Environmental Crimes Blog

Bio-Diesel Scam

On March 29, 2013, Jeffrey David Gunselman was sentenced to one hundred and eighty-eight (188) months in prison, fined $175,000.00 and ordered to pay more than $54,900,000.00 in restitution, by
United States District Judge Sam R. Cummings following his guilty plea in December 2012 to an indictment charging fifty-one (51) counts of wire fraud, twenty-four (24) counts of money laundering and four counts of making false statements in violation of the Clean Air Act.

Gunselman was the owner of Absolute Fuels, LLC, doing business as Absolute Fuels, LLC (“Absolute Fuels”), which he formed in April 2009.  He was also affiliated with several other business entities associated with Absolute Fuels, including Absolute Milling, LLC; Ellipse Energy, LLC; 21 Investments,
LLC; and YGOG Holdings, LLC.  Gunselman admitted that these entities are solely alter egos of himself, as an individual, as he alone owns, manages, directs and controls each of them and each has no separate and distinct existence from him.  Gunselman admitted that from September 2010 to October 2011, he devised a scheme to defraud the USEPA by falsely representing that he was in the business of producing bio-diesel fuel.  Gunselman did not have a bio-diesel fuel-producing facility. Instead, Gunselman’s business operation consisted of falsely generating renewable fuel credits and selling them to oil companies and brokers. He instructed purchasers to wire payments to a bank account he solely controlled, and as a result, approximately $41,762,236 was deposited into that account.

From September 2010 to mid-October 2011, Gunselman conducted fifty-one (51) fraudulent transactions, which were transmitted by wire, that represented to the EPA that bio-diesel fuel had been produced at the Absolute Fuels facility in Anton, Texas.  In fact, no bio-diesel fuel had been produced. This ultimately resulted in Gunselman requesting and receiving payments by EFT of approximately $41,762,236. 

During the same time period, Gunselman engaged in monetary transactions in criminally derived property by purchasing real and personal property valued at approximately $12,000,000.00 with the funds derived from the wire fraud which included several vehicles (a Bentley, a Mercedes-Benz, a Lexus, a Cadillac and a Shelby Cobra), a Patton Military Tank, a Gulfstream airplane, professional basketball season tickets and corporate sponsorship, and agricultural, business and residential real estate.

The case was investigated by both the USEPA Criminal Investigation Division and the United States Secret Service.

More later.

As always, please feel free to contact me at walter.james@jamespllc.com.

WDJiii

Fiscal Year 2012 USEPA Enforcement Results

The USEPA just released its Fiscal Year 2012 enforcement results.  The information from the USEPA web site and a link to the report is below.

“EPA enforcement of the nation’s environmental laws protects families and communities from harmful pollution that can cause serious health issues.  In fiscal year 2012, EPA took on high priority cases to reduce large sources of pollution and deter violators, addressed pollution problems that have
significant health impacts and implemented innovative solutions to protect the environment upon which healthy communities depend.”

“EPA enforcement accomplishments in FY 2012, include: 

• $252 million in criminal fines and civil penalties assessed to deter pollution; 
• 6.6 billion pounds of pollution and hazardous waste reduced, eliminated, properly disposed of or treated
• $44 million in additional investments for supplemental environmental projects that benefit communities;
• Improving compliance with drinking water regulations by 60%: Sustained and focused enforcement attention on serious violators of clean drinking water standards has resulted in dramatic improvements in compliance;
• Progress cleaning up raw sewage and stormwater: 67% of large municipalities with combined
  sewer overflows are now on track to address their local water issues, many using innovations like green infrastructure to help reduce stormwater flows.
• Bringing criminal prosecutions where criminal activity threatens public health: EPA is taking criminal enforcement action against companies or individuals who fail to use required pollution control equipment, knowingly violate pollution rules, resulting in death or serious harm, or falsify pollution information. See a case example in Louisiana.
• Advancing environmental justice: EPA incorporated fenceline monitoring into settlements, ensuring that local residents have access to critical information about pollution that may be affecting their community. See an oil refinery case example.
• Increasing transparency: EPA’s enforcement and compliance online history tools, including the map of enforcement cases in 2012, state dashboards, and Clean Water Act pollutant loadings tool, provide the public with critical access to environmental information.”

