Introduction

In April of 2010, BP’s Deepwater Horizon oil rig sat in the Gulf of Mexico, hovering over a well located almost a mile beneath the surface of the ocean.[1] At the time, BP had planned to close the well for later use and had hired a contractor to seal the well with a concrete mixture.[2] However, on the night of April 20th, a surge of natural gas blasted through the core, traveling up the rig’s riser and igniting its platform.[3] The resulting explosion was devastating.[4] The impact of the blast took the lives of eleven workers on the Deepwater Horizon, and the ruptured well led to the largest oil spill in the history of marine oil drilling operations.[5] Over a period of three months, the well leaked more than three million barrels of oil into the Gulf of Mexico.[6] Deep ocean water currents carried the oil slicks across forty-three thousand square miles, causing permanent damage to aquatic ecosystems and temporarily closing fisheries vital to the Gulf’s economy.[7]

How could BP have allowed this to happen? Who should bear responsibility for the lives, livelihoods, and ecosystems that were destroyed because of one corporation’s action and inaction? These were the questions that the court was faced with in the various civil and criminal trials that ensued. In a criminal trial filed in the U.S. District Court in the Eastern District of Louisiana, BP Exploration and Production Inc. pled guilty to 14 criminal counts for its illegal conduct leading to and after the 2010 Deepwater Horizon disaster, including one misdemeanor count for violation of the Clean Water Act, and another for violation of the Migratory Bird Treaty Act.[8] In addition, BP was sentenced to pay four billion dollars in criminal fines and penalties, the largest criminal resolution in U.S. history.[9] During the sentencing proceeding, U.S. District Court Judge Vance expressed that the fines imposed under the plea agreement were structured so that BP would feel the full brunt of the penalties.[10]

The federal government’s criminal prosecution of BP after the Deepwater Horizon disaster, and the magnitude of the fines imposed by the court, are just one example of a continuing trend in environmental criminal enforcement.[11] Historically, criminal prosecutions under federal environmental laws were rare. Today, however, they are routine, and often reach beyond major environmental disasters like the BP oil spill.[12] This note discusses a phase of environmental criminal enforcement that is often left untouched in the literature: sentencing. Specifically, this note will address the sentencing of corporations under the criminal provisions of environmental statutes and argue for a modification of the organizational sentencing guidelines to include environmental crime and incentivize corporate compliance with these provisions.

Part II provides an overview of criminal environmental enforcement and outlines the Organizational Federal Sentencing Guidelines. Part III introduces the concept of corporate liability for environmental crimes. The final section argues for the adoption of a modification of the proposed 1993 fine guidelines for corporate environmental crime that would financially incentivize corporations to comply with the criminal provisions of environmental statutes.

II. Corporate Environmental Crime and the Federal Sentencing Guidelines

A. Enforcement Of Environmental Crimes

Environmental Law in the United States is comprised of a body of federal statutes that are designed to protect air, water and soil quality, conserve natural resources, and preserve biodiversity.[13] In large part, environmental laws are administrative and civil regulatory schemes.[14] However, all major federal environmental statutes now also contain criminal provisions that penalize failure to comply with the statute’s requirements.[15] Throughout the past two decades, both the EPA and the Natural Resources Division of the Department of Justice have increased their efforts to prosecute environmental crimes.[16] This is evidenced by the fact that environmental crime now constitutes nearly twenty percent of all organizational crime, making it the second-largest group of organizational crime in the United States.[17] Environmental and criminal law scholars have taken notice of this trend, and, in response, have produced a large swath of literature on the subject.[18]

While criminal prosecutions under these provisions have been steadily increasing, the line distinguishing criminal and civil enforcement of environmental laws is often blurry.[19] Many civil environmental offenses could also satisfy the elements of a criminal environmental offense.[20] Thus, the federal government has broad discretion to choose whether to file a case against an environmental offender in civil or criminal court.[21] If the government chooses to prosecute an offender through the criminal system, the differences between enforcement of traditional areas of criminal law and criminal environmental law may also present additional hurtles.[22]

In traditional criminal cases, the underlying wrongfulness of the criminal conduct (or actus reus) is usually readily identifiable.[23] For example, in a homicide case, the wrongfulness of the act is demonstrated by the act itself.[24] When enforcing criminal environmental provisions, however, it is often much more difficult to determine whether the defendant has acted wrongfully.[25]  In contrast to the killing of another, which is socially harmful, environmental statutes recognize that there must be some degree of socially acceptable pollution for industrialized society to function.[26] Thus, many environmental laws are regulatory in nature, and are generally categorized as malum prohibitum, rather than malum in se.[27]

