MARITIME ENVIRONMENTAL COMPLIANCEMARITIME ENVIRONMENTAL COMPLIANCE

Richard A. Udell*Senior Trial AttorneyEnvironmental Crimes SectionU.S. Department of Justice601 D Street, NW - #2008Washington, D.C. 20004202-305-0361Richard.Udell@usdoj.gov

NEW YORK SHIPPING CONFERENCE

January 7, 2006New York City, NY

*The views expressed in this presentation are those of the author.

Summary of U.S. EnforcementSummary of U.S. Enforcement

All types of commercial vessels All types of commercial vessels --U.S. and foreign flag.U.S. and foreign flag.Corporate: $133 million dollars in Corporate: $133 million dollars in criminal fines since 1998.criminal fines since 1998.

Plus restitution, community service Plus restitution, community service and probation with court supervised and probation with court supervised environmental compliance programs. environmental compliance programs.

Individual targets: 19 years of Individual targets: 19 years of incarceration since 1998.incarceration since 1998.

Senior shipboard officers and Senior shipboard officers and responsible shore side officials.responsible shore side officials.

Crimes committed for financial motive.Crimes committed for financial motive.Most cases involve deliberate discharges of tons of waste Most cases involve deliberate discharges of tons of waste oil, sludge and other pollutants.oil, sludge and other pollutants.Intentional bypassing of pollution prevention Intentional bypassing of pollution prevention equipment and falsification of vessel records to deceive equipment and falsification of vessel records to deceive port authorities.port authorities.ConcealmentConcealment: discharges made at night, hiding of : discharges made at night, hiding of bypass equipment, use of dispersants, tricking of OCM, bypass equipment, use of dispersants, tricking of OCM, falsification of Oil Record Book and Tank Sounding falsification of Oil Record Book and Tank Sounding Log, etc. Log, etc. Most cases involve obstruction of justice (witness Most cases involve obstruction of justice (witness tampering, destruction of evidence, alteration of tampering, destruction of evidence, alteration of documents, perjury).documents, perjury).

Summary of U.S. EnforcementSummary of U.S. EnforcementContinuedContinued

DetectionDetection

Remote Remote sensing.sensing.Routine inspections.Routine inspections.Enhanced physical and record Enhanced physical and record inspections.inspections.Targeting.Targeting.Marine casualty investigations.Marine casualty investigations.““Mystery SpillMystery Spill”” investigations.investigations.Referrals from foreign countries. Referrals from foreign countries. Whistleblower allegations.Whistleblower allegations.

Prosecution GoalsProsecution GoalsProtect the environment.Protect the environment.Assure accurate ship records and Assure accurate ship records and verbal statements to port verbal statements to port authorities.authorities.Deter future criminal conduct.Deter future criminal conduct.Punish deliberate and intentional Punish deliberate and intentional violations.violations.Create an even playing field Create an even playing field where law abiding companies are where law abiding companies are not disadvantaged.not disadvantaged.

Each of these vessels was ISM certified and had passed Class, Flag and Port State inspections.

Bypass pipes and hoses found in a Bypass pipes and hoses found in a USCG inspection on May 16, 2005. USCG inspection on May 16, 2005. Approximately 40 cubic meters of Approximately 40 cubic meters of sludge and a larger quantity of bilge sludge and a larger quantity of bilge waste discharged in approximately 6 waste discharged in approximately 6 months. months. Oil Record Book and a Sounding Log Oil Record Book and a Sounding Log were falsified to conceal dischargeswere falsified to conceal dischargesCrew members directed to lie to the Crew members directed to lie to the Coast Guard by senior ship engineers Coast Guard by senior ship engineers and by and by shorshor--esideeside managers.managers.Documents concealed on the ship.Documents concealed on the ship.Computer printer disabled, alarm Computer printer disabled, alarm printout hidden, and false statements printout hidden, and false statements made to USCG.made to USCG.

U.S. v. MSC Ship Management (Hong Kong) Ltd.U.S. v. MSC Ship Management (Hong Kong) Ltd.

MSC Elena MSC Elena BypassBypass

Suction SideDischarge to Overboard Valve

MSC Elena BypassMSC Elena Bypass

MSC Elena OWS BypassMSC Elena OWS Bypass

Portable Welden Pump and Flexible Rubber Hose Used to Bypass the Oil Water Separator

U.S. v. MSC Ship ManagementU.S. v. MSC Ship ManagementSummarySummary

Corporate Defendant: MSC Ship Management (Hong Kong) Corporate Defendant: MSC Ship Management (Hong Kong) Ltd.Ltd.

