Civil and Criminal Environmental Enforcement Seventeenth Annual ELI Boot Camp
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Civil and Criminal Environmental Enforcement Seventeenth Annual ELI Boot Camp Course on Environmental Law November 12, 2008 Barry M. Hartman, Esq. barry.hartman@klgates.com www.klgates.com Why Worry About Environmental Enforcement? Profits Publicity Prison/Penalties 2 Profits $$$$$$$$$$ 3 Profits Criminal Sentencing: Disgorgement of Profits Civil Enforcement: Economic Benefit of Noncompliance 4 Profits AES Discloses Oklahoma Plant Filed False Pollution Reports; Stock Plunges 5 Publicity 6 Publicity 8/16/06 Pipeline Companies Agree to Civil Penalty of $2.57 Million for Spill in Kentucky River 8/22/06 Engineer of Greek Tanker Pleads Guilty To Ordering Crew to Hide Discharges of Oil 10/27/06 Oilseed Processor to Spend $13.9 Million In Air Pollution Settlement With Government 02/13/07 Virginia Contractor Pleads Guilty to Violating Removal Standards, Faces $250,000 in Fines 02/16/07 Honeywell to Plead Guilty to Air Violations At Louisiana Plant Will Pay $12 Million 7 Publicity 02/20/07 Rhode Island Freight Firm Pleads Guilty To Illegal Transportation of Chemicals 04/07/06 California Charges Central Valley Firm, Employees With Faking Air Quality Tests 05/08/06 Texas Gambling Ship Owner Fined $300,000 For Obstructing Pollution Investigation 07/27/06 Worker Endangerment Initiative Survives First Test in Environmental Crimes Trial 12/1/06 Electric Utility Agrees to Pay $9.25 Million In Settlement Over Clean Air Act Charges 8 Publicity 11/17/05 N.C. Surveyor Pleads Guilty to Charges Of Falsifying Wetlands Delineation Maps 12/07/05 Gulf Coast Developer, Others Sentenced To Prison, Fined $5.3 Million in Wetlands Case 01/17/06 Grand Jury Indicts San Diego Energy Utility For Improper Asbestos Removal From Pipes 9 Publicity 02/25/04 California Woman Gets 15 Months in Prison For Falsifying Numerous Environmental Tests 04/12/04 New Jersey Power Plant to Pay $1 Million To Settle Hot Water Discharge Violation 03/18/05 Motiva Pleads Guilty to Air, Water Violations Stemming From Delaware Refinery Explosion 08/11/05 Court Says Party May Face Criminal Liability For Aiding, Abetting Unpermitted Disposal 11/16/05 Former New York City Employee Sentenced To Probation for Faking Water Program Data 10 Publicity 12/12/06 Ex-Employee Sentenced for Falsifying New York City Water Monitoring Records 12/29/06 Colgate-Palmolive Agrees to Pay $2.8 Million To Reimburse EPA for Georgia Site Cleanup 04/25/03 Chicago Man Pleads Guilty to Charges of Falsifying Test Results for Air Technicians 05/01/03 Pennsylvania Landlord Pleads Guilty to Forging Signatures on Lead Paint Forms 09/19/03 Printing Company Officer Pleads Guilty to Falsifying Application for Title V Permit 11 Publicity 06/27/03 Tyson Foods to Pay $7.5 Million in Fines for Water Act Violations at Poultry Plant 07/29/03 Wastewater Plant Operator Found Guilty of Negligence, Lying About Maintenance 08/08/03 Alabama Gasoline Refiner Sentenced, Fined 09/05/03 Houston Businessman Sentenced to Prison, Fined $20,000 for Illegal Asbestos Removal 09/17/03 Used Oil Refiner Fined $1.1 Million for Waste Discharge, Storage Violations 12 Prison 13 EPA Criminal Enforcement Program FY 2002 – FY 2006 500 450 400 350 2006 300 2005 2004 250 2003 2002 200 150 100 50 0 Cases Initiated Defendants Charged Sentences (Years) Fines ($ Mil) 14 Prison Terms Imposed/Served For Environmental Crimes 180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 155 111 72 64 63 59 55 48 39 37 31 32 11 73 70 70 43 37 34 25 23 15 5 198 3 5 2 5 3 1984 1985 8 * 1986 1987 1988 1989 1990 1991 1992 Prison Terms 1993 1994 1995 * 1996 1997 Actual Confinement * Prison terms for FY 96 and FY 97 have not been compiled. 15 Kinds of Criminal Offenses Misdemeanors < 1 yr Felonies > 1 yr 16 Kinds of Criminal Offenses 1984 1986 1987 1990 19?? 