Environmental crimes.

• Author: Agarkova, Elena
• Position: Annual white collar crime survey

1. INTRODUCTION

   Nine principle statutes govern the enforcement of federal environmental regulations through criminal prosecution. After a brief discussion in Section II of issues common to most of these statutes, including theories of liability, defenses, and sentencing issues, this article addresses each of these statutes in turn.

   First, Section III discusses the Resource Conservation and Recovery Act ("RCRA"),(1) a set of amendments reinforcing the Federal Solid Waste Disposal Act ("SWDA"),(2) which imposes criminal penalties on persons who improperly transport, store, or treat hazardous wastes. Section IV considers the Toxic Substances Control Act ("TSCA")(3) which governs the manufacture, processing, and distribution or disposal of chemicals that pose danger to the public or environment. Section V discusses the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"),(4) which regulates the manufacture, registration, transportation, sale, and use of toxic pesticides. Section VI returns to hazardous substances, considering the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),(5) which authorizes the cleanup of hazardous substances at contaminated sites and imposes criminal penalties on those who violate its provisions. Section VII covers air pollution, discussing the Clean Air Act ("CAA"),(6) which imposes penalties on violators of federal and state air pollution control laws and regulations. Sections VIII, IX, and X address water pollution, respectively discussing the Safe Drinking Water Act ("SDWA"),(7) the Federal Water Pollution Control Act ("Clean Water Act" or "CWA"),(8) and the Rivers and Harbors Act of 1899 ("RHA"),(9) which together restore and protect the quality of the nation's surface and ground waters. Crimes against wildlife are considered in Section XI, which analyzes the Endangered Species Act ("ESA").(10)

   Most of these statutes, described more specifically below, contain overlapping civil, criminal, and administrative penalty provisions.(11) Over time, Congress has elevated some violations from misdemeanors to felonies and has increased potential jail sentences and fines for those convicted.(12)

   The EPA enforces the criminal provisions of nearly all of these statutes in conjunction with the Department of Justice (DOJ); the exception is the ESA which is enforced by the Department of Interior. In fiscal year 1998, the EPA referred 266 criminal cases to the DOJ and assessed $92.8 million in criminal fines, while also assessing $63.5 million in civil penalties for 411 civil cases.(13) Criminal prosecutions and fines increased markedly in the early 1990's, and has increased more slowly in recent years.(14) The EPA uses a flexible approach to enforcement, pursuing criminal sanctions(15) only when there is significant environmental harm and culpable conduct.(16) EPA enforcement policy emphasizes both cross-media environmental problems(17) and cooperation with other administrative agencies.(18) The EPA identifies three national industry sectors for priority attention at any given time.(19)

   The DOJ also uses a flexible approach to enforcement, considering several factors in deciding whether to prosecute criminals for a violation of a federal environmental statute.(20) Besides the specific criminal act, the DOJ may consider: (1) voluntary disclosure; (2) the degree and timeliness of cooperation; (3) preventive measures and compliance programs; (4) pervasive non-compliance; (5) disciplinary systems to punish employees who violate compliance policies; and (6) subsequent compliance efforts.(21) The purpose of this prosecutorial discretion is "to encourage self-auditing, self-policing, and voluntary disclosure of environmental violations."(22)

2. COMMON ISSUES

   This section addresses three issues that are common to all of the statutes discussed in this article. Part A considers liability, and the specific doctrines of "respondeat superior" and "responsible corporate officer," under which corporations and individual officers or employees of corporations can be held criminally liable under the statutes. Part B discusses some constitutional and other defenses which are commonly (and often unsuccessfully) asserted by those charged under the statutes. Part C considers the impact of voluntary compliance programs, such as self-auditing, on sentencing of those convicted under these statutes.

