ENVIRONMENTAL AND LAND USE ADVISORY
April 27, 2006
Worker Endangerment Initiative Gets Boost From Guilty Verdicts in
Longest Running Environmental Crimes Trial. New Test of Environmental
Sentencing Guidelines Expected.
On April 26, a jury handed down guilty verdicts against a pipe manufacturing
company and four of its managers in the longest running environmental crimes trial in
U.S. history, United States v. Atlantic States Cast Iron Pipe Company et al., No. 03-852
(D.N.J. filed Dec. 11, 2003). Convicted in the case were the company, its plant manager,
a maintenance supervisor, a finishing superintendent and the former human resource
manager. All five defendants were convicted of a conspiracy charge that alleged an
unlawful agreement to violate the Clean Water Act, the Clean Air Act and to expose
employees to dangerous conditions and impede federal regulatory and criminal
investigations. The individual defendants and corporation were also convicted of an
assortment of environmental and OSHA related charges depending on their area of
corporate responsibility.
The Atlantic States case presents several important developments for in-house council
and environmental managers who are responsible for compliance with environmental
health and safety laws.
The Worker Endangerment Initiative
Atlantic States is the first real test of a joint initiative by the U.S. Department of Justice
(DOJ), the Environmental Protection Agency (EPA) and the Department of Labor’s
Occupational Heath and Safety Administration (OSHA) to target and prosecute
companies that violate EPA and OSHA laws. The initiative was established over concern
that companies who ignored OSHA regulations were also ignoring EPA regulations,
and that OSHA inspectors, who vastly outnumber EPA investigators, could bring an
extra set of eyes and ears to the table.
Formal announcement of the initiative came on March 17, 2005, in connection with
a guilty plea by Motiva Enterprises LLC, an oil refining and retail business owned by
Shell Oil Company and Saudi Refining Inc. Motiva pleaded guilty to a Clean Air Act
negligent endangerment charge (42 U.S.C. § 7413(c)(4)) and a Clean Water Act illegal
discharge violation (33 U.S.C. § 1319(c)(2)(A)) for the death of one worker, injuries
to several others and an illegal discharge into the Delaware River caused by the
collapse of a highly corroded sulfuric acid tank at its Delaware City, Delaware, refinery.
www.alston.com
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Since the Motiva case resulted in a plea agreement, Atlantic States is the first time
worker endangerment charges from the initiative have been contested in court.
Combining OSHA and EPA violations in one indictment can be a risky proposition
for prosecutors. In any law enforcement initiative case, there is a danger that the
investigators and prosecutor may stretch the facts to fit the initiatives. In closing
arguments, one of the defense attorneys suggested as much when he argued that
“the prosecution began with an assumption and worked its way back over ten years to
find some way to prove it.”1 The guilty verdicts in Atlantic States, which included both
EPA and OSHA charges, establishes that in this case the prosecutors had sufficient
evidence to establish both types of crimes.
This verdict will undoubtedly give the initiative some forward momentum. Whereas the
most serious OSHA offense, a willful violation causing death to an employee (29 U.S.C.
§ 666(e)), is only punishable by misdemeanor penalties, the knowing violations of most
environmental laws is punishable by felony penalties including jail time. Now OSHA
inspectors can point to the Atlantic States conviction as one where defendants faced
serious penalties for OSHA related violations that were combined with environmental
crimes (see the Booker discussion below). Company officials should no longer assume
that OSHA inspectors will turn a blind eye to environmental violations and should assume
that any OSHA violations that are discovered may be combined with any environmental
crimes to create a more robust prosecution that could land company officials in jail.
Related Environmental Crimes and Worker Safety Prosecutions
Over the last two years DOJ has aggressively pursued a number of environmental
crime and worker safety cases against an Alabama company and its various divisions.
For the record, here are the results from the McWane Inc. (McWane) series of cases.
