Petition for Writ of Certiorari — Hong v. United States
Supreme Court brief2001
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IN THE SUPREME COURT OF THE UNITED STATES
JAMES MING HONG, PETITIONER,
v.
UNITED STATES OF AMERICA, RESPONDENT.
ON PETITION FOR WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
PETITION FOR A WRIT OF CERTIORARI
John F. Cooney
(Counsel of Record)
Joseph G. Block
Gregory S. Braker
Venable, Baetjer, Howard &
Civiletti LLP
1201 New York Avenue, N.W.
Washington, D.C.20005
(202) 962-4800
Counsel for Petitioner
James Ming Hong
June 5, 2001
QUESTION PRESENTED
Whether, in order to prove that a defendant may be held
criminally liable as a “responsible corporate officer” for a
negligent violation of the Clean Water Act, 33 U.S.C.
§ 1319(c)(1)(A) & (c)(6), the statute requires the government to
prove that the defendant was a de jure officer of the offending
corporation and that he had a “responsible share” in the specific
operations that caused the illegal discharge.
TABLE OF CONTENTS
QUESTION PREGSEDITUD wsssssiisiicsissctcrennctsntavncninsecenbitabotens i
TABLE OF CON TEOGE SS isisscinnscsictecsshonbiandatidencbecinveibapetesastes ii
TABLE OF ALTHRORRI TAGS s.:...:n<scaascontectissecscsseosntectslinieians iv
OPINIONS BPEL IOW os csssstusctiiocsaanens esniianememanas |
FUR TSC THIN asancssincsccscncsiascnaiactlgleteesenaniaasaaaaeatal l
STATUTORY PROVISIONS INVOLVED...........:ccccsseeeseees l
STATEMENT OF TRB (i vissscccxncssresecsnssenicnetesbacsteastoten 2
Tine Stataabenry TCI ociecisninsconcsessczocsessemivevetesmensicnss 2
The Charges Against Mr. Hong............:cccsssseesseeeeeees 3 :
Proceedings in the District Court .........:..:sscesseseeeesees 7
The Fourth Circuit Decision..............::ssesesseseseseeeeeeees y :
REASONS FOR GRANTING THE PETITION .....:e.sesss 11
I. The Fourth Circuit’s Formulation of the
Responsible Corporate Officer Provision
Is Inconsistent with the Plain Language of
the CWA and This Court’s Decision in
A. The Responsible Corporate Officer
Pathrevary 00 LAG occsecsrscerissisnsetiniacinneme 14
_B. The Court Below Ignored the Express Language
of the CWA and Departed from the Principles
1 PI isc snsininisntilaeniaieeipeadiiechiaiimganeelal 18
Il. The Decision Below Conflicts with Decisions
of Other Courts of Appeals .............cssseeesees 21
Ill. The Decision Below Constitutes a Substantial
Expansion in the Scope of Criminal Liability
That Is Not Authorized by Congress............. 22
CORIO TBIOIN 6q.ccesrecsssccesesccccscccsccscosnsccocsesscasensccssssossocosoeeees 25
APPENDIX ...ccccoccccccccccccesscscscsocscsesssccesosnssosscscccssossccosesssoosonss la
Fourth Circuit Opinion, March 9, 2001
(Published) ............s-csssssessseseesesssesnensnsnsensnseensesnserorensneenenes la
District Court Opinion, April 6, 2000
(Unpublished)...........:cecsecscsesesesnesssnenssesnsnsnsesenssensnseneeneneens l4a
Oral Findings of the Magistrate Judge
At the End of Trial, March 31, 1999 ............:scccsssseseseeees 35a
Relevant Provisions of Clean Water ACt .......-..::cssssseeseeeneees 4la
ill
TABLE OF AUTHORITIES
Cases
Apprendi v. New Jersey, 503 U.S. 466 (2000)..........cceeeeeee 18
Burks v. Lasker, 441 U.S. 471 (1979) .......ccsccssssssssscssssssseeeees 19
Solid Waste Agency of Northern Cook County
v. United States Army Corps of Engineers,
Oe ee a aiictibicca cick enitinancicbidiahiaiociasiapincatioagite 2
United States v. Bestfoods, 524 U.S. 51 (1998) .........cseeeeeee 19
United States v. Boldt, 929 F.2d 35 (1st Cir. 1991).............. 15
United States v. Brittain, 931 F.2d 1413
Ce. a i aieciisinnieadintstaaihcitigicnscsintiinitahainandabdiasiniieiiaia passim
United States v. Cooper, 173 F.3d 1192
(9th Cir. 1999), cert. denied, 528 U.S. 1019 :
CIT ssi tcsiicsivnsiktaicisbicgunidantntaceadlelaaiedinaaa dobdeitdtioudikidadendabiiids 15
United States v. Dotterweich, 320 U.S. 277 (1943).............. 16,17
United States v. Frezzo Bros., Inc., 461 F. Supp. 266
(E.D. Pa. 1978), aff'd, 602 F.2d 1123 (3rd Cir. 1979),
cert. denied, 444 U.S. 1074 (1980) .0...... cece eeceeeeeeseeeeeeeees passim
United States v. Hanousek, 176 F.3d 1116, cert.
Seal, Fae LF Ve I i iainetincstccesieisi sentation 13, 24
iv
United States v. Iverson, 162 F.3d 1015
(Oth Cir. 1998).....cccsesscsesesesesssnensenensssssnsenssnsseessssnsaenenens passim
United States v. MacDonald & Watson Waste
Oil Co., 933 F.3d 35 (Ast Cir. 1991) ......csccsecresseesereeeesensens passim
United States v. Park, 421 U.S. 658 (1975) ....ssssssesesersereserees passim
United States v. Stirone, 361 U.S. 212 (1960) .......sesseeeeees 18
Statutes
2B U.S.C. § 1254(1) .cecsccsesessseseseseessrenensnersesnserenensnesenenenenenes l
33 U.S.C. § 1319(C)(1)....sescsecereceseressnenensnsseesensesesseesssensensnsens passim
33 U.S.C. § 1319(C)(6)....sesccresererenenessnenerssssnsscnsscscersensssennsees passim
33 U.S.C. § 1321(O)(3).....ecsescrecesesenesssescnssesessencessnersesnenenenens 2
33 U.S.C. § 1342(a)(3)....scccccsesererenensnsnssssesssesnsnseserserseesenees 1,2
33 U.S.C. § 1342(O)(8).....csccceserererssenessssscsnsnsnseseeersnenserenenes 1,2
33 U.S.C. § 1362(5) ....scsscccscsessesesenensnensncssssensesessenssnsesenenens 1,3,15
42 U.S.C. § 7413(6) ...esescccesesesesersessesssenrsssnensssrsessnsneneaseenenenes 11
Books, Treatises, Periodicals
R. Lazarus, Meeting the Demands of Integration in the
Evolution of Environmental Law; Reforming
Environmental Criminal Law, 83 Geo. L.J. 2407
Hare, Comment, Reluctant Soldiers: The Criminal
Liability of Corporate Officers for Negligent Violations
of the Clean Water Act, 138 U. Pa. L. Rev. 933 (1990)..... 23
PETITION FOR A WRIT OF CERTIORARI
James Ming Hong respectfully petitions for a Writ of
Certiorari to review the judgment of the United States Court
of Appeals for the Fourth Circuit in this case.
OPINIONS BELOW
The opinion of the Fourth Circuit is reported at 242
F.3d 528 (Pet. App. la-13a). The decision of the district
court is unreported (Pet. App. 14a-34a). The oral decision of
the magistrate judge is unreported (Pet. App. 35a-40a).
JURISDICTION
The judgment of the United States Court of Appeals
for the Fourth Circuit was issued on March 8, 2001. This
Petition for a Writ of Certiorari is timely filed within 90 days
of the issuance of that judgment. The jurisdiction of this
Court is invoked under 28 U.S.C. § 1254(1) (1994).
STATUTORY PROVISIONS INVOLVED
Clean Water Act
33 U.S.C. § 1319(c)(1) & (c)(6) (1994)
33 U.S.C. § 1342 (a3) & (b)(8) (1994)
33 U.S.C. § 1362(5) (1994)
These statutes are reproduced at Pet. App. 41a-43a.
STATEMENT OF THE CASE
The Statutory Scheme. The Clean Water Act (CWA)
prohibits the “discharge of oil or other hazardous substances
(i) into or upon the navigable waters of the United States,
adjoining shorelines, or into or upon the waters of the
contiguous zone . . . in such quantities as may be harmful.”
33 US.C. § 1321(b)3) (1994). The CWA provides
administrative, civil, and criminal penalties by which the
government may enforce the Act’s prohibition on
unauthorized discharge of pollutants.
The CWA provides that criminal penalties may be
imposed on “any person” who “negligently” violates the
prohibition in Sections 1342(a)(3) and (b)(8) against
discharging pollutants into waters of the United States. 33
U.S.C. § 1319(c)(1). A negligent discharge is punishable as
a misdemeanor, for which the defendant may be imprisoned
for not more than one year, fined not more than $25,000 per
day of violation, or both, for a first offense. Jd. A knowing
discharge is punishable as a felony, for which the defendant
may be imprisoned for not more than three years, fined not
more than $50,000 per day of violation, or both, for a first
offense. Jd. Enhanced penalties are provided for subsequent
misdemeanor or felony offenses.
Under the CWA, the definition of “waters of the
United States” is broad, and the definition of “pollutant”
expansive. See Solid Waste Agency of Northern Cook
County v. United States Army Corps of Engineers, 531 US.
159 (2001). There is no requirement that a discharge must
exceed a minimum threshold amount before it may be
punished criminally. Nor is there a requirement that the
discharge be shown to have caused actual harm to the
environment.
The definitional section of the CWA, 33 U.S.C.
§ 1362(5), provides that the “persons” subject to criminal
prosecution include:
an individual, corporation, partnership, association,
State, municipality, commission, or political
subdivision of a State, or any interstate body.
In addition, 33 U.S.C. § 1319(c)(6) provides for imposition
of civil and criminal punishment based on the status of a
person as a “responsible corporate officer”:
For the purposes of this subsection, the term “person”
means, in addition to the definition contained in
section 1362(5) of this title, any responsible
corporate officer.
A person may be convicted under the responsible corporate
officer pathway on a lesser quantum of proof than is required
under other pathways to liability, which require proof of
direct involvement in the illegal discharges. '
The Charges Against Mr. Hong. Petitioner James
Ming Hong was charged by Criminal Information with one
misdemeanor count of negligent failure to maintain and
operate a wastewater treatment system and 12 misdemeanor
counts of negligent discharge of polluted wastewater, in
violation of Section 1319(c)(1)(A). On each count, the
Information charged Mr. Hong with criminal liability solely
and expressly as a “responsible corporate officer” of Avion
Environmental, Inc., the company responsible for the illegal
discharges.
' See, e.g., United States v. Iverson, 162 F.3d 1015, 1026 (9* Cir. 1998)
(responsible corporate officer charge relieves government of having to
prove that the defendant personally discharged a pollutant or caused its
discharge).
3
|
Prior to trial, the government stipulated that Mr.
Hong did not personally “direct or participate” in any of the
illegal discharges that occurred at Avion. Mr. Hong also
stipulated that the illegal discharges alleged in the
Information had occurred. Thus, the only issue at trial was
whether Mr. Hong could be held liable, as a responsible
corporate officer, for negligent violations of the CWA with
respect to the discharges committed by Avion employees in
which he had no personal involvement.
The unlawful discharges were not made into any
waterway, but were released directly into the enclosed pipes
of the Richmond, Virginia wastewater treatment system.
Thus, the discharges passed through treatment facilities
before they entered any waterway. None of the pollutants
_ actually entered the external environment or caused any
detectable environmental damage within the Richmond
wastewater treatment system or any waters of the United
States.
The government never introduced evidence that Mr.
Hong had been designated as a de jure officer or director of
Avion. It stated repeatedly, in pre-trial submissions and at
trial, that Mr. Hong had taken considerable efforts to avoid
having any official connection with the company, in order to
insulate himself from Avion’s financial liabilities. The
government attempted instead to demonstrate liability under
the responsible corporate officer provision, by showing that
Mr. Hong was a substantial owner and investor in Avion and
thereby was able to exercise substantial leverage over its
operations.
