West Virginia Spill Demonstrates Senior Management Exposure Under "Responsible Corporate Officer" Doctrine
08/08/2015The recent decision of a company president to plead guilty to a Clean Water Act violation illustrates the hazards facing the executive suite in federal environmental cases. Companies in the business of using, storing or transporting dangerous chemicals or industrial waste are subject to federal felony sanctions for non-permitted discharges based on a standard of simple negligence. All “responsible corporate officers” are culpable for the company’s failure to prevent the spill.
Freedom Industries, Inc., was in the business of processing and selling industrial chemicals including “MCHM,” a cleansing agent used in coal mining. In early 2014 a large quantity of the chemical leaked from a storage tank into a containment area that had not been properly maintained. The chemical then breached the containment walls and spilled into the Elk River in West Virginia, leaving some 300,000 downstream residents without drinking water for days. The rash of lawsuits resulting from the spill soon forced Freedom into bankruptcy.
DOJ later obtained felony indictments against everyone in senior management as responsible corporate officers. According to DOJ, the company failed to follow common industry standards for safety and environmental compliance, failed to adequately inspect the containment structure, and failed to implement a “spill prevention, control and countermeasures” plan as required by environmental regulations. One of the corporate officers, former president Gary Southern, originally entered a not guilty plea but recently changed his plea to guilty, likely as a result of a plea agreement.
This case serves as a textbook example of the enhanced duties of care and oversight required of top corporate management, both individually and collectively, in assuring compliance with environmental safety measures as defined in EPA permits, applicable regulations and common industry practices. The negligence standard, coupled with the responsible corporate officer doctrine, effectively require corporate officers to act as their own engineering and safety ombudsmen.