19?? RCRA felonies CERCLA felonies Clean Water Act misdemeanors and felonies Clean Air Act felonies TSCA felonies OSHA felonies 17 Criminal Offenses = Knowledge What statute is being used? Is the charge a misdemeanor or a felony? What specific standard is alleged to be violated? What court are you in? 18 Factors Shaping the “Knowledge” Element Public Welfare Doctrine Responsible Corporate Officer Doctrine “Knowing” vs “Willful” Due Process Concerns 19 Public Welfare Doctrine U.S. v. Balint, 258 U.S. 250 (1922) Narcotics Act contained no “knowledge” element Misdemeanor Achieving social betterment rather than punishing ‘mala in se’ conduct allows elimination of common law ‘knowledge’ element without offending due process 20 Public Welfare Doctrine U.S. v. International Minerals and Chemicals Corp., 402 U.S. 558 (1971) Transporting hazardous chemicals without classifying on shipping papers Statute contained ‘knowledge element” (knowingly violates regulations….”) Misdemeanor Presumption (vs. elimination) of knowledge from character of materials 21 Public Welfare Doctrine U.S. v. International Minerals and Chemicals Corp., 402 U.S. 558 (1971) “…where dangerous or deleterious devices or products or obnoxious waste materials are involved, the probability of regulation is so great that anyone who is aware that he is in possession of them or dealing with them must be presumed to be aware of the regulation.” 402 U.S. 558,at 565. 22 Public Welfare Doctrine Grenades US v. Fred, 401 U.S. 601 (1971) Felony "one would hardly be surprised to learn that possession of hand grenades is not an innocent act." 401 U.S. at 609 Felonious knowledge may be inferred from character of substance. 23 Public Welfare Doctrine Guns United States v. Staples, 511 U.S. 600 (1994) guns in general are not "deleterious devices or products or obnoxious waste materials… that put their owners on notice that they stand in responsible relation to a public danger…” “In contrast to the selling of dangerous drugs or the possession of hand grenades, private ownership of guns in this country has enjoyed a long tradition of being entirely lawful conduct.” defendant had to know that it was an automatic gun before being subject to possibly 10 years in prison. 24 Public Welfare Doctrine Asbestos United States v. Weintraub, 273 F.3d 139 (2nd Cir. 2001) Real estate developer convicted of knowingly violating the CAA (asbestos handling). Held: need only prove defendant knew substance involved was asbestos; need not know it was ‘friable’. “no reasonable person at this late date could claim to be unaware that asbestos is severely regulated and its handling is fraught with legal risk.” Id. at 151. 25 Public Welfare Doctrine Asbestos was first used legally for its fire retardant properties for over a century and when used properly is no danger at all It was first regulated due to dangers of removal in the late 1970’s Same as guns? 26 Public Welfare Doctrine Evolution of relaxation of “Knowledge” element inherently dangerous product/activity regardless of regulatory history allows inference of knowledge long history of non regulation regardless of danger of product/activity precludes inference of knowledge short history of regulation regardless of danger of product/activity allows inference of knowledge public welfare legislation without more allows inference of knowledge 27 “Responsible Corporate Officer” Doctrine Officers strictly and vicariously liable for environmental violations caused by employee of corporation- what must they know? United States v. Dotterweich, 320 U.S. 277 (1943) person who was otherwise innocent, but who stood in “responsible relation to the public danger” is responsible Premised on “public welfare” character of legislation No knowledge requirement in statute (FFDCA) Misdemeanor 28 The “Knowledge” Element and The “Responsible Corporate Officer” Doctrine United States v. Dipentino, 242 F.3d 1090 (9th Cir. 2001) on-site representative of company hired to oversee removal of asbestos knowingly violated CAA when he was: (1) present at site on daily basis; (2) performed inspections of relevant areas; (3) prepared/signed final inspection reports certifying abatement complete; and (4) had power to stop the contractor’s work for improper performance. United States v. Self, 2 F.3d 1071, 1088 (10th Cir. 1993) conviction of president sustained evidence sufficient to allow jury to infer that defendant knew of illegal storage of hazardous waste. 