United States: Environmental Crimes: How To Keep Your Company And Its Employees On The Right Side Of The Law

The U.S. government intends to prosecute and punish environmental crimes and criminals more than ever in the past. During the last ten years, the number of prosecutions and convictions witnessed a more than three-fold increase. The cases involve not only corporations violating, intentionally and unintentionally, environmental laws but also the corporate officers and managers operating such companies. Moreover, the prosecutions result in both fines and imprisonment for the companies and individuals involved in violating the nation's environmental laws. Nevertheless, many companies, both inside and outside of the maritime industry have failed to implement adequate measures to prevent criminal violations by employees or to react to a criminal investigation by federal or state law enforcement authorities. Thus, this brief article discusses the federal environmental criminal laws that place companies at risk, offers suggestions on how to comply with such laws and provides guidance on reacting to criminal investigations.

This article focuses on the federal legislation used primarily by U.S. Department of Justice lawyers to prosecute environmental offenses. In general, the following legislation represents the eight principal federal environmental statutes:

• Rivers and Harbors Act of 1899 (the "Refuse Act");

• Federal Water Pollution Control Act (the "Clean Water Act");

• Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA");

• Clean Air Act;

• Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA");

• Resource Conservation and Recovery Act ("RCRA");

• Solid Waste Disposal Act; and,

• Toxic Substances Control Act.

For most marine industry participants, the Refuse Act and the Clean Water Act, as amended by the Oil Pollution Act of 1990, represent the federal environmental statutes that generate the most cases from a civil and criminal liability standpoint. Hence, while this article primarily focuses on the criminal aspects of these two statutes, the general discussion found later in the article provides a general discussion on dealing with criminal investigations and avoiding criminal liability.

The federal government enacted the Refuse Act in 1899 to keep the nation's waterways unobstructed and free from pollution. In general, the statute imposes a duty on all persons and corporations to refrain from discarding any debris or "refuse" in navigable waters. The statute imposes "strict liability" meaning that lack of knowledge or intent generally may not be used as a defense to violations of the law. Moreover, as a misdemeanor offense, the act imposes a fine of up to $25,000 per day and imprisonment for up to a year. The federal sentencing guidelines, however, may be used to significantly increase the fines levied for violations of the Refuse Act. Hence, in at least one recent case, a company received a fine of $2.25 million under the statute because of the extensive and costly clean-up necessitated by its violation.

The Clean Water Act, enacted in the 1970s, represents that other major federal legislation intended to restore and to maintain the chemical, physical and biological integrity of the nation's water. From a general standpoint, the act prohibits pollutant discharges into navigable waters of the United States. The Clean Water Act specifically imposes fines that can reach into the millions and further provides for imprisonment ranging from one year to fifteen years depending on the severity of the offense. Moreover, the Oil Pollution Act of 1990, enacted after the Exxon Valdez spill on the Alaska coast, set forth enhanced criminal penalties under the Clean Water Act for failure to notify authorities of unpermitted discharges of oil or hazardous substances into U.S. waters. The penalties for violating the Oil Pollution Act of 1990 include imprisonment of up to five years and fines of the greater of $500,000 for organizations or twice the gross gain or loss from the offense. Therefore, suffice it is to say, the Clean Water Act imposes some fairly severe penalties for violations of its provisions.

Several other federal and state statutes may have both criminal and civil implications for marine industry participants. For example, the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") requires vessel and facility operators to notify authorities of certain releases of hazardous substances. The Resource Conservation and Recovery Act further provides a "cradle-to-grave" regulatory scheme to govern hazardous wastes that may apply to some operations. Consequently, while many of the federal environmental laws may have no application to certain marine industry members, it remains incumbent on all companies to determine the laws applicable to their operations and to ensure compliance with such laws and regulations.

The U.S. Environmental Protection Agency's criminal enforcement statistics have demonstrated a marked increase in the number of individuals prosecuted and imprisoned for offenses. In particular, the statistics for 1991 indicate that individual defendants charged by the EPA for violations of environmental laws received a total of 963 months imprisonment. This number, however, nearly tripled by 1997 when individual defendants received a total of 2,350 months in jail. One theory known as the "responsible corporate office doctrine", which developed in the context of criminal law to impute knowledge to top corporate officers, has been used in prosecutions of environmental law violations. While this doctrine usually requires proof of knowledge (actual or constructive), some U.S. courts have held that knowledge may be established by proving a corporate officer to have been "willfully blind" to facts constituting an environmental criminal offense. Therefore, although U.S. criminal laws impose penalties on the individuals who actually commit the crimes, corporate officers and managers must be cognizant that liability could be imposed against them simply for failing to take adequate measures to prevent an employee from committing a criminal act.