“See FY 2012 National Enforcement Initiative accomplishments.”

More later.

As always, please feel free to contact me at walter.james@jamespllc.com.

WDJiii

United States v. John Emerson Tuma

John Emerson Tuma was sentenced today in federal district court in Shreveport, LA.  Judge Stagg sentenced him to sixty (60) months incarceration, three (3) years probation thereafter and a $100,000.00 fine. 

More later.

As always, please feel free to contact me at walter.james@jamespllc.com.

WDJiii

United States v. United Water Services: A Complete Defense Verdict

The USDOJ and the USEPA always send out press releases for indictments and convictions.  They never send out press releases for acquittals or defense verdicts.  I wonder why that is . . ..

On November 9, 2012, in the United States v. United Water Services case, all defendants were found NOT GUILTY on all counts.  United Water Environmental Services, Inc. is a part of a U.S. subsidiary of Suez Environment, a French company.  The other acquitted defendants were the former plant manager and superintendent of a waste water treatment plant operated by UW in Gary, Indiana.  This was a major environmental criminal prosecution out of the Northern District of Indiana.  The defense team proved (once again) proved that you CAN go to trial and beat the government.  The indictment alleged a conspiracy to violate the CWA and twenty-six (26) substantive violations by United Water Services and two of its employees.  Some counts were dropped along the way by the government.  All three defendants were acquitted of all remaining charges by the jury.  It was a complete victory for the defense. The jury deliberated about eight (8) hours over two days.   The case was tried in Hammond, Indiana.

Here is a link the Post-Tribune story.  http://posttrib.suntimes.com/16272852-537/united-water-acquitted-of-all-charges.html

Congratulations go to the members of the defense team: Larry Mackey, George Horn, Pat Cotter, Harold Bickham, Meredith Rieger, and Tim Haley at Barnes & Thornburg and Steve Solow, Kristine Rembach and Rob Smith at Katten Muchin Rosenman LLP represented United Water Services; Jackie Bennett and Bob Clark of Taft Stettinius & Hollister represented Dwain Bowie; and J.P. Hanlon and Kevin Kimmerling of Faegre Baker Daniels represented Gregory Ciaccio.  My apologies if I left off any defense team members .

More later.

As always, please feel free to contact me at walter.james@jamespllc.com.

WDJiii

Another Oil Waste Case

On November 2, 2012, two German shipping companies pled guilty to the concealment of illegal dumping of oil at sea.  According to the plea agreement, the chief engineer and other crew members on board the vessel repeatedly discharged oily bilge waste water from the vessel into the ocean by using a hose that bypassed the vessel’s Oil Water Separator; the chief engineer then falsified the vessel’s oil record book to conceal the dumping from Coast Guard inspectors when the vessel entered the United States ports in Alaska on January 24, 2012, and then again in Houston on March 4, 2012. 

According to information from court records, the Coast Guard boarded the commercial cargo vessel M/V Susan K in Houston on April 6, 2012, after receiving a tip from a lower level crew member about the illegal dumping.  The Coast Guard then found the hose used to dump the oily waste overboard.  According to court records, during the inspection the chief engineer lied to the Coast Guard about the hose and the oil dumping and instructed a crew member to lie to the Coast Guard about the use of the hose. 

On September 10, 2012, the chief engineer pleaded guilty to one criminal charge in Texas and was fined $1,000 and sentenced to one year probation.   

Nimmrich & Prahm Bereederung and Nimmrich & Prahm Reedrei, the operator and owner of the M/V Susan K, pleaded to two obstruction of justice charges and one violation of the Act to Prevent Pollution from Ships for the violations in the District of Alaska and Southern District of Texas (the obstruction of justice charge in Alaska was procedurally transferred to Houston).  The companies were fined $1,200,000.00, $200,000.00 of which will go to the National Marine Sanctuaries Fund as a community service payment.  Additionally, as a condition of probation, all vessels owned or operated by the companies will be prohibited from entering United States ports or waters for five years.

The three whistle blowers on the vessel who assisted in the criminal investigation were each awarded $67,000.00 by the court.  

My friend, Brian McCarthy with Michael Chalos’ firm handled the defense.  David Kehoe, with the Environmental Crimes Section of the USDOJ, Gary Cobe, AUSA for the Southern District of Texas, and
Kevin Feldis, AUSA for the District of Alaska, prosecuted the case.

