THE RENCO GROUP'S RESPONSE TO VANITY FAIR

In the July issue of Vanity Fair, Michael Shnayerson has written an article entitled Devastating Luxury. That article, which purports to be an investigative profile of Ira Rennert, the Chairman and CEO of The Renco Group, is fundamentally unfair and inaccurate. The article paints a false picture of The Renco Group and Mr. Rennert, relying on snippets of truth, without providing the full context of those facts, and by employing unjustified innuendo.

In the article, Mr. Shnayerson acknowledges, although somewhat reluctantly, that the operating companies owned by The Renco Group have made major achievements in their operations and their impact on the environment and the communities in which they operate. In fact, the objective facts regarding the operations of each of these companies demonstrate that, since being acquired by The Renco Group, they have made significant and important strides in preserving jobs that would have been lost forever, improving their environmental performance and actively engaging as positive members of their communities. Nevertheless, to paint his false picture, Mr. Shnayerson has inexcusably ignored numerous other facts about the companies and their financial affairs, many of which were brought to his attention by The Renco Group prior to his writing the article, and in some instances describes fictional events that have no basis in fact. Further, the article reflects Mr. Shnayerson's erroneous predisposition to believe that Mr. Rennert's home in Sagaponack is being built at the expense of the environment and the financial well-being of The Renco Group's companies. Consequently, the pictures that Mr. Shnayerson attempts to paint of both The Renco Group and Mr. Rennert are untrustworthy.

What follows is a summary of the critical facts that the article either omits or misstates with respect to The Renco Group and its companies, their financial affairs and Mr. Rennert. The totality of those facts demonstrate that The Renco Group and its companies are good corporate citizens and that the Renco Group has dealt fairly with the bondholders of the various companies and the communities in which those companies operate, contrary to the message that Mr. Shnayerson attempts to deliver in his article. The Renco Group is disappointed that Mr. Shnayerson and Vanity Fair published such a mean-spirited and inaccurate article, and that they put sensationalism ahead of accuracy and fairness. The Renco Group is confident that, when all the facts (including those described below) are considered, a far truer picture of The Renco Group and Mr. Rennert will emerge. And that picture most decidedly will not be one of an "empire of notoriously toxic mills and mines falling apart."

The Companies' Environmental Performance

• Mr. Shnayerson asserts that The Renco Group and Mr. Rennert believe that environmental matters for each of the operating companies are not their "issues." In fact, The Renco Group has strongly endorsed and encouraged efforts that each of its companies has undertaken. Addressing environmental issues has been a corporate objective for The Renco Group, and Mr. Rennert (as chairman of each of the various operating companies) has long supported each company's extensive investments in environmental improvements from the time of each acquisition. There is no basis to accuse either The Renco Group or Mr. Rennert of indifference to environmental concerns.
  
  
• Mr. Shnayerson misunderstands and mischaracterizes the litigation commenced by the Department of Justice against The Renco Group and Magnesium Corporation of America ("Magcorp").
  
  
  
  • Mr. Shnayerson states that the government pierced the corporate veil merely by filing the suit, when in fact the suit merely alleges that the veil should be pierced, and the government bears the burden of proof to establish that it should be done. Given The Renco Group's respect for the requirements for separate corporate structure, The Renco Group is confident that the government will fail to meet its burden on this issue and that the 1996 dividend paid to The Renco Group was proper and did not jeopardize Magcorp's financial condition.
    
    
  • Mr. Shnayerson states that the government commenced an extraordinary suit for $900 million, and forecasts the collapse of The Renco Group if the company has to litigate the issues with the government. Mr. Shnayerson neglects to mention that no where in the complaint filed by the government is there a request for $900 million in penalties, and that the only source of that number is speculation in the media.
    
    
  • Mr. Shnayerson talks of a "stew of toxic wastes" and ditches that likely leach into the Great Salt Lake. In fact, the sampling performed by both the EPA and Magcorp (and now US Magnesium) belie such accusations. Sampling by the EPA and the State of Utah has consistently shown that such an accusation is false. Nor is there any evidence that any of the effluent that is transferred to holding ponds via the two ditches has or is likely to leach into the Great Salt Lake. Not one of the chemicals in those streams is present at levels that the EPA's regulations would define as hazardous.
    
