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2015 Major Criminal Cases

OCEFT SealThe criminal enforcement program investigates and assists in the prosecution of deliberate or egregious violations of environmental laws and regulations. This year’s big cases were often tied to individual conduct, and that conduct resulted in incarceration of over 129 years, plus individual and corporate fines over $88.0 million, with an additional $4 billion in court ordered environmental projects and $112 million in restitution.

Clean Water Act

Duke Energy Subsidiaries Sentenced for Criminal Violations of Clean Water Act

Aerial photo of Duke Energy Coal Ash SpillAerial photo of Duke Energy Coal Ash SpillOn May 14, 2015, three subsidiaries of Duke Energy Corporation were sentenced in federal court for multiple criminal violations of the Clean Water Act.  Duke Energy Business Services LLC, Duke Energy Carolinas LLC, and Duke Energy Progress, Inc. were sentenced five years’ probation for each charged count; fined $68 million; and will pay $34 million for environmental projects in North Carolina and Virginia.  In the plea agreement, the defendants admitted that they had unlawfully failed to maintain equipment at the Dan River and Cape Fear facilities and unlawfully discharged coal ash and/or coal ash wastewater from impoundments at the Dan River, Asheville, Lee, and Riverbend facilities.  The fine that Duke has agreed to pay would be one of the largest ever levied under the landmark Clean Water Act.  For more information, read the complete case summary.

West Virginia Oil and Gas Company Fined $600,000 for Criminal Violations of Clean Water Act

Aerial photo of impoundment constructed in 2009Aerial photo of impoundments constructed by Trans EnergyTrans Energy, Inc., an oil and gas exploration company based in Pleasants County, W. Va., was sentenced on April 22, 2015, to two years of probation and ordered to pay fines totaling $600,000 after the company admitted to multiple violations of the Clean Water Act in connection with its natural gas drilling activity. Trans Energy pleaded guilty in October 2014 to three counts of Negligent Discharge of Pollutants without a Permit by unlawfully dumping pollutants into Marshall County waterways. Seeking to capitalize on West Virginia’s Marcellus Shale natural gas resources, Trans Energy discharged rock, sand, soil and stone into streams to build large impoundments, or reservoirs, to supply water for drilling activity at nearby well sites.

Trans Energy also failed to properly train and supervise its employees and relied upon unsubstantiated representations of a nearby property owner to determine whether environmental laws were being followed. The Clean Water Act prohibits the discharge of pollutants from a point source into the waters of the United States without a permit. Discharges of dredged or fill material into waters of the United States are prohibited unless authorized by the U.S. Army Corps of Engineers.  For more information, read the complete case summary.

Energy Production Company Pleads Guilty to Clean Water Act Violation

Off shore storage tanksXPLOR Energy Offshore Storage TanksXPLOR Energy SPV-1, Inc., an Oklahoma corporation residing in Texas, was sentenced on March 4, 2015, for violating the Clean Water Act. The company agreed to pay a total monetary penalty of $3.1 million and serve a three-year term of probation. From about 1997 until 2011, XPLOR operated an offshore oil and natural gas extraction platform in the Gulf of Mexico’s Breton Sound. As part of the production process, XPLOR had to dispose of the pollutant known as “produced water” or “brine.” In November 2011, another corporation took over ownership and operation of XPLOR. The new owner immediately reported that the platform was continuously discharging produced water. An investigation revealed that XPLOR had knowingly discharged produced water into waters of the U.S. without a permit. XPLOR’s intentional failure to make repairs to faulty lines resulted in a total monetary savings or gain to the company in the amount of about $1,550,000. For more information, read the complete case summary.

Louisiana Man Sentenced for Criminal Discharge of Pollutants into Gulf of Mexico Inlet

Area of Discharge at FacilityArea of DischargeAn oilfield production company employee pleaded guilty and was sentenced July 16, 2015, for dumping polluted water into West Cote Blanche Bay, off the Louisiana coast. Brian Osborn pleaded guilty in Lafayette federal court to one count of negligent discharge of pollutants. He was then sentenced to one day in prison and one year of supervised release and was ordered to perform 200 hours of community service. According to court evidence, Gulfport Energy discharged produced water into West Cote Blanche Bay from June 2011 until March 2012. Produced waters result from separating oil from drainage fluids and should be disposed of via barge, injection well or other approved method. As Gulfport Energy Corporation’s platform operation manager, Osborn was aware of the problem but failed to address it in a timely manner. In October 2014, Gulfport Energy pleaded guilty and was sentenced on one count of negligent discharge of pollutants. The company was ordered to pay $1.5 million in fines and community service. For more information, read the complete case summary.