Specifically, the Information charged Mr. Hong with
liability as a responsible corporate officer, on the theory that
he negligently failed to take steps to make certain that the
Avion facility obtained appropriate wastewater treatment
technology and that the treatment system was maintained
and operated to achieve compliance with the facility’s
discharge permit. The Information charged Mr. Hong in
Count 1 with a global failure to learn the facts known to
Avion employees, to conduct appropriate investigations, and
to make any necessary corrections. Mr. Hong’s alleged
failure to honor this duty of care was uniform throughout the
period covered by the Information; he was not alleged to
have had a greater or lesser degree of information, or to have
failed to take specific steps, before any particular release.
Rather, the 12 substantive discharge counts resulted from the
government’s decision to charge that Mr. Hong committed a
separate negligent breach of his duty of care each time Avion
employees committed an illegal discharge.
The government also filed “knowing” (felony) CWA
charges against L. Robert Kirk, the person who managed the
facility on a daily basis and directed the illegal discharges.
Kirk was charged as a direct participant in the illegal
discharges, and not on a “responsible corporate officer”
basis. Kirk pled guilty to one felony charge and testified
against Mr. Hong. He originally was sentenced to 18 months
imprisonment, but this sentence was reduced to “time
served” — less than eight months — in return for Kirk’s
cooperation in the Hong prosecution.
The evidence at Mr. Hong’s trial showed that Kirk
ran the Avion plant and had supervisory responsibility over
the wastewater treatment operations. The employees
reported to Kirk and received their orders from him and
from no other person. None of the employees discussed
wastewater discharges with Mr. Hong. The evidence
5
“showed that Mr. Hong did not have supervisory authority
over the physical functions of the plant, but that as an owner
and investor he concentrated on Avion’s finances.
The evidence further showed that when the plant was
first outfitted, Mr. Hong participated in the acquisition of
pollution control technology that was capable of treating its
wastewater. On two occasions, the Richmond wastewater
treatment system issued operating permits for the plant based
on this technology, and the Avion facility operated within
those permit limits for an extended period. The pollution
control technology ultimately was overwhelmed by the
volume of wastewater to be treated. This resulted in some
discharges that exceeded permit limits. In addition, there
were other discharges for which Kirk deliberately bypassed
the pollution control system and released untreated wastes.
The government failed to show that Mr. Hong had
contemporaneous knowledge of the failure of the Avion
treatment system or that he leamed within the period covered
by the Information that illegal discharges had occurred. In
particular, in its examination of Kirk, the government failed
to gbtain any testimony that Kirk had told Mr. Hong of the
possible failure of the treatment technology or the
occurrence of illegal discharges. Rather, the evidence
showed that Kirk took affirmative steps to prevent Mr. Hong
from learning that the pollution control technology would
become exhausted earlier than had been expected during the
purchase negotiations. Kirk did this by intercepting a letter
from the salesman for the vendor (Bruce Stakeman) that
would have informed Mr. Hong of this fact. At one point,
employees of the Richmond municipal wastewater treatment
authority caught Kirk in the act of making an illegal
discharge; however, neither Kirk nor the municipal
employees ever informed Mr. Hong that this release had
occurred. Finally, when Kirk informed Mr. Hong that he had
6
bypassed the treatment technology, Kirk was terminated,
new filtering media were purchased, the Richmond
wastewater treatment authorities re-issued the permit for the
plant, and Avion resumed wastewater treatment in
compliance with permit limits.
Proceedings in the District Court. After a bench trial,
the magistrate judge in an oral decision found Mr. Hong
guilty on all 13 counts with which he was charged. He was
sentenced to a term of imprisonment of 36 months,
comprised of three consecutive one-year sentences on each
of the first three counts, to be followed by a twelve-month
period of supervised release. Mr. Hong also was fined $1.3
million. He began serving his term of imprisonment on
August 26, 1999. He remains incarcerated as of the filing of
this Petition. Mr. Hong thus already has been incarcerated
for almost two years on these misdemeanor convictions. By
contrast, Kirk served less than eight months upon his felony
CWA conviction as the individual who personally caused or
committed the illegal discharges.
Although the Information charged Mr. Hong solely
as a “responsible corporate officer,” the magistrate judge
found Mr. Hong guilty on a different ground, based on his
ownership and financial control over Avion.
I do not have any doubt that Mr. Hong was not just
an investor. He was an owner, pure and simple,
whether you call it de facto or de jure... .
Pet. App. 37a. The term “owner,” however, is not included
within the statutory term defining “responsible corporate
officer,” which was the sole basis for liability set forth in the
Information.
On appeal to the district court, Mr. Hong argued that
an illegal constructive amendment, or fatal variance, had
occurred, because the government had charged him with
liability solely as a responsible corporate officer, but the
magistrate judge had found him guilty on a different basis,
as an owner.
Further, Mr. Hong argued that, as a matter of law, he
could not be held criminally liable for negligence under the
CWA on a “responsible corporate officer” theory, because
the government had introduced no proof that (1) he had been
designated as a de jure corporate officer of Avion; or (2) he
had direct oversight responsibility for the wastewater
treatment operations from which the releases occurred, or
that he had contemporaneous awareness of possible illegal
discharges and failed to conduct appropriate investigations
and take necessary corrective actions. The district court
affirmed the convictions on all counts and the term of
incarceration. Pet. App. 31a-32a.
The district judge affirmed on different grounds than
the “ownership” standard adopted by the magistrate judge.
The court found that neither the text of the CWA nor prior
Fourth Circuit decisions defined the term “responsible
corporate officer.” The court accordingly constructed its
own meaning for the term, and ruled that a person was
* The district court also determined that the magistrate judge had erred, as
a matter of law, in calculating the sentence to be imposed under the
CWA and remanded the case with directions that Mr. Hong be
resentenced to a maximum fine of $400,000. Pet. App. 3la-32a. On the
government’s cross-appeal, the Fourth Circuit reversed the district
court’s decision on the fine portion of the sentence and directed that the
fine originally imposed by the magistrate judge be reinstituted. Pet. App.
12a-13a. This Petition seeks review only of Mr. Hong’s convictions on
the underlying charges and does not seek review of the Fourth Circuit’s
decision on the amount of the fine.
8
chargeable as a responsible corporate officer if he possessed
one or more of the following attributes:
(1) some degree of control over the finances of the
polluting entity;
(2) the authority to manage one or more employees;
(3) the power to negotiate on behalf of the polluting
entity; and/or
(4) the power to make binding commitments on
behalf of the polluting entity.
Pet. App. 22a. The court found that Mr. Hong met all four
branches of its ad hoc standard and concluded that, under
this novel test, “the evidence at trial clearly showed that
Hong was a RCO [responsible corporate officer], and that as
such he knew or should have known of the illegal dis-
charges.” Pet. App. 23a (emphasis added). The court thus
imputed the requisite mens rea to Mr. Hong based on his
status as a “responsible corporate officer” and held him
vicariously liable for the illegal acts of its employees, due to
his ability to act for Avion in aspects of its business other
than the wastewater treatment function.
The Fourth Circuit Decision. On appeal to the Court
of Appeals, Mr. Hong argued that the Information charged
him with liability solely as a responsible corporate officer,
but that he had been convicted as an owner; and that this
change in the basis for liability constituted an illegal
constructive amendment.
Mr. Hong also argued that the district court had
misstated and misapplied both essential elements of the
responsible corporate officer doctrine. On the “officer”
element, Mr. Hong argued that under the literal language of
Section 1319(c)(6), his convictions were invalid because he
was never a de jure officer or director of Avion. Further,
Mr. Hong argued that he did not have a “responsible share”
in the illegal discharges, under the definition of that element
set forth in United States v. Park, 421 U.S. 658 (1975), in
that he was not shown to have violated one of the duties of
care that may be enforced under that standard of liability,
with its diminished quantum of proof. In particular, he
argued that the convictions should be overturned because the
district court had not found that he had (1) supervisory
responsibility for the specific functions of Avion that
produced the illegal discharges, or (2) actual awareness of
the possible failure of the pollution control system and
subsequently failed to investigate and take corrective actions.
The Fourth Circuit affirmed the convictions on all
counts. Pet. App. 13a. It did not rely on the district court’s
ad hoc formulation of the responsible corporate officer
doctrine. Rather, the court devised its own novel test — the
third ad hoc standard developed in this case — to fit the facts
and held that Mr. Hong was properly held criminally
responsible for his role in failing to prevent Avion’s
violations of the CWA.
With respect to the “officer” element of the
responsible corporate officer statute, the Court of Appeals
agreed with the government that Mr. Hong “went to great
lengths to avoid being formally associated with Avion... .”
Pet. App. 8a. It found, however, that “the Government was
not required to prove that Hong was a formally designated
corporate officer of Avion.” Pet. App. 7a. Instead, it
effectively re-wrote the statute and concluded that the
10
“pertinent question is whether the defendant bore such a
relationship to the corporation that it is appropriate to hold
him criminally liable for failing to prevent the charged
violations of the CWA.” Jd. This elimination of the
“officer” requirement also was the basis for the court’s
rejection of Mr. Hong’s constructive amendment challenge.
Pet. App. 7a (n.2).
With respect to the “responsible share” element, the
Court of Appeals did not discuss the specific duties of care
that Park found were legally enforceable and sufficient for a
criminal conviction that did not violate the Due Process
Clause. Rather, the court concluded that Mr. Hong
“possessed authority to prevent the illegal discharges” and
affirmed “for his role in failing to prevent Avion’s violations
of the CWA.” Pet. App. 8a, 12a-13a.
REASONS FOR GRANTING THE PETITION
The Court of Appeals has incorrectly decided an
important legal question that is critical to the determination
of the scope of criminal liability under the CWA and other
environmental statutes.’ The decision below is inconsistent
with the statutory definition of “responsible corporate
officer” and with the Court’s decision in United States v.
Park, 421 U.S. 658 (1975), concerning the “responsible
share” element of liability. The Fourth Circuit erroneously
based its decision on standardless notions of a functional
“relationship to the corporation,” rather than de jure officer
status. It also erroneously relied on what it found was the
defendant’s ultimate authority over the affairs of the
corporation, rather than personal supervisory responsibility
over the specific corporate functions that produced the
> See 42 U.S.C. § 7413(c)6) (the Clean Air Act provision concerning
responsible corporate officer).
11
discharges or his awareness of possible violations and
subsequent failure to investigate, as required by Park. The
court thereby eliminated important protections that are
essential to prevent CWA negligence charges under the
responsible corporate officer provision, with its diminished
quantum of proof, from operating as a de facto strict liability
standard.
Further, the decision of the Court of Appeals is in
conflict with the decisions of at least two other courts of
appeals that have applied the responsible corporate officer
doctrine under Section 1319(c)(6). The other courts have
held a defendant liable under the responsible corporate
officer provision only when the individual was a de jure
officer of the offending entity. United States v. Brittain, 931
F.2d 1413 (10™ Cir. 1991) (public utilities director of a city);
United States v. Frezzo Bros., Inc., 461 F. Supp. 266 (E.D.
Pa. 1978), aff'd, 602 F.2d 1123 (3™ Cir. 1979), cert. denied,
444 U.S. 1074 (1980) (president and secretary of the
company). * Further, the First Circuit reached the same
conclusion as the Tenth and Third Circuits in United States
v. MacDonald & Watson Waste Oil Co., 933 F.2d 35 (1" Cir.
1991), when that court analyzed the responsible corporate
officer doctrine under another environmental statute, the
Resource Conservation and Recovery Act.
Moreover, other courts of appeals have held a
defendant liable under Section 1319(c)(6) only when the
individual either had (1) personal supervisory responsibility
over the specific corporate activities from which the illegal
discharges occurred, or (2) obtained actual awareness of
possible violations of the CWA in systems subject to his
* Of. United States v. Iverson, 162 F.3d 1013, 1022 n.6 (9 Cir. 1998)
(noting but not reaching the issue, because the defendant did not argue
that the jury instructions were erroneous “for failure to require a finding
that defendant was a corporate officer or employee.”)