    
  • Mr. Shnayerson is dismissive of and fails to understand the important exemption that the EPA implemented pursuant to the Bevill Amendment to the Resource Conservation and Recovery Act. Congress enacted the Bevill Amendment in 1980 (and not in 1998 as Mr. Shnayerson erroneously states) in recognition of the fact that the EPA's stringent hazardous waste program is unnecessary for certain high volume/low hazardous wastes generated by the utility, oil and gas production, cement and mining industries, including specifically Magcorp. The amendment is well-known by the EPA. Indeed, internal documents obtained from the EPA during discovery in the litigation establish, as the District Court has been advised in connection with the pending motion for summary judgment, that the EPA's own representatives up until the government commenced the litigation believed that the regulations exempted the waste streams that the government now challenges.
  • Mr. Shnayerson also states that the action brought by the government was a cause of Magcorp's bankruptcy filing. Mr. Shnayerson offers no basis for that assertion, and instead trivializes Magcorp's financial condition as of the time of filing (which was due to the dramatic decline in revenues and was wholly unaffected by the lawsuit).
    
    
  • Mr. Shnayerson wrongly accuses Magcorp of having stolen minerals from land owned by the Bureau of Land Management (the "BLM"), and that the action by BLM was intended to address that conduct. Mr. Shnayerson fails to report, as he was told, that Magcorp paid the State of Utah royalties for all the minerals that are the subject of the now-dismissed BLM action. That action, in fact, was an unprincipled attempt to make Magcorp pay twice for the minerals and to expropriate future royalties from the State of Utah.
    
    
• In describing the efforts of Doe Run to address lead emissions at its facilities, Mr. Shnayerson attempts to describe Doe Run as doing so reluctantly and as attempting to delay efforts to fulfill its commitments. He furthers suggests that Doe Run is indifferent to the impact that its facilities have on its communities. Mr. Shnayerson's views of Doe Run, however, do not square with the historical facts.
  
  
  • Over the last five years, Doe Run has made dramatic strides in reducing lead emissions and the lead content in the air at both its Herculaneum, Missouri and Peru facilities. The improvements are especially striking in Peru because of the serious pre-existing environmental condition at the facility operated by an agency of the Peruvian government and in the community, which Doe Run inherited as a result of the acquisition. Indeed, in the 1997 acquisition agreement, that agency agreed, with a guarantee from the Government of Peru, that it was financially responsible for any clean-up costs arising from the historic neglect of La Oroya.
    
    
  • As a consequence of the failure of previous owners to address environmental matters during the seven and one-half decades preceding Doe Run's acquisition, the pollution levels in the community were very high. That condition and the harm resulting from those failures are the responsibility of the Peruvian governmental agency, from which Doe Run purchased the facility. Due to that conduct, throughout La Oroya, there are large deposits of lead that have nothing to do with Doe Run's environmental performance. Nonetheless, at the same time that Doe Run has improved the operation of its facilities and meaningfully reduced emissions, it has adopted programs to improve hygiene in the community, particularly in the schools, and to locate sources of lead in the homes. Contrary to Mr. Shnayerson's reports, Doe Run's substantial efforts have resulted in a steady and significant reduction of lead in the blood levels of the population, including in the children of the community.
    
    
  • Mr. Shnayerson also distorts the information regarding blood levels at Doe Run's Peru facility. Under Doe Run ownership, the blood levels of the employees at the Peru facility have been reduced by 30 percent, and those blood levels continue to decline.
    
    
  • The reports regarding blood levels in the Herculaneum community are also inaccurate. Over the last five years, there have been very meaningful declines in children's blood levels. For instance, the Missouri Department of Health and Senior Services found in 2002 that there was a 62 percent decline in the prevalence of elevated blood levels from the year before, and other studies have shown a marked decline in children's blood levels in both the immediate and greater Herculaneum community each and every year. In addition, he dishonestly accuses the company of refusing to publish individual results, ignoring the fact that privacy laws prohibit the release of such information and that local and state governments also do not publish such information.
    
