a company operating an alternative fuels plant in Marengo lied to, and may have bribed, public officials before a massive explosion injured workers there in 2022.

Tali Washburn, a Pottawattamie County woman who worked for the company C6-Zero as its government relations director, is now suing C6-Zero, six of its affiliates and several company officials in U.S. District Court for the Northern District of Iowa.

In December 2022, C6-Zero’s roof-shingle recycling plant in Marengo was rocked by a massive explosion that injured more than a dozen people and resulted in a partial evacuation of the town.

As part of her lawsuit, Washburn alleges that long before the explosion, company officials told her they had purchased a house from the Marengo city official tasked with approving the plant’s emergency safety plan. The purchase was then put in someone else’s name to obscure C6-Zero’s involvement, the lawsuit claims.

In 2023, a judge ordered the company to pay a $95,700 fine for workplace safety violations that contributed to the explosion. The state has since sued the company for $1.5 million in expenses caused by the cleanup of contaminated water at the Marengo site. A trial in that case is scheduled for later this year.

According to Washburn’s lawsuit, she was hired by C6-Zero in March 2020. In mid-2021, she claims, she “blew the whistle” on corporate wrongdoing by contacting the company’s CEO, general counsel and chief operating officer.

The lawsuit alleges she then hired a former federal prosecutor as her own legal counsel and “confronted” the company about what she considered to be safety issues, loan falsification, tax issues and “interference” with the Iowa Department of Natural Resources.

In January 2022, she claims, the company placed her on administrative leave and threatened her with a lawsuit for defamation. In July 2022, she alleges, she was fired and three months later disclosed her concerns to an unspecified “Iowa government official.”

Lawsuit details regulatory issues

The problems began, Washburn alleges, shortly after she was hired to help C6-Zero clear regulatory hurdles in developing recycling technology that would turn asphalt into oil.

According to the lawsuit, C6-Zero’s biggest problem at that time was that it was unable to use patented technology due to various state agencies classifying the business as a recycler, a stockpiler of solid waste and a potential generator of hazardous waste.

Washburn alleges she “developed a pathway” for C6-Zero to successfully obtain a “comfort letter” from the Environmental Protection Agency’s Midwest regional office to launch its business in Iowa. That letter was intended to “validate” the company’s commitment to operate, within the EPA’s own framework, as a manufacturer and not a generator of hazardous waste.

Shortly thereafter, the lawsuit claims, company officials directed Washburn to send a grant application to the state seeking a forgivable multimillion-dollar loan. State officials denied the grant request, allegedly citing issues with the company’s background.

Months later, the lawsuit claims, company officials told Washburn they had “embellished” the grant application in part by stating they would hire 260 employees and have a total annual payroll of $3.7 million.

In addition, the lawsuit states, Chief Operating Officer Christopher Koehn “specifically and purposefully lied on the application” by listing a particular individual with a good reputation as C6-Zero’s chief technology officer. Koehn confessed to Washburn that the man never had any official role in the company and his name was included merely to bolster the company’s bid for the forgivable loan, the lawsuit alleges.

An arrest and a $27,500 fine

In early 2021, with its plans for recycling shingles on hold, the company allegedly initiated plans to get into the business of crushing soybeans as a way to produce an oil that could be used in biodiesel fuel while also producing soybean meal, according to the lawsuit.

Company CEO Howard Brand then purchased a facility in Marengo, Iowa, to handle that work. According to the lawsuit, Koehn later told Washburn the company had mistakenly bought the plant without performing its due diligence. After paying the seller “large sums of money,” the lawsuit claims, C6-Zero learned the facility was in foreclosure and the bank that owned it was reluctant to sell.

In April 2021, Brand was arrested in Marengo and then jailed in connection with issues that another company he owned, BrandLich, had with the Texas Commission on Environmental Quality. The commission accused Brand of illegally dumping asphalt shingles.  Brand eventually admitted responsibility for the dumping and paid a $27,500 fine, the lawsuit alleges.

After the arrest, the lawsuit claims, the company asked Washburn to handle damage control and make sure the incident didn’t derail C6-Zero’s plans to do business in Iowa recycling shingles.

In May 2021, Brand allegedly called Washburn “in a panic because an Iowa Department of Natural Resources field director was at the Marengo facility.” The DNR official then told Washburn the company would have to apply for an air-quality permit if it intended to crush soybeans at the plant, adding that the company was already in violation of regulations for fabricating equipment without such a permit.

House purchased from city safety official

Throughout the spring and summer of 2021, the lawsuit claims, Washburn worked with Travis Schlabach, an elected city councilman in Marengo and the city’s deputy fire chief, since Schlabach was responsible for fire and emergency and management in the city. Without Schlabach’s signature, the company couldn’t manufacture or store oil at the plant, the lawsuit claims.

Washburn alleges that in July 2021, she mentioned to Koehn that it was fortunate at least one public official in Marengo, Schlabach, understood the value of having C6-Zero in the community. According to the lawsuit, Koehn responded, “He better like us. We bought that house from him.”

The lawsuit states that Koehn told Washburn that a separate company he controlled facilitated the purchase of a house from Schlabach and placed it in the name of someone else so the transaction would be harder to trace back to C6-Zero.

“Aghast and taken aback,” the lawsuit states, “Washburn told Koehn that the payment to Schlabach – the public official and deputy fire chief responsible for signing off on the emergency management plan – put the entire company at risk as the payment could be readily interpreted as a bribe. After hearing Washburn clearly wouldn’t ‘play ball,’ Koehn … asserted the house purchase wasn’t meant to curry favor with an important official.”

Schlabach said Monday he doesn’t recall giving his approval to any sort of safety plan or emergency management plan for C6-Zero, and that the city performed no inspections of the site. “I don’t recall signing anything saying, ‘Yes, it’s safe,'” Schlabach said.

He said he agreed to sell the house to Howard Brand on a “handshake,” adding that nothing was put in writing and the property never changed hands. He said the agreed-upon sale price was $150,000, to be paid on a rent-to-own basis, with the monthly rent totaling $750.

Koehn and Brand later had Schlabach sign a letter expressing community support for C6-Zero, although the letter was actually written by Washburn, the lawsuit alleges.

“I can’t argue with that claim,” Schlabach said. “I’m not very good with English, grammar or writing letters.”

Washburn claims she later sent an email headed “Emergency Management Conversation” to company officials expressing concern that the alleged house purchase posed a great risk to C6-Zero. In the email, she also expressed concern with plant safety, noting that a worker had been burned there recently.

In the summer of 2021, the lawsuit alleges, Washburn learned the Marengo plant was still crushing soybeans without the required permits from the DNR. At that time, Brand allegedly told Washburn he wanted to “retaliate” against the City of Marengo due to his arrest there. The lawsuit claims Brand intended to donate the Marengo plant to 4-H so the plant couldn’t be used by other manufacturers for job creation in the community, and then he’d move C6-Zero’s soybean work to another state.

In July 2022, after Washburn hired an attorney to pursue her claim of unpaid wages, the company fired her, the lawsuit alleges.

Her lawsuit seeks damages for breach of contract, unpaid wages, fraudulent misrepresentation and civil conspiracy.

C6-Zero and company officials named in have yet to file a response to the allegations. Company officials did not immediately return a message seeking comment.

The post Lawsuit claims lies and potential bribery tied to Marengo plant appeared first on Iowa Capital Dispatch .