Environmental Crimes Blog

USEPA Announces Web-Based System for Companies to Self-Disclose Environmental Violations

The USEPA recently announced a pilot project that allows regulated facilities nationwide to self-disclose environmental violations in a secure environment on the USEPA’s website under the agency’s audit policy.  This electronic self-disclosure system (called eDisclosure) is expected to reduce transaction costs for companies by ensuring that each disclosure contains complete information.

Under the pilot program, regulated facilities nationwide will be able to use eDisclosure to disclose violations of the Emergency Planning and Community Right-to-Know Act.  Regulated facilities located in Region VI (Arkansas, Louisiana, New Mexico, Oklahoma, and Texas) will be able to disclose violations of all environmental laws.  Based on the results of the pilot program, the USEPA will consider expanding eDisclosure to its other regions.

 

More later.

 

As always, feel free to call me or e-mail me with any questions at walter.james@jamespllc.com.

 

WDJiii

USEPA Encourages New Owners to Audit, Make “Clean Start”

The USEPA is launching an interim policy that offers incentives to new owners who correct environmental violations at recently acquired regulated facilities.  Under the interim policy, new owners may receive lower penalties than long-time owners.  Under the current USEPA Audit Policy, the agency offers reduced penalties to companies that self-audit their facilities, promptly disclose and correct any violations discovered, and take steps to prevent future violations.  Under the interim policy announced today, an owner who acquires a new facility may get additional penalty reductions from disclosing an even greater range of violations.

The new interim policy will be in effect immediately and USEPA will accept public comment until October 30, 2008.  The policy is subject to change in consideration of the comments received. 

Download the Federal Register notice.

 

More later.

 

As always, feel free to call me or e-mail me with any questions at walter.james@jamespllc.com.

 

WDJiii

Mens Rea – The Final Word?

The previous few posts have talked about the basis for the mens rea under the Resource Conservation and Recovery Act and how that mens rea is based upon an application of old “public welfare” regulatory enforcement actions.  The upshot is that there is virtually no mens rea or a lesser mens rea for each element of the crime, even though a “knowing” mens rea is statutorily required to impose criminal culpability.

 

The plea here is that in every case taken to trial and, if necessary up on appeal, the defense bar should be challenging the application of the “public welfare” designation to the extent it is applied to the mens rea.  I applaud those involved in the Ionia Management amicus effort.  I would only ask that they look at and support a fresh look at the “public welfare” mens rea aspect as well.

 

More later.

 

As always, feel free to call me or e-mail me with any questions at walter.james@jamespllc.com.

 

WDJiii

More Mens Rea

A group of business, legal and defense organizations are undertaking an amicus effort in United States v. Ionia Management, No. 07-5801, pending on appeal in the 2d U.S. Circuit Court of Appeals.  The goal is to persuade federal courts to re-examine the standard for holding corporations criminally liable for the acts of their agents.

In the Ionia Management case, a Greek company that manages a fleet of tanker vessels, was convicted and sentenced for its role in falsifying records to conceal the overboard dumping of waste oil from one of its vessels into international waters.  The amicus effort in the Ionia appeal will ask the court to examine the development of vicarious corporate criminal liability.

The amicus brief argues that the trial court gave a common instruction to the jury on vicarious liability based on a mistaken application of the Supreme Court's ruling in New York Central & Hudson River Railroad v. United States, 212 U.S. 481 (1909).  The argument set out is that the New York Central case determined only that Congress has the constitutional power to include respondeat superior principles in a criminal statute.  The argument continues that the New York Central case said nothing whatsoever about the criteria that govern the imputation of corporate criminal liability for those federal criminal statutes where Congress has not specifically acted. 

Typically, under instructions and jury charges typically delivered, a corporation is criminally responsible for the actions of any of its employees taken within the scope of their employment and for the benefit of the corporation.  The amicus effort contends that the United States Supreme Court has never addressed how vicarious corporate criminal liability should be determined when a statute is silent on imputing liability of an employee to the corporation.  Recent United States Supreme Court rulings in the job bias context limit the application of respondeat superior in determining vicarious corporate liability.  The rulings created an affirmative defense for employers facing liability for the acts of supervisors (if the employer had reasonable and effective policies in place to deter the conduct and the employee did not avail him or herself of those policies).  The Model Penal Code also provides an affirmative defense for corporations in those types of situations where there was an exercised due diligence to prevent the commission of a crime.  Allowing corporations to present evidence of effective compliance programs as a defense is consistent with the recent United States Supreme Court rulings and the purpose of corporate criminal liability.

