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Penalties, SEPs & Collections

Penalties, SEPs & Collections. Mary Penny Thompson General Counsel, DENR. Penalties, SEPs & Collections.

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Penalties, SEPs & Collections

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  1. Penalties, SEPs & Collections Mary Penny Thompson General Counsel, DENR

  2. Penalties, SEPs & Collections • NC Constitution directs that “clear proceeds of all penalties and forfeitures and of all fines collected in the several counties for any breach of the penal laws of the State,shall belong toand remain in the severalcounties, and shall be faithfully appropriated and used exclusively for maintaining freepublic schools.” N.C. Const. Art. IX, § 7

  3. Penalties, SEPs & Collections • School Boards Case • North Carolina School Bds Ass’n v. Moore, 160 N.C. App. 253 (2005) • DENR issue: whether money paid by environmental violators to fund Supplemental Environmental Projects (SEPs) in lieu of civil penalties should be subject to Article IX, Section 7 of the North Carolina Constitution

  4. Penalties, SEPs & Collections • SEP in School Boards Case • DENR policy • projects that are beneficial to the environment and/or to public health • defendant agrees to perform as part of settlement to an enforcement action • staff may introduce the possibility of SEP, but final decision on SEP is up to defendant • SEP must bear relationship, or nexus, to the violation

  5. Penalties, SEPs & Collections • SEP in School Boards Case • City of Kinston violated its wastewater treatment permit (poor operation) • In settlement, City of Kinston agreed to fund a local community college training program for operators

  6. Penalties, SEPs & Collections • DENR Argument about SEP • voluntary • made to third party, not to the State • remedial in nature

  7. Penalties, SEPs & Collections • Court’s Analysis of SEP • penalty was punitive in nature • SEP did not remediate specific harm caused by violation (even though a nexus may exist between the violation and the program at the community college to train waste water treatment employees) • payment of punitive penalty can’t be voluntary • payment to third party doesn’t change punitive nature

  8. Penalties, SEPs & Collections • School Boards Case - Open Question • Can the Secretary, through his quasi-judicial powers (remission), require a SEP to protect the environment, i.e., require funding of a remedial action necessary to prevent additional harm to the environment?

  9. Penalties, SEPs & Collections • NC Constitution directs that “clear proceedsof all penalties and forfeitures and of all fines collected in the several counties for any breach of the penal laws of the State, shall belong to and remain in the several counties, and shall be faithfully appropriated and used exclusively for maintaining free public schools.” N.C. Const. Art. IX, § 7

  10. Penalties, SEPs & Collections • 2005 Budget Bill • “The clear proceeds of these funds include the full amount of all civil penalties, civil forfeitures, and civil fines collected under authority conferred by the State, diminished only by the actual costs of collection, not to exceed twenty percent (20%) of the amount collected.” N.C. Sess. Law 2005-276, § 6.37(v)

  11. Penalties, SEPs & Collections • 2005 Budget Bill • “The Office of State Budget and Management shall develop a methodology for computing the actual costs of collection of civil penalties by State departments and agencies. This methodology shall apply to all State departments and agencies, effective July 1, 2006.” N.C. Sess. Law 2005-276, § 6.37(w)

  12. Penalties, SEPs & Collections • OSBM Survey December 2005 • Types of penalties? • Number of collection actions? • Are actual collection costs being withheld? • Has a cost analysis been prepared? • If an actual cost basis is not used, what is used? • What types of collection costs withheld for ‘05-’06? • What types of costs should be allowed?

  13. Penalties, SEPs & Collections • OSBM Survey December 2005 • Types of penalties? Varied • Number of collection actions? 0-450 • Are actual collection costs being withheld? No • Has a cost analysis been prepared? No • If an actual cost basis is not used, what is used? DAQ 10% for collection agency; UST -overhead percentage of .013898 • What types of collection costs withheld for ‘05-’06? 10% for collection agency; UST -overhead percentage of .013898 • What types of costs should be allowed?Most did not answer; DCM - FTEs to issue, collect and track violations; DAQ - 10% plus admin & clerical personnel, postage, sheriff, collection agency; DWM - AG contracts, training costs

  14. Penalties, SEPs & Collections • Options to Consider • Seek change in AG opinion on actual costs being tied to each penalty • Direct DENR staff to track and keep costs for demand letters • Work with AG’s Office to create team focused solely on collections, no other case work • senior level attorney • junior level attorney • paralegal

  15. Mary Penny Thompson General Counsel, DENR (919) 715-0691 mary.p.thompson@ncmail.net

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