12
formal control and failed to undertake appropriate
investigations and corrective actions. United States v.
Iverson, 162 F.3d 1013, 1025 (9" Cir. 1998); Brittain, 931
F.2d at 1420; Frezzo Bros., 602 F.2d at 1420. See
MacDonald & Watson, 933 F.2d at 50.
The holding of the Court of Appeals warrants review
by this Court. Its decision dangerously extends criminal
liability, in a manner not authorized by Congress, to persons
who are not de jure officials of the corporation. Its decision
also ignores the limiting principles incorporated in the
responsible corporate officer doctrine under Park and would
impose liability based on a subjective notion of plenary
“control” over corporate activities generally, freed of any
requirement that the defendant have direct connection to the
specific activities that caused the illegal discharge. This
approach is tantamount to creation of a strict liability
standard that is inconsistent with the “negligence”
requirement that Congress explicitly adopted in Section
1319(c)(1).
The decision below imposed substantial penalties on
Mr. Hong, on a basis that dispensed with the normal
requirements of proof for criminal liability. In United States
v. Hanousek, 176 F.3d 1116 (9" Cir. 1999), cert. denied, 528
U.S. 1102 (2000), Justices Thomas and O’Connor dissented
from the denial of certiorari in a case in which the lower
court had relied on the public welfare offense doctrine to
justify holding a person liable for a misdemeanor violation of
the CWA. The dissenting Justices cited the breadth of the
CWA criminal provisions and the “severity of the penalties
imposed” as justifications for review. 528 U.S. at 1103.
That same concern is even more clearly presented by this
case.
The defendant in Hanousek was directly negligent in
the release of 1,000 to 5,000 gallons of oil into the
environment. He was sentenced to a term of six months
imprisonment, followed by six months in a halfway house,
followed by six months of supervised release, and was fined
$5,000. 176 F.3d at 1120. Mr. Hong, by contrast, was
convicted under the responsible corporate officer doctrine,
with its diminished quantum of proof, for discharges that did
not enter the environment and for which there was no
evidence of his actual involvement. He was sentenced to far
more severe penalties -- three years imprisonment, to be
followed hy one year of supervised release, and a $1.3
million fine. Indeed, while he was prosecuted only for
misdemeanors, Mr. Hong received a far greater sanction than
Kirk, who was convicted of a felony.
The decision below thus presents an extreme example
of a concern that previously prompted two Justices to
conclude that review by the Court would be appropriate.
Petitioner respectfully submits that, for these reasons, the
Court should grant the Petition and delineate the proper
limits for imposition of criminal liability under the CWA, as
a responsible corporate officer.
I. The Fourth Circuit’s Formulation of the Responsible
Corporate Officer Provision Is Inconsistent with the
Plain Language of the CWA and This Court’s
Decision in Park.
A. The Responsible Corporate Officer Pathway to
Liability.
The CWA provides criminal liability for “[a]ny
person who (A) negligently violates” the substantive and
permit limitations of the statute. Several pathways to
liability have been recognized under this provision, including
14
the defendant’s direct involvement in illegal discharges,
United States v. Boldt, 929 F.2d 35, 38 (1" Cir. 1991), as
well as personally causing or directing others to make illegal
discharges, United States v. Cooper, 173 F.3d 1192, 1197
(9" Cir. 1999), cert. denied, 528 U.S. 1019 (1999). These
pathways were not available in this case, because the
government stipulated that Mr. Hong did not “direct or
participate in” the illegal discharges.
Section 1319(c)(6) establishes another pathway to
liability, upon proof that the defendant is a “responsible
corporate officer:”
For the purposes of this subsection, the term “person”
means, in addition to the definition contained in
section 1362(5) of this title, any responsible
corporate officer.
The term “responsible corporate officer” is not further
defined by the CWA. The courts of appeals that have
interpreted the term have concluded that it was intended to
expand liability beyond the scope defined by Section
1362(5).° Those courts have followed the principles in
United States v. Park in defining and applying this term.°
Park established the requirements of the responsible
corporate officer doctrine. There, a divided Court upheld the
conviction of the chief executive officer of a company for
* United States v. Brittain, 931 F.2d at 1419 (Section 1319(c)(6) expands
liability under the CWA and allows mens rea to be imputed to the
defendant by virtue of his position as an official of the offending entity);
United States v. Iverson, 162 F.3d at 1026 (responsible corporate office
pathway relieves the government of having to prove that the defendant
personally discharged a pollutant or caused its discharge).
* Iverson, 162 F.3d at 1023-1024; Brittain, 931 F.2d at 1419; MacDonald
& Watson, 933 F.2d at 51-52; Frezzo Bros., 602 F.2d at 1130 n. 11.
15
violations of the Federal Food, Drug and Cosmetic Act,
which permitted misdemeanor convictions for introducing
adulterated food into interstate commerce without requiring a
showing that the individual had been negligent. The
evidence showed that the FDA had advised the CEO by
letter of unsanitary conditions at the company’s Philadelphia
warehouse. 421 U.S. at 661, 664. A later inspection
revealed similar unsanitary conditions at the company’s
Baltimore warehouse. The FDA also informed the CEO by
letter of these problems, but a second inspection of the
Baltimore warehouse revealed that the company still had
failed to eliminate them. Jd. at 662-663. The CEO was
charged and convicted on five misdemeanor counts
involving the conditions at the Baltimore warehouse and was
sentenced to pay a fine of $50 on each count. Jd. at 666.
In upholding the convictions, the Court cited a line of
cases, beginning with United States v. Dotterweich, 320 U.S.
277 (1943), that permitted imposition of criminal liability on
corporate officers based on the acts of others. Those cases
contained broad language asserting that Congress could,
consistently with the Due Process Clause, “dispense[] with
the conventional basis for criminal conduct — awareness of
some wrongdoing.” E.g., Dotterweich, 320 U.S. at 280-281.
Recognizing the validity of concerns that this language,
applied literally, might sweep within its scope many senior
officials due simply to their formal position in the
corporation, the Park Court emphasized the “limiting
principle” articulated in Dotterweich, which narrowed the
class of corporate officers who could be held criminally
accountable for an alleged omission to learn of or act upon
negative information. Park, 421 U.S. at 669.
This “limiting principle” restricted liability to
corporate officers and to those officers “who . . . have a
responsible share in the furtherance of the transaction which
16
the statute outlaws.” Jd. at 669, quoting Dotterweich, 320
U.S. at 284 (emphasis added). The Court recognized that an
enforceable duty of care could be shown in one of two ways
under the “responsible share” element: (1) the defendant had
actual authority to exercise control over the specific
activities that caused the illegal discharges (id. at 674, 675);
or (2) the defendant failed to “implement measures that will
insure that violations will not occur” (id. at 672) or, having f
implemented such control systems, obtained actual ty
awareness of possible violations and then failed to carry out ly
his “positive duty to seek out and remedy violations when ;
they occur” (id.). With these limitations, the Cr-rt 4
concluded that the responsible corporate officer doctrine n.ay
be applied consistently with fundamental notions of justice. H
Id. at 673. |
Thus, as applied in Park, the “responsible share”
element precludes the government from charging that the
head of a corporation or a senior official is automatically
liable for any illegal act committed by an employee
nominally subject to his supervision. Rather, the senior
official must have had some actual personal connection to
and personal blameworthiness for the specific conditions or
activities that violated the law — that is, there must be a
showing that the defendant had actual “responsibility in the
business process resulting in” a violation. Jd. at 669.
Under Park, and taking Sections 1319(c)(1) and
(c)(6) together, the CWA requires that for a person to be held
liable for negligence under the responsible corporate officer
pathway, the government must prove that the defendant (1)
was a de jure officer; and (2) breached a duty of care
imposed by law, either by possessing actual supervisory
responsibility over the specific corporate activities that
produced an illegal discharge; or, having delegated
supervisory responsibility to another person, by failing to
17
establish pollution control systems in the first instance or by
failing, after obtaining knowledge of potential problems with
the operation of those systems, to investigate and take proper
corrective actions.
Individuals who fail to satisfy these elements are not
necessarily exempt from criminal liability under the CWA.
The government may still attempt to prosecute them, but
may not rely on the diminished quantum of proof necessary
for liability under the responsible corporate officer doctrine.
Rather, it must rely on another pathway to liability, one that
requires proof of the defendant’s personal involvement in the
actual events that led to the illegal discharge.
In charging a crime, the government must choose
which approach to follow. Having made its decision, the
government must prove each essential element of the
pathway it chooses. See Apprendi v. New Jersey, 530 U.S.
466, 494 (2000); Stirone v. United States, 361 U.S. 212, 217
(1960) (government may not lawfully charge a crime under
one pathway but prove it under another).
B. The Court Below Ignored the Express Language
of the CWA and Departed from the Principles in
Park.
The Court of Appeals erred by devising its own novel
formulation of the responsible corporate officer doctrine, a
formulation that ignored the statutory requirement that a
defendant prosecuted under this pathway must be a corporate
officer. Further, the Fourth Circuit ignored the analysis of
responsibility for the specific conditions that caused the
illegal discharges, as required by Park, and erroneously
applied a less demanding standard which required a showing
18
only that Mr. Hong possessed general authority to prevent
the illegal discharges by virtue of his alleged position in the
company. Pet. App. 19a-20a.
1. “Officer” Element. The literal language of :
Section 1319(c)(6) provides that liability may be imposed on 3
a “responsible corporate officer.” The term “officer” is
unambiguous. It requires that the accused have been
designated as a de jure officer of the company.
The term “officer” is well-known and strictly defined
in established corporate law. When Congress, in drafting a
statute, adopts a fundamental corporate law doctrine and fails
to modify it, the standard common law rule must be applied.
— E.g., Burks v. Lasker, 441 U.S. 471, 478 (1979). This Court
held in United States v. Bestfoods, 524 U.S. 51, 63 (1998),
that this principle applies to environmental laws as well as
other types of statutes. Since Congress adopted the term
“officer” in Section 1319(c)(6) without modification, the
Court of Appeals erred by failing to give this term its
ordinary, established meaning. 524 US. at 63.
The Fourth Circuit found that “Hong went to great
lengths to avoid being formally associated with Avion.” Pet.
App. 8a. It expressly declined, however, to apply the literal
“officer” provision of the statute. It opted instead to rewrite
Section 1319(c)(6) and apply a functional test — “whether the
defendant bore such a relationship to the corporation that it is
appropriate to hold him criminally liable for failing to
prevent the charged violations of the CWA.” Pet. App. 7a-
8a. The court thereby erroneously ignored the plain,
unambigu-ous language of the statute and relied instead on a
circular and highly subjective test that threatens to increase
substantially the exposure of corporate owners and investors
to criminal liability.
19
2. “Responsible Share” Element. The court below
departed from this Court’s prior decision in Park by ignoring
the specific breaches of duty that may be enforced through
the “responsible share” element. The court instead relied
upon the theory, advocated by the government and adopted
by the district court, that Mr. Hong could be held liable
because he had plenary authority over Avion — that is, he
substantially controlled corporate operations.
While the Court of Appeals made some brief factual
findings, its decision is nonetheless erroneous as a matter of
law, because those findings were keyed to an overly broad
standard of liability that conflicts with this Court’s decision
in Park and the limiting principles it there adopted so that
this doctrine could be applied consistently with fundamental
notions of justice.
In particular, the Fourth Circuit relied on purported
factual findings by the magistrate judge, who held that Mr.
Hong was liable as the owner of Avion — a basis for liability
not followed by the district court. Jd. However, the finding
on which the-Court of Appeals relied — that “evidence
regarding Hong’s relationship to Avion demonstrated his
responsibility for the discharges” Pet. App. 8a (n. 2) — fails
as a matter of law to support the convictions. It is based on
notions of overall authority over a corporation. It fails to
undertake the required analysis of the narrower duties of care
20
that are imposed by law and are enforceable under the
responsible corporate officer doctrine: whether Mr. Hong
had direct personal responsibility for discharge operations;
whether he provided for installation of appropriate controls
in the first instance; or whether he had reason to suspect that
Kirk was failing to insure compliance with the discharge
permit and whether, “once violations were unearthed . . . he
did everything possible to correct them.” Park, 421 U.S. at
677.
