of counsel | by kathryn a. larkins

The Ugly Consequences of Environmental Convictions

Picture this: a construction supervisor doesn't ensure a pipeline is covered during a construction project. The pipeline is punctured by construction equipment and oil flows into a river; the supervisor is charged with negligently discharging a pollutant into waters of the United States. The supervisor, not present at the time of the spill, argues that the government must prove that he grossly deviated from the standard of care that a reasonable person would observe. The court rejects this argument, saying that his failure to use reasonable care is enough for his conviction under the Clean Water Act. The man is sentenced to six months in prison - he's a convicted felon, although he unknowingly engaged in the illegal conduct he was convicted of.

The government continues to pursue criminal enforcement of environmental laws with increasing frequency, and, as illustrated by the real-life case of the construction supervisor, the target is not always a "typical" environmental criminal - an environmental technician who falsified monitoring results or a corporate official who sanctioned an employee's illegal conduct. Even the negligent actions of non-environmental employees can expose a company to criminal liability under environmental statutes.

Criminal penalties can be harsh. Maximum fines for criminal violations of environmental statutes theoretically can reach $1 million per violation. Convicted individuals may face up to 15 years imprisonment. Also, because imposition of criminal penalties does not typically implicate constitutional double jeopardy concerns, it is not uncommon for EPA or the Department of Justice to initiate a civil enforcement action after the successful completion of a criminal matter.

Even after a criminal enforcement action is resolved and the fines are paid, a company may find itself coping with the implications of conviction for years to come. A conviction may result in potentially significant consequences such as debarment, loss of environmental permits under habitual violator statutes, and what's known as collateral estoppel.

A company that has been debarred is prohibited from contracting with or receiving financial assistance from the federal government. The Clean Water Act and Clean Air Act includes mandatory debarment provisions that prohibit federal agencies from contracting for goods, materials, or services with any person convicted of a criminal violation of the Acts. The EPA will sometimes entertain pre-indictment negotiations, during which a company facing a criminal conviction may obtain a commitment that the EPA will not debar the company in exchange for the company's agreement to implement compliance assurance measures.

Both Missouri and Kansas have habitual violator or "bad actor" statutes limiting the ability of companies convicted of crimes or civil violations to obtain environmental permits. Most bad actor statutes focus on hazardous and solid waste laws. Under Missouri law, the Department of Natural Resources must revoke a facility's solid waste permit when the company has three or more felony convictions in a period of five years.

Finally, a company previously convicted of a crime may be prohibited from denying its guilt in a subsequent civil proceeding under a doctrine called collateral estoppel. After a criminal enforcement action, the EPA could use this doctrine to prevent a company from denying the existence of violations in a subsequent action for civil penalties. Additionally, private party or citizen suit plaintiffs could utilize this same doctrine and the convicted company would be unable to re-litigate issues decided in the criminal action.

A company accused of an environmental crime should remember these potential consequences while attempting to resolve a government enforcement action. Otherwise, the company could find itself battling the effects of the conviction for years to come . . . and those effects can be ugly.

Kathryn A. Larkins is an attorney with the Environmental Section of Shook, Hardy & Bacon L.L.P. in its Overland Park, Kansas, office. Reach her at 913.663.8913 or klarkins@shb.com