29 The “Knowledge” Element and The “Responsible Corporate Officer” Doctrine United States v. McDonald & Watson, 933 F.2d 35 (1st Cir. 1991) Defendant (president) must have actual knowledge of some facts No mandatory presumption of knowledge from position United States v. Hansen, 262 F.3d 1217 (11th Cir. 2001) Defendant has responsible relationship to violationunder his authority Power or capacity to prevent violation Acted knowingly in failing to prevent, detect or correct violation 30 What must you “know” to knowingly violate the law”? Must you know what your permit requires? Must you know what the law is? Must you know the acts that constitute the violation of law? Must you know the conditions that constitute the violation of law? 31 Language of the Statute Knowingly violate a provision V. Knowingly engage in conduct in violation of a provision 32 Language of the Statute Clean Air Act (42 U.S.C. § 7413(c): (i) Any person who knowingly violates a requirement … of … 42 U.S.C. § 7413(c)(1); Clean Water Act, 33 U.S.C. § 1319(c): (1) Any person who negligently violates sections …, 33 U.S.C. § 1319(c)(1)(A); (2) Any person who knowingly violates sections …, 33 U.S.C. § 1319(c)(2)(A); RCRA, 42 U.S.C. § 6928(d) (1) Any person who knowingly transports … hazardous waste, listed under this subchapter to a facility which does not have a permit …, 42 U.S.C. § 6928(d)(1); (2) Any person who knowingly treats, stores, or disposes of any hazardous waste identified or listed …, 42 U.S.C. § 6928(c)(2) (a) without a permit, or (b) In knowing violation of material condition. CERCLA, 42 U.S.C. § 9603(b) (i) Any person who fails to notify immediately the appropriate agency…. 33 RCRA: How far does ‘Knowing” travel? United States v. Johnson & Towers, Inc., 741 F.2d 662 (3d Cir.1984). “it is unlikely that Congress could have intended to subject to criminal prosecution those persons who acted when no permit had been obtained irrespective of their knowledge under subsection (A), but not those persons who acted in violation of the terms of a permit unless that action was knowing (subsection (B)). Thus, we are led to conclude that the omission of the word “knowing” in (A) was inadvertent or that “knowingly” which introduces subsection (2) applies to subsection (A).” 34 RCRA: How far does ‘Knowing” travel? On the other hand…. United States v. Hoflin, 880 F.2d 1033 (9th Cir. 1989) “Had Congress intended knowledge of the lack of a permit under subsection (A) it could have easily said so. It specifically inserted a knowledge element in subsection (b) and did so notwithstanding the “knowingly” modifier which introduces subsection (2) In the face of such obvious Congressional action we will not write something into the statute that Congress so plainly left out.” 35 RCRA: “Knowledge” jury instruction That Defendant knowingly disposed of or commanded and caused others to dispose of chemical wastes on or about …; That Defendant knew that the chemical wastes had the potential to be harmful to others or to the environment, or in other words, it was not an innocuous substance like water; The wastes were listed or identified by the United States Environmental Protection Agency ("EPA") as a hazardous waste pursuant to RCRA; The defendant had not obtained a permit from either EPA or the State authorizing the disposal under RCRA. 36 RCRA: “Knowledge” United States v. Dee, 912 F.2d 741 (4th Cir. 1990) [RCRA] “… the knowledge element does extend to knowledge of the general hazardous character of the wastes. But the government does not have to show that Defendants knew the chemicals were characterized as hazardous under the law…” “ You need only to find that the defendant knew (1) the waste had potential to be harmful to the environment (2) the defendant knew the waste was not an innocuous substance.” Id. at 1181. 