For these reasons, the judgment below warrants
review by this Court, because of the Fourth Circuit’s
departure from the literal language of the CWA and this
Court’s decision in Park, and because of the significance of
the broad and subjective expansion of liability under the
CWA produced by its decision.
I. The Decision Below Conflicts with Decisions of
Other Courts of Appeals.
; Other courts of appeals that have considered criminal
charges under Section 1319(c)(6) of the CWA have imposed
liability under the responsible corporate officer doctrine only
when the accused was a de jure officer of the entity that
committed the illegal acts. United States v. Brittain, 931
F.2d 1413, 1418 (10 Cir. 1991) (public utilities director for
a city); United States v. Frezzo Bros, Inc., 461 F. Supp. 266,
269 (E.D. Pa. 1978), aff'd, 602 F.2d 1123 (3 Cir. 1979)
(president and secretary of family company), cert. denied,
444 U.S. 1074 (1980). See United States v. MacDonald &
Watson Waste Oil Co., 933 F.3d 35, 50 (1" Cir. 1991) (“[iJn
order to prove that a person is a responsible corporate officer
21
. [f]irst, it must be shown that the person is an officer of
the corporation, not merely an employee. “
Further, the other courts of appeals that have upheld
convictions under Section 1319{c)(6) have followed Park
and have imposed criminal liability only where the defendant
either had direct, personal supervisory responsibility over the
specific corporate activities from which the illegal discharges
occurred, or obtained actual awareness of possible violations
of the CWA in systems subject to his ultimate control and
failed to undertake appropriate investigations and corrective
actions. For example, in Brittain, 931 F.2d 1418, 1420, the
Tenth Circuit found that the defendant director of public
utilities had been informed by the plant supervisor that it was
discharging raw sewage, discussed the illegal discharges
with the plant supervisor several times, and physically
observed illegal discharges. In Jverson, 162 F.3d at 1018-
1019, the defendant supervised the drum-cleaning operation
that caused iliegal discharges, personally discharged
wastewater, and ordered company employees to make
improper releases. Similarly, in Frezzo Bros., 461 F. Supp.
at 270, aff'd, 602 F.2d at 1125, 1129, the president and
secretary of the company had direct knowledge of discharges
through repeated contacts with regulatory officials; indeed,
one of the brother-defendants also stated to regulatory
officials that their pollution controls worked “95% of the
time.”
The conflict between the Fourth Circuit’s decision
and those of other courts of appeals that have applied the
responsible corporate officer doctrine in environmental cases
warrants review by this Court.
” Of Iverson, 162 F.3d at 1022 n.6 (in upholding CWA conviction under
responsible corporate officer theory, the Ninth Circuit noted that
defendant did not raise the “officer” issue).
22
I. The Decision Below Constitutes a Substantial
Expansion in the Scope of Criminal Liability
That Is Not Authorized by Congress.
The Court should grant the Petition in order to
address the important legal question concerning the proper
scope of the responsible corporate officer doctrine as a
pathway for criminal liability in environmental cases. The
Fourth Circuit’s decision has improperly extended the scope
of that liability in a manner not authorized by Congress.
Federal courts have had substantial difficulty in
applying criminal law principles to the CWA, because of the
breadth of its liability provisions. See R. Lazarus, Meeting
the Demands of Integration in the Evolution of
Environmental Law: Reforming Environmental Criminal
Law, 83 Geo. L. J. 2407, 2465-2484 (1995). This difficulty
has lead to concerns that, unless the limiting principles
within these doctrines are followed carefully, the
combination of the negligence and responsible corporate
officer doctrines could operate as a de facto strict liability
doctrine.®
The Fourth Circuit has adopted an interpretation of
the “duty of care” enforceable under the criminal negligence
provision, through the diminished quantum of proof required
for responsible corporate officer liability, that is broader than
that adopted by any other court of appeals. It has improperly
rewritten the CWA to fit the facts of this case.
® See Hare, Comment, Reluctant Soldiers: The Criminal Liability of
Corporate Officers for Negligent Violations of the Clean Water Act, 138
U. Pa. L. Rev. 933, 952-54 (1990):
[TJhe negligence concept and the “responsible corporate
officer” concept . . . working in tandem, have the effect of
exponentially increasing the scope of the negligence standard
... Analytically, this theory of liability lies very close to a strict
liability construct . . .
23
The CWA, as enacted by Congress, already afforded
defendants few of the traditional protections against criminal
liability. The statute imposes a minimal mens rea
requirement; a broad definition of “pollutant;” a broad
definition of “waters of the United States” (here, the
enclosed pipes of a municipal wastewater treatment system);
no minimum quantity necessary to trigger criminal liability;
and no requirement of a showing of actual environmental
harm. Under these circumstances, it is important that courts
adhere to the limits on criminal liability that Congress did
include in the CWA, so that its criminal liability provisions
may be applied consistently with fundamental principles of
justice.
This judicial restraint is especially important in light
of the “severity of the penalty” that may be imposed under
the CWA. MHanousek, 528 U.S. at 1103 (Thomas and
O’Connor, JJ., dissenting from denial of certiorari). Here,
Mr. Hong, a first time offender, was sentenced to three years
imprisonment and a $1.3 million fine, for an alleged
negligent failure to make certain that operational personnel,
under the direct control of the plant manager, ran an
established and permitted pollution control system in
accordance with discharge limits. Under _ these
circumstances, it is important that Federal courts adhere to
the limiting principles that Congress and this Court have
drawn, and not rely on the circular, subjective and sweeping
basis for liability relied upon by the Fourth Circuit in this
case.
For these reasons, the Court should grant the Petition
and define the standards under which an individual may be
held criminally liable under the environmental laws as a
responsible corporate officer.
24
CONCLUSION
The Petition for a Writ of Certiorari should be granted.
June 5, 2001
25
Respectfully submitted,
John F. Cooney
(Counsel of Record)
Joseph G. Block
Gregory S. Braker
Venable, Baetjer, Howard &
Civiletti, LLP
1201 New York Avenue, NW
Washington, DC 20005
(202) 926-4800
Counsel for Petitioner
James Ming Hong
APPENDIX
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
JAMES MING HONG,
)
)
)
)
v. ) No. 00-4335
)
)
Defendant-Appellant. )
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
No. 00-4462
V.
JAMES MING HONG,
)
)
)
)
)
)
)
Defendant-Appellant. )
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 00-4502
JAMES MING HONG,
Defendant-Appellant.
=
)
)
)
)
)
)
)
)
la
UNITED STATES v. HONG
Appeals from the United States District Court
for the Eastern District of Virginia, at Richmond.
James R. Spencer, District Judge; David G. Lowe,
Magistrate Judge.
(CR-99-269)
Argued: December 8, 2000
Decided: March 8, 2001
Before WILKINSON, Chief Judge, and WILKINS and
KING, Circuit Judges.
Affirmed in part, vacated in part, and remanded by published
opinion. Judge Wilkins wrote the opinion, in which Chief
Judge Wilkinson and Judge King joined.
a COUNSEL |
ARGUED: John Fontana Cooney, VENABLE, BAETJER,
HOWARD & CIVILETTI, L.L.P., Washington, D.C., for
Appellant. John Staige Davis, V, Assistant United States
Attorney, Michael R. Fisher, Special Assistant United States
Attorney, Richmond, Virginia, for Appellee. ON BRIEF:
Joseph G. Block, Gregory S. Braker, VENABLE,
BAETJER, HOWARD & CIVILETTI, L.L.P., Washington,
D.C., for Appellant. Helen F. Fahey, United States Attorney,
Richmond, Virginia, for Appellee.
2a
UNITED STATES v. HONG
OPINION
WILKINS, Circuit Judge:
James Ming Hong appeals his convictions and sentence for
violating the Federal Water Pollution Control Act,
commonly known as the Clean Water Act (CWA). See 33
US.C.A § 1319(c)(1)(A) (West Supp. 2000). The
Government cross-appeals, arguing that the district court
erred in vacating the fine imposed by the magistrate judge
who convicted and sentenced Hong and instructing the
magistrate judge to impose a fine of no more than $25,000
each for 12 of Hong's 13 convictions. We conclude that
Hong's challenges to his convictions and term of
imprisonment are without merit but that the district court
erred in vacating the fine initially imposed by the magistrate
judge. Accordingly, we affirm in part, vacate in part, and
remand for reimposition of the original fine.
I.
In September 1993, Hong acquired a wastewater treatment
facility at Second and Maury Streets in Richmond, Virginia
from Environmental Restoration Company, Inc. Hong
initially operated the facility under the name ERC-USA but
subsequently made several changes to the company name,
eventually calling it Avion Environmental Group (Avion).
Hong also moved the company’s operations to a new facility
on Stockton Street in Richmond. Hong avoided any formal
association with Avion and was not identified as an officer
of the company. Nevertheless, he controlled the company's
finances and played a substantial role in company operations.
For example, Hong negotiated the lease for the Stockton
3a
UNITED STATES v. HONG
Street facility,' participated in the purchase of a wastewater
treatment system (discussed further below), reviewed
marketing reports, urged Avion employees to make the
company successful through the use of various marketing
strategies, and controlled the payment of Avion's various
expenses. Hong maintained an office at Avion from which
he conducted business.
In late 1995, Hong and Robert Kirk, Avion's general
manager, began to investigate the possibility of obtaining a
carbon-filter treatment system for the Stockton Street
facility, which lacked a system to treat wastewater. Hong
and Kirk were specifically advised that the treatment system
they were considering was designed only as a final step in
the process of treating wastewater; it was not intended for _
use with completely untreated wastewater. Nevertheless,
after purchasing the system, Avion used it as the sole means
of treating wastewater. The system quickly became clogged.
Hong was advised of the problem by Avion employees and
inspected the~ treatment system himself on at least one
occasion. Additionally, Bruce Stakeman, who sold the
filtration media necessary for the system, advised Hong that
the treatment system would not function properly unless it
was preceded by an additional filtration mechanism. No
additional filtration media were purchased, nor was an
additional filtration system installed.
In May 1996, Avion employees began discharging
untreated wastewater directly into the Richmond sewer
system in violation of Avion's discharge permit. Untreated
wastewater was discharged numerous other times during the
remainder of 1996. Based on these activities, Hong
' Hong signed the lease for the Stockton Street facility as Avion's
president.
4a
UNITED STATES v. HONG
subsequently was charged by information with 13 counts of
negligently violating pretreatment requirements under the
CWA. See 33 U.S.C.A. § 1319(c)(1)(A). More specifically,
Hong was charged with one count of failing to properly
maintain and operate a treatment system and with 12 counts
of discharging untreated wastewater. Each count of the
information alleged that Hong committed the violations "as a
responsible corporate officer." E.g., J.A. 19.
The case was tried before a magistrate judge, who found
Hong guilty on all counts. The magistrate judge imposed a
fine of $1.3 million—$100,000 for each count of
conviction—and sentenced Hong to 36 months
imprisonment. In calculating the appropriate term of
incarceration, the magistrate judge first determined that
Hong was subject to a sentencing range of 51-63 months
pursuant to the sentencing guidelines. After departing
downward four levels to a guideline range of 33-41 months,
the magistrate judge concluded that the appropriate sentence
under the guidelines was 36 months imprisonment. Because
each of Hong's misdemeanor convictions provided a
maximum penalty of one year, the magistrate judge imposed
sentences of 12 months on Counts One, Two, and Three to
be served consecutively to each other, and sentences of 12
months on the remaining counts to be served concurrently
with each other and with the sentences for Counts One, Two,
and Three. See United States Sentencing Guidelines Manual
§ 5G1.2(d) (1998).
Hong appealed to the district court, which affirmed his
convictions and term of imprisonment but, based upon its
conclusion that the maximum fine for each of Counts Two
through Thirteen was $25,000, vacated the fine and
remanded for imposition of a fine of no more than $300,000
Sa
UNITED STATES v. HONG
on those counts. Hong now appeals his convictions and term
of imprisonment, and the Government cross-appeals the
reduction of the fine.
Il.
