Pollution nets a $37-million penalty

Times Staff Writers

Capping a three-year international investigation, federal officials on Tuesday announced a landmark, $37-million penalty in a maritime pollution case involving one of the world's largest publicly traded tanker companies.

The fine against Overseas Shipholding Group Inc., a U.S. corporation based in New York, is the largest criminal penalty on record concerning deliberate maritime pollution, and it includes a $9.2-million "community service payment" that will fund maritime environmental projects from coast to coast, including projects off California.

Overseas Shipholding pleaded guilty to 33 felony counts related to deliberate dumping of sludge and other contaminants as well as falsification of log entries that such carriers are required to maintain.

All of the vessels involved were oil tankers, including the Cabo Hellas, whose captain pleaded guilty this year in Los Angeles to obstructing a Coast Guard investigation of dumping oil into the ocean.

"To those who cut corners at OSG, discharging waste in the middle of the night to save a few bucks, this case sends a message that crime just does not pay," said acting Associate Atty. Gen. William Mercer, at a news conference Tuesday beside the Boston waterfront. "We will not see our oceans and our seas used as convenient dumping grounds for corporations."

Charging that Overseas Shipholding "engaged in repeated and deliberate pollution of our oceans," Mercer added: "What is more disturbing is that OSG's management failed to uncover or stop this illegal activity after allegations were brought to the attention of management on several occasions, and again after the initiation of the government's investigation."

Morten Amtzen, Overseas Shipholding's president and chief executive, said in a statement Tuesday that his company had "worked hard to correct the issues that resulted" in the judgment.

The prosecution concerns violations on 12 oil tankers in six U.S. ports on both coasts and the Gulf of Mexico. Officials in Boston, San Francisco, Los Angeles, North Carolina and Texas participated in an inquiry that began in 2003 when Canadian authorities looked into a routine report of spillage in New Brunswick, off the country's eastern coast.

Capt. William Nash, director general of maritime safety for Transport Canada -- the government agency responsible for enforcing Canada's maritime pollution laws -- said Tuesday that officials boarded an Overseas Shipholding vessel to examine the ship's records.

"They realized there had been some inappropriate entries in the logbook," Nash said. The Canadians passed the information on to U.S. authorities.

Mercer said U.S. investigators found that Overseas Shipholding vessels were dumping "hundreds of thousands of pounds" of contaminants into marine waters. Court documents said the toxins included "machinery space bilge water and/or bilge slops, oily wastes and oil residues ... in a manner that intentionally circumvented required pollution prevention."

Mercer said the company's personnel altered ship log books in what he called "a conspiracy to hide the crimes from the Coast Guard."

Thomas S. Rue, a lawyer with a large maritime practice in Mobile, Ala., said: "I am personally aware that ship owners are undertaking action to prevent this kind of practice, but that is coming from the top.

"If some third engineer wants to dump something off the deck in the middle of the night, there's not much they can do to stop it," Rue said.

Rodolfo Esplana Rey, captain of the Cabo Hellas, admitted in Los Angeles that he had failed to maintain proper records about oil dumping from the 750-foot vessel and that he had made false statements that oily bilge waste had been correctly treated. In September, Rey was sentenced to one year of probation.

A portion of the settlement is expected to aid environmental causes along California's Central Coast and at Channel Islands National Park.

But Mercer said the full extent of actual or potential environmental damage was impossible to calculate.

He said the contamination undoubtedly would produce "significant effects in terms of bird life and other ocean life."

Prior to Tuesday's announcement, the largest federal fine levied in a similar ocean vessel case occurred last year in Los Angeles, when Evergreen International, another of the world's largest shipping lines, agreed to pay $25 million for secretly dumping oil waste into the ocean rather than bringing it ashore for disposal.




Mehren reported from Boston and Krikorian from Los Angeles.

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