37 RCRA: “Knowledge” United States v. Hayes International Corp. - 786 F.2d 1499 (11th Cir. 1986) Neither lack of knowledge that waste was hazardous …is valid defense under RCRA. “it is completely fair and reasonable to charge those who chose to operate in such areas with knowledge of the regulatory provisions” 38 Bad Facts Make Bad Law United States v. Dean, 969 F.2d 187 (6th Cir. 1992) [RCRA] Defendant said that he had read the RCRA waste code “but thought it was a bunch of bullshit.” 39 RCRA: “Knowledge” United States v. Jo Miller, 484 F. Supp.2d 154 (D. Me. 2007) Government did not have to show that the defendant knew of the requirements of RCRA or even that the materials being transported were regulated hazardous waste. Even if the defendant relied on another’s representation that the company was in compliance with the law, she can still be found in violation of RCRA. 40 RCRA: “Knowledge” United States v. Elias, 1999 U.S. Dist. LEXIS 21372 (D. Idaho) If defendant thought the substance disposed of was benign, he did not “knowingly dispose of a hazardous substance” (mistake of fact) 41 Summary of RCRA “knowledge” Aware of facts/conduct that are the basis for the violation (the storage, discharge or emission); Knowledge that the material is a pollutant/waste might be harmful; Mistake of fact defense. 42 Clean Water Act “Knowledge” United States v. Hopkins, 53 F.3d 533 (2nd Cir. 1995) Congress intended to punish the defendant who knowingly commits a proscribed act, "even if the defendant was not aware of the proscription." The court also considered International Minerals as well as other public welfare offense cases. The government was only required to prove that the defendant knew the nature of his acts and performed them intentionally; not that he knew his acts violated the statute or permit. 43 Clean Water Act “Knowledge” United States v. Wilson, 133 F.3d 251 (4th Cir. 1997) “…does not require the government to show that the defendant knew that permits were available or required. …it…, preserves the availability of a mistake of defense if the defendant has something he mistakenly believed to be a permit to make the discharges for which he is being prosecuted.” 44 Clean Water Act “Knowledge” United States v. Ahmad, 101 F.3d 386 (5th Cir. 1996) Government has to prove that the defendant knew he was discharging gasoline. gasoline vs. guns: What about “public welfare” exception? 45 Clean Water Act “Knowledge” United States v. Sinskey, 119 F. 3d 712, 714 (8th Cir. 1997) The defendant asserted that he did not know that his discharge of waste exceeded the permit (rather than mistakenly believing that the amount of discharge was within permit limits). Held that a permit is another layer of regulation in the nature of a law. Mistake relating to permit is a mistake of law – no defense. 46 Clean Water Act “Knowledge” United States v. Weitzenhoff, 35 F.3d 1275 (9th Cir.1993) does not require the polluter to know of the existence of the permit but only that the polluter knowingly engaged in conduct that results in a permit violation. 47 Clean Water Act “Negligence” United States v. Hanousek, 176 F.3d 1116 (9th Cir.1999), cert denied, 528 U.S. 1102 (2000) Clean Water Act requires only “ordinary” negligence (i.e., civil definition), not “gross” or “criminal” negligence (i.e., involuntary manslaughter definition) Criminal sanctions for ordinary negligence do not violate Due Process where statute is a public welfare statute Thomas, J., dissent from denial of certiorari Concern that Hanousek will affect ordinary industrial activities 48 The Double Standard for Knowledge Under the Clean Air Act Senior Management Liable for Knowing Violations Rank and File Employees Liable for Knowing and Willful Violations 49 The Double Standard for Knowledge Under the Clean Air Act (cont.) United States v. Metalite, 51 ERC 1950 (D. Ind. 2000) “The generally accepted understanding of "willful" versus "knowing" in the criminal law context is that "willfulness" requires an act in conscious disregard of a known duty, whereas "knowingly" designates a lack of mistake or accident and an awareness of actions that make up a violation of the law, without knowing that one's acts were prohibited by law. 50 Conscious Disregard – (Jury Instruction) “deliberately closed his eyes to what would otherwise have been obvious to him” “failing to investigate if he is in possession of facts which cry out for investigation” 51 Conscious Disregard – (Jury Instruction) (cont.) “circumstantial evidence may be used, including evidence that the defendant took affirmative steps to shield himself from relevant information” 52 53 Due Process and “Knowledge” United States v. Engler, 806 F.2d 425 (3rd Cir. 1986) Felony statute is not necessarily rendered unconstitutional because it lacks a knowledge element. The due process clause may set some limits on the imposition of strict criminal liability, but it has not set forth definite guidelines as to what those limits might be. 54 Due Process and “Knowledge” Lambert v. California, 355 U.S. 225, 228, (1957) "We do not go with Blackstone in saying that a 'vicious will' is necessary to constitute a crime . . . for conduct alone without regard to the intent of the doer is often sufficient. There is wide latitude in the lawmakers to declare an offense and to exclude elements of knowledge and diligence from its definition." 55 Due Process and “Knowledge” United States v. Wulff, 758 F.2d 1121 (6th Cir. 1985) Applying the Migratory Bird Treaty Act without a scienter requirement would be unconstitutional, because the crime is not one known to the common law, and because the felony penalty provision is severe and would result in irreparable damage to one's reputation. 56 Factors Shaping the “Knowledge” Element Public Welfare Doctrine Responsible Corporate Officer Doctrine “Knowing” vs “Willful” Due Process Concerns 57 Two More Thoughts Audits; “Independent counsel” investigations 58 Corporate “Knowledge” CORPORATION FACT F FACT H FACT G GENERAL COUNSEL VP OPERATIONS VP ENVIRONMENT FACT D FACT C REGIONAL MANAGER PLANT MANAGER FACT B EMPLOYEE FACT A EMPLOYEE 59 Title 18 Offenses False Statements Obstruction of Justice Conspiracy Conspiracy to Defraud an Agency of the United States Aiding and abetting Accessory after the fact 60 Conspiracy Existence of agreement to achieve unlawful objective Knowing and voluntary participation Overt act in furtherance 61 Conspiracy (cont.) Agreement to operate a plant Knowledge that there are environmental issues at the plant subject to regulations United States v. Hansen (11th Cir). 62 Federal Sentencing Guidelines 63 Base Level Offenses Factors Offenses involving “knowing endangerment” of others; Offenses involving mishandling of hazardous or toxic substances or pesticides (including related recordkeeping offenses); Offenses involving mishandling of “other” (nontoxic) pollutants (including related recordkeeping offenses); 64 Base Level Offenses Factors (cont.) Offenses involving public water systems; Offenses involving hazardous or injurious devices on federal lands; and Offenses involving specially protected fish, wildlife, and plants 65 Base Level Offenses Factors (cont.) Base Level for an Environmental Violation: 8 Possession of 250 grams of marijuana: 8 Murder: 43 Robbery: 20 66 Enhancements to Base Level 6 level enhancement of continuous and ongoing violation, USSG §2Q1.2(b)(1)(A); Lack of harm mitigates against finding that a violation is continuous. United States v. Van Loben Sels, 198 F.3d 1161 (9th Cir. 1999) Number of days a defendant violated the CWA could be a sentencing factor. United States v. Chemetco, Inc., 274 F.3d 1154 (7th Cir. 2001) 67 Enhancements to Base Level (cont.) Proof of actual contamination IS required. United States v. Ferrin, 994 F.2d 658 (9th Cir. 1993) Harm can be presumed from continuous discharge. United States v. Hoffman, 2000 U.S. App. Lexis 5185 (4th Cir. 2000) 68 Enhancements to Base Level (cont.) Proof of Actual Contamination NOT required United States v. Cunningham, 194 F.3d 1186 (11th Cir. 1999) United States v. Liebman, 40 F.3d 544 (2d Cir. 