Ignoring the Need for a Permit Can Lead to Jail Time

U.S. EPA released its December Environmental Crimes Bulletin.  One notable case highlighted involved the failure to  obtain and industrial pre-treatment permit for discharges to the municipal wastewater system.  As set forth in the bulletin, U.S. EPA describes the case as follows:

Thomas H. Faria, Sheffield’s former president and chief executive officer, who pleaded guilty to a felony violation of the Clean Water Act on July 8, 2014. From at least April 2004 to May 2011, under Faria’s leadership, Sheffield discharged polluted industrial wastewater from its New London factory into the municipal sewage system without the required permit and industrial wastewater treatment system. As a condition of his guilty plea, Faria resigned from the company on March 7, 2014, and no longer has any role in its operations or management. On February 13, 2015, Judge Thompson sentenced Faria to three years of probation, a $30,000 fine, and 300 hours of community service. 

As described in the bulletin, U.S. EPA states that the former president of the company was informed by consultants and its own employees that a permit and some pre-treatment was needed to legally continue the indirect discharge of industrial wastewater into the municipal system.  

Evidence the president had knowledge is what likely made U.S. EPA pursue this as a criminal case. However, keep in mind that the Clean Water Act has a criminal negligence standard. Therefore, U.S. EPA has the ability to pursue criminal charges even if it doesn't have specific evidence that company personnel were aware of permitting requirements.  

Here is the criminal negligence provision in 33 U.S.C. § 1319

(c)Criminal penalties

(1)Negligent violationsAny person who—
(A)
negligently violates section 131113121316131713181321(b)(3)1328, or 1345 of this title, or any permit condition or limitation implementing any of such sections in a permit issued under section 1342 of this title by the Administrator or by a State, or any requirement imposed in a pretreatment program approved under section 1342(a)(3) or 1342(b)(8) of this title or in a permit issued under section 1344 of this title by the Secretary of the Army or by a State; or
(B)
negligently introduces into a sewer system or into a publicly owned treatment works any pollutant or hazardous substance which such person knew or reasonably should have known could cause personal injury or property damage or, other than in compliance with all applicable Federal, State, or local requirements or permits, which causes such treatment works to violate any effluent limitation or condition in any permit issued to the treatment works under section 1342 of this title by the Administrator or a State;
shall be punished by a fine of not less than $2,500 nor more than $25,000 per day of violation, or by imprisonment for not more than 1 year, or by both. If a conviction of a person is for a violation committed after a first conviction of such person under this paragraph, punishment shall be by a fine of not more than $50,000 per day of violation, or by imprisonment of not more than 2 years, or by both.

 

What to Do in the Event of an Environmental Criminal Search Warrant

Nothing can be more stressful than having your business be the subject of a criminal investigation.  The investigation itself can have serious ramifications for employees, result in lost business as well as interrupt typical business operations.  With so much on the line, your business and your freedom, it is wise to contact legal counsel as soon as you have any indication a criminal investigation may be underway.

How does an environmental criminal investigation get initiated?

  • Disgruntled former employees call investigators
  • A current employee contacts authorities with information
  • A witness or citizen contacts investigators and makes a complaint
  • Sampling performed detects a significant problem
  • Regulators notice inconsistencies in record keeping
  • A significant event- a major spill, improper disposal of drums or dumping

The first time you may learn your company is the subject of a criminal investigation is when agents show up at your business with a criminal search warrant.

How you respond to a warrant or subpoena can have serious ramifications.  Here are some key tips to keep in mind:

  1. Contact Legal Counsel Immediately- While legal counsel will not interfere with the execution of a warrant, they can ensure agents adhere to the scope of the warrant.  They may also be able to observe the agents and see what pictures or documents they take during execution of the warrant..  Even if you believe you have nothing to be concerned about, owners and/or senior executives should not be interacting with agents. Attorneys can make sure during execution of the warrant the company demonstrates the proper level of cooperation without exposing their client to unnecessary risk.
  2. Information Regarding the Agents and Purpose of Investigation- Business cards should be requested from the lead agent and/or all agents conducting the search.  The attorney should open up a line of communication with the agents regarding the scope of the criminal investigation.
  3. Scope of the Warrant- Read the warrant or subpoena carefully.  Determine which portions of the facility and documents are covered.  Does the warrant allow for the seizure of computers or other equipment?  It is important that investigators are limited to the scope to the warrant.
  4. Do Not Interfere with the Warrant- Trying to prevent agents from taking items covered by the warrant or preventing access to records can result in obstruction of justice charges. 
  5. Inventory of Seized Items- Request a copy of the inventory of seized times so you know what was taken during execution of the warrant. 

How do you respond if the agents seek to interview employees during execution of the warrant?

This can be a complicated issue and should be left to your legal counsel.  The owner of the company or senior executives should not and cannot instruct employees to not talk with investigators.  Such directives from senior management could be deemed as improper, or even illegal by the agents.  Employees can be informed they have the right to speak or not to speak and can also request that individual legal counsel be present before being questioned.

Who exactly an attorney may represent in a criminal matter is much more complicated than a civil case.  Generally, in an environmental criminal investigation, an attorney cannot ethically represent the company, owners, senior executives and all the employees of the company.  At best, one attorney can represent the company and senior executives and a separate attorney/firm would be retained to represent all non-target employees who desire the assistance of counsel. ("Target"- means an employee identified by investigators as possibly guilty of a crime)  Depending upon the circumstances, each owner and or senior executive may even need separate counsel.  This separation is important to avoid any conflicts that may arise between those that may have criminal culpability, and those that do not.

U.S. EPA's July Environmental Crimes Bulletin- Failure to Notify, Falsification and Waters of the U.S.

Here are the highlights from U.S. EPA's July Environmental Crimes Case Bulletin:  

Failure to Notify Regarding Asbestos

A Company had sampling performed to determine if the walls and ceiling of a riverboat they were going to demolish contained asbestos.  The samples indicated they did contain asbestos.  According to U.S. EPA, the company hired a demolition contractor and told the contractors that the walls and ceiling "may" contain asbestos.  The contractor proceeded to perform the demolition work without instructing its workers to take proper precautions.  A key reason why U.S. EPA elected to pursue a criminal case versus civil enforcement was likely the potential exposure of workers to asbestos.

Waters of the United States

An area of environmental law with continued uncertainty is which streams and wetlands are considered "Waters of the United States" and, therefore, fall under the jurisdiction of the Clean Water Act.  The U.S. EPA's "Waters of the U.S." Rule has been stayed by the 6th Circuit.  The test for determining which waters/wetlands are federally protected continues to be the "Significant Nexus" Test as established by Justice Kennedy in Rapanos.

The "Significant Nexus" test is rather vague.  Under the test, a waterway or wetland is evaluated to determine whether it impacts the "chemical, physical, and the biological integrity" of a navigable water. If it does impact a navigable water in that manner, then it falls under federal jurisdiction

A key issue at the trial of Joseph David Anderson was whether the ponds Mr. Anderson created resulted in dredged material and sediment which impacted "Waters of the U.S."  The Army Corps of Engineers and EPA provided the scientific evidence to support a finding the impacted waters had a "significant nexus" to downstream waters and were, therefore, federally protected.  Testimony included fishery biologists from U.S. Fish & Wildlife that the headwater streams impacted provided critical support of trout in downstream rivers.  

Despite the vague legal standard at issue, it is interesting that the Government successfully applied the "Significant Nexus" test during a criminal trial.  

Falsified Records

A common criminal charge in environmental white collar cases is falsification of records required to be kept under environmental permits or regulations.  The latest criminal bulletin includes a case of a German shipping company and its employees that did not record transfers of oily waste-water on the M/V Cornelia, a German-owned commercial vessel.  EPA charged the company with falsified record keeping stating the omissions were a attempt to conceal discharges of oily-waste water overboard.

The case is a reminder that it is not just the act of entering false data that can lead to a charge of falsification.  It can also be the omission of important information.