The Risks and Costs of a Vessel Criminal Investigation and Prosecution

1. The Risks and Costs of a Vessel Criminal Investigation and Prosecution Gard Charterers and Traders 2010 Seminar STEVEN P. SOLOWPartnerWashington, D.C.p / 202.625.3550f / 202.295.1171steve.solow@kattenlaw.com

2. Vessel Prosecutions/A U.S. Government Priority • Vessel enforcement cases are 15% to 25% of the federal environmental criminal prosecution docket

3. Vessel Criminal EnforcementPast Five Years • More than 65 vessel-related convictions • 2005: 16 • 2006: 16 • 2007: 10 • 2008: 19 • 2009: Not yet complete

4. Vessel EnforcementPast Five Years How many cases investigated and declined? • Unknown • May be as many as 60 – 100 per year

5. A Broader Enforcement NetworkAccording the U.S. Authorities • Canada – strong maritime enforcement authority • EU – established power to impose criminal sanctions for knowing acts of maritime pollution • France – increased penalties for both knowing and accidental maritime pollution • Australia – increased enforcement on intentional maritime pollution • Taiwan – increased resources to detect and prosecute intentional acts of vessel pollution • Interpol – continued international discussion and cooperation

6. U.S. Criminal Penalties • Between 1998 and 2005 – approximately $200 million in fines • Past five years – approximately $200 million more • Fines per case: $1 million to over $25 million *Based on Total Fines (2005-2009) and Total Cases (2005-2009).

7. Imprisonment • Over the past five years numerous defendants sentenced to terms of incarceration • Sentences range from a day to almost three years

8. Imprisonment Before Trial • Terms of imprisonment do not reflect time spent in detention by crew and officers away from family and work. • The average detention time is believed to be150-180 days. • The average costs to owners/operators ranges between $350,000 to $500,000.

9. Long Term Costs of Conviction • Hundreds of vessels operating under court-supervised ECPs • Government designed and monitored • Third party reviews • Conditions of probation that can lead to further court sanctions if requirements are not met

10. Changing Legal Standards/Expanding Legal Liability • 1998 – 2008: What a difference 10 years can make

11. Changing Legal Standards/Expanding Legal Liability • 1998 – U.S. v. RCCL • The alleged violation is not discharging oil while at sea and failing to record the discharge at that time, it is the presentation of the materially false Oil Record Book to the United States Coast Guard while in port.

12. The RCCL Court in 1998 • It is not necessary to reach the question of the obligation of RCCL to record various entries in the Oil Record Book while outside the jurisdiction of the United States and the attendant ability of the United States to enforce any omissions thereof in order to determine the obligation of RCCL not to knowingly and willfully present a false writing to the United States Coast Guard.

13. The RCCL Court in 1998 • Because the gravamen of this action is not the pollution itself, or even the Oil Record Book violation occurring at that time, but the misrepresentation in port, this proceeding is not properly characterized as “in respect to a pollution incident” such that UNCLOS, a convention addressing the law of the sea and appropriate protocols thereof, is applicable to this case.

14. The Jho Trial Court in 2006 • Consistent with RCCL • The district court held that U.S. law could not reach the violations that occurred on the high seas, and dismissed the charges relating to the failure to maintain an oil record book while outside U.S. waters.

15. The Jho Trial Court in 2006 – Dismissed the Charges • The Court is of the opinion that long-standing principles of international law require dismissal of the criminal charges alleging violation of the Coast Guard regulations. • Here, the United States government is seeking to criminally prosecute a foreign flag ship for alleged violations of U.S. Coast Guard regulations that occurred aboard ship and outside U.S. waters.

16. The Jho Court – Expanding Legal Liability • 2008 – U.S. v. Jho (5th Circuit) (Reversing the trial court) • Maintaining an accurate oil record book is a continuing duty. Accordingly, the chief engineer of an oil tanker violated that duty each time the ship called in a U.S. port, despite the fact that the fraudulent entries were made in the book on the high seas, outside the jurisdiction of the United States. • The violations (which occurred outside of U.S. jurisdiction) were consummated by each port call, despite the fact that the oil record book was “presented” to Coast Guard officials on only two of eight port calls.

17. Department of Justice in Washington, D.C.Role in Environmental Criminal Case Development & Prosecution

18. United States Attorney’s OfficePrimary Authority for Criminal Case Development and Prosecution

19. Critical Changes in DOJ Policy • Cooperation - Previously • Government may demand waiver of the attorney-client privilege as a condition of cooperation • Government objects to companies providing legal counsel for individuals

20. Critical Changes in DOJ Policy • December, 2006 • Privileged attorney-client communication “should be sought only in rare circumstances” and requires high-level DOJ approval to do so • Prosecutors may not “take into account” whether a business is providing counsel for its employees or agents under either investigation or indictment, except in “extremely rare” cases

21. How to Prevent Prosecutions • Plan, Execute, Review, Revise • Watch What They Do • Perhaps the Single Biggest Way to Effectively Manage Risk: • Promptly investigate and, where appropriate, meaningfully sanction employees who do not follow your environmental compliance policy

22. How to Respond to an Incident/Investigation • Quickly • Comprehensively • Communicate • Internally – clearly and appropriately • Externally – with discipline • Plan to litigate – preserve records • Evaluate your options

23. Thank you

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