Moreover, the mental state required to prove a felony offense under an environmental criminal provision is often unclear.[28] Under the Resource Conservation and Recovery Act, most courts are willing to impose liability even when the defendant does not have actual knowledge of the applicable federal laws or regulations concerning hazardous waste.[29] Similarly, the Clean Water Act’s criminal provision is ambiguous as to whether a “knowing” violation requires the prosecutor to prove that the defendant knew that their actions violated the statute.[30]

To combat these ambiguities, the Supreme Court has developed a protocol for interpreting mental state provisions in regulatory crimes.[31] First, the court will classify the statute as either a “public welfare offense” or a “non-public welfare offense”.[32] Public welfare provisions criminalize conduct that threatens a community’s health or safety.[33] For an environmental public welfare offense, the court has determined that a standard of care approaching strict liability should apply to those who handle dangerous materials, since the public can often do little to protect themselves from the dangers of pollution.[34] Thus, to knowingly violate a public welfare provision, an actor must (1) be aware that they are engaging in a dangerous and uncommon activity and (2) fail to take steps to determine the legally correct way of conducting the task.[35] On the other hand, to show that an actor knowingly committed a non-public welfare offense, or acted in a way that did not threaten community health or safety, the prosecutor must only prove that the defendant was aware the behavior was unauthorized by regulatory law in general.[36] This approach aligns closely with traditional mens rea requirements, where an actor must act with knowledge that their conduct was unlawful in order to be held liable.[37]

Once an actor is convicted under an environmental provision, a court may sanction the actor through either jail sentences, fines, or both. For individuals, a federal judge may impose a jail sentence for violation of a criminal environmental provision under the Federal Environmental Sentencing Guidelines for Individuals.[38] By contrast, a court may punish a corporate entity for an environmental crime through (1) restitution, (2) fines and (3) probation.[39] However, corporations, or organizational environmental offenders, are not included within the federal environmental sentencing guidelines.[40]  

B. The Organizational Sentencing Guidelines

Enforcement of criminal penalties under federal environmental laws is primarily determined by the Federal Sentencing Guidelines (Guidelines) issued by the U.S. Sentencing Commission.[41] In United States v. Booker, the U.S. Supreme court deemed the guidelines to be “advisory” in assisting federal judges to impose fines and penalties.[42] Despite their advisory nature, the Guidelines have a major impact on the sentences imposed in federal cases.[43]

The Guidelines applicable to organizations or business entities convicted of federal crimes, referred to as the Organizational Guidelines, were enacted in November of 1991.[44] The Organizational Guidelines apply to any organization convicted of a federal crime and provide the formula and procedures for determining fine amounts under the mandatory fine provisions of the Federal Sentencing Guidelines.[45] The Organizational Guidelines are structured such that companies will face the full extent of their liability through both criminal fines and payment of restitution and remediation to victims of the offense.[46]

Determination of fines under the Organizational Guidelines depends on two factors: (1) the base fine, and (2) the culpability score.[47] The base fine is calculated through three numerical determinations: (1) the offense level, and (2) the pecuniary gain for the corporation or (3) the pecuniary loss for the corporation, whichever is greater.[48] A federal court determines the offense level by comparing the offense charged with the appropriate numerical offense level listed in Chapter Two of the United States Sentencing Commission Guidelines Manual, and then matching this level to the offense level fine table in Appendix, Table 1.[49] The pecuniary gain amounts to a corporation’s monetary gain from engaging in the criminal action, while the pecuniary loss represents the amount of harm caused by the corporations intentional, knowing or reckless conduct.[50] Thus, the base fine is determined by calculating the highest degree of financial culpability for the organization.[51] By contrast, the culpability score may increase or decrease according to a corporation’s actions prior to, during, and after the criminal conduct for which they are being sanctioned.[52] The base line culpability score of five may rise according to aggravating factors such as involvement in or tolerance of criminal activity, prior corporate history of criminal misconduct, the violation of a judicial order or injunction, or obstruction of justice.[53] On the other hand, the score may fall if a court finds that the corporation has engaged in mitigating factors, such as an effective corporate compliance program, self-reporting of criminal violations, cooperation with a government investigation, and acceptance of responsibility for wrongdoing.[54] After calculating the culpability score, the sentencing court will determine the final fine by multiplying the base score times the minimum and maximum culpability multipliers and then choosing the final fine from the final fine range.[55] However, even after this determination, a sentencing court possesses the discretion to ignore the Organizational Guideline’s fine formula and impose a harsher or more lenient sentence.[56]

Currently, no federal sentencing fine guidelines address organizational environmental crime.[57] Former Commissioner and Co-Chair of the Commission's Advisory Group on Environmental Sanctions, Ilene H. Nagel, stated that environmental crime was excluded from the Organizational Guidelines because there was a “consensus that these offenses might be sufficiently different from other kinds of crimes that organizations commit”.[58] In showing that organizational environmental crime was sufficiently different from other forms of organizational crime, the Sentencing Commission offered four “principal considerations”: (1) the problem of determining the Base Fine; (2) the problem of determining culpability; (3) the problem of overlapping enforcement; and (4) the problem of balancing economic and environmental interests.[59]

