Department of Justice Hitches Environmental Crimes to Worker Safety Violations Eileen D. Millett Eileen D. Millett is a Partner in the real estate/environmental group in the New York City and Westfield, New Jersey offices of Lindabury, McCormick, Estabrook & Cooper, P.C. She advises her clients on environmental issues in litigation and administrative proceedings, in federal and state enforcement proceedings, and in land use matters, mergers and acquisitions, real estate transactions and financings, environmental compliance, Superfund and hazardous waste cases, sustainability and climate change issues, remediation matters, and brownfields. Ms. Millett is a member of the American College of Environmental Lawyers (ACOEL), a professional association of preeminent lawyers who practice in the field of environmental law, recognized by their peers as the best practitioners in their field. THE FOURTH QUARTER OF 2015 saw two striking pronouncements on criminal prosecutions and civil actions against individuals. The first, referred to unofficially as the Yates Memo, came in the form of new guidance to the Department of Justice (DOJ) and all United States attorneys on individual accountability. The second came in the form of a memorandum of understanding (MOU) between the DOJ and the Department of Labor (DOL). The MOU was designed to bolster the environmental side of worker safety violations, by scrutinizing environmental records. Armed with two new tools, prosecutors are now equipped to examine violations involving worker safety using criminal environmental statutes. Thus, if the government accuses a company of worker safety violations, the company may expect a close analysis of their environmental record. The MOU itself is the next logical step of the DOJ s strengthening its enforcement cases involving worker safety violations under environmental statutes. With the new understanding between the DOJ and the DOL, civil division attorneys are to share information with criminal division attorneys. Moreover, the MOU requires that criminal division attorneys explain to a supervisor why they did not seek charges against an individual company wrongdoer. The Practical Real Estate Lawyer 11
12 The Practical Real Estate Lawyer July 2016 What circumstances brought about the new push? In many circles, dissatisfaction, criticism and even anger over the paucity of prosecutions brought against individuals in the aftermath of the subprime mortgage crisis fueled a desire for more accountability. The accountability came first in the form of the Yates Memo and then in the form of a memorandum of understanding the DOJ/DOL MOU following a growing emphasis on government concern over weak Occupational Safety and Health Administration (OSHA) enforcement capability. So both policies were born out of frustration with the status quo. Yates Memo: Individual Accountability for Corporate Wrongdoing The Yates Memo is designed to be a game changer. Deputy Attorney General, Sally Yates, announced the new Justice Department policy last fall. It requires that corporations disclose all relevant facts about potential misconduct by their employees, in order to receive credit for cooperating with an investigation. The government push is toward holding individual executives more accountable. Current practice has been to resolve high profile corporate criminal investigations without bringing charges against an individual. Important change began in April of this year, when Donald Blankenship, the former CEO of Massey Mining Company was sentenced to one year in prison and ordered to pay a fine of $250,000 for conspiring to violate mine safety standards at Upper Big Branch mine in West Virginia. Twenty-nine people were killed following an explosion. Blankenship was found guilty of conspiring to willfully violate mine safety and health standards, a misdemeanor. Although the jury did not convict him on three felony charges, his prosecution used multiple allegations to bring more substantial charges. Blankenship is believed to be the first CEO of a major U.S. company prosecuted for worker safety violations. The Yates memo directs prosecutors to make prosecution more meaningful by charging crimes that often occur concurrently false statement, obstruction of justice, witness tampering, conspiracy, environmental and endangerment crimes. The Yates Memo suggests that the reason for the small number of prosecutions against individuals could have something to do with the lack of enthusiasm among prosecutors for sharing information within the DOJ. Thus, the Yates Memo requires that civil division attorneys share information with criminal division attorneys, and it goes further to require an attorney to demonstrate why more significant criminal charges could not be lodged against an individual. Additionally, the Yates Memo suggests that companies have been successful in avoiding criminal prosecution, avoiding identifying evidence of misconduct by individual employees, and have, irrespectively, obtained cooperation credit. Yates suggests that some accountability for the failure to pursue individual wrongdoing lies with attorneys who have not been sufficiently probing or sufficiently aggressive in internal investigations. It is for this reason that Yates says that a corporation cannot receive cooperation credit without disclosing all relevant facts about individual misconduct. Yates contends that a company will not be eligible for corporation credit if it has not fully investigated and identified the responsible parties, and provided all non-privileged information. Further, it suggests that the government is asking corporate counsel to work in tandem with prosecutors. Regardless of whether this is the government overreaching, or simply leveling the playing field, it seems certain that there will be more scrutiny of cooperation credit in the form of deferred prosecution agreements. Deferred prosecution agreements have been used to resolve significant corporate investigations, and have increasingly been used to afford corporations, but not individuals, a chance for rehabilitation without the stigma of a criminal conviction. In a 2015 case in the District of Columbia, United States v. Saena Tech Corporation, No. CR 14-211, 2015
