©2010 KATTEN MUCHIN ROSENMAN LLP

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

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Vessel Prosecutions/A U.S. Government Priority

Vessel enforcement cases are 15% to 25% of the federal environmental criminal prosecution docket

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Vessel Criminal EnforcementPast Five Years

More than 65 vessel-related convictions

• 2005: 16

• 2006: 16

• 2007: 10

• 2008: 19

• 2009: Not yet complete

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Vessel EnforcementPast Five Years

How many cases investigated and declined?

• Unknown

• May be as many as 60 – 100 per year

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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

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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).

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Imprisonment

Over the past five years numerous defendants sentenced to terms of incarceration

Sentences range from a day to almost three years

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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.

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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

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Changing Legal Standards/Expanding Legal Liability

1998 – 2008: What a difference 10 years can make

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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.

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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.

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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.

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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.

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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.

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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.

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Eric HolderAttorney General

Gary GrindlerActing Deputy Attorney General

Tom PerrelliAssociate Attorney General

Ignacia MorenoAssistant Attorney General

Environment & Natural Resources

John CrudenDeputy Assistant Attorney General

Stacey MitchellChief Environmental Crimes Section

Assistant Chiefs &Trial Attorneys

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

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

Eric HolderAttorney General

United States Attorneys(93 Federal Districts)

Chief, Criminal Division

Assistant United States Attorneys (Trial Attorneys)

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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

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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

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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

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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

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Thank you

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