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Recent Convictions and Large Civil Penalties Show Environmental Matters Remain DOJ Priority

By: James W. Kraus
March 15, 2013

As the Marcellus Shale boom continues to proliferate across the Mid-Atlantic, those involved with operations and wastewater disposal must remain committed to maintaining and improving compliance efforts.  While the specific environmental regulations and enforcement priorities relating to that industry may not be quite settled,  there continues to be signs that DOJ remains willing to take on environmental protection as a law enforcement matter. The most recent examples came this week with the guilty plea on Tuesday by the owner of a Colorado painting company for illegally treating hazardous waste, and yesterday’s announcement by DOJ that Teva Pharmaceuticals USA Inc. agreed to pay a $2.25 million civil penalty to settle alleged violations of numerous federal and state environmental statutes at Teva’s Missouri manufacturing facility.

...both cases demonstrate the factors that will turn simple regulatory matters into large civil penalties or criminal charges.

Both cases are instructive on the complex web of environmental laws and regulations with which industrial companies must comply.  Perhaps more importantly, however, both cases demonstrate the factors that will turn simple regulatory matters into large civil penalties or criminal charges.  The take home point is that environmental enforcement actions that involve evidence of repeated violations, deception of regulators or risk of injury to people, are far more likely to raise the stakes for a company and it's officers.   

On Tuesday, Norman Teltow, owner of Gold Metal Paint Co. LLC (GMP), pleaded guilty to a criminal information charging him, under the Resource Recovery and Conservation Act (RCRA), with illegally treating hazardous waste at the company’s facility.  According to the government, GMP was primarily in the business of painting small aircrafts.  During the course of its business, GMP created hazardous waste in the form of spent methylene chloride-based solvents mixed with paint waste.  Methylene chloride, a listed hazardous waste, is both ignitable and toxic.  Under RCRA, GMP was required to use a licensed waste management company to transport the hazardous waste to a licensed facility for disposal.  The government alleged that, in order to save money, Teltow directed GMP employees to store the spent solvents in an underground tank below the facility, knowing that it was illegal to store the waste in that manner. 

When this illegal storage was initially discovered by the Colorado Department of Public Health and Environment (CDPHE), no criminal charges were filed.  Instead, the agency ordered Teltow to hire a licensed waste management company to pump the waste out of the tank and dispose of it properly.  It further ordered that the tank be cleaned, that the trench drain leading to the underground tank be sealed, and that GMP use a licensed waste management company to transport all hazardous waste in the future. 

According to the government, Teltow only partially complied with CDPHE’s orders by hiring a licensed waste management company to pump out the tank, and sealing off the trench drain to the underground tank.  However, rather than hire a licensed waste management company to clean out the tank, Teltow ordered subordinate employees to clean out the tank without the benefit of any personal protective equipment.  The employees were exposed to hazardous waste containing methylene chloride, and suffered from headaches, dizziness, and nausea.  

With that done, Teltow aggravated matters further by devising a new plan for treating GMP’s hazardous waste by “evaporating” it into the atmosphere.  Teltow ordered subordinate GMP employees to pour the hazardous waste onto the floor of the hangar at the end of the work day.  That of course was illegal, but apparently there was more. When Teltow’s “evaporation” method was unsuccessful at treating all of the waste that GMP accumulated, he drilled open the trench drain so that the waste could again flow into the underground tank.   As a result, the government had evidence that Mr. Teltow had hit a trifecta of aggravating factors:  (1) deceiving the regulators regarding his remedial efforts, (2) exposing employees to toxic substances, and (3) eventually returning to the use of the illegal storage tank that got him in trouble in the first place.

The Teva case is not a criminal matter, but the $2.25 million civil penalty it agreed to pay was the result of allegations of repeated violations of several federal environmental statues, the Clean Air Act (CAA), Clean Water Act (CWA), and RCRA, as well as Missouri’s companion statutes.  The problems for Teva USA began when a 2007 inspection of its Missouri facility revealed violations of the CAA.  A CWA inspection that same year by EPA found the Teva facility was discharging pollutants above permitted levels.  It was reported that, in some cases, the pollutants interfered with the local municipality’s (City of Mexico) ability to treat its domestic sewage, leading to pollutant discharges into the Salt River.  A 2008 inspection further found that Teva was discharging a green effluent that ultimately discolored a portion of the Salt River.   The problems continued in 2009 when an inspection by the Missouri Department of Natural Resources uncovered various RCRA violations.

The government made it clear that the repeated and multiple violations across the spectrum of environmental media (air, water, and solid/hazardous waste) motivated the substantial settlement.   “This settlement penalizes Teva for multiple violations of U.S. environmental laws when it allowed excess emissions of hazardous air pollutants from Teva’s wastewater treatment facility and excess discharges of pollutants into the City of Mexico, Missouri’s wastewater treatment facility,” said Ignacia S. Moreno, the Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division. 

According to yesterday’s announcement, Teva’s $2.25 million penalty includes a $1.125 million payment to the U.S. Treasury and a $1.125 million payment to the State of Missouri.  But Teva’s costs in resolving this matter are likely to be more the double the total of the civil penalty.  Specifically, under the agreement, Teva will complete other actions at the facility valued at approximately $2.5 million, including the installation of new equipment to reduce emissions, an audit to identify past causes of CWA violations, implementation of a program to prevent leaks of hazardous air pollutants at the facility, and implementation of an Environmental Management System with third party monitoring.