Environmental Crimes and Worker Safety Violations 13 WL 6406266 (D.D.C. Oct. 21, 2015), the judge wrote that he was disappointed that notwithstanding Congress s clear intent, deferred prosecution agreements are being used to allow corporations a chance for rehabilitation without the destructive effects of a conviction. Yates was designed to strengthen the government s pursuit of individual corporate wrongdoing. Going forward, if the government finds that a company has violated laws that impact worker safety, the government now has more choices available in pursuing a remedy. DOL/DOJ MOU on Criminal Prosecutions of Worker Safety Laws The Occupational Safety and Health Administration (OSHA), the agency that has traditionally prosecuted worker safety violations, has received a new tool in its arsenal, a memorandum of understanding that enhances the penalties OSHA would otherwise use to prosecute violations of worker safety laws. The enhancement comes in the guise of using criminal environmental statutes for worker safety violations, statutes that have stiffer penalties and larger fines than OSHA might impose. On December 17, 2015, the DOL and DOJ entered into the MOU, in effect, a partnership with the Environmental Crimes Section (ECS) of the DOJ and the DOL, to criminalize violations of worker safety incidents. The Memorandum of Understanding enables the DOJ s Environmental Crimes Section to prosecute worker safety cases, and enables the DOL to share information, to make criminal referrals and to jointly investigate cases. In discussing the MOU, Ms. Sally Quillian Yates, DOJ s Deputy Attorney General, remarked that the announcement demonstrates a renewed commitment by both DOJ and DOL to utilize criminal prosecutions as an enforcement tool to protect the health and safety of workers. Federal prosecutors are encouraged to work with the ECS to pursue violations under the Occupational Safety and Health Act (OSH Act), the Mine Safety and Health Act, and the Migrant and Seasonal Agricultural Worker Protection Act as environmental crimes. DOJ has previously sought to rely upon environmental statutes to enforce workplace violations but has never taken a step this radical. DOJ took this action for two reasons. First, environmental offenses often occur in conjunction with worker safety violations. Second, criminal violations of environmental statutes can be charged as felonies, while OSHA violations are mere misdemeanors. On October 7, 2015, Dr. David Michaels, Assistant Secretary of Labor for OSHA, told a House subcommittee that OSHA penalties must be increased to provide a real disincentive for employers accepting injuries and worker deaths as a cost of doing business. He went further in describing the rationale for why the enhancement with the DOJ was necessary, saying, [the] most serious obstacle to effective OSHA enforcement of the law is the very low level of civil penalties allowed under our law, as well as weak criminal sanctions. OSHA has long been criticized for seeking meager financial penalties, and for failing to bring criminal charges against employers in the wake of serious incidents, that frequently involve casualties. This is particularly true in cases where both the U. S. Environmental Protection Agency (EPA) and OSHA inspect the same incidents and OSHA demands relatively small penalties and elects not to pursue criminal prosecution, while EPA demands considerable financial penalties and brings criminal charges. A prime example is the tragic incident at BP s Texas City refinery in March 2005, in which 15 employees were killed and 180 employees were seriously injured. OSHA and EPA investigated the incident. OSHA sought less than half the financial penalty demanded by EPA, and EPA brought criminal charges.
14 The Practical Real Estate Lawyer July 2016 Using Environmental Statutes To Enhance Penalties: New DOJ and DOL Partnership Using Title 18 of the U.S. Code (the federal penal code), prosecutors can demand larger fines and prison sentences for worker safety violations using environmental statutes, and could effectively increase deterrence. The DOJ announcement pointed out that the Environment and Natural Resources Division (ENRD) of DOJ had already been engaged in strengthening its efforts to pursue civil cases that involve worker safety under environmental statutes. This development is the next logical step. Among the internal changes to DOJ s investigation practices are two requirements: Civil division attorneys must share information with criminal division attorneys; and Criminal division attorneys must explain to a supervisor why they did not seek charges against an individual company wrongdoer. For its part, the DOL is committing to robust information sharing with the ENRD, including making its investigative files available to DOJ for case development. Both DOJ and DOL agreed to develop and conduct periodic training programs to ensure the validity of referrals and to increase the frequency of criminal prosecutions. By working in concert, the goal of both agencies is to increase the effectiveness of criminal prosecutions of worker safety violations. Today s OSHA can be described as anything but anemic. OSHA during the Obama administration has dramatically expanded the industries and hazards that it targets for enforcement. As a result of the new federal budget and the MOU, OSHA is on the verge of dramatically increasing fines associated with alleged OSHA violations, and is poised to prosecute workplace violations as felonies. What policies and procedures should a company review? Chief among the policies and procedures that require review are compliance plans. Taking steps to minimize both corporate and individual liability is the prudent course. Naturally, examining directors and officers liability coverage should be a priority to ensure that a company is covered for the increased costs that would be associated with concurrent investigations. Companies should prepare themselves to face more drawn out investigations and settlement negotiations. The government will look to companies for continuing and ongoing obligations to disclose relevant information. Failing to make such disclosures could subject a company to additional penalties of the withdrawal of the settlement agreement. In conducting an internal investigation, a company should take care to inform company employees that the attorney represents only the company and not the individual employee. This notice is also known as a corporate Miranda or Upjohn warning. Given Yates emphasis on individual corporate accountability, a company must take precautions to ensure that employees acknowledge and that the company memorializes the employees understanding of the scope of attorney-client privilege and that the company will control government disclosures of information obtained during the investigation. What Employers Should Do Now Reevaluate safety and health programs and aggressively correct any issues and inadequacies that are identified; Develop and strengthen employee training programs aimed at every hazard associated with employees jobs in order to significantly decrease the threat of prosecution; Consider conferring with counsel to conduct an attorney-client privileged safety and health audit of your workplaces. Otherwise, OSHA could request your audit report during an in-
Environmental Crimes and Worker Safety Violations 15 spection and use it as a map to potential hazards at the facility. Taking these proactive steps could not only improve the health and safety of your workplace, but also prevent your business from facing millions of dollars in OSHA fines under environmental statutes. Being proactive could also help you avoid a finding of criminal responsibility with jail time for individual executives and employees.
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