COLUMN ONE : Corporate Crime of the ‘90s : Prosecutors are aiming for the boardroom in a growing push against polluters. Critics argue they’re going overboard.

Jan. 19 was just another working day for the Los Angeles County Hazardous Waste Strike Force, but for Roland G. Mathews and Peter S. Jonas it was the beginning of a nightmare that might not end for years.

That was the day the strike force--made up of policemen, public health officers, sanitation department officials and investigators from the district attorney’s office--raided the Diceon Electronics Inc. factory in Chatsworth. Mathews and Jonas weren’t there. But as the two top executives at Irvine-based Diceon, they were the ultimate target.

Nine months later, on Oct. 31, the district attorney filed felony complaints against Diceon, Mathews, Jonas and former director of manufacturing Richard Thomas for illegal disposal of hazardous waste. If convicted, the company faces huge fines and the executives face three years in jail.

Diceon allegedly dumped highly toxic heavy metals and caustics into the sewer system, transgressions that Los Angeles County’s lead environmental prosecutor, David H. Guthman, called “crimes of violence” that should be handled accordingly.

The case comes at a time of growing public support for harsh punishment of environmental crimes. Politicians across the country are scrambling to toughen environmental laws, including provisions holding company executives responsible for pollution violations. And law enforcement agencies from the U.S. Department of Justice to county district attorneys’ offices are hiring more staff and developing more sophisticated investigative procedures to catch environmental criminals, who more and more frequently are found in the boardroom.

If insider trading was the corporate crime of the 1980s, then violating environmental regulations stands to become the corporate crime of the 1990s.

But a controversy is brewing over the aggressive use of criminal sanctions--and especially felony charges--in environmental cases. Critics, including defense lawyers and former government officials, claim that some tactics used in pursuing alleged polluters are violating the due process rights of defendants. And because environmental crimes are politically popular and can yield large fines--a part of which flow straight to the prosecutors’ office--the government has a tremendous incentive to pursue even marginal cases with the most serious criminal charges, the critics contend.

Judson W. Starr, the founder and until recently the head of the U.S. Department of Justice Environmental Crimes Unit in Washington, said the situation today was much different from five years ago, when a small group of prosecutors pioneered the environmental crime area: “Now the atmosphere is so highly charged and the political aspects so important that it has become impossible for prosecutors to decline cases.”

Barry C. Groveman, a self-described environmentalist who helped develop the strike force concept while working for the Los Angeles city attorney’s office, is among those who feel the pendulum has swung too far toward criminal enforcement: “As we head into the 1990s, we are seeing a political climate of affirmative action on the environment in which a businessman does not have civil rights.”

Sanctions Supported

The critics are quick to point out that they support severe sanctions, including jail sentences, for deliberate and egregious environmental crimes that threaten public safety. The so-called “midnight dumpers,” who dispose of dangerous materials anywhere it is convenient to avoid the high cost of hazardous waste landfills, find few defenders anywhere.

Even today, a sizable portion of environmental prosecutions are aimed at midnight dumpers. In Eastern states, the desire to jail the perpetrators is fueled by the fact that many are owners or employees of alleged Mafia-linked waste disposal companies.

But over the last several years, many law enforcement agencies have gained new legal tools and additional resources that enable them to cast a much wider net. On the federal level, the Environmental Protection Agency’s Office of Criminal Enforcement now has about 50 agents, up from 23 when it was founded in 1982, and a proposal in Congress would double that number.

On the state and local level, where most environmental crimes are prosecuted, new attorneys and investigators are also being added. In Orange County, for example, a toxic waste strike force was formed just last year, and the South Coast Air Quality Management District now has its own prosecutor.

The Los Angeles County district attorney’s office, which along with the Los Angeles city attorney’s office has been a pioneer in environmental enforcement, now has 10 attorneys and nine investigators in the environmental unit headed by Guthman, and the number of investigations in the latest fiscal year leaped to 393, up from 123 two years ago.

Dist. Atty. Ira Reiner said his office now has enough resources that “we do not limit our caseload to the most serious violators. We try to police all kinds of violators.”

Herbert G. Johnson, senior environmental counsel at the National Assn. of Attorneys General in Washington, added: “In the last few years, the states have dramatically increased the size of their programs. The number of cases has grown, and the sophistication of cases has grown.”