The provision of the CWA under which Hong was
convicted applies to "[a]ny person who" negligently violates
pretreatment requirements. 33 U.S.C.A § 1319(c)(1)(A).
The CWA defines "person" generally as "an individual,
corporation, partnership, association, State, municipality,
commission, or political subdivision of a State, or any
interstate body." 33 U.S.C.A. § 1362(5) (West 1986). For
purposes of § 1319(c), "person" is further defined to include
"any responsible corporate officer." 33 U.S.C.A. §
1319(c)(6) (West Supp. 2000). As noted previously, the
information charged Hong with negligently violating
pretreatment requirements "as a responsible corporate
officer." E.g., J.A. 19. Hong argues that the Government
failed to prove that he was a responsible corporate officer.
Specifically, he maintains that the Government failed to
prove that he was a formally designated corporate officer of
Avion and that, even if such proof was not required, the
Government failed to prove that he exerted sufficient control
over the operations of Avion to be held responsible for the
improper discharges. We disagree with both contentions.
The "responsible corporate officer" doctrine was first
articulated by the Supreme Court in United States v.
Dotterweich, 320 U.S. 277 (1943). See United States v.
Iverson, 162 F.3d 1015, 1023 (9th Cir. 1998). In
Dotterweich, the president and general manager of a drug
company argued that he could not be held criminally liable
for the company's violations of the Federal Food, Drug, and
6a
UNITED STATES v. HONG
Cosmetic Act. See Dotterweich, 320 U.S. at 279. The
Supreme Court rejected this contention, holding that all who
had "a responsible share" in the criminal conduct could be
held accountable for corporate violations of the law. Jd. at
284; see id (explaining that "a corporation may commit an
offense and all persons who aid and abet its commission are
equally guilty").
The Court revisited the responsible corporate officer
doctrine in United States v. Park, 421 U.S. 658 (1975). In
elaborating on the concept of a "responsible share" in a
violation that the defendant did not personally commit, the
Court stated that the Government may satisfy its burden of
proof by introducing "evidence sufficient to warrant a
finding by the trier of the facts that the defendant had, by
reason of his position in the corporation, responsibility and
authority either to prevent in the first instance, or promptly to
correct, the violation complained of, and that he failed to do
so." Park, 421 U.S. at 673-74. The Court explicitly rejected
the argument that the defendant must have brought the
violation about through some "wrongful action." Jd. at 673
_ (internal quotation marks omitted); see Jverson, 162 F.3d at
1025 ("Under the CWA, a person is a ‘responsible corporate
officer’ if the person has authority to exercise control over
the corporation's activity that is causing the discharges.
There is no requirement that the officer in fact exercise such
authority or that the corporation expressly vest a duty in the
officer to oversee the activity.").
It is evident from these principles that the Government was
not required to prove that Hong was a formally designated
corporate officer of Avion. The gravamen of liability as a
responsible corporate officer is not one's corporate title or
lack thereof; rather, the pertinent question is whether the
7a
UNITED STATES v. HONG
defendant bore such a relationship to the corporation that it is
appropriate to hold him criminally liable for failing to
prevent the charged violations of the CWA.”
Regarding that question, Hong contends that the
Government failed to prove that his relationship to Avion
was such that he possessed authority to prevent the illegal
discharges. Ample evidence supports the magistrate judge's
finding of guilt, however. The evidence indicated that
although Hong went to great lengths to avoid being formally
associated with Avion, in fact he substantially controlled
corporate operations. Furthermore, Hong was involved in
the purchase of the filtration system and was aware, in
advance, that the filtration media would quickly be depleted
if used as Hong intended. And, the evidence supported a
finding that Hong was in control of Avion's finances and
refused to authorize payment for additional filtration media.
Finally, Hong was regularly present at the Avion site, and
discharges occurred openly while Hong was present.
Accordingly, we affirm Hong's convictions.
Il.
Hong next challenges his sentence, maintaining that the
three-year term of imprisonment imposed by the magistrate
judge violates the Eighth Amendment prohibition against
"cruel and unusual punishments," U.S. Const. amend. VIII,
> This rationale is fatal to Hong's claim that the magistrate judge
constructively amended the information by convicting Hong as an owner
of Avion rather than as a responsible corporate officer. While the
magistrate judge did conclude that Hong was the de facto owner of
Avion, the finding of guilt was based on the magistrate judge's
determination that the evidence regarding Hong's relationship to Avion
demonstrated his responsibility for the discharges.
8a
TPR SES aN
UNITED STATES v. HONG
because it is grossly disproportionate to the crime
committed, see Solem v. Helm, 463 U.S. 277, 284 (1983)
(observing that the cruel and unusual punishments clause
"prohibits not only barbaric punishments, but also sentences
that are disproportionate to the crime committed"). Because
Hong failed to challenge his sentence on this basis before the
magistrate judge or the district court, our review is for plain
error. See United States v. Olano, 507 U.S. 725, 731-32
(1993).
This court has held that proportionality review is not
available for any sentence less than life imprisonment
without the possibility of parole. See United States v. Polk,
905 F.2d 54, 55 (4th Cir. 1990).? Even if we were to review
Hong's claim, however, we would conclude that his sentence
was not disproportionate and thus that no error occurred.
Hong argues, essentially, that his sentence of three years is
disproportionate because the criminal conduct consisted of
the "negligent breach of a single duty of care." Brief of
Appellant at 56. Hong's argument glosses over the fact that
he was convicted of violating his duty of care not once, but
thirteen times. The imposition of consecutive one-year terms
of imprisonment for three of those convictions is not
disproportionate. See Hawkins v. Hargett, 200 F.3d 1279,
1285 n.5 (10th Cir. 1999) (explaining that "[t]he Eighth
Amendment analysis focuses on the sentence imposed for
> In arguing that his three-year sentence is disproportionate,
Hong relies on two decisions of this court that left open the question of
whether proportionality review is appropriate for sentences of less than
life without the possibility of parole. See Sutton v. Maryland, 886 F.2d
708, 712 (4th Cir. 1989); United States v. Rhodes, 779 F.2d 1019, 1027-
28 (4th Cir. 1985). Polk answered the question left open in Sutton and
Rhodes.
9a
UNITED STATES v. HONG
each specific crime, not on the cumulative sentence for
multiple crimes"), cert. denied, 121 S. Ct. 83 (2000).
IV.
On cross-appeal, the Government challenges the fine of
$25,000 imposed on each of Counts Two through Thirteen,’
maintaining that the district court erred in determining that
the guidelines precluded application of the alternative fine
statute, 18 U.S.C.A. § 3571 (West 2000). The Government's
cross-appeal presents a question of guidelines interpretation,
which we review de novo. See United States v. Dawkins,
202 F.3d 711, 714 (4th Cir.), cert. denied, 120 S. Ct. 1989
(2000).
The sentencing guidelines provide that a fine shall be
imposed in all cases unless the defendant is unable to pay.
See U.S.S.G. § 5E1.2(a). Generally, the amount of the fine
is determined by reference to a table that specifies a
minimum and maximum fine for each offense level. See id.
§ 5E1.2(c)(3). However, the guidelines also provide that the
maximum fine set forth in the fine table "does not apply if
the defendant is convicted under a statute authorizing... (B)
a fine for each day of violation. In such cases, the court may
impose a fine up to the maximum authorized by the statute."
Id. § 5E1.2(c)(4) (emphasis added).
The parties agree that because the statute of conviction, 33
U.S.C.A. § 1319(c)(1), authorizes a fine for each day of
violation, Hong is subject to a fine "up to the maximum
authorized by the statute" pursuant to § 5E1.2(c)(4). Hong
maintains, however, that the guideline language referring to
4
The magistrate judge also imposed a fine of $100,000 on Count
One. That fine is not challenged by either party.
10a
UNITED STATES v. HONG
"the maximum [fine] authorized by the statute" limits the
potential fine to the maximum specified in the statute of
conviction. Under this interpretation, the maximum fine fort
each of Counts Two through Thirteen is $25,000, as set forth
in 33 U.S.C.A. § 1319(c)(1). The Government, in contrast,
argues that § 5E1.2(c)(4) is properly understood as a
directive that the guidelines do not provide any maximum
fine when the statute of conviction authorizes a fine per day
of violation. Under the Government's interpretation, the
maximum fine for_each of Counts Two through Thirteen is
$100,00, as set forth in 18 U.S.C.A. § 3571.° The magistrate
* The alternative fine statute, 18 U.S.C.A. § 3571, provides in
pertinent part:
(b) Fines for individuals —Except as provided in
subsection (e) of this section, an individual ... may be fined not
more than the greatest of —
(1) the amount specified in the law setting forth the
offense; [or]
(5) for a Class A misdemeanor that does not result in
death, not more than $100,000[.]
(e) Special rule for lower fine specified in substantive
provision. —If a law setting forth an offense specifies no fine or a
fine that is lower than the fine otherwise applicable under this
section and such law, by specific reference, exempts the offense
from the applicability of the fine otherwise applicable under this
section, the defendant may not be fined more than the amount
specified in the law setting forth the offense.
18 U.S.C.A. § 3571 (emphasis added). In short, § 3571 provides that the
maximum possible fine for a Class A misdemeanor of the type
committed by Hong is $100,000 unless the statute of conviction—here,
33 U.S.C.A. § 1319(c)(1)}—specifically precludes application of the
alternative fine provision. Section 1319(c)(1) does not specifically
preclude application of § 3571.
lla
UNITED STATES v. HONG
judge, believing the Government's position to be correct,
imposed a total fine of $1.2 million on Counts Two through
Thirteen. On appeal, the district court agreed with Hong that
the maximum fine on each count was $25,000; accordingly,
it vacated the fine imposed by the magistrate judge and
remanded for imposition of a total fine on Counts Two
through Thirteen no greater than $300,000.
We conclude that the interpretation of § 5E1.2(c)(4) by the
district court was incorrect. In determining the meaning of
the guideline, we are guided by the commentary to § 5E1.2,
which specifically provides that "the guidelines do not limit
maximum fines" when § 5E1.2(c)(4) applies. U.S.S.G. §
5E1.2, comment. (n.5); cf id. comment. (n.2) (citing the
alternative fine provision for the proposition that "[ijn
general, the maximum fine permitted by law as to each count
of conviction is...$100,000 for a Class A misdemeanor"). It
is settled law that "commentary in the Guidelines Manual
that interprets or explains a guideline is authoritative unless
it violates the Constitution or a federal statute, or is
inconsistent with, or a plainly erroneous reading of, that
guideline." Stinson v. United States, 508 U.S. 36, 38 (1993).
Here, we perceive no conflict between the guideline and the
commentary. Rather, application note 5 explains the import
of § 5E1.2(c)(4), namely, that the guidelines impose no limit
on the maximum fine when the offense of conviction allows
a fine per day of violation. We therefore vacate the fine and
remand for reimposition of the fine initially imposed by the
magistrate judge.
V.
In sum, we conclude that Hong was properly held
criminally responsible for his role in failing to prevent
12a
STOMA LE AMOS IAL NE NAH SPS RIE ARNT He ERP MEY eg PLR Bt ad piel i lake die ca ace
UNITED STATES v. HONG
Avion's violations of the CWA and that the 36-month
sentence imposed on Hong did not violate the Eighth
Amendment. Accordingly, we affirm Hong's convictions
and sentence. Because the district court erred in concluding
that the maximum fine for each of Counts Two through
Thirteen was $25,000, we vacate the fine and remand for
reimposition of the original fine.
AFFIRMED IN PART, VACATED IN PART,
AND REMANDED
13a
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION
UNITED STATES OF AMERICA
Vv.
Criminal Action
Number 3:99CR269
JAMES MING HONG
MEMORANDUM OPINION
THIS MATTER is before the Court on an Appeal of
Magistrate Decision brought by Defendant JAMES MING
HONG. Hong was convicted on April 30, 1999 for thirteen
alleged violations of the Clean Water Act (herein “CWA”) in
a trial held before United States Magistrate Judge David G.
