By Sarah Q. Wirskye

Published in theThird Quarter 2000 Firm Newsletter

    Managers, executives and officers are increasingly being criminally prosecuted for their companies’ actions. Moreover, the fact that the individual knew nothing about or was not involved in the actions which led to the indictment may not shield him or her from prosecution.

    Such prosecutions and convictions are possible under criminal statutes which lower or eliminate the intent requirement. For example, many federal environmental, antitrust, and healthcare statutes are considered public welfare statutes. Consequently, because these statutes protect the public, company owners and employees do not always have to act intentionally or knowingly in order to be convicted. Furthermore, the individual may not even have to act at all, because personal involvement in the actions that led to the indictment may not be required either.

    The Supreme Court recently declined to review a case where the defendant-manager was not involved and did not know about the wrongdoing when it occurred. In United States v. Hanousek, 176 F.3d 1116 (9^th Cir. 1999) cert. denied, 120 S. Ct. 860 (2000), Hanousek unsuccessfully appealed his conviction for negligently discharging a harmful quantity of oil into navigable water of the United States. Hanousek was employed by the Pacific & Arctic Railway and Navigation Company ("Pacific & Arctic"). As road master, Hanousek was responsible for the safe and efficient maintenance and construction of track, structures and marine facilities of the entire railroad and assumed similar duties with special projects. One of the special projects under Hanousek’s supervision was a rock quarrying project at a site alongside the railroad referred to as "six mile," located on an embankment 200 feet above the Skagway River. The project involved casting rock and outcroppings alongside the railroad, working the fractured rock toward railroad cars, and loading the rock onto railroad cars with a backhoe. Pacific & Arctic hired Hunz & Hunz, a contracting company to provide equipment and labor for the project.

    At six mile, a high pressure petroleum products pipeline owned by Pacific & Arctic’s sister company, Pacific and Arctic Pipeline, Inc., ran parallel to the railroad within a few feet of the tracks. To protect the pipeline during the project, a work platform of sand and gravel was constructed. The location of the work platform changed as the location of the work progressed along the railroad tracks. After Hanousek took over responsibility for the project, with the exception of a movable backhoe work platform, no further sections of the pipeline along the work site were protected. One evening, a Hunz & Hunz backhoe operator used the backhoe on the work platform to load a train with rocks. The employee noticed that some fallen rocks had caught the plow of the train as it departed and were in the vicinity of the unprotected pipeline. While sweeping the rocks from the tracks, the employee struck the pipeline causing a rupture. The pipeline was carrying heating oil and an estimated 1000 to 5000 gallons of oil were discharged into the Skagway River.

    Among other crimes, Hanousek and M. Paul Taylor, an officer of Pacific & Arctic and Pacific and Arctic Pipeline, Inc., were charged with one count of negligently discharging a harmful quantity of oil into a navigable water of the United States. Hanousek was convicted of negligently discharging a harmful quantity of oil into a navigable water, but Taylor was acquitted of this count.

    The appellate court affirmed Hanousek’s conviction. It rejected Hanousek’s argument that a violation under the statute requires that a defendant act with criminal negligence. Instead, a person who acts with ordinary negligence may be subject to criminal penalties.

    The appellate court also rejected Hanousek’s argument that a public welfare statute that imposes criminal penalties for ordinary negligent conduct violates due process. Instead, the court emphasized that the criminal provisions of the Clean Water Act constitute public welfare legislation and are clearly designed to protect the public at large from the potentially dire consequences of water pollution. Therefore, because public welfare legislation is designed to protect the public from potentially harmful or injurious items and may render criminal a type of conduct that a reasonable person should know is subject to stringent public regulation and may threaten the communities health and safety, a public welfare statute may subject a person to criminal liability for his or her ordinary negligence without violating due process.

    The court also rejected Hanousek’s challenges to the jury instructions relating to his involvement in the actions that led to the indictment. First, although the jury instructions stated that in order to convict the jury must find that the particular defendant caused the discharge of oil, the court declined to instruct the jury that (1) the defendant was not responsible for and could not be held criminally liable for any negligent act or omissions by the person responsible for the rupture or other Hunz & Hunz personnel, and (2) a person is responsible, under the criminal laws, only for acts he performs or causes to be performed on behalf of a corporation. The appellate court held accordingly despite the trial court allowing the prosecutor to argue during closing argument that when the employee responsible for the rupture hit the unprotected pipeline, Hanousek was guilty of negligently discharging oil into the Skagway River. The appellate court also found that the causation jury instruction was sufficient because it required the jury to find that the defendant’s conduct had a "direct and substantial" connection to the discharge of the oil. Therefore, Hanousek’s conviction and prison sentence were affirmed.

    Thus, under these types of statues, even individuals who are virtually uninvolved with criminal conduct can be convicted and go to jail.   Constitutional due process challenges to such statutes generally have not fared well. Therefore, much more prosecutions are probably likely.