The evidence at trial demonstrated that Ionia Management had an explicit policy, trained its people rigorously on that policy and periodically put superintendents aboard vessels to observe.  Crewmen testified that they knew the policy and of their duty.  Contrary evidence was presented by the Department of Justice of a history of ignoring environmental laws and obstructing United States Coast Guard investigations.

More later.

As always, feel free to call me or e-mail me with any questions at walter.james@jamespllc.com.

WDJiii

 

RCRA and Public Welfare – What is the Mens Rea?

Under the Resource Conservation and Recovery Act (“RCRA”) criminal provisions, the mens rea is the “knowing” standard.  See 42 U.S.C. § 6928(d).  That is, anyone who “knowingly” does the prohibited acts is guilty of a felony. 

 

Originally, administrative police regulations not expressly stating a mens rea element “involving small monetary penalties came to be recognized as a special class of offense for which no mens rea was required.”  Sayre, Public Welfare Offenses, 33 Colum. L. Rev. 55, 61 (1933); see generally Morissette v. United States, 342 U.S. 246 (1952).  Known as “public welfare offenses,” the “penalties commonly [were] relatively small, and conviction [did] no grave damage an offender’s reputation.”  Morissette, at 256. 

 

In recent years, however, RCRA and other similar environmental criminal provisions have also been construed as “public welfare” statutes requiring no mens rea or a lesser mens rea for each element of the crime, even though a “knowing” mens rea is statutorily required to impose criminal culpability.  In contrast to its origins, these environmental crimes are felonies punishable by imprisonment and fines.  This development traces its beginnings to United States v. Balint, 258 U.S. 250 (1922) and United States v. Dotterweich, 320 U.S. 277 (1943).  Both Balint and Dotterweich imposed pure strict criminal liability for violations of the Food and Drug Act and federal drug regulations which did not expressly state a mens rea element and provided only misdemeanor punishment.

 

Strict criminal liability was extended beyond regulatory misdemeanors in United States v. Freed, 401 U.S. 601 (1971), a case decided under the National Firearms Act (“NFA”).  The NFA in Freed also did not expressly state a mens rea requirement.  Freed was important, however, because unlike the “public welfare statutes” in Balint and Dotterweich, the NFA at issue in Freed imposed felony penalties rather than misdemeanor penalties.  As the federal courts have obviously recognized, the consequences of a felony conviction are much more severe than those of a misdemeanor.  United States v. Engler, 806 F.2d 425, 439-41 (3rd Cir. 1986), cert. denied, 107 S. Ct. 1900 (1987).  The Freed Court’s rationale was generally that because the “firearms” (specifically hand grenades) regulated under the NFA were obviously dangerous, it could be presumed that a person was aware of regulations requiring that firearms must be registered.  Freed, 401 U.S. at 608-9.  Under the environmental laws, apparently innocent conduct can and is criminalized.  See Liparota v. United States, 471 U.S. 419 (1985) (mens rea necessary as to what the regulation required because to hold otherwise would criminalize apparently innocent conduct).  

 

Freed’s rationale was later applied in United States v. International Minerals Corp., 402 U.S. 558 (1971). In International Minerals, the Court created a distinction stating that, at a minimum, where a “knowing” mens rea is required, a defendant must have knowledge of hazardousness in the general sense of the word, i.e. hazard in fact, before criminal culpability even for misdemeanor crimes dealing with obviously dangerous substances or devices can be imposed.  The Court stated: “So far as possession, say, of sulphuric acid is concerned, the requirement of ‘mens rea’ has been made a requirement of the Act as evidenced by the use of the word ‘knowingly.’  A person thinking in good faith that he was shipping distilled water when in fact he was shipping some dangerous acid, would not be covered.”  Id. at 563 - 64; accord United States v. Johnson & Towers, 141 F.2d 661 (3rd Cir. 1984), cert. denied, 469 U.S. 1206 (1985) (“at a minimum, the word ‘knowingly’ [in RCRA) . . . must also encompass knowledge that the waste material is hazardous.”); United States v. Greer, 850 F.2d 1447, 1450 (11th Cit. 1986) (court’s jury instruction for violation of RCRA required that defendant knew the chemical waste was “not an innocuous substance like water . . ..”).