Drilling Operator Sentenced for Environmental and Maritime Crimes in Alaska

photo of Noble Kulluk Ship Run Aground off Shore of AlaskaNoble Drilling Unit KullukOn December 19, 2014, Noble Drilling, LLC was sentenced in U.S. District Court in Anchorage for committing eight felony environmental and maritime crimes arising out of its operation of the drill ship Noble Discoverer and the drilling unit Kulluk. Noble will pay $12.2 million dollars in fines and community service and serve a four year period of probation during which time it must implement a comprehensive Environmental Compliance Plan.

Noble’s parent corporation, Noble Corporation plc, headquartered in London, England, will also implement an Environmental Management System for all of its mobile offshore drilling units worldwide. During the 2012 drilling season, the Kulluk and the Noble Discoverer made several port calls in Washington and Alaska on their way to a drilling site in the Chukchi Sea. The Kulluk broke free from its tow in bad weather and ultimately ran aground off the coast of Unalaska. The Noble Discoverer was towed from Dutch Harbor to Seward due to failures with its main engine and other equipment. For more information, read the complete case summary.

Hawaii Firm to Pay $1 Million for Criminal Harbor Discharge

Aerial Photo of Molasses spill into waterAerial Photo of Matson Terminal Molasses Spill into Ocean off Hawaiian Island CoastOn January 29, 2015, Matson Terminals, Inc., was sentenced in U.S. District Court in Honolulu to pay a $400,000 fine plus restitution of $600,000 based on previously entered guilty pleas to two criminal charges of unlawfully discharging molasses into Honolulu Harbor. The restitution will be divided equally to support coral protection programs and beach clean-ups. According to information provided to the court, Matson Terminals loaded molasses from storage tanks into ships in Honolulu Harbor. From at least September 9, 2013, continuing to September 10, 2013, Matson discharged about 233,000 gallons of molasses into the harbor without authorization. Matson had been aware of a 2012 state report which noted that the pipeline in question was leaking molasses. The discharge caused or contributed to the death of an estimated 25,000 fish. For more information, read the complete case summary.

Dairy Company Owner Sentenced for Illegal Discharge

Photo of overflowing lagoon at tap root dairyWaste Lagoon Overflowing at Tap Root DairyWilliam “Billy” Franklin Johnston, owner of one of North Carolina’s largest dairy farms, was sentenced on April 30, 2015, to four years of probation, six months of which will be spent in home detention, and ordered to pay a $15,000 fine for his role in the illegal discharge of cow feces into the French Broad River. Tap Root Dairy, LLC, was fined $80,000, placed on four years’ probation and required to abide by a comprehensive environmental compliance plan.

Each year, Tap Root disposes millions of pounds of solid and liquid animal waste, which are considered pollutants under the Clean Water Act. On December 4, 2012, 11,000 gallons of cow feces and other material spilled from waste containment lagoons into the French Broad River, which supplies drinking water to more than one million people and is frequently used for swimming and other recreational activities. In 2012, North Carolina listed the French Broad River from Mud Creek to NC Highway 146 as “impaired” for fecal coliform bacteria. Tap Root is located along this impaired section of the French Broad River. For more information, read the complete case summary.

Florida Residents Sentenced to Prison for Biodiesel Production Fraud

Four Florida residents pleaded guilty and were sentenced in Columbus, Ohio federal court on August 27, 2015, for charges related to a scheme involving the false production of biodiesel. Dean Daniels was sentenced to 63 months incarceration; William Bradley was sentenced to 51 months incarceration; Richard Smith was sentenced to 41 months incarceration; and Brenda Daniels was sentenced to 366 days incarceration. The defendants were all officers and employees of New Energy Fuels LLC, a business in Waller, Texas that claimed to process animal fats and vegetable oils into biodiesel.

the defendants sold in excess of $15 million worth of fraudulent biodiesel RINs and more than $7 million in false tax credits.The defendants subsequently relocated to Ohio, operating a similar scheme at Chieftain Biofuels LLC. According to court documents, the defendants profited by generating and selling fraudulent biodiesel credits (known as “RINs”) and claiming biodiesel tax credits for the production and blending of fuel that was not actually biodiesel. In total, the defendants sold in excess of $15 million worth of fraudulent biodiesel RINs and more than $7 million in false tax credits. In addition, the defendants’ production process generated substantial hazardous by-products which, in at least one instance, was dumped in and around Houston, Texas. For more information, read the complete case summary.

