Introduction
When a U.S. Coast Guard inspector boarded the M/T Chem Faros, a 21,145-gross-ton cargo ship that pulled into port in Morehead City, N.C., an oiler with the engine crew quietly handed him a note.
“GOOD MORNING SIR, I WOULD LIKE TO LET YOU KNOW THIS SHIP DISCHARGING BILGE ILEGALLY USING BY MAGIC PIPE,” the note said. “IF YOU WANT TO KNOW ILLEGAL PIPE THERE IN WORKSHOP FIVE METERS LONG WITH RUBBER.”
The crewman’s hand-scrawled note, passed that March day two years ago, triggered an inquiry that unmasked a wave of high-seas pollution and phony recordkeeping as the ship ferried cargo in Asia and the U.S. The crew had used the so-called magic pipe to divert oily waste overboard at least 10 times in six months. Eleven days before the inspection, the chief engineer ordered 13,200 gallons of oil-contaminated waste dumped into the ocean.
The ship’s owner, Cooperative Success Maritime S.A., was fined $850,000 and sentenced to five years’ probation after its guilty plea. And the chief engineer — after cooperating with authorities — was sentenced to one year of probation. “The oceans must be protected from being used as dump sites for waste oil or other hazardous substances,” said Maureen O’Mara, special agent-in-charge of the Environmental Protection Agency’s criminal enforcement program in Atlanta, in June 2010. A company attorney declined comment.
That Department of Justice prosecution is one piece of a larger federal crackdown targeting dumping on the high seas, a form of pollution that taints global waterways and is drawing increased scrutiny.
The weapons in the government’s arsenal: whistleblowers who can reap six-figure rewards for reporting dumping and sometimes providing secret cell phone photos to inspectors; investigators who hunt for “magic pipe” diversion devices hidden aboard massive ships; and ship operators pressed to change their ways or risk a ban from U.S. waters.
Over the past 10 years, a Justice Department Environment and Natural Resources Division report shows, the Vessel Pollution Program has triggered more than $200 million in fines and 17 years in prison for ship officers and executives. Four corporations that own and operate a Panamanian cargo vessel were fined $1 million last July — and banned from doing business in the U.S. for five years for deliberately dumping waste overboard and trying to hide their crimes.
“Imagine this, you are the owner of a ship and you can’t come to the most lucrative market in the world. That’s a big hammer,” Capt. David Fish, chief of the Coast Guard’s Office of Investigations and Analysis, said in an interview with the Center for Public Integrity. “They can sail away, but they’re never coming back.”
Yet even with the number of high profile cases brought, more cases come. That leads some experts to conclude the government has snared only part of the problem.
“It’s still occurring at a fairly regular basis, which as a prosecutor is frustrating,” said John Cruden, president of the Environmental Law Institute in Washington and former deputy assistant attorney general for DOJ’s Environment and Natural Resources Division. “That leads me to think there’s a lot more of this out there than the Coast Guard is finding. We are probably just seeing part of the iceberg of the criminal behavior.”
The law, magic pipes — and whistleblowers
Under federal and international law, ships must properly dispose of oily wastewater and sludge by passing the waste through an oil-water separator on board, or burning sludge in an incinerator. The ship’s crew must record each transfer or disposal in an “Oil Record Book.”
When dumping occurs in international waters, U.S. authorities cannot prosecute the actual pollution because it lies outside their jurisdiction. But they can bring charges when crews file false paperwork, use illegal diversion devices, or lie to investigators.
Many scofflaws use so-called “magic pipes” — detachable pipes that can route waste overboard and then be hidden when inspectors arrive — to bypass the required pollution prevention equipment. Some dump in the dark of night in international waters far from port.
Whistleblowers help bring these cases to light, handing to inspectors the scrawled notes or cell phone photos capturing illegal dumping and homemade diversion pipes hidden on board.
Yet some defense lawyers for shipping companies have questioned the government’s use of whistleblowers, contending that a quest for cash could distort a company’s true environmental record. Ultimately, though, the evidence from crews has factored in several cases.
This January, two companies that owned and operated the M/V Aquarosa, a 33,005-gross-ton cargo ship registered in Malta, were fined $1.2 million and sentenced to three years of probation in a case sprung from 300 cell-phone pictures. The ship’s chief engineer got a three-month prison sentence for obstruction of justice.
On the ship’s first voyage in 2010, court papers say, senior engineers started dumping oil bilge waste. They sometimes used a magic pipe constructed from a long rubber hose and metal flanges welded together onboard.
The investigation began after the shipped pulled into Baltimore port in February 2011, and an engineer handed Coast Guard investigators his cell phone with 300 pictures revealing a magic pipe spewing sludge and oily waste overboard. The crew also dumped oil-soaked rags in plastic garbage bags. Prosecutors are seeking a reward for the whistleblower.
In another case, in 2007, a dozen crew members each pocketed $437,500 for blowing the whistle on Overseas Shipholding Group Inc. in what became the largest-ever fine for deliberate vessel pollution: $37 million.
One crewman, upset by dumping close to the New England shore, created a secret journal hidden inside another book. An engineer, being sent back to the Philippines after alleging company wrongdoing, contacted the Coast Guard with help from a hotel night clerk in Wilmington, N.C., and provided evidence, prosecutors said. Yet another engineer contacted the Coast Guard through an Internet café.