Lowe. Hong asks that the Court reverse his conviction on all
counts; in the alternative, he asks that Counts Two through
Thirteen be reversed as multiplicitous, or that the sentence be
vacated and remanded for resentencing. For the reasons
discussed below, the Magistrate’s Decision is AFFIRMED in
part and REVERSED in part as follows:
i. All findings of guilt are AFFIRMED;
l4a
2. All findings on sentencing issues are
AFFIRMED, except as noted below;
3. The 3-year term of imprisonment is
AFFIRMED; and
4. The $1.3 million fine is REVERSED. The
issue of an appropriate fine as to Counts Two
through Thirteen is hereby REMANDED to
the Magistrate for resentencing in accordance
with the Memorandum Opinion.
I. Background
At its core, this Appeal concerns a sole proprietor’s
liability for violations of the Clean Water Act (herein the
“CWA”) committed by a corporation. Hong was the sole
proprietor of Avion Environmental Group, Inc. (herein
“Avion”), a small, Richmond-based environmental company
which was in business to “receive, treat and dispose of
petroleum-contaminated industrial groundwater.”
(Appellee’s Br. “Statement of Facts” § I(A).). Avion was
formed in 1995 following Hong’s 1993 acquisition of
Environmental Restoration Company, a similar Richmond-
based wastewater treatment company, later reorganized as
ERC-USA and then as ERC-Richmond (herein collectively
“ERC”). Id. § I(B).). The Government maintains that ERC
committed numerous environmental violations under Hong’s
direction, eventually leading ERC to enter into an
enforcement order with the Virginia Department of
Environmental Quality. (Id.). Hong formed Avion in 1995,
listing the chief operating officer of another Hong-owned
company as Avion’s sole director without her knowledge.
Id. § I(C).). Hong was Avion’s sole owner and director,
although other individuals have been listed falsely at various
15a
times as Avion officers and directors. (Id. § I(G).). While
Hong’s principal office was in Virginia Beach, Hong
maintained an office at Avion in Richmond. (Id.). Hong
also performed the following tasks, suggesting control over
Avion: (1) he controlled and directed Avion’s finances; (2)
he directed Avion employees to perform personal services;
(3) he led staff meetings on occasion; (4) he handled Avion’s
marketing; (5) he obtained insurance coverage for Avion
(although he stated to insurers that Avion did not need
pollution liability coverage); (5) he worked with attorneys on
Avion’s behalf to obtain a hazardous waste transporter
permit; and (6) he controlled Avion’s expenditures on waste
treatment, which are detailed below. (Id.).
Soon after forming Avion, Hong explored the
possibility of utilizing a polymerized carbon filter
wastewater treatment system (herein the “treatment system”)
to conduct Avion’s business; this treatment system required
the owner to replace its filtration media on a periodic basis,
lest it become clogged with impunties and shut down. (Id. §
I(C).). The treatment system was designed to act as a
“polishing agent, not a gross removal agent,” meaning that it
was not designed to handle totally untreated industrial
wastewater. (Id.). The manufacturer of the treatment system
informed Hong of these facts, and noted that the cost of
replacing the filtration media constituted the principal
expense of running the treatment system. (Id.). Hong
ordered a treatment system, which was received by Avion on
December 22, 1995. (Id.). Despite the manufacturer’s
warnings, Avion employed no additional means by which to
process incoming industrial wastewater. (Id.). Hong later
refused to pay the manufacturer for the treatment system or
for the filtration media on various grounds (including that
Avion had not yet received an industrial user permit from the
City of Richmond, although Avion still refused to pay the
l6a
manufacturer after the permit had been granted), but Hong
eventually paid for the treatment system only. (Id. §(E).).
Hong spoke to his employees of using “charcoal” as a
substitute for the filtration media, and suggested his daughter
could “reverse-engineer” the media so that Avion would not
have to purchase more from the manufacturer. (Id.).
The City of Richmond issued Avion an industrial
user permit (herein the “permit”) on November 15, 1995,
authorizing the discharge of treated wastewater into
Richmond’s sanitary sewer system. (Id. § I(D).). The permit
specified that all discharged wastewater was to be processed
through Avion’s treatment system, and it required Avion to
“at all times properly operate and maintain all facilities and
systems of treatment and control (and related appurtenances)
which are installed or used by the permittee to achieve
compliance with the conditions of this permit.” (Id.). The
permit also capped the levels of various pollutants that could
be accepted into the sewer system, including benzene,
toluene, ethyl benzene, and xylene (herein collectively
“BTEX”), which was capped at 2.13 milligrams per liter of
discharge. (Id.).
As a result of Hong’s refusal to employ additional
means of filtration and Hong’s decision not to replace old
filtration media, Avion’s filtration system became
overwhelmed by contaminants in the incoming industrial
wastewater. (Id. § I(E).). Hong was informed of the
treatment system’s problems by Avion employees, and
inspected it himself on at least one occasion in 1996. (Id.).
Hong was informed directly by Bruce Stakeman, a filtration
media salesman, of the need to employ an additional filter
system (an oil-water separator) in conjunction with the
existing treatment system; Stakeman also observed by letter
that Avion was operating the treatment system improperly,
17a
that contamination levels were too high, and that the waste
stream passing through the treatment system was “heavy in
sludge and particulates.” (Id.). Despite these varied
warnings, Avion continued to accept industrial wastewater
from its customers. (Id.).
By May 1996, Avion employees began to discharge
wastewater directly into the Richmond sewer system
(predominantly at night) without bothering to send the
wastewater through the treatment system at all; these
discharges violated the permit limits on BTEX on at least
three occasions. (Id.). The employees discharged the
untreated wastewater using large hoses stretching across the
Avion lot. (Id.). Hong was aware of the hoses, as he drove
over them on at least one occasion and on another occasion
he asked employees to move them so he could drive out.
(id.). Avion employees were caught in the act by a city
official on August 26, 1996, and thereafter stopped recording
the illegal discharges in the company’s records. (Id.). These
activities prompted at least one employee to resign in
disgust, and by December 1996 only one employee—Robert
Kirk—was willing to perform the discharges. (Id.). Despite
these events, Hong still failed to purchase an oil-water
separator, to replace old filtration media, to install a working
flow meter to monitor discharge volume (as required by the
permit), to transport wastewater offsite for treatment and
disposal, or even to buy a business license. (Id. at § I(G).).
When confronted in January 1997 by Julian Mills, Avion’s
new CFO, Hong acknowledged the problems but stated that
charcoal could be used in the treatment system because it
was cheaper than new filtration media. (Id. § I(G).).
Following the firing of Robert Kirk for alleged
mismanagement on January 24, 1997, Avion obtained
replacement filter media for the first time, although Hong
18a
soon berated an Avion employee for testing storm water for
contamination (in accordance with a state requirement),
calling the requirement a “stupid law.” (1d. § I(H).). Hong
changed Avion’s corporate name to Avion Biotechnology
LLC in July 1997 in an apparent attempt to avoid creditors,
and instructed Avion Biotechnology’s registered agent—an
Avion employee—to use the new name to avoid existing
liabilities; this agent resigned soon thereafter. (Id.). Hong
then decided to sell the business, and represented to the
buyer that he “never had anything to do with Avion.” (d.).
Hong sold the business in April 1998, and abandoned
approximately 40,000-50,000 gallons of untreated waste at
Avion’s Richmond location, despite the pleas of the property
owner. (Id.).
Hong was charged by Criminal Information on
December 31, 1998 with thirteen pretreatment violations of
the CWA, 33 U.S.C. § 1319(c)(1)(A). These counts are
misdemeanor violations. Hong was found guilty on all
counts on April 30, 1999. Based upon expert testimony, the
trial court found that the discharges at issue involved toxic
and hazardous pollutants, and accordingly applied United
States Sentencing Guideline § 2Q1.2’s base offense level of
eight. (Appellee’s Br. § II.). The trial court then departed
downward two levels, despite finding that Hong had actual
knowledge of the violations and that he was primarily
responsible for them. (Id.). It then applied the following
upward additions: (1) a six-level upward adjustment under §
2Q1.2(b)(1)(a) for an “ongoing, continuous, or repetitive
discharge” into the environment; (2) a four-level upward
adjustment for violating a permit pursuant to § 2Q1.2(b)(4);
(3) a two-level upward departure under Application Note 8
of § 2Q1.2, in light of the volume and toxicity of the
discharges at issue; (4) a four-level upward adjustment
pursuant to § 3B1.1(a) based on Hong’s role in the offense.
19a
(Id.). The trial court departed downward by four to produce
a Total Offense Level of 20, which results in a Sentencing
Guidelines Range of 33-41 months. (Id.). The trial court
sentenced Hong to 3 years of imprisonment and $1.3 million
in fines. Hong brought this appeal on November 5, 1999.
II. Standard of Review
On appeal from a Magistrate court’s judgment of
conviction, the district court sits solely as an appellate court.
United States v. Moore, 586 F.2d 1029, 1032 (4" Cir. 1978);
FED. R. CRIM. P. 58(g)(2)(D). When evidence is
challenged as insufficient to support a conviction, the district
court must determine whether the evidence would permit the
Magistrate court to find the defendant guilty beyond a
reasonable doubt, not whether the district court itself
believes the defendant is guilty beyond a reasonable doubt.
United States v. Fletcher, 344 F.Supp. 332, 335 (E.D. Va.
1972). Factual determinations made by the Magistrate court
may be overturned on appeal only if clearly erroneous.
United States v. Jerge, 738 F.Supp. 181 (E.D. Va. 1990).
“On appeal, eyidence is sufficient to sustain a guilty verdict
if, construed most favorably to the prosecution, the evidence
furnished the trial court sufficient basis to find the defendant
guilty beyond a reasonable doubt.” United States v.
Williams, 405 F.2d 14, 17 (4™ Cir. 1968). The district court
must view the evidence and all reasonable inferences arising
therefrom in the light most favorable to the United States.
Jerge, 738 F.Supp. at 183. Questions of law will be
reviewed de novo. United States v. Cade, 2000 WL 204048
(4th Cir.) (slip opinion)(unpublished); United States _v.
Hicks, 948 F.2d 877, 880 (4" Cir. 1991). Whether an
indictment or information is multiplicitous is therefore
reviewed de novo. United States v. Mancuso, 42 F.3d 836,
847 (4™ Cir. 1994).
20a
A district court reviewing the imposition of a
sentence by a Magistrate court must determine’ whether the
sentence (1) was imposed in violation of law; (2) was
imposed as a result of an incorrect application of the
Sentencing Guidelines; (3) imposes a greater fine, term of
imprisonment or term of supervised release than the
maximum established in the Guidelines and/or agreed to by
the parties pursuant to a Plea Agreement; or (4) was imposed |
for an offense for which no sentencing guideline has been
issued and is greater than the sentence specified in a plea
agreement. 37 U.S.C. §§ 3742(a)(1)-(4). A trial court’s
factual findings with respect to the imposition of a fine are
upheld unless clearly erroneous. United States v. Aramony,
166 F.3d 655, 665 (4" Cir. 1999).
III. Analysis
Four issues lie at the heart of Hong’s appeal: (1)
whether the Magistrate court erred in holding Hong liable
under the Clean Water Act; (2) whether the Criminal
Information is multiplicitous; (3) whether the Magistrate
court erred in imposing the term of imprisonment; and (4)
whether the Magistrate court erred in imposing the fine.
These four issues are addressed in turn.
A. Whether the Magistrate Court Erred in Holding
Hong Liable Under the CWA
The CWA imposes liability upon “any person” who
violates its provisions. 33 U.S.C. § 1319(c)(1). A “person”
can include any entity defined as such under 33 U.S.C. §
1362(5)' or any “responsible corporate officer.” 33 U.S.C. §
1319(c)(3). Neither the CWA nor binding case law from the
_ Fourth Circuit appear to define the term “responsible
corporate officer’ (herein “RCO”), but a _ reasonable
examination of the term in its CWA context demonstrates
that a person must possess one or more of the following
attributes in order to be held liable as a RCO: (1) some
degree of control over the finances of the polluting entity; (2)
the authority to manage one or more employees; (3) the
power to negotiate on behalf of the polluting entity; and/or
(4) the power to make binding commitments on behalf of the
polluting entity. Individuals who exhibit one or more of
these indicia of RCO status are in the best position to know
of actual or potential violations of the CWA, and/or to
prevent such violations from occurring. The evidence
adduced at trial demonstrates that Hong exhibited all four
attributes of RCO status, and therefore the Court cannot say
that the Magistrate’s finding of liability under the CWA was
clearly error. This finding shall therefore not be disturbed.