Salvage Firm Owners & Managers Sentenced To Prison for Conspiracy Associated With Illegal Asbestos Removal

Five people will spend time in prison for conspiring to commit Clean Air Act offenses in connection with the illegal removal and disposal of asbestos-containing materials at the former Liberty Fibers Plant in Hamblen County, Tenn. A&E Salvage had purchased the bankrupt facility in order to salvage metals which remained in the plant. During the sentencing hearing, experts testified that there was a substantial likelihood that A&E Salvage workers who handled asbestos materials would suffer death or serious bodily injury as a result of their exposure.

On January 21, 2015, former A&E Salvage Manager Mark Sawyer received the statutory maximum sentence of five years in prison, to be followed by two years of supervised release. A&E Salvage manager Newell Lynn Smith was sentenced to 37 months and two years of supervised release. A&E Salvage Manager Eric Gruenberg received a 28-month sentence. Armida DiSanti and Milto DiSanti each received sentences of six months in prison, to be followed by six months of home confinement. The judge ordered all the defendants to pay restitution of more than $10.3 million, which will be returned to EPA’s Superfund which was used to clean up the plant site contamination. For more information, read the complete case summary.

Former New York State Inspector, Four Others Sentenced for Negligent Endangerment under CAA

Theodore Lehmann, a New York state certified air sampling technician and project monitor, was sentenced November 6, 2014, in U.S. District Court to one year probation. He had been convicted of negligent endangerment under the Clean Air Act. He was the final defendant sentenced in Buffalo’s Kensington Towers asbestos abatement project.    

In August 2014, four others were sentenced separately. Rai Johnson, who was convicted of violating the Clean Air Act’s Asbestos Work Practice Standards, was sentenced to time served, 160 days, and two years of supervised release.  Ernest Johnson was sentenced to two years of probation.  Evan Harnden and Brian Scott were convicted of being accessories to a false statement under the Clean Air Act.  Each was sentenced to one year probation.

photo of pre demolished kensington towers buildings with focus on asbestos warning signKensington Towers Buildings Prior to Completed DemolitionFrom June, 2009 to January, 2010, co-defendants Johnson Contracting of WNY, Inc., Ernest Johnson and Rai Johnson, conducted asbestos abatement activities at six buildings at the Kensington Towers complex.  Harnden and Scott were employed by JMD Environmental, Inc., as air sampling technicians and as project monitors.  They were certified by the New York State Department of Health to conduct asbestos project monitor and air sampling duties.

photo of kensington towers building during demolition processKensington Towers Buiding during Demolition ProcessDuring the asbestos abatement work, the men violated the Clean Air Act asbestos work practice standards.  They aided and abetted in the violations by conducting visual inspections and final clearance air sampling that indicated no violations of the asbestos work practice standards.  Rai Johnson wrote in his daily project log that all asbestos-containing floor tile had been removed from the building, when it had not been.   Thereafter, he conducted a visual inspection for floor tile and issued a satisfactory report, when he knew all tile had not been removed.  In doing so, he acted as an accessory to the false statements of the other defendants.

For more information, read the complete case summary.

Clean Air Act

Supervisors at Seafood Processing Facility in Alaska Sentenced to Jail for CAA Crime

On November 12, 2014, James Hampton, the former assistant chief engineer for Westward Seafoods, Inc., and Raul Morales, the former powerhouse supervisor, were each sentenced to serve time in jail after previously pleading guilty to falsifying data to cover up the fact that they intentionally failed to operate air pollution controls required under the Clean Air Act at the Westward seafood processing facility in Dutch Harbor. Hampton was sentenced to just over two months in prison and Morales was sentenced to 1.5 months in prison. Both defendants were ordered to pay $1,000 fine and will serve a one-year term of supervision upon release from prison.

On November 25, 2014, Bryan Beigh, a powerhouse operator, was sentenced after previously pleading guilty to charges that he tampered with the meters used to monitor the operation of the CASS pollution control equipment. Beigh was sentenced to three years’ probation and a $750 fine. Beginning in 2009, and continuing until August 2011, Westward failed to operate the Combustion Air Saturation System (CASS) pollution control equipment. Morales discussed with Hampton that he and the powerhouse staff had stopped operating the CASS. Thereafter, Hampton not only allowed this permit violation to continue, but he used his position to actively participate in a cover-up designed to make it appear that the CASS was in fact being used as required by law. Morales, along with Beigh, falsified data collection forms called “Engine Round” forms on a daily basis when it came to recording information about the operation of the CASS. For more information, read the complete case summary