 

More later.

 

As always, feel free to call me or e-mail me with any questions at walter.james@jamespllc.com.

 

WDJiii

Superfund Bid-rigging?

On July 24, 2008, JMJ Environmental Inc. (“JMJ”), its owner John Drimak Jr., and Norman Stoerr pleaded guilty to bid rigging, fraud and tax charges in connection with sub-contracts for wastewater treatment supplies and services at two Superfund sites in New Jersey (the Federal Creosote Superfund Site in Manville, New Jersey and the Diamond Alkali Superfund Site in Newark, New Jersey). 

JMJ and Drimak pleaded guilty to rigging bids at Federal Creosote from approximately October 2002 to approximately February 2006.  Drimak also pleaded guilty to one count of conspiracy to defraud the USEPA at the Federal Creosote site and to defraud Tierra Solutions Inc. (a general contractor) at the Diamond Alkali site.  As part of the conspiracy, Drimak participated in a false invoicing and kickback scheme from January 2002 until April 2007.  Drimak also pleaded guilty to filing false income tax returns for 2002 through 2005.  Stoerr pleaded guilty to rigging bids at Federal Creosote from approximately October 2002 to approximately October 2003.  Stoerr also pleaded guilty to one count of conspiracy to defraud the USEPA at the Federal Creosote site and to defraud Tierra Solutions at the Diamond Alkali site by participating in a false invoicing and kickback scheme from the fall of 2000 until approximately the spring of 2004.  Stoerr also pleaded guilty to one count of aiding Drimak in the filing of a false income tax return.

According to the pleadings, Drimak provided more than $26,000.00 in kickbacks to Stoerr and more than $385,000.00 to Stoerr’s former superior, at both the Federal Creosote and Diamond Alkali sites, in exchange for their assistance in allocating certain sub-contracts to JMJ.  The kickbacks were in the form of checks, cash, cruises, home renovations, boat trailers and airline flights.  In addition, as part of the fraud scheme, Stoerr and a former superior inflated invoices and accepted kickbacks from three other sub-contractors at Federal Creosote and Diamond Alkali.

Bid-rigging violations by an individual occurring before June 22, 2004, carry a maximum penalty of three years imprisonment and a $350,000.00 fine, while bid-rigging violations by an individual occurring after June 22, 2004, carry a maximum penalty of 10 years in prison and a $1,000,000.00 fine.  The maximum fine for a corporation charged with bid-rigging after June 22, 2004, is $100,000,000.00.  The maximum fine for each of these violations may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.  The fraud conspiracy for which Stoerr and Drimak are charged carries a maximum penalty of five years in prison, three years of supervised release, and a $250,000.00 fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

The tax violations for which Stoerr and Drimak are charged carry a maximum penalty of three years in prison, one year of supervised release, and a $100,000.00 fine.

More later.

As always, feel free to call me or e-mail me with any questions at walter.james@jamespllc.com.

 

WDJiii

USEPA Stonewalling An Investigation?

The United States Environmental Protection Agency (“USEPA”) advised employees last month in an e-mail that they were not to answer questions from journalists, the Government Accountability Office or the agency's inspector general.  The USEPA e-mail was made public on Monday, July 28, 2008.

According to CNN, Senator Barbara Boxer has said the USEPA is becoming a “secretive, dangerous ally of polluters.”  Speaking from experience, that is not the case; however, there is serious spin going on inside USEPA on this issue.

As you are reading the story below, just think how this whole scenario would go over if the USEPA was investigating your company?  Probably not so good, you think? 

From the

Public Employees for Environmental Responsibility web site at http://www.peer.org/news/news_id.php?row_id=1083

EPA STAFF ORDERED TO STONEWALL INVESTIGATORS AND MEDIA — Employees Told Not to Answer Questions or “Make Any Statements”

Washington, DC — The U.S. Environmental Protection Agency is ordering its staff to “not respond to questions or make any statements” if contacted by congressional investigators, reporters or even by its own Office of Inspector General, according to documents released today by Public Employees for Environmental Responsibility (PEER). The order reinforces a growing bunker mentality within an EPA that is the subject of a growing number of probes into political interference with agency operations.