In contrast to other forms of organizational crime, where the pecuniary gain or loss can be quantified through economic valuations, the pecuniary gain or loss for organizational environmental offenders is often indeterminable or does not adequately reflect the harm caused by the offense.[60] Most environmental criminal offenders are prosecuted for failing to pay for required permit fees or properly dispose of hazardous waste.[61] Thus, since environmental offenses can have broad reaching, prolonged effects, and the victims of these effects may not be able to identify the source of the harm, the severity of the offense is often not reflected in the monetary “gain” by the organization.[62] Additionally, environmental crimes do not fit within the Organizational Guideline’s fine range determination because the Organizational Guidelines require a showing of culpability. Since many environmental regulations are strict liability statutes, which do not require a showing of fault, they cannot be accommodated by the Organizational Guidelines.[63] Moreover, the Commission excluded environmental crime from the Organizational Guidelines due difficulty in balancing corporate and environmental interests, and fear that the Organizational Guidelines would impose “overly harsh” fines on organizational environmental offenders.[64]

III. Corporate Culpability and Non-Compliance

A. Corporate Liability and Culpability

Corporate liability for environmental crimes first appeared in the mid 1930’s, and courts have been increasingly willing to levy criminal penalties against both corporations and their officers, employees, and agents under a variety of environmental statutes.[65] Under the criminal provisions of environmental laws, the government has prosecuted both companies and individuals who played a significant and knowing role in the violations. [66]In deciding whether to prosecute individuals or the organization, the government will assess whether the violation arose from “bad apples” or a “bad orchard”.[67] That is, whether the violation stemmed from the acts of isolated employees (bad apples), or from a corporate culture of non-compliance (bad orchard).[68] The government will also base their decision to prosecute on facts gathered during the investigation that indicate the perceived level of responsibility and culpability of individuals or the corporation as a whole.[69] In assessing corporate liability, prosecutors will refer to the Principles of Federal Prosecution of Business Organizations, which provide guidance to federal prosecutors in making decisions involving the investigation, charging, and plea negotiations in corporate criminal cases.[70]

Despite the recent increase in enforcement of environmental criminal provisions, large organizations are continually willing to violate environmental laws and risk their assets in order to make a profit.[71] In large part, compliance with criminal environmental provisions will depend on a corporation’s cost-benefit analysis of the economic consequences of violation.[72] Since the corporate goal is primarily to maximize profit, corporations are less likely to comply with environmental laws if violation will result in a greater overall net profit for the corporation.[73] However, raising the stakes of violation may be the key to incentivizing corporate compliance with the criminal provisions of environmental statutes.[74] The next section of this note will introduce the U.S. Sentencing Commission’s previous attempt to impose higher penalties for corporate criminal environmental offenders and will argue for adoption of a modified version of the proposed guidelines that will incentivize corporate compliance with criminal environmental laws.

IV. Proposed Modification of the Federal Sentencing Guidelines for Environmental Crime

A. The 1993 Proposed Sentencing Guidelines For Organizational Environmental Crime

In 1993, an Independent Advisory Group on Environmental Sanctions presented the U.S. Sentencing Commission with the first proposed sanctions for organizations convicted of environmental offenses.[75] Although the U.S. Sentencing Commission never officially adopted the proposal, its compliance provisions flag important differences between organizational environmental crime and other forms of organizational crime.[76]

According to the Advisory Group’s proposal, the sentencing guidelines for organizational environmental crime would be codified in a separate chapter, “Chapter Nine”, of the Federal Sentencing Guidelines.[77] The Guidelines lay out a four-step procedure requiring a determination of (1) sentencing requirements and options relating to fines, (2) aggravating and mitigating factors applicable to the violation, (3) the appropriate fine calculation, and (4) the requirements and options relating to probation.[78] In short, the Proposed Guidelines would establish a final fine through a determination of (1) a final offense level based on statutory maximums and (2) a base offense level that could be adjusted up or down according to aggravating or mitigating factors.[79]

Unlike the Organizational Guidelines, which determine a Final Offense Level through predetermined amounts, the Proposed Guidelines determined Final Offense Levels according to the statutory maximum for the relevant offense.[80] By doing so, the Proposed Guidelines can establish substantial fines for environmental crimes in which the pecuniary gains or losses are undeterminable, as is the case for many environmental crimes.[81] While the Proposed Guidelines may impose harsher fines than those that would otherwise be imposed under the Organizational Guidelines, they also consider an organization’s culpability when determining base fines.[82] Additionally, the Proposed Guidelines assign culpability retroactively[83], considering whether an organization took satisfactory preventive or corrective measures in response to the commission of an offense when determining whether to increase or decrease a base fine.[84] Under the Proposed Guidelines, much of the evaluation of aggravating factors, mitigating factors, and probation options would be dependent on an organization’s voluntary environmental compliance program.[85]

In accordance with these principles, the last section of this note will argue for a modification of the Proposed Guidelines that places a greater emphasis on the pecuniary gain of an organization in violating an environmental criminal statute to incentivize corporate compliance and reflect public opinion on the role that the federal government should be playing in mitigating the effects of environmental degradation.