A company obviously cannot protect itself against every disgruntled employee or individual who may attempt to subject the corporation and its officers to criminal liability. But, a corporation can implement policies, procedures and guidelines to emphasize the importance of compliance with federal and state environmental statutes. A company also can ensure that each and every officer and employee understands compliance with these laws to be an individual as well as a corporate responsibility. Finally, policies, procedures and guidelines ensuring compliance with environmental laws can be communicated to all employees through meetings, seminars and other events on a regular basis. Hence, while no corporate compliance policy ever will be foolproof, corporate officers and managers need to take reasonable steps in implementing and enforcing compliance with environmental laws.

One of the first steps in a successful environmental compliance program involves establishing and reviewing compliance responsibilities. More specifically, a company initially should compile a list of applicable statutes, regulations and other requirements. These requirements should be categorized and thereafter assigned to staff members competent to handle such assignments. Next, the priorities should be developed in light of enforcement priorities set by the U.S. Environmental Protection Agency, the U.S. Coast Guard and other governmental agencies. The last task in process of establishing and reviewing compliance responsibilities requires maintaining knowledge of environmental laws and regulations. Hence, after the initial review of applicable laws and regulations, it becomes imperative to keep abreast of changes in the area of environmental compliance.

The next step in a successful environmental compliance program includes conveying the policies and procedures. In particular, a company should adopt an environmental compliance policy at the highest levels. All employees should be required to read and sign a copy of the policy or similar statement concerning a company's intent to comply with environmental laws. Moreover, in some companies, it might be beneficial to make implementation of environmental policies a factor in compensation. Other companies also provide awards or bonuses for efforts to achieve compliance. Finally, a corporate officer should be designated for employees to provide confidential information concerning compliance. Thus, the adoption of policies concerning environmental compliance also must be buttressed by an active effort to convey such policies to all levels of employee.

A third component requires the development of record retention and review policies and other preventative measures. First, it must be stressed that many, if not most, criminal prosecutions revolve around paperwork demonstrating compliance with environmental laws and regulations. A company should adhere to any applicable government regulations concerning retention policies but also avoid the "pack rat" approach to record retention. Next, officers and employees should be familiar with the types of documents kept in their files and only keep those documents necessary to ensure compliance. Another preventative measure involves good working relationships with both federal and state regulatory agencies as a record of compliance and cooperation assists tremendously when facing a criminal investigation. Finally, listen to disgruntled employees because such individuals not only can cause problems but, at times, also may be the only persons willing to identify problem areas in an environmental compliance program. Therefore, as noted above, no environmental compliance program will be foolproof but certain measures may be taken to protect both a company, its officers and its managers from criminal liability.

The U.S. Department of Justice and the U.S. Environmental Protection Agency consider a number of factors to decide whether to pursue criminal penalties. First, the authorities consider the potential deterrent effect on future illegal discharging or dumping of hazardous waste. A permitting or "paperwork" type violation usually involves consideration over whether the company deliberately or negligently failed to comply. Next, a significant factor involves actions (or the lack thereof) on the part of a company or individual to conceal activities violating environmental laws. The government also will consider previous violations and the likelihood of conviction on the potential criminal charges. Finally, the existence or absence of financial gain from the illegal activity will be reviewed. Hence, although no one factor governs, the U.S. government usually decides whether to initiate a criminal prosecution using some, or all, of the foregoing factors.

