When OSHA began investigating allegations of unsafe work conditions at facilities owned by Birmingham, Ala.-based McWane Inc., it uncovered a veritable environmental disaster area. Ongoing investigations exposed a litany of serious violations such as employees tampering with air pollution devices, operations that regularly dumped oil into the Delaware River, and such unsafe work conditions that several workers ended up scarred, maimed or, in one case, dead.

But the penalties for violations of OSHA were not stringent enough to deal with the severity of violations found at McWane. So prosecutors from the DOJ's environmental crimes division got involved–eventually bringing criminal charges against the company in four states. The most recent prosecution resulted in the sentencing on June 12 of former McWane executive Charles Matlock to a year in jail and a $20,000 fine for his role in falsifying air pollution tests at a McWane facility in Utah. Meanwhile, the court fined the company $3 million.

While few companies flout environmental laws as flagrantly as McWane, what happened to the company is not, in certain respects, all that uncommon. In the past, violations of the environmental laws often were punished with a slap on the wrist. But that is changing. The DOJ's environmental crimes unit and the EPA are making it explicitly clear that criminal enforcement of environmental laws is a priority.

“The message should be clear that prosecutions will go as high up the corporate hierarchy as the evidence permits,” says Granta Nakayama, head of the EPA's Office of Enforcement and Compliance. “All employees should definitely think twice about knowingly breaking the law because they will face incarceration and fines.”

Paying Attention

It may come as a surprise–given the general disposition of the current White House administration–that criminal enforcement of environmental laws is on the rise, but several factors have upped the number and scale of criminal enforcement actions.

First, two key changes within the DOJ occurred. Previously, the agency had two separate units that enforced environmental laws: one focused on enforcing the Clean Air Act and the Clean Water Act, and another on enforcing wildlife-protection laws. Several months ago, the agency combined these groups, expanding the pool of lawyers available to prosecute any environmental violation. In addition, the agency recently added five attorneys to the combined environmental crimes unit–raising the total number of prosecutors to 40.

With those bolstered resources, the unit is now focused on maximizing the impact of the cases it brings. Therefore it's directing its energies toward high-profile corporate defendants.

“We need to maximize the deterrent effect of our cases,” says David Ulhmann, chief of the environmental crimes section of the DOJ. “We're focused on bringing high-impact cases. It helps us spread the word that if you violate the environmental laws you may get caught, you may get prosecuted and you may go to jail.”

Further, Nakayama, whom President Bush appointed as the EPA's top enforcer in 2005, has proved to be tougher on corporate polluters than many expected the former Kirkland & Ellis partner to be. Among his most significant policy decisions is the co-location of criminal investigators with civil enforcers nationwide to ease the process of mounting criminal cases against companies that get caught for civil violations.

“Nakayama has publicly stated that he wants to increase the use of criminal sanctions,” says Steven P. Solow, a partner at Hunton & Williams, who formerly headed the DOJ's environmental crimes unit.

Expanding Enforcement

Along with the bolstered resources has come an expanded slate of criminal actions. For years, improper asbestos abatement was the only type of environmental violation to frequently result in criminal action. However, now the Justice Department is increasing its efforts in other areas.

First, the agency is focused on bringing actions under the Clean Air Act. The law in this area has been notoriously unsettled and complex, which often led government enforcers to shy away from it. Now, companies with mining or refinery operations are increasingly coming under scrutiny in the Clean Air Act arena.

“There's a whole range of covered activity under the Clean Air Act that hasn't led to much enforcement,” Solow says. “But despite the unsettled law, criminal prosecutions under Title V [the section which requires companies to obtain state permits for activities that may generate air pollutants] are starting to arise. You can't assume an investigation into clean air permits will be limited to civil enforcement.”

The second area in which the DOJ plans to up enforcement is contamination from shipping activities. Particularly, the DOJ and EPA are focused on prosecuting those companies that are found to have falsified their compliance certifications or sought to conceal violations. For example, Japan-based MK Ship Management Co. Ltd. recently pled guilty in a New Jersey court to a felony charge related to its failure to maintain records of oil discharges from a cargo ship.

“When you look at the cases that get prosecuted, you commonly see conduct that is designed to conceal unlawful activity,” says Kathleen Brickey, professor of criminal law at Washington University in St. Louis. “There are false statement statutes and false books and records statutes. They will get you every time on those.”

A third area of risk is growing cooperation between OSHA and the DOJ to bring criminal charges against companies that endanger workers.

“We are working closely with OSHA to identify facilities that are persistent violators of environmental and worker safety laws,” Ulhmann says.

Compliance Is Key

Given its limited resources, the DOJ does not have the time to prosecute every offender, so the last thing a company wants to do is give prosecutors a chance to hit a home run. The companies that are falling victim to the rising tide of criminal enforcement actions have a few things in common.

“Oftentimes it's less sophisticated companies that get in trouble,” says Steven T. Miano, a partner at WolfBlock. “They don't have programs in place to learn what their obligations are and they aren't checking on whether they are meeting those obligations.”

Furthermore, prosecutors are paying close attention to more sophisticated companies that have compliance policies, but don't enforce them adequately.

“SOX, the Sentencing Guidelines and the DOJ all place emphasis on this,” Brickey says. “Prosecutors will look at whether it's vigorously enforced and adequately communicated.”

Finally, prosecutors are attuned to how seriously companies take their obligations under environmental laws. Toward that end, companies should be prepared to discipline or dismiss managers or employees who don't work within the guidelines you set out.

“What's remarkable about the companies we prosecute is how much they fall down in that area,” Ulhmann says. “They don't reward employees who identify problems or discipline or remove the people who are responsible for criminal violations.”

