When does bad judgment equal conspiracy to violate environmental laws?
Randal Hansen was a financial expert who lived and worked in New Jersey. His father was CEO of a company that operated a chemical plant in Georgia. The company was in financial difficulty, and in 1991 filed a voluntary bankruptcy petition. Shortly thereafter, Randall was hired by the company to develop the business and financial plans necessary to turn the business around. Randall, working under the supervision of the bankruptcy court and a creditors' committee, and with advice from the company's outside law firms, worked on the project for about a year, serving part of the time as the company's CEO, with a brief stint as interim operations officer and plant manager. He worked mostly from his office in New Jersey, visiting the plant only twice during his tenure as CEO.
The plant's waste treatment system was inadequate, and routinely violated its federal Clean Water Act permit. It also was improperly handling its hazardous wastes, and had OSHA violations. Randall was unable to come up with the funds to correct these problems, and his requests to have funds released for this purpose were usually denied by the creditors committee and the court. When the Georgia Department of Environmental Protection finally revoked the plant's discharge permit, Randall filed an appeal which stayed the revocation, and successfully defended the agency's state court action seeking a preliminary injunction to close down the operation. Meanwhile he was trying to sell the plant, and had entered into a sales agreement with Allied Signal, which began providing funds to make necessary improvements in the environmental systems. The deal ultimately fell through, however, and the plant closed. EPA then began an environmental clean-up at the plant, estimated to cost more than $50 million.
Randall, his father, and two other company officials were indicted by the federal government and charged with conspiracy to commit environmental crimes, and various substantive crimes under the environmental statutes. They were convicted by the federal district court, and Randall was sentenced to four years of imprisonment. His conviction and sentence was affirmed by the 11th Circuit [262 F.3d 1217], and recently the U.S. Supreme Court denied certiorari, sealing Randall's fate.
Randall's attorneys argued mightily on many fronts that Randall was not guilty of any criminal conduct. He had limited authority, they argued, under the constraints of the bankruptcy proceeding, and tried unsuccessfully to correct the problems. He had no direct knowledge of and did not "cause," they argued, the various unlawful discharges. These arguments were unavailing.
Where did Randall go wrong? The 11th Circuit Court's opinion summarizes facts showing that Randall in his attempts to keep the plant operating until it could be sold made some seriously bad decisions. He signed many reports to the board of directors and to the environmental agency that falsely understated the number and seriousness of the violations. He received many detailed, written and oral reports of ongoing violations and knew that the plant was incapable of operating in compliance with the environmental laws. Despite this knowledge he permitted plant employees to continue violating the law. A jury concluded that he and his co-defendants "conspired" to continue to operate the plant knowing that it was in continuous violation of environmental laws. His determination to save the plant and the jobs of the 150 employees who worked there caused him to step over that invisible line separating good business decisions from unlawful conduct.
What to remember: A responsible corporate officer may be charged individually for crimes of the corporation under various environmental laws. If that officer has knowledge of a violation and the authority to prevent it, he or she may be individually liable for criminal conduct. The bankruptcy code does not provide protection from prosecution for environmental crimes, and anyone in possession of a property is subject to environmental regulations irrespective of bankruptcy proceedings. The officers and manager of companies facing environmental compliance problems need to pay close attention to those issues. EPA, the Justice Department and most states have policies against prosecuting those who voluntarily report violations. Prompt, thorough and accurate reporting of environmental transgressions to appropriate authorities, under the guidance of an experienced environmental attorney, is the best way to head off potential liabilities.
The plant's waste treatment system was inadequate, and routinely violated its federal Clean Water Act permit. It also was improperly handling its hazardous wastes, and had OSHA violations. Randall was unable to come up with the funds to correct these problems, and his requests to have funds released for this purpose were usually denied by the creditors committee and the court. When the Georgia Department of Environmental Protection finally revoked the plant's discharge permit, Randall filed an appeal which stayed the revocation, and successfully defended the agency's state court action seeking a preliminary injunction to close down the operation. Meanwhile he was trying to sell the plant, and had entered into a sales agreement with Allied Signal, which began providing funds to make necessary improvements in the environmental systems. The deal ultimately fell through, however, and the plant closed. EPA then began an environmental clean-up at the plant, estimated to cost more than $50 million.
Randall, his father, and two other company officials were indicted by the federal government and charged with conspiracy to commit environmental crimes, and various substantive crimes under the environmental statutes. They were convicted by the federal district court, and Randall was sentenced to four years of imprisonment. His conviction and sentence was affirmed by the 11th Circuit [262 F.3d 1217], and recently the U.S. Supreme Court denied certiorari, sealing Randall's fate.
Randall's attorneys argued mightily on many fronts that Randall was not guilty of any criminal conduct. He had limited authority, they argued, under the constraints of the bankruptcy proceeding, and tried unsuccessfully to correct the problems. He had no direct knowledge of and did not "cause," they argued, the various unlawful discharges. These arguments were unavailing.
Where did Randall go wrong? The 11th Circuit Court's opinion summarizes facts showing that Randall in his attempts to keep the plant operating until it could be sold made some seriously bad decisions. He signed many reports to the board of directors and to the environmental agency that falsely understated the number and seriousness of the violations. He received many detailed, written and oral reports of ongoing violations and knew that the plant was incapable of operating in compliance with the environmental laws. Despite this knowledge he permitted plant employees to continue violating the law. A jury concluded that he and his co-defendants "conspired" to continue to operate the plant knowing that it was in continuous violation of environmental laws. His determination to save the plant and the jobs of the 150 employees who worked there caused him to step over that invisible line separating good business decisions from unlawful conduct.
What to remember: A responsible corporate officer may be charged individually for crimes of the corporation under various environmental laws. If that officer has knowledge of a violation and the authority to prevent it, he or she may be individually liable for criminal conduct. The bankruptcy code does not provide protection from prosecution for environmental crimes, and anyone in possession of a property is subject to environmental regulations irrespective of bankruptcy proceedings. The officers and manager of companies facing environmental compliance problems need to pay close attention to those issues. EPA, the Justice Department and most states have policies against prosecuting those who voluntarily report violations. Prompt, thorough and accurate reporting of environmental transgressions to appropriate authorities, under the guidance of an experienced environmental attorney, is the best way to head off potential liabilities.
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