Search warrants have been used increasingly by various law enforcement officers in recent years to investigate violations of environmental laws. To obtain a search warrant, a federal or state law enforcement officer must demonstrate to an appropriate judicial officer that "probable cause" exists to substantiate a criminal violation. A law enforcement officer generally will present an affidavit to a federal or state magistrate judge who then considers the supporting facts and decides whether "probable cause" exists to issue the warrant. Upon issuance of the warrant, law enforcement authorities make an unannounced search and seizure of the property described in the warrant for specified items. A search warrant generally must identify with specificity the items to be seized and must be executed during normal business hours. A federal judicial officer, however, may waive this requirement and also impose other conditions such as allowing law enforcement officers to remain at the company site until completed with the search. Finally, the federal or state agents tasked with executing a search warrant expect cooperation from the company or individual being searched and have authority to arrest anyone who interferes with the search. Thus, while a search warrant provides law enforcement authorities with broad powers, a company may take certain actions in prior to and during the execution of a warrant to protect its rights.

The response to a search warrant may vary depending on the circumstances but certain actions taken by a company to protect its rights apply in most situations. First, a senior company official should be designated in advance to act as the liaison with government investigators. The senior company official should be designated on a premises-by-premises basis as law enforcement authorities do not wait prior to beginning a search and seizure. Next, upon execution of a warrant, the designated company representative should ask for a copy of the search warrant and review it carefully. Law enforcement authorities should not exceed the parameters of the search warrant to include the property description to be searched and the items to be seized. Nevertheless, as the company official must ensure cooperation and refrain from obstructing a search, his or her only remedy at the time of the search would be to object and to inform the authorities that the warrant does not authorize the scope of the search being undertaken by the investigators. The U.S. Constitution still protects companies and individuals from searches and seizures that exceed the boundaries of lawfully-issued search warrants. Therefore, if the investigating officers do not follow the scope of the warrant, a court could exclude any evidence illegally seized by them during the search.

A company also should take several other actions to protect itself from the disruption and potential criminal liability presented by execution of search warrants. In this regard, the designated company officer may request that the search warrant be executed after business hours. He or she also may ask the law enforcement authorities to permit an attorney to be present for the search. Moreover, the senior company representative may seek to accompany the inspector or investigator if permitted. Finally, a criminal attorney should be contacted immediately for advice in responding to the search warrant. A criminal attorney also should conduct an internal investigation with the assistance of company officials once the investigators leave the premises. Thus, although the governmental authorities control the execution of search warrants, a company may take certain affirmative steps upon execution of a warrant to ensure the protection of its rights under the appropriate legal standards and to protect itself against criminal liability.

A search warrant does not authorize law enforcement authorities to interview company officers and employees. On the other hand, company officials should not prevent employees from being interviewed by inspectors or investigators. A company generally should advise its employees prior to execution of a warrant about individual rights. Most importantly, individual officers and employees should be informed that the decision to cooperate or not to cooperate remains entirely their own. Law enforcement authorities cannot compel a person to provide information without issuance of a subpoena or other legally-enforceable tool. Nevertheless, the U.S. Constitution provides individuals, not companies, with a right to remain silent and to refrain from self-incrimination even if faced with a subpoena for testimony. Consequently, the execution of a search warrant does not strip company officers and employees of their rights under the law to refrain from being interviewed by governmental authorities.

Individual officers and employees also must be informed about the role of company counsel in defending against the execution of a search warrant. More specifically, an attorney retained by the company represents the corporation and not individual officers or employees. Employees should be aware of the outside counsel's representation of the company. Moreover, employees should be advised that separate counsel will be made available if requested. A company and its outside counsel, however, usually make determinations regarding separate counsel after considering the circumstances at hand. Some situations present conflicts of interest that prevent outside counsel from representing the interests of both the company and its employees. Hence, the foregoing issues should be discussed in advance with the understanding that circumstances will dictate the actions to be taken by a company.

Criminal prosecutions on the federal level for criminal violations of environmental laws more than tripled during the last decade. In general, the U.S. Department of Justice received more referrals for criminal prosecution from law enforcement agents, charged more defendants, and obtained significant sentences of imprisonment and fines. The U.S. government also has used criteria known as "environmental justice" to target environmental crimes in minority or low-income communities. Next, the Environmental Protection Agency continues to emphasize environmental violations involving the Mississippi River as part of the Mississippi River Initiative. The Vessel Initiative also has resulted in criminal prosecutions of marine companies, their officers and their employees to stem pollution along U.S. coastal waters. Hence, it remains imperative that marine industry participants protect their companies, officers and employees against the increased use of criminal laws to prosecute environmental law violations.