$2.8 Million Penalty for UST Violations in Fraud Settlement
In 2004, the Environmental Protection Agency (EPA) cited a Dover, Delaware-based petroleum company for underground storage tank violations (USTs) at five of its gas stations in Maryland. In 2006, the complaint was settled, requiring the company to complete compliance measures for its USTs and imposing a $65,000 penalty.
When the company failed to carry out the compliance measures established in the settlement, the EPA showed up with inspections of 13 more of the company’s gas stations and found UST violations at each. In 2008, the United States filed a civil action against the company and its owner for failing to comply with one or more of the following requirements at each of facilities:
1. Provide release detection for underground storage tanks;
2. Provide release detection for underground piping;
3. Provide and annually test line leak detectors;
4. Provide overfill protection;
5. Investigate and report suspected releases;
6. Provide and test cathodic protection systems;
7. Inspect impressed current protection systems; and
8. Maintain corrosion protection on out-of-service UST systems.
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In 2010, a 2-day jury trial resolved the claims by a stipulated order in which the owner agreed to pay a $2-million penalty by December 15, 2010. At that time, Ignacia S. Moreno, assistant attorney general for the Justice Department’s Environment and Natural Resources Division, stated, “These defendants violated their obligation to bring several large underground storage tanks into compliance with the law. The precedent-setting $2-million civil penalty that they will pay in this settlement is appropriate in light of the unacceptable risk created by their misconduct.”
Once again, however, the company’s owner failed to comply, this time claiming an inability to pay the agreed-upon penalty. As a result, the government proceeded to analyze the company owner’s financial information and found that 6 months before the trial, the owner had conveyed about $10 million in assets to several foundations and LLC trusts under his control.
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Shortly thereafter, in August 2011, another complaint was filed by the government against the company owner and affiliated parties that sought to void the asset transfers pursuant to the Federal Debt Collection Procedures Act. Just 1 day before the new trial in March 2014, the company owner stipulated that the government had sufficient evidence to establish that most of the asset transfers were indeed fraudulent. The government then agreed to delay proceedings to allow the owner to settle the penalty liability through the sale and refinancing of his assets.
In the end, after a decade of investigations and court cases, the Justice Department, on behalf of the EPA, settled with the company owner for payment of the original $2-million penalty and an additional $889,351 in interest, daily stipulated penalties, and attorneys’ fees and costs.
In a statement about the settlement, Charles M. Oberly III, U.S. attorney for the District of Delaware said, “This case should send a clear message that EPA and the Justice Department take seriously our duty to enforce environmental laws, and pursue appropriate remedies, including monetary penalties, against violators. Defendants who fraudulently convey assets to avoid paying penalties should expect to pay a far greater amount, including additional penalties, interest, and attorneys’ fees.” As of August 6, 2014, the United States had received the total payment of $2,889,351.41.