More later.

As always, feel free to contact me at walter.james@jamespllc.com

WDJii

First Storm Water Pollution Criminal Case

This case is the first storm water pollution criminal case brought in the United States.

On October 10, 2012, Bryan Stowe, a Sumner, Washington developer, was sentenced to six (6) months in prison, one year of supervised release and a $300,000.00 fine by US District Court Judge Ronald B. Leighton in Tacoma, Washington, for a felony violation of the CWA (knowingly violating a national pollution discharge elimination permit).  In addition, Stowe was ordered to make a $100,000.00 payment to the National Fish and Wildlife Foundation for environmental projects targeting resources impacted by the illegal discharges.   Last month, Stowe Construction, Inc. was sentenced to a $350,000.00 criminal fine.  Both Stowe and Stowe Construction will be subject to a court imposed storm water compliance plan for all current and future development sites.

Stowe, the president and co-owner of Stowe Construction, Inc., admitted to knowingly violating the Construction General Storm Water Permit for the Rainier Park of Industry project.  The permit violation discharges contributed to two major landslides at the development site in 2010 and 2011, both of which forced closure of the West Valley Highway.  

In its press release, Tyler Amon, SAIC for the USEPA's CID in the Northwest stated: “The EPA and Washington Department of Ecology want this criminal case to send a message to developers: Serious environmental crimes will be vigorously pursued.”  Makes me think more of these will be forthcoming.

According to the developed facts of the case, Stowe obtained coverage under the Construction Storm Water General Permit for Stowe Construction for the West Valley Highway site in October 2006.  The permit required Stowe Construction to prepare and implement a plan to prevent the discharge of pollutants through site improvements and practices designed to minimize and eliminate the migration of pollutants from the site to nearby waters.  Stowe Construction failed to install adequate improvements and undertake the practices between 2007 and 2011, which led to significant discharges of pollutants from the site to adjacent wetlands and streams.  Weekly site inspection reports and discharge sampling reports were also falsified.  State and federal regulators monitoring the West Valley Highway site issued several administrative compliance orders in an unsuccessful effort to bring Stowe Construction into compliance.

More later.

As always, feel free to contact me at walter.james@jamespllc.com

WDJiii

US v. John Tuma – Sentencing Update

On March 21, 2012, John Tuma was found guilty on all five counts under the indictment (conspiracy, obstruction and three CWA counts). 

The sentencing has now been rescheduled, again, from October 5, 2012, at 2:30 p.m. to December 5, 2012, at 10:30 a.m.  The rescheduling was for the convenience of the Court and will allow it to address issues raised by the corporate entity that acquired the facility from John Tuma that it is a victim of Mr. Tuma’s criminal activity and that it is entitled to an order of restitution under, inter alia, the Crime Victim Rights Act     

More later. 

As always, feel free to contact me at walter.james@jamespllc.com

WDJiii

An APPS Case That Went to Trial

On August 15, 2012, a federal jury in Washington, D.C., returned guilty verdicts against Sanford Ltd., a New Zealand fishing company, on six counts of conspiracy, obstruction of justice and violations of the Act to Prevent Pollution from Ships (“APPS”), specifically for causing the vessel to enter to the port of Pago Pago with a falsified oil record book; obstruction for falsely stating in the oil record book that required pollution prevention equipment had been used when it had not; and of discharging machinery space bilge waste into the port of Pago Pago without using required pollution prevention equipment including the oil water separator.  The jury also found James Pogue, the primary chief engineer, guilty of two charges: failing to maintain an oil record book for the vessel and obstruction of justice for falsely stating in the oil record book that required pollution prevention equipment had been used. 

This case was tried by my good friend, Michael Chalos. 

The case was tried over two weeks in the United States District Court for the District of Columbia, before Judge Beryl A. Howell.  Sentencing is currently scheduled for November 16, 2012.  Sanford faces a maximum fine of up to $500,000.00 on each count, for a total potential penalty of $3,000,000.00.  Pogue faces up to up to twenty years in prison for obstruction of justice and up to six years for knowingly failing to maintain an accurate oil record book.