Charges: Charges: Conspiracy, Obstruction, False Statements, and Act to Prevent Conspiracy, Obstruction, False Statements, and Act to Prevent Pollution from Ships.Pollution from Ships.

Criminal Fine:Criminal Fine: $10 million$10 millionCommunity Service: Community Service: $500,000$500,000

To National Fish & Wildlife Foundation to fund nonTo National Fish & Wildlife Foundation to fund non--profit organizations to profit organizations to provide environmental education to seafarers, including how to rprovide environmental education to seafarers, including how to report eport environmental crimes to the U.S. Coast Guard.environmental crimes to the U.S. Coast Guard.

Probation: 5 years. Subject to the terms of an Environmental CProbation: 5 years. Subject to the terms of an Environmental Compliance ompliance Plan.Plan.

Individuals:Individuals:Chief Engineer: Pleaded guilty to charges of Conspiracy, ObstruChief Engineer: Pleaded guilty to charges of Conspiracy, Obstruction, False ction, False Statements and Act to Prevent Pollution from Ships.Statements and Act to Prevent Pollution from Ships.

Second Engineer: Pleaded guilty to charges of Act to Prevent PoSecond Engineer: Pleaded guilty to charges of Act to Prevent Pollution from llution from Ships.Ships.

Procedures to Achieve ComplianceProcedures to Achieve ComplianceIncrease shoreIncrease shore--side accountability.side accountability.Waste stream audit and Waste stream audit and minimization.minimization.Upgrade best available technology Upgrade best available technology (OWS, OCM, Incinerator, ODME, (OWS, OCM, Incinerator, ODME, MSDS, etc.).MSDS, etc.).Flexible budget for environmental Flexible budget for environmental compliance.compliance.Establish formal written policies:Establish formal written policies:

Corporate compliance statement.Operational procedures regarding storage, treatment and disposal of each waste stream and testing, use and maintenance of equipment.Recordkeeping and log entry requirements.Job position descriptions.Rewards and punishment for compliance/non-compliance.

Conduct Internal/External audits at Conduct Internal/External audits at sea that are designed to sea that are designed to investigateinvestigatecompliance.compliance.Operational testing of key Operational testing of key equipment while vessel is underway equipment while vessel is underway using actual waste streams.using actual waste streams.Provide meaningful training.Provide meaningful training.Develop direct communication with Develop direct communication with crew.crew.Reward compliance and penalize Reward compliance and penalize nonnon--compliance.compliance.Install control devices (e.g., tags, Install control devices (e.g., tags, seals and lock boxes) that will send seals and lock boxes) that will send a message to employees and provide a message to employees and provide a check on shipboard conduct. a check on shipboard conduct. Verify:Verify:

Enhanced physical inspections.Operational tests.Document analysis.Crew certifications.

Address motives.Address motives.

Addressing MotivesAddressing MotivesTo save on cost of offloading To save on cost of offloading waste in port.waste in port.

Response: Response: Emphasize environmental compliance. Have waste removal Emphasize environmental compliance. Have waste removal available in every port. Minimize waste stream. Have flexible available in every port. Minimize waste stream. Have flexible budget for budget for environmental compliance. Remove any financial incentives for cenvironmental compliance. Remove any financial incentives for crew to rew to pollute. Reward compliance. Punish violators.pollute. Reward compliance. Punish violators.

To save on cost of parts and To save on cost of parts and to save maintenance time to save maintenance time necessary if equipment used necessary if equipment used properly.properly.

Response: Response: Emphasize environmental compliance. Have waste removal Emphasize environmental compliance. Have waste removal available in every port. Minimize waste streams. Have flexibleavailable in every port. Minimize waste streams. Have flexible budget for budget for environmental compliance. Remove any financial incentives for cenvironmental compliance. Remove any financial incentives for crew to rew to pollute. Reward compliance. Punish violators. Make essential ppollute. Reward compliance. Punish violators. Make essential parts a budget arts a budget line item. Make Port Engineer responsible for having spares on line item. Make Port Engineer responsible for having spares on board. board. Consider need for equipment upgrade. Consider need for equipment upgrade.

Corporate culture: Corporate culture: Environmental compliance Environmental compliance perceived to be low priority in perceived to be low priority in relation to other priorities. relation to other priorities.