Perhaps even more important, legislators are continually adding to the list of environmental offenses that can lead to jail. Congress has upgraded the enforcement provisions of most of the major federal environmental laws--including the Clean Water Act, the Toxic Substances Control Act and the Resource Recovery and Conservation Act--to include felony charges. Violations of the Clean Air Act will likely become felonies when the law is reauthorized this year.

And a move is afoot in the House of Representatives to pass a new environmental crime law providing jail terms of up to 30 years for those deemed responsible for catastrophes such as the Exxon Valdez oil spill.

Further, the new federal sentencing guidelines now mandate jail time for many environmental criminals who in the past would have received suspended sentences or probation.

Felony Violations

Similarly, in California, the ability of county district attorneys to send people to jail was given a huge boost in 1984 when violations of the hazardous waste control act became a felony. While prosecutors can bring environmental charges under a variety of statutes ranging from clean air to fish and game laws, it is the hazardous waste law that accounts for the bulk of the prosecutions.

Law enforcement officials argue that sending company officials to prison is the only effective way to deter environmental crime. “When we charge a company, we also charge the highest person responsible,” said James L. Prange, assistant director of the Environmental Protection Agencies Office of Criminal Investigations. “Charging a company just doesn’t serve as a deterrent.”

Guthman is more blunt: “We go criminal because the old sanction--money--doesn’t work anymore.” Fines, he and others claim, have simply become a cost of doing business for many companies.

Business people who feel they have been unfairly victimized by the new prosecutorial approach are generally unwilling to discuss their cases publicly on the grounds that any additional media attention can only hurt them further.

And defense attorneys--some of whom are former prosecutors--charge that the publicity an environmental case can bring in the current climate has more than a little to do with prosecutors’ motives.

A more fundamental criticism of environmental prosecutions, however, has to do with possible violations of the due process rights of defendants in environmental cases, and whether the criminal sanctions in environmental statutes are “Draconian in nature,” as Fred M. Blum of the San Francisco law firm Jaffe, Trutanich, Scatena & Blum charges.

“The laws don’t only cover the midnight dumper,” Blum said. “Any failure to comply with any regulation is a misdemeanor, and I challenge anyone to be 100% in compliance with these laws.”

‘Strict Negligence’

Part of the difficulty stems from the fact that some of the environmental statutes--including the state air pollution laws and federal water pollution laws but not the hazardous waste laws--use a “strict negligence” standard to determine guilt. While strict negligence is common for civil tort, or liability, cases, most criminal offenses require the prosecution to prove “gross negligence.”

With a strict negligence standard, which the U.S. Supreme Court has ruled constitutional only for matters involving public health and safety, an offense need simply have happened for the responsible parties to be found guilty. It is not necessary to prove intent, or even to prove that the accused knew about the violation.

‘It’s offensive to people’s notion of fairness that you can be put in the state penitentiary for something you knew nothing about,” Groveman said.

The strict negligence offenses are misdemeanors, not felonies, and though they often carry one-year prison terms, judges will rarely jail an otherwise clean company official for a misdemeanor.

But even the felony hazardous waste charge in California requires merely that a defendant “knew or reasonably should have known” that a violation was being committed. And in a decision that stunned the legal community, the California Court of Appeal ruled in June that such a standard was essentially equivalent to strict negligence.

Reiner and others assert that if high-level officers are permitted to plead ignorance, then companies will increasingly employ sub-contractors for environmentally sensitive jobs and use other means to shield individuals from legal responsibility.

The legal philosophy behind charging high-level executives is known informally as the “responsible corporate officer doctrine,” and it is increasingly being used nationwide not only for environmental crimes but also in cases involving worker health and safety.

In the Diceon case, felony charges were filed against Mathews and Jonas, the president and executive vice president of the company, for illegal discharges that took place after the strike force raid, on the grounds that the raid must have alerted them to the problems. Court documents indicate that several lower-level Diceon employees will testify for the prosecution.

Former Los Angeles City Atty. Burt Pines, a pioneer in the environmental crime area, said prosecutors have too much discretion in how to use the felony charges. “I strongly disagree with prosecuting people on felony charges for mistakes, or ordinary negligence,” Pines said. “Felony charges are only appropriate when you have deliberate intention or a record of prior violations.”

No Contest Pleas

Even today, many environmental cases end with “no contest” pleas by the defendants, accompanied by a fine and probation or a suspended sentence. Most environmental defendants, in California and elsewhere, are not going to jail, in part because the cases take so long to work their way through the courts that the fruits of the more aggressive approach to environmental crime have not yet been reaped.