   1. Liability

      1. Corporate

         Corporations are included in the legal definition of "persons" used in each statute.(23) Corporate liability for environmental crimes, or any crime, is "based on the imputation of agents' [or employees'] conduct to a corporation, usually through the application of the doctrine of respondeat superior."(24) Corporations may also incur liability for the conduct of their subsidiaries(25) or predecessors(26) through separate doctrines. The trend in environmental enforcement is to indict corporate officers rather than corporations themselves(27) by piercing the corporate veil. In 1991, 80% of environmental criminal defendants were companies, while by 1995 that percentage had fallen to 20%.(28)

         The rationales for criminal prosecution of corporations engaging in environmental crimes are that (1) the harms posed by environmental crimes may be as significant as those posed by traditional crimes; (2) the corporate environmental criminal may be just as morally culpable as traditional criminals; and (3) without criminal sanctions, corporations may view environmental sanctions as "a mere cost of doing business" which they may ultimately pass on to their customers.(29) These criminal prosecutions are effective because, like individuals, corporations "can suffer from the stigma of a conviction and there may also be collateral consequences that flow from a conviction."(30) Criminal sanctions have a unique ability to give force to moral values of the society, conveying its condemnation of acts in question(31) and making it very clear that "noncompliance is a crime rather than a business decision."(32)

         When imposing criminal sanctions on a corporation, courts focus on the authority of the culpable employee to act on the corporation's behalf and whether the employee intended to benefit the corporation through his or her criminal act.(33) Generally, if an individual employee's guilt can be established, prosecutors can establish the criminal liability of the employer/corporation by showing that the individual acted within the scope of his or her job for corporate benefit.(34) However, some commentators suggest that prosecutors should not pursue criminal sanctions against corporations in every instance that an employee or agent commits an environmental crime.(35)

         In addition to incurring liability for the conduct of employees acting within the scope of their employment(36) for the corporation's benefit,(37) corporations may incur liability under certain statutes for directly or indirectly supervising illegal dumping conducted by high level employees.(38) Other statutes impose liability on corporations or corporate officials as "operators" if the corporation could prevent the violation with reasonable measures.(39)

         Under certain circumstances the acts of a corporation's predecessors can create liability for the corporation. The well-established rule is that the corporation is not responsible for the liabilities of its predecessor unless one of the four exceptions applies: (1) the successor expressly or impliedly agrees to assume the liabilities of the predecessor; (2) the transaction may be considered a de facto merger; (3) the successor may be considered a "mere continuation" of the predecessor; or (4) the transaction is fraudulent.(40) According to the "mere continuation" exception, liability is imposed only when, "after the transfer of assets, only one corporation remains, and there is an identity of stock, stockholders, and directors between the two corporations." (41) However, some circuits have also recognized the "continuity of enterprise" or the "substantial continuity" theory, which expands the scope of the "mere continuation" exception.(42) The "substantial continuity" test evolved from the "mere continuation" test in contexts "where the public policy vindicated by recovery from the implicated assets is paramount to that supported by the traditional rules delimiting successor liability."(43)

         In June 1998, the Supreme Court resolved a conflict in the circuits over the extent to which a parent corporation is liable for violations of a subsidiary. In United States v. Bestfoods,(44) the Court rejected the "authority to control" test applied in several of the circuits, holding instead that parent corporations are liable for violations of their subsidiaries only when there is sufficient evidence to pierce the corporate veil, or if the parent is directly liable for the violation.(45)

      2. Responsible Corporate Officer Doctrine

         Most criminal sanctions under the environmental statutes apply to any "person"(46) who violates a regulation. The "responsible corporate officer doctrine"(47) generally imposes individual liability upon those with the responsibility or authority to prevent or correct the violation(48) rather than those who actually commit the contaminating act.(49)

         The degree to which the responsible corporate officer doctrine eliminates the mens rea requirement of various environmental statutes is not well settled. The First Circuit has held that actual knowledge of the alleged misconduct by the corporation or an employee of the corporation is required to incur liability under RCRA.(50) The Fifth Circuit, under CERCLA has required personal participation in the liability-creating activity.(51) The Third and Tenth Circuits have allowed a jury to infer knowledge and/or control of environmental crimes by corporate officers based on circumstantial evidence.(52) The Second, Sixth, Eighth and Ninth Circuits have not required knowledge of criminal activity to find corporate...