Response: Response: Emphasize environmental compliance. Display top level Emphasize environmental compliance. Display top level environmental commitment through training, policies, audits, etcenvironmental commitment through training, policies, audits, etc. Make . Make environmental compliance a positive factor in personnel evaluatienvironmental compliance a positive factor in personnel evaluations. Reward ons. Reward compliance. Punish violators. Emphasize importance through audcompliance. Punish violators. Emphasize importance through audits, its, turnover, maintenance schedules, and shoreturnover, maintenance schedules, and shore--side supervision. side supervision. Communication with those directly responsible. Consider additioCommunication with those directly responsible. Consider additional staffing. nal staffing.

Equipment not operable.Equipment not operable. Response: Response: Emphasize environmental compliance. Determine root cause. Emphasize environmental compliance. Determine root cause. Consider upgrade. Minimize waste streams. Make operability eveConsider upgrade. Minimize waste streams. Make operability everyoneryone’’s s responsibility. Open lines of communication with shore and flexiresponsibility. Open lines of communication with shore and flexible budget to ble budget to handle contingencies. handle contingencies.

Fear of losing job. Blind Fear of losing job. Blind obedience to authority.obedience to authority.

Response: Response: All of the above. Address cultural issues. Establish direct liAll of the above. Address cultural issues. Establish direct lines nes for reporting violations. Reward and protect employees who makefor reporting violations. Reward and protect employees who make internal internal reports. Zero tolerance for retaliation against employees who rreports. Zero tolerance for retaliation against employees who report violators. eport violators. Report violators to flag state and to port state authorities.Report violators to flag state and to port state authorities.

No fear of getting caught or No fear of getting caught or being subjected to being subjected to consequences by employer. consequences by employer.

Response: Response: Create shoreCreate shore--side and shipboard accountability. Establish side and shipboard accountability. Establish internal procedures that make violations more difficult to commiinternal procedures that make violations more difficult to commit without t without detection. Reward and protect employees who make internal repordetection. Reward and protect employees who make internal reports. Punish ts. Punish violators. Zero tolerance for retaliation against employees whoviolators. Zero tolerance for retaliation against employees who report report violators. Report violators to flag state and to port state autviolators. Report violators to flag state and to port state authorities.horities.

How to Encourage Internal ReportingHow to Encourage Internal Reporting

Establish clear environmental policies.Establish clear environmental policies.Take measures to convince employees that Take measures to convince employees that owner/operator really wish to comply fully owner/operator really wish to comply fully with all applicable laws, including with all applicable laws, including MARPOL.MARPOL.Display top level commitment to Display top level commitment to environmental compliance.environmental compliance.Establish direct and anonymous lines of Establish direct and anonymous lines of communication to senior management with communication to senior management with regard to environmental and safety matters.regard to environmental and safety matters.Zero tolerance for retaliation against those Zero tolerance for retaliation against those that report violations.that report violations.Zero tolerance for violators.Zero tolerance for violators.Reward employees who report violations.Reward employees who report violations.Establish safety and environmental Establish safety and environmental compliance as positive factors in employee compliance as positive factors in employee evaluations.evaluations.

Technical ApproachesTechnical ApproachesControl DevicesControl Devices

Uniquely numbered Uniquely numbered environmental tags on environmental tags on flanges to prevent flanges to prevent unauthorized unauthorized bypassing.bypassing.Use of seals on Use of seals on overboard valves and overboard valves and cross connections.cross connections.Placards.Placards.Surveillance cameras.Surveillance cameras.

Note: Control devices alone cannot guarantee compliance.Control devices alone cannot guarantee compliance.

Technical ApproachesTechnical ApproachesControl DevicesControl Devices

Use of tamper resistant Use of tamper resistant recorder systems, alarms and recorder systems, alarms and printouts to verify printouts to verify equipment operation, valve equipment operation, valve position, flow, OWS position, flow, OWS ppmppm, , incineration, position, etc. incineration, position, etc. Lock boxes/cages on Lock boxes/cages on monitoring equipment.monitoring equipment.Interlocks to prevent Interlocks to prevent tricking of monitoring tricking of monitoring equipment. equipment. Use of meters to record Use of meters to record equipment runequipment run--time and time and volume for all engine room volume for all engine room pumps.pumps.

Note: Control devices alone cannot guarantee compliance.Control devices alone cannot guarantee compliance.