    
  • Mr. Shnayerson also erroneously describes Herculaneum as being filled with smoke "so intense". Contrary to that assertion, however, this condition is a historical one that existed only before The Renco Group's acquisition of Doe Run. Today, Doe Run complies with emission standards for air emissions.
    
    
  • Mr. Shnayerson makes an outright misrepresentation when he shows a picture of a sign stating "High-Lead Levels On Streets" accompanied with the caption "A sign warns of dangerous lead levels near the Doe Run smelter in Herculaneum." The use of this picture and the statement are inexcusable because those signs were removed in June 2002 by the authorities that had erected the signs, a year before the publication of Mr. Shnayerson's article.
    
    
  • Mr. Shnayerson suggests that Doe Run has acted only when coerced to do so. In fact, Doe Run has a long record of voluntary efforts to make environmental improvements and has substantially improved its environmental performance at Herculaneum. Moreover, Mr. Shnayerson's assertion that Doe Run declines to act, blaming "venetian blinds and lead paint" is utterly false, as the company has never made any such statement.
    
    
  • The same is true for the house buying program, which the company started more than 10 years ago on a voluntary basis and memorialized in an agreement well before any public demands that it engage in such a program. Further, Mr. Shnayerson's discussion of the home buying program falsely asserts that Doe Run has not complied with its commitments. The schedule established with the State of Missouri for the purchase of homes was phased, and Doe Run has kept to that schedule. It has not deferred the repurchase of homes whatsoever. Further, while Doe Run would be happy to purchase homes more quickly, it can do so only if and when the residents request Doe Run to do so - hence, the pace of the purchases are very much controlled by the residents.

The Companies' Financial Affairs

• Mr. Shnayerson declares that The Renco Group is on the brink of collapse, a false assertion that is a result of misstatement and apparently a lack of any financial sophistication. The Renco Group and its companies have experienced a difficult period of time because of a recession and depressed prices for natural resources, but those difficulties and the losses that they incurred have not threatened or damaged The Renco Group's ability to survive and ultimately to prosper as the economy slowly improves.
  
  
• Mr. Shnayerson describes the various bond offerings by several of the operating companies and the dividends made to The Renco Group in connection with them. He then asserts throughout the article that thereafter, The Renco Group failed to make any financial contributions to the operating companies. Mr. Shnayerson knows, that that assertion is false because The Renco Group advised him of the facts to the contrary. As Mr. Shnayerson was told, The Renco Group has provided significant cash to the operating companies. In fact, The Renco Group has provided cash and credit support in excess of $100 million to the companies.
  
  
• Mr. Shnayerson describes The Renco Group's dealings with bondholders, and the supposed mistreatment of the bondholders of Magcorp and Lodestar. Mr. Shnayerson neglects to report, as The Renco Group advised him, that The Renco Group made substantial proposals to the bondholders of each company, which would have entailed significant contributions from The Renco Group. In each case, had the bondholders accepted the offers, both Magcorp and Lodestar might well have avoided bankruptcy, and the bondholders would not have lost their entire investment. Instead, the bondholders intentionally chose to reject these offers, calculating, albeit incorrectly, that they could obtain better results by pursuing different strategies.
  
  
• As to one of the bondholders, Wexford Capital, Mr. Shnayerson asserts that its losses during the Lodestar bankruptcy are the fault of Mr. Rennert. Yet, neither Mr. Rennert nor The Renco Group interfered or obstructed anything that Wexford attempted to do during the bankruptcy. Further, Mr. Rennert did not control the operations of Lodestar - it was operated by Mr. Francisco, whom Wexford wanted to be Lodestar's CEO.
• Mr. Shnayerson also misdescribes the auction process that occurred for Magcorp. An auction occurred not because of any impasse with the bondholders, but because Magcorp had exhausted its working capital and would have had to close its doors forever unless it was sold in auction, as the Bankruptcy Court held. The Renco Group had no obligation to bid at the public auction supervised by the Bankruptcy Court, but it chose to do so because it did not want the company to close. It instead bid for the company through a subsidiary (of which Mr. Sadlowski was its officer), for approximately $11 million cash as well as the assumption of certain liabilities. In approving that bid, the Bankruptcy Court held that the auction was conducted fairly and in accordance with the law, and that the bid made by The Renco Group was the best bid. Mr. Shnayerson's comment that Renco got the company for free is a silly one, and reveals Mr. Shnayerson's failure to examine the papers on file with the Bankruptcy Court regarding Magcorp's financial condition, which made clear that Magcorp had no working capital whatsoever. Indeed, had there been the working capital in the amount described by Mr. Shnayerson, there certainly would have been more bidders and higher bids. The fact is that The Renco Group made a further investment in the company by the amount of its bid and has subsequently had to make additional investments in order to continue the operations of the company and to maintain the jobs of the 400 individuals employed by US Magnesium.
  