Hong argues at length that he cannot be held liable as
a RCO because he was never an officially-designated
corporate officer of Avion, but this argument eviscerates the
CWA liability scheme. Permitting a defendant who
functions as a responsible corporate officer to conceal his
actual corporate role through creative manipulation of a
company’s organizational chart encourages violators to
escape CWA liability through fraud. Envisioning such a
ploy takes no great leap of imagination, as the Magistrate
found that Hong himself attempted to mask his true role at
Avion by falsely listing various individuals as officers and
' 33 U.S.C. § 1362(5) defines “person” to include “an individual,
corporation, partnership, association, State, municipality, commission, or
political subdivision of a State, or any interstate body.” 33 U.S.C. §
1362(5).
22a
directors of Avion (including the chief operating officer of
another Hong-owned company, who was listed as Avion’s
sole director without her knowledge). For these reasons, the
Court holds that the “RCO” designation looks to an
individual’s authority and actions, not to an individual’s
specific title or position on an organizational chart. The
Magistrate’s finding of liability must therefore be upheld, as
the evidence at trial clearly showed that Hong was a RCO,
and that as such he knew or should have known of the illegal
discharges.
B. Whether the Criminal Information was
Multiplicitous
The next issue before the Court is whether the
thirteen-count Criminal Information was multiplicitous and
thus invalid for reasons of double jeopardy. Although Hong
mounts a multi-faceted attack upon the Criminal
Information, a de novo review of the Criminal Information
demonstrates that the counts charged are not multiplicitous
of one another and therefore must stand. Three findings
Support this conclusion. First, although all thirteen counts
allege various pretreatment violations of the CWA occurring
between April and Decemiber of 1996, Counts Two through
Thirteen concern different permit provisions than does Count
One, and thus are not multiplicitous of Count One. Count
One charges that Hong “negligently caused the failure
properly to operate and maintain the facilities and systems of
control that were installed and used to achieve compliance
with Avion’s permit.” (Compl. Count One.). This count
arises primarily from Hong’s failure to replace the original
filtration media. By contrast, Counts Two through Thirteen
do not concern improper maintenance of the treatment
system in violation of the permit, but rather the illegal
discharges of untreated wastewater in violation of the
23a
permit’s requirement that all wastewater “be pretreated and
discharged through the filtration and polymerized carbon
system.” In other words, Count One concerns improper
maintenance of the treatment system, whereas Counts Two
through Thirteen concern improper use (or disuse) of the
treatment system. (See generally Compl. Counts One
through Thirteen. ).
The Court finds also that Counts Two through
Thirteen involve discharges that occurred over multiple days;
these amount to different offenses and therefore not
multiplicitous of one another. The Government notes wisely
that to find otherwise would defeat both Congressional intent
and valid public policy. (Appellees’ Br. “Argument” § II.).
By structuring the CWA to permit liability per day of
violation, Congress clearly intended to punish violations
individually, not in the aggregate. (Id.). This structure
permits liability to be tailored to the misdeeds of a particular
defendant, imposing greater punishment and more effective
deterrence upon those defendants who commit CWA
violations that are comparatively frequent or more severe
than those committed by a one-time, accidental offender.
Such a scheme is also required out of basic fairness, for it
would be unjust to punish a defendant whose negligence
results in a single minor violation the same way society
punishes a _ defendant whose _ flagrant, deliberate
environmental misdeeds result in much greater harm. The
evidence introduced at trial is sufficient to support a finding
that Hong falls in the latter category.
The Court finds also that the evidence introduced at
trial was sufficient to support a finding that Hong was the
proximate cause of each violation. The harm involved was
clearly to foreseeable to Hong—he had heard the warnings,
he had decided not to replace the filtration media, he had
24a
chosen not to buy additional filter systems, and he withheld
funds from his subordinates that could have been used for
these purposes. (Appellee’s Br. “Argument” § I(B).). The
trial court therefore had sufficient evidence before it to find
that Hong was the proximate cause of each violation.
For these reasons, the Court finds that the Cnminal
Information was not multiplicitous.
Cc Whether the Trial Court Erred in Imposing
Hong’s Term of Imprisonment
The third issue before the Court is whether the term
of imprisonment imposed by the trial court was in error.
Hong argues that the term of incarceration imposed by the
Magistrate Court was excessive, and argues that it repeatedly
misapplied the Sentencing Guidelines in calculating this
sentence. (Appellant’s Br. § IV.). Contrary to these
assertions, there is sufficient evidence in the record to
support the trial court’s findings of fact, its application of the
Sentencing Guidelines, and each of its decisions to depart
from those Guidelines. The 3-year term of imprisonment
imposed below shall therefore not be disturbed.
The Court looks first to the trial court’s
characterization of the discharges at issue in this case. Hong
argues that the trial court wrongly characterized these
discharges as “toxic” or “hazardous” in order to find a Base
Offense Level of 8 under § 2Q1.2(a). (Id. § IV(A)(1).).
Hong maintains that these discharges qualify as “oil” under
the CWA and thus do not merit an upwards adjustment in
Hong’s base offense level. (Id.). According to Hong, the
Government’s witnesses acknowledge that ‘he discharge
limits found in the permit do not establish hazardous levels
per se, but merely were based upon the capability of existing
25a
technology to detect quantities of BTEX in the wastewater.
(Id.). Hong contends that the discharges at issue here would
not qualify as hazardous under either RCRA or CERCLA
(a.k.a. “Superfund”), two comparable statutes dealing with
the remediation of hazardous waste, or under the Clean Air
Act. (Id. §§ IV(A)(2),(3).).
These arguments miss the mark. Sentencing
Guideline § 2Q1.2 hinges upon whether a given substance
has been classified as “hazardous” or “toxic”; if so classified,
§ 2Q1.2 provides a Base Offense Level of 8 and permits the
trial court to adjust upwards. U.S. SENTENCING
GUIDELINES MANUAL §§ 2Q1.2(a),(b) (1998).
Application Note 1 to § 2Q1.2 states that “[t]his section
applies to offenses involving pesticides or substances
designated toxic or hazardous at the time of the offense by
statute or regulation.” Id. Application Note 1. As
demonstrated at trial, BTEX (or any solution or substance
containing BTEX) has been designated as hazardous by the
EPA in regulations adopted pursuant to the CWA, 33 U.S.C.
§ 1319(c)(2)(A). (Appellee’s Br. “Argument” § III(A).).
The criteria for application of a Base Offense Level of 8
were therefore satisfied; the trial court need not have looked
afield to either RCRA or CERCLA, for regulations applying
the CWA itself treat BTEX or any BTEX-ridden substance
as hazardous. The discharges were therefore classified
appropriately, permitting the imposition of a Base Offense
Level of 8 pursuant to § 2Q1.2.
The Court looks next to the trial court’s imposition of
a six-level increase in Hong’s Base Offense Level for an
“ongoing, continuous, or repetitive discharge” into the
environment, pursuant to § 2Q1.2(b)(1)(A). Hong argues
that the increase was improper, because (1) it assumes that
hazardous substances escaped the sewer system and entered
26a
the environment, of which there is no evidence; (2) John
Handzo, the Environmental Compliance Director for the
Richmond sewer -system, could not identify any such
contamination other than to the sewer system; (3) it permits a
6-level increase for most cases involving chemicals, because
most chemicals will volatize into the air even if no discharge
occurs; and (4) the majority rule in these cases is to apply
such an increase only in the event of an actual discharge.
(Appellant’s Br. § IV(B).).
While Hong argues to the contrary, the Court finds
that the record contains sufficient evidence of ongoing,
continuous or repetitive discharges to the environment to
support the six-level increase under § 2Q1.2(b)(1)(A). Hong
essentially asks the Court to accept one of three equally
untenable positions: (1) that substances discharged into a
sewer system do not or cannot progress to the environment at
large; (2) that substances discharged into a sewer system
cannot have an environmental impact beyond the sewer
system; or (3) that a sewer system is not “the environment”
for sentencing purposes, and therefore violators should incur
no additional penalty if they choose to discharge illegally
into a sewer. None of these positions makes intuitive sense,
nor are they supported by the record. Without entering into
an extensive factual inquiry as to the nature of modern
sanitation systems, the Court finds it reasonable to believe
that certain hazardous or toxic substances may pose an
environmental threat even when discharged into a sewer.
Nor does Hong offer any evidence to suggest that the U.S.
Sentencing Commission meant to distinguish illegal
discharges to sewer systems from such discharges to the
“environment,” even if Application Note 5 to § 2Q1.2 calls
for proof of “actual” contamination. See US.
SENTENCING GUIDELINES MANUAL § 2Q1.2(b)(1)(A),
Application Note 5 (1998). The evidence presented at trial
27a
demonstrates that Avion discharged its untreated wastewater
directly into the sewer system (where it would enter the
general waste stream), and that this untreated wastewater
contained a substance classified as hazardous or toxic by the
EPA. This evidence was therefore sufficient to justify the
trial court’s imposition of a six-level increase under §
2Q1.2(b)(1)(A). The fact that all chemicals may volatize
into the air is of no consequence, for proof of actual
contamination is not required under the law of this circuit.
The Court finds no “majority rule” requiring proof of actual
contamination, contrary to Hong’s assertion. The trial
court’s imposition of a six-level increase shall therefore not
be disturbed.
The Court looks next to whether a four-level increase
in Hong’s Base Offense Level pursuant to § 3B1.1(a) was
appropriate based upon his aggravating role in the offense.
Hong argues that such an increase is improper because these
offenses were acts of omission; Hong argues that mere
management of others who violate the law does not make the
manager liable in an aggravating role. (Appellant’s Br. §
IV(D).).? There is ample evidence in the record to suggest
? Though Hong’s assessment of the criteria for upwards adjustment
under § 3B1.1 is not dispositive as to whether the trial court’s adjustment
under this Guideline must stand, it should nevertheless be noted that
Hong interprets § 3B1.1 incorrectly. Application Note 2 to § 3B1.1
recognizes that “[a]n upward departure may be warranted...in the case of
a defendant who did not organize, lead, manage, or supervise another
participant, but who nevertheless exercised significant management
responsibility over the property, assets or activities of a criminal
organization.” Id., Application Note 2. Application Note 2 demonstrates
therefore that upon sufficient evidence, a trial court may indeed apply a
four-level increase to those defendants who were “merely managing”
others who violate the law. This contrasts with Hong’s assertion that
mere managers could not possible qualify for an upwards adjustment
under § 3B1.1. This point is rendered moot by the volume of evidence
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that he has utterly mischaracterized his role in these offenses,
and upon which the trial court could have found that Hong
played an aggravating role. § 3B1.1 permits a court to apply
a four-level increase to a defendant’s base offense level if the
court finds that the defendant played an aggravating role in
the offense, which can include serving as an “organizer or
leader of a criminal activity that involved five or more
participants or was otherwise’ extensive.” U.S.
SENTENCING GUIDELINES MANUAL § 3BI1.1(a)
(1998). The record demonstrates that Hong directed Avion
employees to break the law, and that he reacted with disdain
when Avion employees attempted to comply with the law
(such as by berating an Avion employee for testing storm
water for contamination as required under state law, calling
the requirement a “stupid law”). These actions satisfy the
criteria under § 3B1.1(a) for an “aggravating” role. For all
of these reasons, the Court finds that the four-level increase
applied by the trial court pursuant to § 3B1.1(a) falls
squarely within the discretion of the trial court, and shall
therefore be affirmed.
The Court turns finally to whether the trial court
erred in applying a two-level upwards adjustment pursuant to
Application Note 8 to § 2Q1.2 and/or Application Note 7 to
§ 2Q1.3, based upon the volume of the discharges and upon
their toxicity. Both Application Note 8 to § 2Q1.2 and
Application Note 7 to § 2Q1.3 provide that in pollution cases
involving permit violations, a trial court may depart upwards
or downwards “[djepending upon the nature and quantity of
the substance involved and the risk associated with the
offense.” U.S. SENTENCING GUIDELINES MANUAL §§
2Q1.2, Application Note 8; 2Q1.3, Application Note 7
presented at trial demonstrating that Hong broke the law and directed
others to do the same.