Technical ApproachesTechnical ApproachesInstallation of best available technology Installation of best available technology (OWS, OCM, Incinerator, ODME, MSDS, (OWS, OCM, Incinerator, ODME, MSDS, etc.etc.Upgrade related equipment to minimize Upgrade related equipment to minimize waste production. waste production. PrePre--processing of waste (staged operations).processing of waste (staged operations).Increase tank capacity for various waste Increase tank capacity for various waste streams.streams.System modification to allow inSystem modification to allow in--port testing port testing of treatment systems and development of of treatment systems and development of ClassClass--approved test procedures. approved test procedures. Sampling and testing of waste streams and Sampling and testing of waste streams and effluent to verify technology.effluent to verify technology.Use of cleaning agents consistent with Use of cleaning agents consistent with equipment design and capability.equipment design and capability.

Response Dictates OutcomesResponse Dictates OutcomesDOJ and EPA have existing voluntary disclosure DOJ and EPA have existing voluntary disclosure programs that can lead to nonprograms that can lead to non--prosecution or leniency as prosecution or leniency as appropriate.appropriate.A company under investigation may choose to:A company under investigation may choose to:

Cooperate (including waive privilege and work product Cooperate (including waive privilege and work product doctrine and provide the government with facts from an doctrine and provide the government with facts from an internal investigation).internal investigation).Conduct a comprehensive internal investigation and Conduct a comprehensive internal investigation and determine root causes.determine root causes.Audit entire fleet and take prompt and effective remedial Audit entire fleet and take prompt and effective remedial measures to achieve fleetmeasures to achieve fleet--wide compliance.wide compliance.Promptly and thoroughly produce requested records.Promptly and thoroughly produce requested records.Take disciplinary action taken against violators. Take disciplinary action taken against violators. Support seafarers.Support seafarers.Accept responsibility.Accept responsibility.

How a company responds to an investigation may be How a company responds to an investigation may be factored into the outcome of the case, as well as help factored into the outcome of the case, as well as help determine the companydetermine the company’’s future image. s future image.

Why ?????Why ?????Why do senior engineers and Why do senior engineers and other crew members deliberately other crew members deliberately risk their liberty, career and risk their liberty, career and companycompany’’s image?s image?Why does a convicted company Why does a convicted company continue to commit crimes while continue to commit crimes while on probation?on probation?Why does a company under Why does a company under investigation continue to commit investigation continue to commit crimes?crimes?Why have senior engineers Why have senior engineers deliberately tricked newly installed deliberately tricked newly installed antianti--tricking equipment?tricking equipment?

Why ??? Why ??? ContinuedContinued……..

Why do port engineers, class, ISM Why do port engineers, class, ISM auditors and flag states not find auditors and flag states not find and/or not report evidence of and/or not report evidence of bypassing to the owner/operator or to bypassing to the owner/operator or to port state authorities? port state authorities? Why do flag administrations not take Why do flag administrations not take any action against ship, owner, any action against ship, owner, operator or crew members who have operator or crew members who have been convicted of intentional been convicted of intentional MARPOL violations and deliberate MARPOL violations and deliberate falsification of records?falsification of records?Why have ISM auditors not recorded Why have ISM auditors not recorded major nonmajor non--conformities against ship, conformities against ship, owner, or operator after a criminal owner, or operator after a criminal conviction? conviction? Why do Insurance Clubs pay criminal Why do Insurance Clubs pay criminal costs?costs?

Lessons LearnedLessons LearnedClass, Flag State and Port State certifications do not Class, Flag State and Port State certifications do not alone provide assurance of compliance.alone provide assurance of compliance.Operator needs to minimize waste streams, know how Operator needs to minimize waste streams, know how much waste is generated, establish correct procedures much waste is generated, establish correct procedures and budget.and budget.Operator has ultimate responsibility for establishing Operator has ultimate responsibility for establishing corporate compliance culture corporate compliance culture –– Experience shows many Experience shows many crew members engage in illegal conduct to benefit crew members engage in illegal conduct to benefit employer or to preserve job.employer or to preserve job.Control procedures and devices alone cannot guarantee Control procedures and devices alone cannot guarantee compliance.compliance.Environmental crimes represent a management failure.Environmental crimes represent a management failure.Environmental nonEnvironmental non--compliance is usually an indication compliance is usually an indication of other nonof other non--compliance and management deficiencies.compliance and management deficiencies.Costs of nonCosts of non--compliance is going up. compliance is going up.

MARITIME ENVIRONMENTAL MARITIME ENVIRONMENTAL COMPLIANCECOMPLIANCE

Richard A. Udell*Senior Trial AttorneyEnvironmental Crimes SectionU.S. Department of Justice601 D Street, NW - #2008Washington, D.C. 20004202-305-0361Richard.Udell@usdoj.gov

NEW YORK SHIPPING CONFERENCE

January 7, 2006New York City, NY

*The views expressed in this presentation are those of the author.