The whistleblower awards were granted under the Act to Prevent Pollution from Ships, which allow those providing information leading to conviction to reap up to half of the criminal fines collected. The company, OSG, pleaded guilty for violations in Boston; Portland, Maine; Los Angeles; San Francisco; Wilmington, N.C.; and Beaumont, Texas, and was also sentenced to three years of probation.
In some instances, the company “tricked” pollution prevention equipment by flushing an oil sensor with fresh water, DOJ said.
“The violations at issue in this case were so systemic, repetitive and longstanding that the criminal conduct amounted to a serious failure of corporate and shore-side management,” prosecutors told the court. “Criminal violations continued on some ships during the three years in which OSG was under investigation, including six vessels on which OSG self-reported violations.”
An OSG spokeswoman, contacted this week, said the company had no immediate comment.
Banned from U.S. seas — but some critics of whistleblowers
Last April, in the Panamanian cargo vessel case, four companies were banned from U.S. waters for five years.
Stanships Inc. of the Marshall Islands, Stanships Inc. of New York, Standard Shipping Inc. and Calmore Maritime Ltd. — owners and operator of the M/V Americana — pleaded guilty in New Orleans to 32 felony counts of violating the Act to Prevent Pollution from Ships, the Ports and Waterways Safety Act, and obstruction of justice. The owner of the companies was banned from owning or managing ships trading in the United States.
The inquiry began when a crew member told the U.S. Coast Guard the crew used a magic pipe to illegally dump sludge and oily waste overboard — and provided cell phone pictures taken at sea. Ultimately, the companies admitted transferring sludge and oily waste from the vessel’s engines to a fuel tank, and then pumping it overboard. The metal bypass pipe was hidden when the ship was in port.
The government’s exhibit list included the cell phone pictures showing the magic pipes in action.
Michael G. Chalos, the attorney for Stanships, said the company “is not operating anymore.”
Chalos has raised questions about the government’s investigations of ships. Earlier this year, he helped bring a lawsuit, filed by eight shipping companies, challenging the conditions that the Coast Guard and Homeland Security imposed before releasing vessels that allegedly kept false Oil Record Books. The U.S., in a court filing this week, maintained that its procedures are proper.
Chalos also challenges the government’s use of whistleblowers.
“I would say the majority of ship owners want to be compliant and they pay a lot of money to set up these compliance programs and procedures,” Chalos said. “But they can’t outbid the government. Some whistleblower who decides he wants to make some money can thwart all those efforts. … They don’t report it to the owner, because they know if they wait until they come to the U.S. and they have pictures of some alleged illegal act, they are going to get a reward.”
Cruden, the former DOJ official, said the cases are difficult by their nature. The dumping comes, often, in the dark of night on seas far from port. Ships, many flying under foreign flags, sometimes dock at port a day or two.
“I’m well aware that corporations do not like these laws, because their own employees are finding things and basically turning them in,” he said. “But the problem is, how else would you know?”
Federal case files show how those whistleblowers turn up crucial evidence. In 2010, four crew members who flagged authorities about illegal discharges of oil and plastic from the M/V Iorana, a Greek flagged cargo ship, were awarded $125,000 each. In that case, Irika Shipping S.A. paid a $4 million penalty — $3 million for a criminal fine and $1 million to fund marine environmental projects.
The investigation began in January 2010, court records say, when a crew member, after the ship’s arrival in Baltimore, passed a note telling a Customs and Border Protection inspector that the ship’s chief engineer had ordered the dumping of waste oil overboard through a bypass hose.
“We are asking help to any authorities concerned about this,” the note said, “because we must protect our environment and our marine lives.”
The government’s exhibits at sentencing included pictures of the hoses that flushed waste overseas — and a photo of the vessel with a large painted sign: “Safety First Clean Seas.” An attorney for the company, Dimitri Georgantas, said Friday he doesn’t comment on specific cases. But speaking broadly, he believes the government has “over-reached” in the length of time it holds crews during investigations.
One month earlier, in December 2009, nine crew members of the M/V Theotokos shared $540,000 for helping secure the guilty plea of Polembros Shipping Ltd. The ship management company, headquartered in Greece, paid a $2.7 million criminal fine for violating anti-pollution laws and ship safety laws, and making false statements during a U.S. Coast Guard investigation, the DOJ said.
Polembros was ordered to pay a separate $100,000 to the Smithsonian Environmental Research Center, and was given three years of probation — and its 20 vessels were barred from entering U.S. ports and waters for three years. Ship officers also received punishment, including 10 months’ confinement for the ship master. Georgantas, who also represented Polembros, declined comment.
Sometimes, the whistleblowers turn to higher authorities.
Last May, the chief engineer of the M/V Capitola pleaded guilty to obstructing a Coast Guard inspection a year earlier.
The investigation, launched at the Port of Baltimore, began after a crew member told a clergy member, on board as part of a pastoral visit, that there had been “monkey business in the engine room” involving a magic pipe. At the crew member’s request, the minister alerted the Coast Guard, and its inspectors found the magic pipe: A bypass hose that dumped waste oil overboard.
Fish, the Coast Guard captain, said the cases are emerging amid a confluence of factors: Information from whistleblowers, detailed inspections on board — and an increased appetite by prosecutors to bring cases.
Yet one constant, he said, is money. “In any environmental contamination, it’s in reverse correlation to the economy. The economy is down, companies cut corners, and they generally cut corners in maintenance.”
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