Alabama
On June 10, 2005, a federal petit jury found McWane Inc. guilty of conspiracy, false
statement and Clean Water Act charges. Three company managers, including the
company’s vice president of environmental affairs Charles “Barry” Robinson, were
also found guilty of various charges. On December 5, 2005, Judge Robert B. Propst
sentenced McWane to pay a $5 million criminal fine and five years of probation.
United States v. McWane, Inc. et al., No. 04-00199 (N.D. Ala. filed May 25, 2004).
On September 6, 2005, Union Foundry Company, another division of McWane paid
a $3.5 million fine and faced three years of probation for willfully violating an OSHA
regulation that caused the death of an employee and for illegally treating bag house
waste dust generated from its foundry operations. United States v. Union Foundry
Company, No. 05-00299 (N.D. Ala. filed July 28, 2005).
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Tom Quigley, Foundry defense: witnesses were afraid, Express Times (N.J.), April 6, 2006.
2
Texas
On March 22, 2005, Tyler Pipe Company, a division of McWane, paid a $4.5 million
criminal fine and was placed on probation for five years for knowing violations of the
Clean Air Act preconstruction requirements and for concealment of material facts
from EPA at its Smith County, Texas, facility. United States v. Tyler Pipe Company,
No. 05-00029 (E.D. Tex. filed March 22, 2005).
Utah
On February 8, 2006, Pacific States Cast Iron Pipe Company, a division of
McWane, paid a $3 million fine - the largest criminal environmental fine ever imposed
in Utah - and was placed on probation for three years for knowingly submitting false
emission test results to the State of Utah as required by the Clean Air Act. Charles
Matlock, the vice president and general manager of the Provo, Utah, facility also pleaded
guilty to knowingly rendering inaccurate a testing method required by the Clean Air
Act and is awaiting sentencing on June 12, 2006. United States v. McWane Inc et al.,
No. 05-00811 (D. Utah filed Nov. 3, 2005).
The Need For a Compliance Program
These cases clearly demonstrate the importance of an effective compliance program.
It is not clear from the public record what kind of environmental health and safety
compliance program McWane had in place prior to this prosecution, but with convictions
at five of its facilities one can safely assume that whatever program was in place was
inadequate. Any company with environmental health and safety issues that operates
without a compliance program or with a program that is only on paper, faces certain,
if not, inevitable disaster. Defending one, no less multiple criminal prosecutions is a
costly and distracting affair. Time and money spent on prevention at the front end is
time and money well spent. If you think otherwise, you need only look to these cases
as the potential alternative.
Will Post-Booker Sentences Bring Jail Time in Environmental
Crimes Cases?
Finally, the sentencing of the individuals in the Alabama case in December 2005 represents
one of the first sentencings for an environmental case since the Supreme Court decision
in United States v. Booker, 126 S. Ct. 738 (2005). In Booker, the Supreme Court declared
that the federal Sentencing Guidelines were wholly advisory and that their mandatory
application violated an accused’s Sixth Amendment right to a jury trial. Id. at 767. Since
Booker, there has been great concern among prosecutors that the “loosening” of the
guidelines would result in lighter sentences for environmental polluters who often hold
high corporate positions and have no prior criminal record. In the McWane Alabama
cases, that concern proved accurate as Judge Robert B. Propst declined to follow the
prosecutor’s recommended guideline sentence, which would have required jail time for
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each of the defendants, and sentenced all three to various lengths of probation. Two of
these sentences have been appealed.
The question now is whether Judge Mary L. Cooper in the Atlantic States case will
follow suit and depart downward from the recommended guideline range. If she does,
it could be a major blow to both the worker safety initiative and the department’s overall
environmental crimes enforcement efforts. Part of OSHA’s reasoning for participating in
the initiative was the added deterrence value of environmental charges. Now with the
guidelines as advisory only, environmental crimes offenses may not carry any greater
penalty than OSHA offenses. If the Alabama sentences stand and the New Jersey
district court follows suit, United States attorneys offices may re-think their commitment
to the initiative. They may decide to use their limited resources in pursuit of cases
with a greater deterrent impact, i.e., those were they are more certain of receiving jail
sentences. Sentencing in Atlantic States is set for September 7, 2006.
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