Sanford operates the San Nikunau a vessel that routinely delivers tuna to a cannery in Pago Pago.  Over the past five years, Sanford was paid over $24,000,000.00 for tuna deliveries.  In July 2011, according to the government, the United States Coast Guard conducted a Port State Control
examination on the Fishing Vessel (F/V) San Nikunau, when the vessel entered port in Pago Pago, American Samoa.  The examination revealed that the vessel had been making false entries and
omissions in its oil record book (vessels are required to maintain accurate records of oil waste generated). 

Prior to the trial, Rolando Ong Vano, another chief engineer who worked on the vessel, pleaded guilty to charges in the case.  He is to be sentenced September 7, 2012.  

The case was tried for the government by Kenneth E. Nelson of the Environmental Crimes Section of the DOJ and AUSA Frederick W. Yette of the United States Attorney’s Office for the District of Columbia.

More later. 

As always, feel free to contact me at walter.james@jamespllc.com

WDJiii

US v. John Tuma – Sentencing Update

On March 21, 2012, John Tuma was found guilty on all five counts under the indictment (conspiracy, obstruction and three CWA counts). 

The sentencing has been rescheduled from August 28, 2012, at 2:30 p.m. to October 5, 2012, at 2:30 p.m. 

More later. 

As always, feel free to contact me at walter.james@jamespllc.com

WDJiii

Gibson Guitar – Lacey Act Criminal Enforcement Agreement

On August 6, 2012, the USDOJ announced that Gibson Guitar had entered into a criminal enforcement agreement to resolve a criminal investigation into allegations that Gibson Guitar violated the Lacey Act by illegally purchasing and importing ebony wood from Madagascar and rosewood and ebony from India.

The criminal enforcement agreement deferred prosecution under the Lacey Act and required Gibson to pay a penalty of $300,000.00 and a community service payment of $50,000.00 to the National Fish and Wildlife Foundation.  Gibson is also implementing a compliance program to strengthen its compliance controls and procedures.  The government had seized the wood and as a part of the agreement, Gibson withdrew its claims to the seized wood.  The USDOJ then declined criminally charging Gibson under the Lacey Act.

The Lacey Act makes it illegal to import plants and plant products (including wood), into the United States, that have been harvested and exported in violation of the laws of another country. 

The criminal enforcement agreement set out in detail the facts on which the criminal enforcement agreement was based.  From the press release announcing the criminal enforcement agreement, the USDOJ stated:   

Madagascar Ebony is a slow-growing tree species and supplies are considered threatened in its native environment due to over-exploitation.  Both legal and illegal logging of Madagascar Ebony and other tree species have significantly reduced Madagascar’s forest cover. Madagascar’s forests are home to many rare endemic species of plants and animals.  The harvest of ebony in and export of unfinished ebony from, Madagascar has been banned since 2006.

Gibson purchased “fingerboard blanks,” consisting of sawn boards of Madagascar ebony, for use in manufacturing guitars.  The Madagascar ebony fingerboard blanks were ordered from a supplier who obtained them from an exporter in Madagascar.  Gibson’s supplier continued to receive Madagascar ebony fingerboard blanks from its Madagascar exporter after the 2006 ban.  The Madagascar exporter did not have authority to export ebony fingerboard blanks after the law issued in Madagascar in 2006.  In 2008, an employee of Gibson participated in a trip to Madagascar, sponsored by a non-profit organization.  Participants on the trip, including the Gibson employee, were told that a law passed in 2006 in Madagascar banned the harvest of ebony and the export of any ebony products that were not in finished form.  They were further told by trip organizers that instrument parts, such as fingerboard blanks, would be considered unfinished and therefore illegal to export under the 2006 law.  Participants also visited the facility of the exporter in Madagascar, from which Gibson’s supplier sourced its Madagascar ebony, and were informed that the wood at the facility was under seizure at that time and could not be moved.  

After the Gibson employee returned from Madagascar with this information, he conveyed the information to superiors and others at Gibson.  The information received by the Gibson employee during the June 2008 trip, and sent to company management by the employee and others following the June 2008 trip, was not further investigated or acted upon prior to Gibson continuing to place orders with its supplier.  Gibson received four shipments of Madagascar ebony fingerboard blanks from its supplier between October 2008 and September 2009.

So, what happens to the seized wood?

More later. 

As always, feel free to contact me at walter.james@jamespllc.com

WDJiii