1994) United States v. Goldfaden, 959 F.2d 1324 (5th Cir. 1992) 69 Enhancements to Base Level (cont.) Whether the person has committed prior crimes, USSG 4A1.1 A prior unrelated DUI charge outstanding when offense environmental offense is committed is a prior crime. United States v. Kyle, 2001 WL 1580232 (6th Cir. 2001) [unpublished] Whether the violation created the threat of death or bodily injury, USSG §2Q1.2(b)2); 70 Enhancements to Base Level (cont.) 4 level increase if the violation involved permit requirements, USSG §2Q1.2(b)(4); Notice to State is not a permit requirement. United States v. Weintraub, 96 F.Supp.2d 135 (D.Conn 2000); United States v. Chau, 293 F.3d 96 (3rd Cir. 2002) 71 Enhancements to Base Level (cont.) Whether the defendant was the supervisor 4 levels if more than five person involved. USSG §3B1.1; 2 levels for 2 persons United States v. Okoli, 20 F.3d 615 (5th Cir. 1994) defendant must have been the “organizer, leader, manager, or supervisor of one or more other participants.” Need not demonstrate was personally in charge of five or more participants. 72 Enhancements to Base Level (cont.) Vulnerable victim enhancements USSG §3A1.1(b); United States v. Bragg, 207 F.3d 394 (7th Cir. 2000) 73 Enhancements to Base Level (cont.) 4 levels for substantial expenditures for clean up; USSG §2Q1.2(b)(3); $200,000 is substantial. United States v. Chau, 293 F.3d 96 (3rd Cir. 2002) 74 Enhancements to Base Level (cont.) Whether the violation created the threat of death or bodily injury, USSG §2Q1.2(b)2); Not appropriate unless conviction is for offense that causes the injury. United States v. Elias, 32 ELR 20,218, 269 F.3d 1003 (9th Cir. 2001) Special Skills contributed to violation United States v. Ellen, 961 F.2d 462 (4th Cir. 1992). 75 Reductions to Enhanced Level This base level can also be decreased based on a number of factors, such as, Whether the offense involved recordkeeping only, USSG §2Q1.2(b)(6); or Whether the defendant cooperated in the investigation, USSG §3E1.1 76 Downward Departures Is the case outside the ‘heartland of environmental cases.” USSG §5K2.0. United States v. Elias, 32 ELR 20,218, 269 F.3d 1003 (9th Cir. 2001) 77 Other factors Standing in community not normally relevant. Committing crime to avoid a greater harm not normally relevant. 78 79 © 2002 K&L Gates 79 Applying the Guidelines Nature of Offense Increase/Decrease Offense Level Offense involving a toxic waste 8 Increase based on noncontinuous violation +4 Increase based on permit violation +4 Decrease because defendant pled guilty/cooperated -2 Total value assigned to offense 14 80 81 © 2002 K&L Gates 81 Applying the Guidelines (cont.) Cooperate by pleading guilty -2 82 Applying the Guidelines (cont.) Downward Adjustment: -2 Criminal History 1 83 84 © 2006 K&L Gates 84 Why Worry About Civil Environmental Enforcement? Profits: Economic Benefit of Noncompliance Publicity 85 EPA Civil Judicial Referrals to DOJ FY 2002 – FY 2006 Source: Data Source: Integrated Compliance Information System (ICIS), October 28, 2006; data source for previous fiscal years: annual ICIS data 86 Potentially Responsible Party Commitments for Superfund Site Cleanup, Oversight and Cost Recovery FY 2002 – FY 2006 $1,000 $900 Total Value ($ million) $800 $700 $600 Cleanup Oversight Cost Recovery $500 $400 $300 $200 $100 $0 FY02 FY03 FY04 FY05 FY06 Source: Data Source: Integrated Compliance Information System (ICIS), October 28, 2006; data source for previous fiscal years: annual ICIS data 87 Source: http://www.epa.gov/compliance/resources/reports/endofyear/eoy2003/fy2003enforcementandcomplianceendofyearcharts.pdf 88 EPA Dollar Value of Concluded Enforcement Actions FY 2002 – FY 2006 Criminal Penalties ($ Mil) Total Civil Penalties ($ Mil) $154 $149 $100 $150 $100 $124 $71 $62 $50 $96 $100 $80 $47 $43 Administrative Judicial $50 $0 $0 FY06 FY05 FY04 FY03 FY02 Injunctive Relief ($ Bil) FY06 FY05 FY04 FY03 FY02 Supplemental Environmental Projects ($ Mil) $10 $10 $100 $78 $8 $6 $75 $43 $4.9 $43 $43 $4. 