B. Modification of the Proposed Guidelines

To raise the stakes of corporate environmental crime, environmental criminal sentences must be structured such that they will result in a loss of profit for corporations that fail to comply with environmental statutes. To incentivize compliance, the sentencing calculation for organizational environmental offenders should place greater weight on the perceived pecuniary gain that the corporation has or would have received by violating the statute. However, this does not mean that a court should forgo consideration of any mitigating factors that a corporation takes to maintain voluntary compliance programs or cooperate with a government investigation. Rather, these factors should be assessed on a case-by-case basis to determine if an offense was either (1) a mere good faith mistake on the part of the organizational environmental offender, or (2) if the violation was the result of a corporation’s attempt to circumvent compliance with the applicable statute. This section will lay out each step of the Proposed Organizational Environmental Sentencing Guidelines and argue for modifications that would produce increased incentive for corporate compliance.

Under the Proposed Guidelines, a court must first determine whether an organization operated primarily for a criminal purpose or primarily by criminal means.[86] If so, the court must apply § 9B1.1, and set at an amount (subject to the statutory maximum) sufficient to divest the organization of all of its net assets.[87] If a corporation does not operate primarily for a criminal purpose, the Proposed Guidelines direct the court to apply § 9B2.1 (Primary Offense Level) to determine the primary offense level for the violation.[88] The Primary Offense Level is determined by the type of environmental offense and the specific offense characteristics.[89] Under each of the environmental offenses, the Proposed Guidelines should be modified to include a specific offense characteristic that increases the base offense by a range of four to six levels according to whether the violation resulted in a substantial pecuniary gain for the corporation. Here, a substantial gain would be one in which a violation caused a substantial net increase in a corporation’s profits. It may often be difficult to determine whether violation was the proximate cause of increased corporate profit. Thus, courts will need to conduct a case-by-case analysis to pinpoint the cost of compliance and the amount that a corporation saved by forgoing compliance with an environmental provision. Additionally, in order to reduce risk of bias in expert witnesses called by a corporation, courts should instead appoint their own experts to conduct an investigation of the company’s finances and the effect that compliance would have on net profit.

Next, the Proposed Guidelines direct the court to consider the aggravating and mitigating factors applicable to the violation.[90] Here, the Proposed Guidelines should maintain the aggravating factors currently listed. [91] While analyzing these aggravating factors, the court should also consider whether a corporation was purposefully evading compliance to increase profit. Additionally, the Proposed Guidelines should continue considering commitment to environmental compliance cooperation and self-reporting as mitigating factors for the base level. However, the maximum base level reduction under the mitigating factors should be capped at four base levels. In determining whether to grant mitigation, the Proposed Guidelines should maintain the current Minimum Factors Demonstrating a Commitment to Environmental Compliance.[92] Here, the burden of showing that a violator has made the substantial commitment necessary to be entitled to mitigation of the offense level should continue to be placed on the organization, primarily by providing documentation that demonstrates their commitment to environmental compliance at the time of the offense.

Using the forgoing factors, the court will then determine the final organizational fine.[93] The court will set the fine according to the calculated offense level, and the corresponding percentage of the maximum statutory fine for the offense. However, rather than setting the maximum statutory fine at 10% for offense levels zero to six, the Proposed Guidelines should be modified to increase the maximum statutory fine at 30% for the lowest offense levels. The Guidelines should then increase the statutory maximum for each base level by 20%.

V. Conclusion

Enforcement of organizational environmental crimes differs substantially from that of traditional organizational criminal enforcement. As a result, the Organizational Sentencing Guidelines have been unable to include environmental crimes committed by organizational offenders within their fine calculations. However, the 1993 Proposed Guidelines presented an additional chapter to the Organizational Sentencing Guidelines that would allow the court to determine a final fine based on a percentage of the statutory maximum of a particular offense, while also considering additional aggravating factors, and decreasing the sentence according to mitigating factors.

To (1) increase corporate compliance with the criminal provisions of environmental statutes and (2) follow public opinion regarding the government’s role in holding corporations accountable for their effect on the environment, the Proposed Guidelines should include an evaluation of organizational pecuniary gain within the specific offense characteristics that may increase the base offense by a range of four to six levels. Additionally, the maximum base level reduction under the mitigating factors should be capped at four base levels. Finally, the percentage of a statutory maximum should begin at 30%, rather than 10%, for base levels zero to six.