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Directors and officers forced to pay $3.81 million to cover pollution cleanup

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An Ontario, Canada, case in which directors and officers of a now-bank-rupt aerospace company agreed to help pay environmental remediation costs remains applicable only to Canada, but experts say the deal is disturbing.

Twelve former directors and officers of bankrupt Bedford Park, Illinois-based Northstar Aerospace Inc. agreed to pay 4.75 million Canadian dollars ($3.81 million) to the Ontario Ministry of the Environment and Climate Change to help cover environmental remediation and monitoring expenses of the company's Cambridge, Ontario, airplane parts plant.

The settlement was reached in October 2013 while the directors and the company, which Rosemont, Illinois-based private equity firm Wynnchurch Capital acquired in 2012, were appealing a ministry order holding them liable for the environmental cleanup. It also was before a final judicial ruling had been reached by Ontario's Environmental Review Tribunal.

A ministry spokeswoman said this was the first time corporate directors were held personally responsible for remediation costs.

The former directors' attorney, Terrence O'Sullivan of Lax O'Sullivan Scott Lisus L.L.P. in Toronto, said: “There was no applicable insurance in the case.”

Mr. O'Sullivan said the Ontario environmental legislation that permitted the ministry to pursue the directors was “draconian and should be of serious concern to any director or officer or any insurer of any company that might be associated now, or historically, with environmental contamination” in the province.

“Canada has a different legal framework around environmental liability” than the United States, said Rob Yellen, New York-based executive vice president of Finex North America, a unit of Willis Group Holdings P.L.C

But given that individual directors were charged with being personally liable, this was a “very disturbing settlement” and is “certainly something you want to keep an eye on,” said Kevin LaCroix, executive vice president at RT ProExec, a division of R-T Specialty L.L.C. in Beachwood, Ohio.