Archive for the ‘Criminal Enforcement’ Category

Do We Have Your Attention Now?

via WikiMedia Commons

via WikiMedia Commons

Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully. – Samuel Johnson

Nobody ever said it would be easy. There’s lots of natural gas in the ground. We’ve been siphoning it up from the ground for years. But supplies dwindled as traditional fields yielded less and less gas. Fracking has brought a new production bonanza to states around the Union. Inevitably, protests have come hand in hand with increased production. This summer has been dubbed #FearlessSummer by environmentalists opposed to the extraction and carbon energy industries.

Fracking is dirty work. It can pollute ground water, endangering wells and agricultural water, and it produces a tremendous amount of waste. The byproduct of fracking is a wicked stew of proprietary chemicals and water used to force natural gas out of its ancient hiding places underground.

One of the sources of particular ire in the environmental circles is the seeming impunity with which energy companies have been able to pursue natural gas over hill and under dale. The companies rely on eminent domain to site their drilling rigs, and have been largely shielded from liability for environmental damage they have caused while feeding the country’s unquenchable demand for energy.

XTO Energy, a subsidiary of ExxonMobil settled with the Environmental Protection Agency over a 50 thousand gallon spill of fracking slurry at one of its storage tanks in Pennsylvania. Without admitting liability, it agreed to pay a $100,000 fine and implement a more rigorous waste water management regime. It also hauled away some 3,000 tons of contaminated soil.

All well and good as far as the Feds and XTO were concerned. Environmentalists,  not so much. Also not so pleased – the Pennsylvania state Attorney General. Last Tuesday, Attorney General Kathleen Kane filed criminal charges against XTO over the 2010 spill. Not civil. Criminal. That’s a first. No other Marcellus Shale production company has ever faced criminal charges.

Environmentalists are giddy over the prosecution, comparing it to the genteel supervision the company has received from state regulators. Energy industry representatives went ballistic, as well they might, accusing Kane of doing some polluting of her own – of the business environment – and sending a “chilling message” to the energy business.

But Kane’s office insists it wasn’t going off half-cocked. “The prosecutorial powers of this office are used carefully and with great consideration,” First Deputy Attorney General Adrian R. King Jr. said through a spokeswoman. “We closely examine the facts and the applicable law in each case and proceed accordingly.” And Kane’s office didn’t arrive at the charges by itself. It was a grand jury that handed down the charges.

Settlements like the one XTO reached with federal regulators are just a cost of doing business for an enormous company like ExxonMobil. Criminal charges, on the other hand, take the risk/benefit calculation to a whole new level. The Pennsylvania charges have ignited a furor and are sure to be fought by an industry red in tooth and claw. But as the good doctor observed to his friend Boswell, the gallows sharpens the mind. The prospect of standing in the dock is likely to do the same for the captains of the energy industry.



Supreme Court Limits Judges’ Discretion in Criminal Fines

Photo by dbking. Some rights reserved.

The Supreme Court on Thursday ruled on a case triggered by an environmental law with implications reaching to criminal and financial spheres. The Court overturned an $18 million penalty imposed on Texas-based natural gas company Southern Union, which had been found guilty of storing mercury in a Pawtucket, Rhode Island building without a permit. The judge on the case arrived at his $18 million number based on calculating a maximum fine of $38 million – 762 days of violations carrying a maximum of $50,000 in fines (Reuters has the story here).

Southern Union’s argument, rejected in the 1st U.S. Circuit Court of Appeals in Boston, is that the jury did not specifically determine how long the mercury had been improperly stored and relied on the dates specified in the indictment. The Supreme Court agreed with the defendant that Apprendi v. New Jersey, requiring any fact that increases the maximum punishment for a crime to be proved to a jury beyond a reasonable doubt, applies to criminal fines like the one imposed on Southern Union (ie, not just prison sentences as in Apprendi).

Mayer Brown’s Dan Himmelfarb points out that corporate defendants (which cannot go to jail) are more likely to be subjected to fines than individuals. Facts that increase a fine such as the duration of a violation cannot just be proved by a preponderance of evidence to a judge. In Justice Sotomayor’s opinion, she rejects the government’s argument that because fines are a lesser burden than prison, they should be exempt from Apprendi. Further, and as Himmelfarb points out, perhaps of broader importance, the Court seems now to comfortably favor the jury in the “judge/jury” debate over who must find facts to increase a defendant’s sentence or fine.

EPA Not Messing Around When It Comes to Asbestos-Related Prison Sentences

Photo by daryl_mitchell. Some rights reserved.

While the EPA is often seen as soft on companies, they may be making up for it by coming down hard on individuals.

Yesterday, the EPA announced that Bobby Joe Knapp, the former owner and operator of the Equitable Building in downtown Des Moines, Iowa, would be spending more than 3 years in prison for his role in the careless removal of asbestos from the building.

By failing to notify the EPA before starting the removal process, as well as using some very shoddy demolition methods (untrained workers, workers not provided with protective equipment, failure to wet asbestos tiles), Knapp was in violation of the Clean Air Act work practice standards for the removal and disposal of asbestos. Failure to follow these procedures can expose building occupants and construction workers to high levels of the material, which can increase the risk of lung cancer.

The case was investigated by the EPA and the Iowa Department of Natural Resources. Minutes from a meeting with the DNR (see page 20) paint a more vivid picture of the events that led up to the DNR referring the Equitable case to the Attorney General, including several visits to the work site and early conversations with Knapp and the building manager.

Knapp was formally charged by a federal grand jury in February of 2010. He pled guilty to the charges a year later, in March 2011, and just yesterday, U.S. District Judge James E. Gritzner sentenced Knapp to 41 months in prison, plus 300 hours of community service and more than $12,000 in fines.

He isn’t the only chap to go to jail for such a crime. On the EPA’s Criminal Enforcement page, they boast that, in FY 2010, “individual criminal defendants were sentenced to a total of 72 years of jail-time.”

It doesn’t feel right, does it?

I don’t want to diminish the seriousness of what Knapp did, nor trivialize the exposure to the building residents, but I might argue that to lavish these heavy prison sentences on an individual hardly sends the broad message one would hope for.

Spotlight-prone corporate executives that violate environmental laws rarely see the inside of a jail cell – their punishments always seem to be variations on a theme: pay up the big bucks. Bucks being one thing of which they have plenty to spare.

Knapp cut corners, endangered the health of a handful of people, and essentially had his life put on hold for three years. Corporate giant BP was found guilty for conduct that resulted in an explosion that killed 15 employees (no, not that explosion – they weren’t held criminally accountable for that), and was fined $50 million dollars in 2007. That comes to a whopping 1% of their total revenue for that fiscal year – hardly a disincentive. Where’s the jail time??

So I hope Knapp, and other building owners, have learned their lesson, and that people are scared straight into treating asbestos with care. But don’t we have bigger fish to fry?

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