Navy sell-off leads to abuses Scrapping of ships leaves wake of spills, double-deals, deaths

Buyers ignore rules, get rich

'It's more difficult to get driver's license than to buy a ship'

April 28, 1996|By Will Englund | Will Englund,SUN STAFF

With the end of the Cold War, the Navy has begun selling off its huge fleet of surplus warships for scrap -- and the handful of businesses cashing in are leaving a dismal trail of toxic spills, mishandled asbestos, worker injuries and tangled lawsuits in port after port across the country.

The Navy program has spawned a new type of ship-scrapping business, led by men who see opportunity where older shipyards see only risk and liability. Veterans of the business have largely refused to take part, convinced that the old ships are so loaded with toxic chemicals that the only way to turn a profit is to cut corners and break the law.

The newcomers are not so squeamish.

Unencumbered by high technology, capital investment or even permanent places of business, they say they are ready to handle as many ships as the Navy wants to sell -- as many as 150 over the next few years.

They reject the accusation that they can make money only if they break the rules, but since 1993 they have established a track record in Baltimore and other ports of environmental violations, injuries and deaths on the job, and financial double-dealing.

Hardly anyone has noticed.

Ship-scrapping is not a glamorous field. It doesn't attract the attention of congressional oversight committees. Local officials become aware of problems when a scrapper comes to town, but can't connect those to a national picture. Critics say the Defense Department has only the barest interest in what happens to the ships it sells.

"These guys are destroying the environment, and the Navy doesn't want to do anything about it," says Said Farokh, an environmental consultant in Buffalo, N.Y.

"We have a bunch of ships in the hands of the wrong people," he says. "It's not creating jobs. It's creating a mess."

Typically, a ship scrapper rents a pier in some forgotten industrial stretch of waterfront, hires a subcontractor to supply a crew, finds another subcontractor to take care of toxic wastes and lines up scrap dealers to find buyers for rail-car loads of cut-up steel.

In Maryland, Rhode Island, North Carolina and California, state officials have done little to check the records of these scrappers, who create different shell companies to handle each deal. They move their operations from port to port, even as environmental officials struggle to catch up.

Prominent new players

Two of the most prominent new players are Richard Jaross, who until recently had a home in Ellicott City, and Andrew A. Levy, a lawyer who works out of a Park Avenue office in New York.

Mr. Jaross has moved his operations over the past several years from Texas, to Virginia, to California, to Baltimore, to North Carolina, leaving in his wake angry partners, protracted lawsuits and environmental violations.

Mr. Levy, who obtained the aircraft carrier Coral Sea and had it towed to Baltimore, has a partner in Rhode Island under indictment and a partner here -- Kerry Ellis, of Seawitch Salvage -- who is the target of a federal investigation into the illegal handling of asbestos.

Mr. Levy and Mr. Jaross have been high bidders on 40 of the 60 ships put up for scrap so far.

"You see guys getting away with murder," says David Peck, who runs an established ship-cutting yard in Richmond and was an unsuccessful bidder on several surplus ships. "How many mishaps do you have to have?"

Ship-breaking is a dirty, dangerous, low-tech line of work. The primary tools are cutting torches and sledge hammers. Crews break and cut their way down through a ship, often in complete darkness, the rusty decks sloshing with chemically contaminated water and sometimes overrun with rats.

If warships consisted of steel alone, they would be valuable -- as much as $300 a ton. The problem is not in the steel -- it's in the asbestos that was used as a fire-retardant, the polychlorinated biphenyls (or PCBs) that were used in electrical insulation, the sodium chromate that was poured into ballast tanks to prevent rusting, the triorthocresyl phosphate that was mixed into hydraulic fluid, and the lead paint on the bottom.

The need to clean up those chemicals drives down the value of an old ship. The Coral Sea, with steel worth about $9 million,

fetched only $750,000. A lot of money could be made from scrapped ships -- if only it weren't for those environmental considerations.

"I've told scrappers every way I can," said Jack Billings, an environmental consultant in Oregon, "that they're not going to be able to do it -- unless they're not planning on following all the rules and regulations."

'Get rich on this thing'

"There are serious bidders, who are in it for the business, in it for the haul," says Mr. Peck. "The opposite approach is to take a guy with a torch, and say, 'I can really get rich on this thing. I can cut corners. I can screw Uncle Sam and get rich at the same time.' "

The Coral Sea, a 65,000-ton aircraft carrier launched in 1947, was put up for bid in 1993. It marked Andrew Levy's entry into the world of ship-breaking.

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