In a June 16, 2008 e-mail distributed throughout EPA’s Office of Enforcement and Compliance Assurance, managers were asked to “remind your staff” to comply with “these important procedures.” These procedures forbid staff from speaking with any reporters or representatives of the Government Accountability Office or the EPA Inspector General (IG). If contacted, EPA employees are not supposed to say anything but are to immediately refer the person to a designated public affairs official.

“Inside the current EPA, candor has become the cardinal sin,” stated PEER Executive Director Jeff Ruch, noting that while this directive is of questionable legality, an agency specialist risks discipline or even termination for disregarding a direct order. “The clear intention behind this move is to chill the cubicles by suppressing any uncontrolled release of information.”

By way of justification, EPA’s Office of Public Affairs defends the order as “standard operating procedures” to promote efficiency and consistency in responding to official investigations. That office also contends this “procedure was developed in part to respond to a recent IG report” entitled “EPA Can Improve its Oversight of Audit Followup” issued in May 2007.

That cited IG report, however, makes no such recommendation and is primarily about how EPA lacks an accountability system for correcting admitted deficiencies identified in previous IG audits. Moreover, the cited audit has absolutely nothing to do with reporters or the Congressional GAO.

An additional concern is that the directive may illegally obstruct IG or GAO investigations. Although the EPA Public Affairs claims that the IG “signed off on” the gag order it has not offered written confirmation of that approval. Moreover, an inquiry to the EPA IG General Counsel as to the propriety of this directive has gone unanswered. Currently, the EPA Inspector General position is vacant.

Today, EPA is the target of intense scrutiny, including congressional attempts to subpoena agency files. Following increasingly contentious hearings, Administrator Johnson has even refused to appear before a Senate committee. By contrast, 25 years ago EPA Administrator William Ruckelshaus proclaimed that –

“EPA would operate ‘in a fishbowl’. We will attempt to communicate with everyone … as openly as possible.”

While this 1983 Ruckelshaus “fishbowl” policy was never rescinded, it no longer reflects agency practice.

“Ironically, EPA has brought a lot of these congressional hearings on itself by not being open,” added Ruch, questioning the need for such secrecy at a public health agency. “Fortunately, non-disclosure policies do not work very well as evidenced by the robust traffic in these leaked e-mails.”

More later.

As always, feel free to call me or e-mail me with any questions at walter.james@jamespllc.com.

 

WDJiii

The Cosco Busan

On July 23, 2008, a federal grand jury in San Francisco returned a second superseding indictment charging Fleet Management Limited with negligently causing the discharge of 50,000 gallons of oil from the Cosco Busan and falsifying documents after the crash to cover-up the company’s negligence.  As a result of the discharge of heavy fuel oil from the Cosco Busan, approximately 2,000 birds died, including brown pelicans, marbled murrelets and western grebes.  The brown pelican is a federally endangered species and the marbled murrelet is a federally threatened species and an endangered species under California law.

Fleet Management, a Hong Kong based ship management company, was responsible for operating the Cosco Busa.  Fleet Management was charged with six felony counts for making false statements and obstruction justice.  According to the indictment, Fleet Management, acting through senior ship officers and shore-based supervisory officials, concealed and covered-up documents with the intent to impede, obstruct and influence the investigation of the spill.  According to the indictment, the falsified documents include a fictitious passage plan for November 7, 2007, the day of the crash, as well as two prior voyages made after Fleet Management assumed management responsibility of the vessel in October 2007. 

The indictment also charges Fleet Management with misdemeanor crimes for violating the Clean Water Act (“CWA”), as amended by the Oil Spill Act of 1990, and the Migratory Bird Treaty Act. 

Fleet Management was charged as a co-defendant with Captain John Cota, a California ship pilot responsible for assisting the ship to safely transit the internal waters.  The indictment charges that on November 7, 2007, Fleet Management and Cota were both responsible for negligently causing the discharge because they failed to stay on a collision free course, failed to prepare and review an adequate passage plan before departure, departed in heavy fog, proceeded at an unsafe speed despite limited visibility, failed to use the vessel’s radar on the final approach, failed to operate properly the vessel’s electronic chart system, as well as other navigational errors.  Fleet Management is also charged with negligence for failing to adequately train the new crew that it had placed on the ship and failing to post an adequate lookout.  According to the indictment, these failures led to the Cosco Busan striking the bridge and discharging oil into San Francisco Bay.