When OSHA began investigating allegations of unsafe work conditions at facilities owned by Birmingham, Ala.-based McWane Inc., it uncovered a veritable environmental disaster area. Ongoing investigations exposed a litany of serious violations such as employees tampering with air pollution devices, operations that regularly dumped oil into the Delaware River, and such unsafe work conditions that several workers ended up scarred, maimed or, in one case, dead.

But the penalties for violations of OSHA were not stringent enough to deal with the severity of violations found at McWane. So prosecutors from the DOJ's environmental crimes division got involved–eventually bringing criminal charges against the company in four states. The most recent prosecution resulted in the sentencing on June 12 of former McWane executive Charles Matlock to a year in jail and a $20,000 fine for his role in falsifying air pollution tests at a McWane facility in Utah. Meanwhile, the court fined the company $3 million.

While few companies flout environmental laws as flagrantly as McWane, what happened to the company is not, in certain respects, all that uncommon. In the past, violations of the environmental laws often were punished with a slap on the wrist. But that is changing. The DOJ's environmental crimes unit and the EPA are making it explicitly clear that criminal enforcement of environmental laws is a priority.

“The message should be clear that prosecutions will go as high up the corporate hierarchy as the evidence permits,” says Granta Nakayama, head of the EPA's Office of Enforcement and Compliance. “All employees should definitely think twice about knowingly breaking the law because they will face incarceration and fines.”

Paying Attention

It may come as a surprise–given the general disposition of the current White House administration–that criminal enforcement of environmental laws is on the rise, but several factors have upped the number and scale of criminal enforcement actions.

First, two key changes within the DOJ occurred. Previously, the agency had two separate units that enforced environmental laws: one focused on enforcing the Clean Air Act and the Clean Water Act, and another on enforcing wildlife-protection laws. Several months ago, the agency combined these groups, expanding the pool of lawyers available to prosecute any environmental violation. In addition, the agency recently added five attorneys to the combined environmental crimes unit–raising the total number of prosecutors to 40.

With those bolstered resources, the unit is now focused on maximizing the impact of the cases it brings. Therefore it's directing its energies toward high-profile corporate defendants.

“We need to maximize the deterrent effect of our cases,” says David Ulhmann, chief of the environmental crimes section of the DOJ. “We're focused on bringing high-impact cases. It helps us spread the word that if you violate the environmental laws you may get caught, you may get prosecuted and you may go to jail.”

Further, Nakayama, whom President Bush appointed as the EPA's top enforcer in 2005, has proved to be tougher on corporate polluters than many expected the former Kirkland & Ellis partner to be. Among his most significant policy decisions is the co-location of criminal investigators with civil enforcers nationwide to ease the process of mounting criminal cases against companies that get caught for civil violations.

“Nakayama has publicly stated that he wants to increase the use of criminal sanctions,” says Steven P. Solow, a partner at Hunton & Williams, who formerly headed the DOJ's environmental crimes unit.

Expanding Enforcement

Along with the bolstered resources has come an expanded slate of criminal actions. For years, improper asbestos abatement was the only type of environmental violation to frequently result in criminal action. However, now the Justice Department is increasing its efforts in other areas.

First, the agency is focused on bringing actions under the Clean Air Act. The law in this area has been notoriously unsettled and complex, which often led government enforcers to shy away from it. Now, companies with mining or refinery operations are increasingly coming under scrutiny in the Clean Air Act arena.

“There's a whole range of covered activity under the Clean Air Act that hasn't led to much enforcement,” Solow says. “But despite the unsettled law, criminal prosecutions under Title V [the section which requires companies to obtain state permits for activities that may generate air pollutants] are starting to arise. You can't assume an investigation into clean air permits will be limited to civil enforcement.”

The second area in which the DOJ plans to up enforcement is contamination from shipping activities. Particularly, the DOJ and EPA are focused on prosecuting those companies that are found to have falsified their compliance certifications or sought to conceal violations. For example, Japan-based MK Ship Management Co. Ltd. recently pled guilty in a New Jersey court to a felony charge related to its failure to maintain records of oil discharges from a cargo ship.

“When you look at the cases that get prosecuted, you commonly see conduct that is designed to conceal unlawful activity,” says Kathleen Brickey, professor of criminal law at Washington University in St. Louis. “There are false statement statutes and false books and records statutes. They will get you every time on those.”

A third area of risk is growing cooperation between OSHA and the DOJ to bring criminal charges against companies that endanger workers.

“We are working closely with OSHA to identify facilities that are persistent violators of environmental and worker safety laws,” Ulhmann says.

Compliance Is Key

Given its limited resources, the DOJ does not have the time to prosecute every offender, so the last thing a company wants to do is give prosecutors a chance to hit a home run. The companies that are falling victim to the rising tide of criminal enforcement actions have a few things in common.

“Oftentimes it's less sophisticated companies that get in trouble,” says Steven T. Miano, a partner at WolfBlock. “They don't have programs in place to learn what their obligations are and they aren't checking on whether they are meeting those obligations.”

Furthermore, prosecutors are paying close attention to more sophisticated companies that have compliance policies, but don't enforce them adequately.

“SOX, the Sentencing Guidelines and the DOJ all place emphasis on this,” Brickey says. “Prosecutors will look at whether it's vigorously enforced and adequately communicated.”

Finally, prosecutors are attuned to how seriously companies take their obligations under environmental laws. Toward that end, companies should be prepared to discipline or dismiss managers or employees who don't work within the guidelines you set out.

“What's remarkable about the companies we prosecute is how much they fall down in that area,” Ulhmann says. “They don't reward employees who identify problems or discipline or remove the people who are responsible for criminal violations.”