CRIMINAL AND CIVIL LIABILITY FOR MARITIME ENVIRONMENTAL AND RECORD KEEPING OFFENSES

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1 CRIMINAL AND CIVIL LIABILITY FOR MARITIME ENVIRONMENTAL AND RECORD KEEPING OFFENSES Ben A. Hagood, Jr, Moore & Van Allen, PLLC, Charleston, SC Gregory F. Linsin, Blank Rome LLP, Washington, DC 1

2 Criminal Enforcement Deliberate discharges of tons of waste oil, sludge and other pollutants. Intentional falsification of vessel records to deceive port authorities. Concealment: discharges made at night, hiding of bypass equipment, use of dispersants, tricking OCM, falsification of Oil Record Book and Tank Sounding Log, etc. Obstruction of justice (witness tampering, destruction of evidence, alteration of documents). United States Coast Guard 2 Marine Safety, Security, 3 and Stewardship

3 2011 Prosecutions ~ 8 main criminal prosecutions Companies = 11 Individuals = 4 > $9 million 6 months in prison; 2 await sentencing OWS cases, Ports & Waterways Safety Act, Ballast Water Reporting Many whistleblowers False Claims Act suit Administrative banning of a ship After a slowdown at the end of 2009, DOJ is now getting about a case a week, which is almost a record pace. 3

4 Whistleblower Awards Increased whistleblower awards under APPS 50% of DOJ prosecutions arise from whistleblower reports: 2011 Case 2011 Case 2010 Case 2010 Case 2010 Case 1 whistleblower awarded $250,000 3 whistleblowers awarded $550,000, $350,000 and $350,000 4 other whistleblowers share $100,000 1 whistleblower awarded $250,000 3 whistleblowers share $250,000 1 whistleblower awarded $200,000 2 whistleblowers awarded $125,000 In the discretion of the Court, an amount equal to not more than 1/2 of such fine may be paid to the person giving information leading to a conviction. BUT several recent cases involved whistleblowers who violated company policies by failing to report known MARPOL violations, and permitted violations to continue over months while gathering evidence: Award in one such case was only 40% of what government sought. In another, government did not request award In a third, court has not yet decided on $925,000 award objected to by owner/operator 4

5 Hypothetical While a container vessel is docked for unloading, the USCG boards and inspects. While in the engine room, the inspecting petty officers photograph the piping around the OWS, and take a swab sample from the overboard discharge pipe. They then seize the Oil Record Book and begin questioning the Master, the Chief Engineer and the engineering crew. You are sitting at your desk when shoreside management calls, tells you what is happening and requests your advice. What do you do immediately and what advice do you give about what may result from this investigation? 5

6 Magic Pipe Cases What s The Crime? In 1990s, cases involved discharges in U.S. waters in violation of MARPOL / APPS Enforcement role has expanded to reach improper discharges wherever they occur APPS regulations require accurate maintenance of ORB Inaccurate ORB brought into U.S. port can be prosecuted as criminal violation 6

7 Oil Record Book Entry [ INSERT CHART ] 7

8 How Do Investigations Start? Port State Control inspections Red flags will cause investigation to expand Whistleblowers Remote sensing International cooperation Obstructive conduct / false statements will intensify any investigation Casualties / Oil Spills 8

9 Some Key Red Flags Discharges in excess of capacity Conflicts between sounding logs and ORB Flexible hoses / blank flanges Turned nuts and bolts / chipped paint Fresh paint / different colors Lack of sludge or disposal records Leaking oil / hull stains Malfunctioning incinerators OWS systems not matching drawings Lack of familiarity with the OWS system 9

10 Potential Targets & Penalties Chief Engineer and/or other crewmembers Shoreside superintendents or managers Technical manager can be held responsible as operator/employer of crew although agent only Vessel owner can also be held responsible, if it exercised some control over crew or vessel Individuals can be incarcerated Fine under Alternative Fines Act and APPS 10

11 Investigation Timeline Coast Guard onboard Port State Control Whistleblowers P&I counsel attend Criminal counsel needed? Documents taken / hard drives imaged Interviews Referral to the Department of Justice Lawyers for the crew, owner and manager Conflicts? Security Agreement Ticket to leave Customs clearance to depart withheld Bond, cooperation, lodging/maintenance of crew Generally, up to 10 crewmembers removed from ship New developments 11