Two Men Sentenced to Prison for International Biofuels Fraud Scheme

sentenced to ten years in prison for his role in illegal schemes to generate fraudulent biodiesel credits and to export biodiesel without providing biodiesel credits to the United States.On August 5, 2015, Nevada resident James Jariv was sentenced in in Las Vegas federal court to ten years in prison for his role in illegal schemes to generate fraudulent biodiesel credits and to export biodiesel without providing biodiesel credits to the United States. Jariv was also ordered to make restitution in the amount of $6.3 million and to forfeit between $4 to $6 million in cash and other assets. Jariv was the second defendant to be sentenced for the scheme. In April, Nathan Stoliar of Australia was sentenced to two years in prison and ordered to pay more than $1.4 million in restitution and to forfeit $4 million in cash. Jariv and Stoliar both pleaded guilty to one count of conspiracy, one count of conspiracy to engage in money laundering, two counts of wire fraud and one count of making false statements under the Clean Air Act. Jariv’s son, Alexander Jariv, was sentenced on September 25, 2015, to 30 months of incarceration and ordered to pay $491,000 in restitution after pleading guilty to one count of conspiracy to commit wire fraud, make false statements and launder monetary instruments.

Beginning in 2009, James Jariv and Stoliar operated and controlled several firms such as Global E Marketing (GEM) in Las Vegas and City Farm Biofuel in Vancouver, British Columbia, Canada, that represented itself as a producer of biodiesel from “feedstocks” such as animal fat and vegetable oils. The three defendants falsely claimed to produce biodiesel at the City Farm facility and to import and sell biodiesel to GEM, and then generated and sold valuable credits (known as renewable identification numbers, or RINs) to the gallons of biodiesel they claimed to produce or import. Using this scheme, the three men fraudulently generated more than $7 million. James Jariv and Stoliar also purchased and resold RIN-less B-99 biodiesel as B-100 biodiesel, which allowed them to charge substantially more than if it has been accurately labeled. In doing so, the two failed to give to the United States RINs worth more than $34 million, instead keeping the money for themselves. For more information, read the complete case summary.

Resource Conservation and Recovery Act (RCRA)

South Carolina Businesswoman Sentenced to Prison for Criminal Hazardous Waste Practices and Bank Fraud

On January 21, 2015, Nancy Marie Stein, 62, was sentenced to six years in prison for using her company to swindle millions of dollars from financial institutions all over the country while she stockpiled illegal hazardous waste at the business. Stein was also ordered to pay nearly $18 million in restitution. Her company, the now-defunct American Screw and Rivet Corporation, was put on probation for five years and ordered to pay restitution for bank fraud and hazardous waste. From at least 2004 until 2011, Stein used ASR to defraud financial institutions by creating fictitious manufacturing companies, organizations and business associations with phony addresses, bank accounts and telephone numbers in various locations throughout the Southeast and the Midwest. At least 26 financial institutions were victimized for a total loss in excess of $16 million. In the environmental crime, Stein and ASR needed a permit to store large amounts of hazardous manufacturing waste, but she never got one. In June 2011, investigators uncovered more than 24,000 gallons of hazardous waste at the plant in Anderson, S.C. The waste was removed and disposed of by the EPA at a cost of approximately $1,720,000. For more information, read the complete case summary.

Federal Insecticide, Fungicide and Rodenticide Act (FIFRA)

Illinois Man Sentenced in Environmental Crimes Case to Eight Years in Federal Prison

Photo of diuron packages on Carl Kieser propertyBags of Diuron located during a search warrant at Carl Kieser’s property in 2012.On February 20, 2015, Gibson City, Ill., resident Carl Kieser was sentenced to more than eight years in prison (97 months) followed by three years of supervised release for mail fraud, tax evasion, and illegal application of a pesticide inconsistent with its labeling. A jury convicted Kieser last October of three counts of mail fraud and illegal application of a pesticide. In July 2014, Kieser pleaded guilty to four counts of tax evasion. Kieser was owner/operator of Aquatic Control of Illinois, which manufactured, sold, and distributed a product called Pond Clear Plus. Kieser falsely claimed his product could control lake weeds and algae naturally, with no chemicals.

To produce Pond Clear Plus, Kieser mixed dye and other ingredients with Diuron 80DF, a registered pesticide for the control of land-based weeds; its EPA-approved labeling warns that the chemical should not be applied directly to water due to its toxicity to fish and other aquatic wildlife. As a result of Kieser’s actions, Diuron 80DF was directly applied to ponds and lakes throughout the nation and multiple customers reported fish kills. Kieser was ordered to pay restitution in the amount of nearly $76,000; $71,000 to the IRS; and more than $4,000 to victims he defrauded. Kieser was scheduled to begin serving his federal prison sentence on May 5, 2015. Fore more information, read the complete case summary.

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