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(1998). The Government presented evidence at trial of
repeated discharges (at great quantities) of untreated
wastewater, which contained quantities of a substance
classified as “hazardous” by the EPA. Such evidence is
sufficient to support a finding by the trial court that the
discharges were sufficiently great and hazardous as to merit
an upwards adjustment in Hong’s Base Offense Level. The
Court therefore—cannot say that this adjustment was clearly
erroneous, so it shall not be disturbed.
In sum, the Court holds that the trial court applied the
Sentencing Guidelines correctly in calculating Hong’s
sentence, and that any departures or adjustments from
Hong’s Base Offense Level were construed or applied
properly. The 3-year term of imprisonment, which results
from three of the thirteen counts receiving consecutive
sentence treatment, is not excessive based on the facts of this
case.
D. Whether the Trial Court Erred in Imposing a
Fine Upon Hong
The final issue before the Court on this appeal is
whether the Magistrate erred in imposing the fine in this
case. The Court finds that the imposition of a $1.3 million
fine is not legally supportable. This fine appears to have
been calculated by multiplying the maximum fine allowable
for a Class “A” misdemeanor under 18 U.S.C. § 3571(b)(5)
($100,000) by the thirteen counts of conviction, to produce a
total fine of $1.3 million. This figure exceeds the applicable
fine table in the Sentencing Guidelines, which offers a fine
range of $7,500 to $75,000 for a Total Offense Level of 20.
Id. § 5E1.2(c)(3). The Court’s inquiry does not stop there,
however, because Sentencing Guideline § 5E1.2(c)(4)
permits a trial. court to depart from the fine table if the
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relevant statute authorizes a fine per day of violation. Id. §
5E1.2(c)(4). In such cases, the trial court is allowed to
impose a fine up to the maximum figure authorized by the
statute, even if that figure exceeds the applicable range in the
fine table. Id. The CWA does indeed authorize a fine per
day of violation, ranging anywhere from $2,500 to $25,000.
33 U.S.C. § 1319(c)(1). Since Counts Two through Thirteen
pertain to only one day of violation each, the maximum fine
permitted for each of those counts is $25,000. Count One
differs from the remaining counts, in that it alleges a
continuing violation over approximately six months. As
noted above, the maximum fine allowed for any Class “A”
misdemeanor is $100,000. Therefore, the trial court’s
imposition of a $100,000 fine for Count One is supported by
law and is therefore affirmed.
This case is remanded to the tnal court for
resentencing solely as to the appropriate fines for Counts
Two through Thirteen. The Magistrate is instructed that
$300,000 is the uppermost limit for the total fines for Counts
Two through Thirteen, as calculated by multiplying the
$25,000 maximum fine by twelve counts of conviction. All
other findings by the Magistrate are affirmed.
IV. Conclusion
For the reasons discussed above, the Magistrate’s
Decision is AFFIRMED in part and REVERSED in part as
follows:
5. _ All findings of guilt are AFFIRMED;
6. All findings on sentencing issues are
AFFIRMED, except as noted below;
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iP The 3-year term of imprisonment is
AFFIRMED; and
8. The $1.3 million fine is REVERSED. The
issue of an appropriate fine as to Counts Two
through Thirteen is hereby REMANDED to
the Magistrate for resentencing in accordance
with the Memorandum Opinion.
Let the Clerk send a copy of this Memorandum
Opinion to all counsel of record.
And it is SO ORDERED.
/s/ James R. Spencer
UNITED STATES DISTRICT JUDGE
6 APR 2000
DATE
~
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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION
UNITED STATES OF AMERICA
Vv.
Number 3:99CR269
)
)
)
)
) Criminal Action
JAMES MING HONG )
)
is FINAL ORDER
THIS MATTER is before the Court on an Appeal of
the Magistrate’s Decision brought by Defendant JAMES
MING HONG. For the reasons discussed in the
accompanying Memorandum Opinion, the Magistrate’s
Decision is AFFIRMED in part and REVERSED in part as
follows:
1. All findings of guilt are AFFIRMED;
2. All findings on sentencing issues are
AFFIRMED, except as noted below;
a The 3-year term of imprisonment is
AFFIRMED; and
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4. The $1.3 million fine is REVERSED. The
issue of an appropriate fine as to Counts Two
through Thirteen is hereby REMANDED to
the Magistrate for resentencing in accordance
with the Memorandum Opinion.
Let the Clerk send a copy of this Order to all counsel
of record.
And it is SO ORDERED.
/s/ James R. Spencer
UNITED STATES DISTRICT JUDGE
6 APR 2000
DATE
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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION
UNITED STATES OF AMERICA,
PLAINTIFF
V. Criminal No:
3 : 98-591M
JAMES M. HONG,
DEFENDANT.
Before: THE HONORABLE DAVID G. LOWE, JUDGE
VOLUME 1
DAY 3 OF 3
APRIL 30, 1999
Richmond, Virginia
HALASZ REPORTING
Court Reporters
Post Office Box 1644
Richmond, Virginia 23218-1644
(804) 741-5215
Reported by: Sally Valentine Qualls, RPR
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APPEARANCES:
UNITED STATES ATTORNEY’S OFFICE
By: JOHN STAIGE DAVIS, ESQUIRE
ENVIRONMENTAL PROTECTION AGENCY
By: MICHAEL R. FISHER, ESQUIRE
On behalf of the PLAINTIFF
BRENNER, DOHNAL, EVANS & YOFFY
By: DENNIS W. DOHNAL, ESQUIRE
On behalf of the DEFENDANT
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EXCERPTS FROM TRANSCRIPT
(4TH CIRCUIT JOINT APPENDIX, PAGES 990-993)
* eK KK XK
THE COURT: All right. I don’t have any
problem with the basics of this case. I do not have any doubt
that Mr. Hong was not just an investor. He was an owner,
pure and simple, whether you want to call it de facto or de
jure. This is a man who set this whole operation into being,
along with Mr. Kirk. He managed it with Mr. Kirk. They
went together to look at filtration systems. They went to
bring it back. They both knew about the need for an oil
separator. No, I’m sorry, this is not an investor who just
simply had a lien on the property. This is an investor in the
sense that he took an actual active participation in the
operation of these entities. And to that extent, I find that
he’s liable under the law.
My problem comes with finding him guilty of
each separate instance, because in each separate instance, I
have to find guilt beyond a reasonable doubt. And I say this,
Mr. Dohnal, because I assume you are going to appeal it, so
you know exactly where I’m coming from. I am interpreting
the statute to mean that once the owner puts the machinery
into place and then negligently permits the operation of the
company to discharge the effluence into the sewer system in
violation of the permit, he’s responsible for each separate
discharge while he’s in charge of the company, whether or
not he’s present on the premises. I have no doubt that Mr.
Hong knew what was happening was wrong, he knew that he
had not supplied the filtration system that was required. He
did not supply the filter, the oil separator that was required.
And he walked by that filter unit every time he went up to
his office. And Mr. Tate, Mr. Morgan, everybody who
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worked there got disgusted and left. From the one picture I
saw, I don’t blame them. All right.
Stand up please, Mr. Hong. Mr. Hong, upon
the evidence before the Court, the Court finds you guilty of
count one; finds you guilty of count two; finds you guilty of
count three; finds you guilty of count four; finds you guilty
of count five, and it finds you guilty of count six; finds you
guilty of count seven; finds you guilty of count eight; it finds
you guilty of count nine; finds you guilty of count ten; finds
you guilty of count eleven; finds you guilty of count twelve;
finds you guilty of count thirteen. I’m going to need a
pretrial or presentence report, obviously, and I think we’re
75 days now, if I’m correct, to get one.
MR. DOHNAL: Could Mr. Hong be
seated?
THE COURT: Yes. You may be
seated, Mr. Hong.
MR. DOHNAL: - Do you want to pick
that date now, Your Honor?
THE COURT: Yes.
THE CLERK: July 14?
MR. DOHNAL: I’m sorry?
THE CLERK: July 14?
MR. DOHNAL: Yes, ma’am.
THE COURT: July 14th.
38a
MR. DOHNAL: Yes, sir.
THE COURT: Is the defendant on
bond?
MR. DOHNAL: Yes, sir, he is
THE COURT: Will be contimued on
the same bond, yes?
MR. DAVIS: Your Honor, I am not
familiar with the conditions of bond, and I should be.
THE COURT: He has a passport. It’s
going to be turned in.
MR. DAVIS: I would ask that the
passport be turned in.
MR. DOHNAL: It already has been
turned in.
THE COURT: That takes care of that.
That’s all we need. Other than that, he’s out on bond. All
right. Thank you. Stand in recess.
(Proceedings concluded at 4:14 p.m.)
39a
REPORTER’S CERTIFICATE
I, SALLY VALENTINE QUALLS,
shorthand reporter, do hereby certify that the pages contained
herein accurately reflect the notes taken by me, to the best of
my ability, in the above-styled action.
/s/
SALLY VALENTINE QUALLS
Shorthand Reporter
40a
RELEVANT CLEAN WATER ACT PROVISIONS
33 U.S.C. §§ 1319(c)(1) AND (c)(6)
(c) Criminal penalties
(1) Negligent violations
Any person who-
(A) negligently violates section 1311, 1312, 1316,
1317, 1318, 1321(b)(3), 1328, or 1345 of this title, or any
permit condition or limitation implementing any of such
sections in a permit issued under section 1342 of this title
by the Administrator or by a State, or any requirement
imposed in a pretreatment program approved under
section 1342(a)(3) or 1342(b)(8) of this title or in a
permit issued under section 1344 of this title by the
Secretary of the Army or by a State; or
(B) negligently introduces into a sewer system or into
a publicly owned treatment works any pollutant or
hazardous substance which such person knew or
reasonably should have known could cause personal
injury or property damage or, other than in compliance
with all applicable Federal, State, or local requirements
or permits, which causes such treatment works to violate
any effluent limitation or condition in any permit issued
. to the treatment works under section 1342 of this title by
the Administrator or a State; shall be punished by a fine
of not less than $2,500 nor more than $25,000 per day of
violation, or by imprisonment for not more than 1 year,
or by both. If a conviction of a person is for a violation
committed after a first conviction of such person under
this paragraph, punishment shall be by a fine of not more
than $50,000 per day of violation, or by imprisonment of
not more than 2 years, or by both.
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(6) Responsible corporate officer as “person”
For this purpose of this subsection, the term “person”
means, in addition to the definition contained in section
1362(5) of this title, any responsible corporate officer.
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33 U.S.C. §§ 1342(a)(3) and 8
(a) Permits for discharge of pollutants
(3) The permit program of the Administrator under
paragraph (1) of this subsection, and permits issued
thereunder, shall be subject to the same terms,
conditions, and requirements as apply to a State permit
program and permits issued thereunder under subsection
(b) of this section.
keeekee
(b) State permit programs
(8) To insure that any permit for a discharge from a
publicly owned treatment works includes conditions to
require the identification in terms of character and
volume of pollutants of any significant source
introducing pollutants subject to pretreatment standards
under section 1317(b) of this title into such works and a
program to assure compliance with such pretreatment
standards by each such source, in addition to adequate
notice to the permitting agency of (A) new introductions
into such works of pollutants from any source which
would be a new source as defined in section 1316 of this
title if such source were discharging pollutants, (B) new
42a
introductions of pollutants into such works from a source
which would be subject to section 1311 of this title if it
were discharging such pollutants, or (C) a substantial
change in volume or character of pollutants being
introduced into such works by a source introducing
pollutants into such works at the time of issuance of the
permit. Such notice shall include information on the
quality and quantity of effluent to be introduced into such
treatment works and any anticipated impact of such
change in the quantity or quality of effluent to be
discharged from such publicly owned treatment works;
*ex* eee *
33 U.S.C. § 1362
(5) The term “person” means an_ individual,
corporation, partnership, association, State, municipality,
commission, or political subdivision of a State, or any
interstate body.
43a
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.