8 $4 $43 $2.8 $43 $3.9 $65 $57 $56 $48 $50 $25 $2 $0 $0 FY06 FY05 FY04 FY03 FY02 FY06 FY05 FY04 FY03 FY02 Source: http://www.epa.gov/compliance/resources/reports/endofyear/eoy2006/2006numbers.html 89 “Bush's EPA Is Pursuing Fewer Polluters; Probes and Prosecutions Have Declined Sharply” Washington Post, September 30,2007 90 Civil Enforcement Actions Two types Administrative Civil Judicial 91 Civil Enforcement Actions Differences between civil and administrative: Amount Injunctive Relief Tribunal 92 Civil v. Administrative Enforcement Actions Amount- higher amounts go to court Injunctive Relief – goes to court Tribunal ALJ Environmental Appeals Board (40 C.F.R. § 22.4) 93 Administrative Enforcement Actions Hearing Officers work for EPA Regional counsel prosecutes – works for EPA Hearing Officers Bound by regulations Bound by EAB decisions Injunctive Relief not Self-enforcing 94 Administrative Enforcement Actions Environmental Appeals Board Delegated Functions for Administrator in reviewing administrative enforcement actions- final agency action Three members All former EPA enforcement officials No statutory basis Bound by EAB decisions 95 Civil Judicial Enforcement Actions Liability Penalty Injunctive Relief 96 Liability Strict/Vicarious Individual →Company Subsidiary ≈Injunctive Relief (“Bestfoods” analysis) 97 Liability Common Issues Validity of test results Self v. agency Applicability of agency “interpretation of regulation” Validity of regulation Interpretation of permit 98 Allegheny Ludlum v. United States 366 F.3d 164 (3rd Cir. 2004) “Invalid test” defense 30 day violation presumption Interest rate 99 Liability Invalid Test defense: Evidence of inaccurate laboratory reporting is relevant to show that no violation occurred. Liability attaches to an unlawful discharge, rather than the reporting of faulty results. 100 Liability - Calculating Days of Violation “per day of violation” Should violation of a monthly average count as a violation of the regulation on each day? The Allegheny Court advised lower courts to exercise discretion in calculating how many days were out of compliance, considering: Whether the polluter's conduct already had already been punished by penalties for daily violations by using the maximum daily penalty as a basis for comparison. Whether the site operated on all days during that monthly period. 101 Statutory Criteria Governs Assessment of Civil Penalties – CWA Seriousness of violations; Economic Benefit of noncompliance; History of violations; Good Faith efforts to comply; Economic impact on violator; Other factors as justice may require 102 Clean Water Act: Penalty Policy Penalty = Economic Benefit + Gravity +/- Gravity Adjustment Factors - Litigation Considerations - Ability to Pay Supplemental Environmental Projects Gravity= $1000 x (a + b + c + d) A—Significance: the degree of exceedance of effluent limits (scale of 0 to 20) B—Environmental and Health: real or potential harm to humans or environment (scale of 0 to 50) C—Number of violations: how many limits in the permit were violated (scale of 0 to 5, based on percentage) D—Significance of non-limit violations 103 Clean Air Act Size of business; Economic Impact on the business; History of violations; Good Faith efforts to comply; Duration of evidence (CRE); Payment of penalties previously assessed; Economic benefit of noncompliance; Seriousness of the violation 104 Clean Air Act—Penalty Policy EPA will take at least the economic benefit of noncompliance unless: Benefit is trivial and will not affect the violator Compelling public concerns Concurrent enforcement actions seeking the same penalty The larger the net assets, the bigger the penalty surcharge Beware—large cap companies can see larger surcharges of up to $70,000 105 RCRA Seriousness of the violation Good faith efforts to comply 106 RCRA: Penalty Policy Governed by a matrix 107 FIFRA Size of business; Effect on ability to continue in business; Gravity of violations; Good Faith/due care – warning in lieu of penalty. 