Cota is also charged with making false statements to the United States Coast Guard in 2006 and 2007 concerning his medications and medical conditions.   Cota certified that all the information he provided on required medical forms was complete and true to the best of his knowledge when it was neither complete nor true, including information regarding his current medications, the dosage, possible side effects and medical conditions for which the medications were taken. 

The maximum penalty for Fleet Management’s alleged felony obstruction and false statements offenses is a criminal fine of $500,000.00 per count or twice the gross gain or loss caused by the offense.  The maximum penalty for a misdemeanor violation of the CWA is $200,000.00 or twice the gross gain or loss caused by the offense.  The maximum penalty for a Migratory Bird Act violation is a $10,000.00 fine or twice the gross gain or loss caused by the offense. 

More later.

As always, feel free to call me or e-mail me with any questions at walter.james@jamespllc.com.

 

WDJiii

MARPOL Annex VI

On July 21, 2008, President Bush signed the Maritime Pollution Protection Act of 2008 (“MPPA”).  President Bush's signature on the MPPA brings into statute form Annex VI to the International Convention on the Prevention of Pollution from Ships (known as MARPOL).  The United States Senate gave its formal advice and consent to Annex VI in 2006.  The final step of the ratification process is for the President deliver a letter, known as diplomatic instrument of ratification, to the International Maritime Organization.  The United States then becomes a party three months later.  MARPOL Annex VI entered into force beginning in May of 2005, although ships have met most provisions since 2000.

 

Under MARPOL Annex VI, container ships, tankers, cruise ships and bulk carriers must limit NOx emissions from their category three diesel engines.  It also sets a cap on the sulfur content of the fuel they burn and includes a program for designating areas where more stringent fuel controls apply, such as near coastlines that have more severe air quality concerns.  This October, the parties to MARPOL will work to strengthen NOx and SO₂ standards and the sulfur requirements in fuel.  The amendments under review are consistent with the stringent and comprehensive proposal put forward by the United States government.  If adopted, these stronger international standards will yield significant environmental and public health benefits in the United States and around the world.

As foreign trade grows and the USEPA's new emissions controls take effect on other transportation sources, emissions from large ships comprise an increasing share of the nation's pollution inventory.  In 2001, in terms of mobile sources, oceangoing vessels contributed nearly six (6) percent of NOx, over ten (10) percent of PM_2.5, and about forty (40) percent of SO₂ to the nation's air pollution.  Without further controls, those numbers will rise to about thirty-four (34) percent of NOx, forty (45) percent of PM_2.5, and ninety-four (94) percent of SO₂ emissions by 2030.

More later.

 

As always, feel free to call me or e-mail me with any questions at walter.james@jamespllc.com.

 

WDJiii

BP and the Crime Victims’ Rights Act

United States District Court Judge Lee Rosenthal will examine medical bills and lost wages of people who died or were hurt in the 2005 explosion at BP's Texas City refinery to determine whether a $50,000,000.00 fine to resolve criminal liability is sufficient.  On Wednesday, July 16, 2008, Judge Rosenthal told attorneys representing blast victims, the government and BP that she needs that information before she can accept or reject BP’s plea deal.  Specifically, Judge Rosenthal will examine economic losses of the fifteen people who died as well as those of thirty-five other victims selected by lawyers for the victims.  Judge Rosenthal will use those figures to estimate how tangible victim losses compare to the proposed fine.  Judge Rosenthal, however will not consider non-economic losses (such as payments to settle civil litigation that compensated for mental anguish or pain and suffering) in making her determination.

 

Judge Rosenthal did tell the victims in February 2008 that she could not just toss out the plea deal and impose her own; rather, she could only rule on the proposed plea deal presented. 

 

BP has indicated that it will cooperate with victims' lawyers in providing the information Judge Rosenthal. 

 

A hearing has been scheduled for October 7, 2008. 

 

More later.

 

As always, feel free to call me or e-mail me with any questions at walter.james@jamespllc.com.

 

WDJiii