Contrary to popular belief, moreover, records indicate that most defendants are not executives of large corporations but rather small businessmen. Their defenders contend that they often lack the $500,000 to $1 million it can take to effectively defend a complicated felony case and thus are forced to plea-bargain.

Still another potential problem relates to the way the inter-agency strike forces operate. Courts have upheld the right of regulatory agencies, such as the department of health services, the department of public works or the air quality management district, to conduct “administrative” searches to assure that industries are in compliance with regulations.

Such searches may still require warrants, but they are easy to obtain. The problem arises when regulators, who are in close consultation with law enforcement officers through the strike force, use such searches to gather information for criminal prosecutions.

Groveman and others involved with environmental crime reject this attack on the strike forces on the grounds that regulatory officials are careful to avoid such abuses and that criminal warrants are obtained when a prosecution is contemplated. In addition, they point out that an inter-agency approach is virtually the only way to carry out the lengthy and complex investigations that are required to nail down pollution offenses.

But Joel Moskowitz, formerly head of the state health department toxic substances program and now an environmental lawyer with Gibson Dunn & Crutcher who counts Diceon among his clients, expressed concern about the commingling of prosecutorial and police powers that is inherent in the strike force approach. Prosecutors who have participated in a raid cannot be expected to objectively evaluate the evidence that is seized, he asserted.

There is less disagreement about another delicate issue in environmental prosecutions: the role of money. Under a state law designed to support environmental enforcement and cleanup, local district attorneys’ offices get 25% of the money recovered from fines for environmental offenses, in addition to expenses.

Even prosecutors admit that money plays a role in how cases are pursued.

“I generally look at the pocket of a defendant,” said Steven Burtnett, deputy district attorney for environmental crimes in San Bernardino County. “If it’s a deep pocket, we’ll try to settle and impose a fine or a contribution to an environmental trust. But if the company has disappeared and the principals are trying to deny wrongdoing, then we’ll try to get a state prison sentence.”

Indeed, the decision about whether to file criminal or civil charges--and prosecutors can generally do one or the other, but not both, for any given offense--can depend on that particular prosecutor’s need for funds. “We use the civil penalties to pay for our operations,” said Gilbert A. Jensen, deputy district attorney in Alameda County.

‘Terrorist Tactic’

Moskowitz claimed that for a time, criminal prosecutions in Los Angeles were being brought to gain a large monetary settlement. “Individuals were being charged in order to motivate people to settle--it was essentially a terrorist tactic,” he said. “Here is a person who has been respectable, and suddenly he’s facing state prison, and the company will pay almost any amount of money to get out of that.”

Moskowitz and Guthman agreed, however, that the Los Angeles district attorney today is more eager to send people to jail. In recent months, two brothers who ran a North Hollywood company called All-American Plating have been sentenced to serve time, as has the owner and president of a Van Nuys electronics company called Lai Circuits. Guthman estimates that two-dozen jail sentences have been meted out over the last five years.

Many small companies, such as All-American Plating, do not survive environmental prosecutions, and some consider the shut-down of polluting companies to be a desirable outcome.

If the objective of criminal prosecution is to make companies take notice, then the tactic appears to be succeeding. “The knowledge that criminal prosecution is being imposed has gotten into the corporate structure, and companies are taking steps to make sure their processes are in shape,” said Thomas E. Bailey, former director of the state Superfund environmental cleanup program and now a principal with Kleinfelder, an environmental consulting firm headquartered in Walnut Creek.

Starr added that the impact of the enforcement program had thus far been “greater than I thought. It has had a major impact on corporate decision-making.”

That impact has led Angelo J. Bellomo, formerly head of the state toxic substances control program for Southern California, to conclude that awareness is now sufficiently high to justify a shift in tactics.

“Initially, when the laws were new, it was important to let people know that these were crimes,” Bellomo said. “Industry is now very much aware that these laws are serious.”

Greater education on how to comply with the burgeoning body of environmental laws would be a more effective method of actually reducing pollution, Bellomo added.

Prosecutors maintain, however, that criminal prosecutions remain a vital tool. Guthman said the Los Angeles district attorney’s criterion for criminal sanctions is “disposal plus deception,” with concealment indicating that a suspected violator is not acting in good faith and deserves to bear the full brunt of the law.

“Jail has a chilling effect on businesses, and that’s what we want,” he said. “A societal decision has been made that there are reasons for regulating hazardous waste, and one way to do that is with criminal sanctions.”