12 Investigation Timeline (continued) Put new crew in place Subpoenas documents/equipment DOJ investigation Experts / Evaluation of Data Defenses? Plea negotiations? Respondeat Superior Joint Factual Statement and ECP Indictment? Information? Trial? Plea/Sentencing/Jail Immigration Status Timing 12

13 Civil Liability The Oil Pollution Act of 1990 (OPA 90) was enacted after the Exxon Valdez spill to: Increase pollution prevention; Ensure better spill response capabilities; Increase liability for oil spills; and Facilitate prompt compensation for cleanup and pollution damage. 13

14 Who is the Responsible Party? The Responsible Party is liable under OPA 90 for all removal costs and damages resulting from a spill The Responsible Party includes the owner, operator, or demise charterer of a vessel Damages may include natural resources, real or personal property, subsistence use, revenues, profits and earning capacity, and public services Coast Guard monitoring costs may also be recoverable from the Responsible Party In some states, the cargo owner is also liable for a spill under state laws, such as California, Washington, Alaska, Oregon, and Maryland, even though the cargo owner would not be liable under OPA

15 Limits to Liability Vessel Tank vessel >3,000 gross tons with a single hull, double sides, or double bottom Tank vessel of 3,000 gross tons or less with single hull, double sides, or double bottom Tank vessel >3,000 gross tons with a double hull Tank vessel of 3,000 gross tons or less with a double hull Limits of Liability (greater of) $3,200 per gross ton or $23,496,000 $3,200 per gross ton or $6,408,000 $2,000 per gross ton or $17,088,000 $2,000 per gross ton or $4,272,000 Any other vessel $1,000 per gross ton or $854,000 Liability limit under CERCLA: $300/ gross ton Limits of liability for an offshore facility are removal costs + $75 million; and for an onshore facility are $350 million 15

16 Loss of Limits to Liability In some circumstances, the Responsible Party may not utilize the limits to liability. The incident was caused by the Responsible Party s gross negligence or willful misconduct The incident was caused by the Responsible Party s violation of applicable federal safety, construction, or operating regulations The Responsible Party fails or refuses to report the incident, or fails to provide reasonable cooperation and assistance in connection with removal activities 16

17 Defenses to Liability The Responsible Party will not be held liable for damages or removal costs if the incident is caused solely by: An act of God; An act of war; or An act or omission by a third party. 17

18 Clean Water Act Penalties Any owner, operator, or person in charge of a vessel from which an oil or hazardous material is discharged is liable for: $25,000 per day of violation; or $1,000 per barrel or unit of oil or hazardous material discharged Any owner, operator, or person in charge of a vessel from which an oil or hazardous material is discharged that fails to remove the discharge or comply with orders under the CWA is liable for: $25,000 per day of violation; or Three times the costs incurred by the Oil Spill Liability Trust Fund as a result of the failure 18

19 Hypothetical A tug towing a barge laden with crude oil loses propulsion on the Sabine River inbound to Port Arthur. The barge quickly drifts across the river and is struck by an outbound vessel. The resulting spill from the barge and clean up activities shuts down the port. The vessel, while sustaining some structural damage, does not cause any discharge. Who are the responsible parties and what are they liable for? 19

20 Avoiding Enforcement Comprehensive Environmental Compliance Program à From a Plea Agreement or à Implemented in Advance The Department of Justice will continue to prosecute shipping companies who break the laws that protect our oceans. ~ Assistant Attorney General Moreno Good Company Culture Close Coordination with Flag State 20

21 Environmental Compliance Program Enhanced Compliance Training Deck and Engine Officers / Unlicensed Crew Communicate commitment to compliance Non-compliance not an option Repeated reminders Open Reporting System Information is valuable Hotlines, electronic, and anonymous Internal monetary rewards 21

22 Future Enforcement Activities Continued aggressive enforcement both civil & criminal EPA s Vessel General Permit Coast Guard s ballast water management regulations MARPOL Annex VI NOx air emissions limits New federal statutes? New state statutes? 22

23 Q & A 23