108 FIFRA: Penalty Policy Uses separate matrices for Sections 14(a)(1) and 14(a)(2) Based on size of business and level of violation Value is assigned for gravity of offense Remedy is adjusted based on gravity value From 3-8: Reduce matrix value From 8-12: Assess matrix value 12 and above: Increase matrix value 109 TSCA The nature, extent, and circumstances of the violation; The gravity of the violation; Ability to pay; Effect on ability to continue to do business; History of noncompliance; The degree of culpability; Other matters as justice may require 110 TSCA: Penalty Policy Calculates penalty based on four factors Potential or actual harm to human health or environment Potential exposure of the public or environment to an unregulated new chemical substance Impact on the validity of the Inventory Deterrent effect of penalty 111 Penalty Assessment – Common Issues Top down v. bottom up Economic Benefit of Noncompliance Ability to Pay (parent control) 112 Penalty Assessment: Top Down Sierra Club v. Cedar Point Oil Co., 73 F.3d 546 (5th Cir. 1996) Citizen suit for civil penalties under Clean Water Act 809 days of unpermitted discharge Court first calculated maximum penalty (809 x $25,000 = $ 20,225,000) Court then adjusted “downward” based on findings of fact on statutory factors Ultimately, court assessed penalty of $186,070 (based mostly on economic benefit of noncompliance) 113 Penalty Assessment: Bottom Up United States v. Smithfield Foods, 191 F.3d 516 (4th Cir. 1999) Citizen suit for civil penalties under Clean Water Act District court began with the economic benefit of noncompliance ($4.2 M) Added from other six factors to reach a final penalty of $12.6 M Moral—while “top down” seems for defendant-friendly than “bottom up,” that may not always be the case 114 Allegheny Ludlum v. United States 366 F.3d 164 (3rd Cir. 2004) Interest Rate 115 Economic Benefit of Noncompliance What should have been done to avoid noncompliance and when should it have been done? Cost of money Level the playing field 116 Economic Benefit of Noncompliance the expenditures made and included in the economic benefit calculation must relate directly to the violations; the least costly method of compliance should be used in calculating economic benefit (Ford v. Lexus?); economic benefit calculations must be based only on periods of noncompliance 117 Economic Benefit of Noncompliance Methodologies Costs avoided method Wrongful profits method 118 Economic Benefit of Noncompliance Costs Avoided Method Return on funds not spent for compliance Avoided operational and maintenance costs and return on them 119 Economic Benefit of Noncompliance Cost Avoided Methods (con’t) Measuring Return on Capital Funds Cost to obtain capital elsewhere Weighted average cost of capital – BEN model On what date should company’s capital structure be used? Stability of industry Actual rates of return 120 Economic Benefit of Noncompliance Wrongful Profits Method Would violator have had to shut down to avoid noncompliance? Potential massive penalties 121 Economic Benefit of Noncompliance Resources EPA Enforcement Economic Models: http://www.epa.gov/compliance/civil/econmodels/index.html BEN Model: calculates violator’s economic savings in delaying or avoiding pollution control measures EPA Policy and Guidance Documents http://www.epa.gov/Compliance/resources/policies 122 EPA Voluntary Disclosure Programs FY 2002 – FY 2006 Number of Companies Disclosing & Correcting Violations Voluntary Disclosures Resolved Voluntary Disclosures Initiated 1,600 1,600 1,487 1,475 1,467 1,400 1,400 1,223 1,200 1,032 1,000 927 Companies Facilities 800 600 627 614 541 500 491 379 400 Total Count Total Count 1,200 969 1,000 1,002 848 Companies Facilities 800 600 511 512 551 460 400 252 200 200 0 0 FY 02 FY 03 FY 04 FY 05 FY 06 FY 02 FY 03 FY 04 FY 05 FY 06 Source: Data Source: Integrated Compliance Information System (ICIS), October 28, 2006; data source for previous fiscal years: annual ICIS data 123 Numquam debes purgamentum dare rustico cui nomen Bubbarum et qui carrum utilem invehit. 124 Never Give Your Waste to a Man Named Bubba Driving a Pick-Up Truck. 125