  
• As with Magcorp, Doe Run's financial difficulties arose due to a steep decline in revenues due to a dramatic decline in the price of lead. Contrary to Mr. Shnayerson's suggestion, neither Doe Run's environmental programs nor its house buying programs have had any role in its need to restructure. Further, the restructuring was not done to gain some advantage for The Renco Group. Over 95 percent of the bondholders endorsed the restructuring program and voluntarily participated in it. When the price of lead recovers, the bondholders and The Renco Group will both benefit.

Mr. Rennert's Personal Affairs

• Mr. Shnayerson imagines a discussion regarding an extravagant Gulfstream jet, obtained for purposes of ego, and with over $5 million having been spent on interior design. In fact, for many years, The Renco Group has owned a corporate jet, which Mr. Rennert and his colleagues use to travel two to three days each week to the operating companies located in Ohio, Indiana, Missouri, Tennessee, Utah and Peru. When it came time for The Renco Group to replace its old plane, it acquired the Gulfstream because of its quality and its ability to handle the demands of constant and extensive corporate travel. Mr. Shnayerson's description of the plane and Mr. Rennert's discussion of the plane are completely untrue and have no basis in fact. Mr. Shnayerson also engages in gross exaggeration about the plane's design. The $5 million sum was spent for the entire interior of the plane, and the overwhelming portion of it was devoted to the plane's cockpit and the navigation and guidance systems, and not its interior design.
  
  
• Mr. Rennert is on the verge of completing the construction of his home in Sagaponack, which is known as Fairfield. Contrary to Mr. Shnayerson's belief that the home will never be finished and that Mr. Rennert will never use it, Mr. Rennert and his family intend to move into their home next year. In addition, Mr. Shnayerson chose to perpetuate false descriptions of Fairfield, ignoring the building plans on file with the Town of Southampton as well as the decisions of the Town's of Southampton Zoning Board of Appeals and the courts that hold that opponents' descriptions and characterizations of Fairfield were false. Mr. Shnayerson instead grossly exaggerates the size of and nature of the buildings on the property. There is no 100,000-square-foot home, no theater, no vast parking garage. Indeed, a simple drive along the property reveals that the description of the property is grossly inaccurate. Similarly, the dune restoration project had nothing to do with Mr. Rennert's view, but was specifically designed to rebuild dunes that had been destroyed by three years of substantial beach erosion. As a result of Mr. Rennert's efforts, the dunes are now higher, not lower. The property, with its extensive landscaping, presents one of the most pastoral properties in keeping with the environment of Sagaponack.
  
  
• Sadly, Mr. Shnayerson employs innuendo to suggest that Mr. Rennert's philanthropy in Israel is used to support violence against Arabs. This suggestion is shameful. Mr. Rennert deplores violent acts, and such acts do not constitute "the other side of the story" concerning Mr. Rennert's charitable gifts to schools and temples in Israel. Not only is the innuendo a false and defamatory attack on Mr. Rennert's character, but it is also an anti-Semitic attack on Mr. Rennert's charitable support of his religious beliefs. Mr. Rennert has generously provided financial support to poor communities to supply Torahs where there were none, to build temples when services occurred in people's basements and to build schools and pediatric hospices where they were lacking. These gifts are acts of love and peace, and any suggestion to the contrary is simply dishonest.