"Monkey business" with magic pipe costs Cardiff Marine $2.4 million

cardiffmarineCardiff Marine Inc, a Liberian-registered shipping company, was sentenced Wednesday in federal court in Baltimore after pleading guilty to a felony violation of the Act to Prevent Pollution from Ships. The company admitted falsifying records of illegal discharges of oily waste from the M/V Capitola , making false statements to the Coast Guard and other acts of concealment. U.S. District Judge Marvin J. Garbis sentenced Cardiff to pay a $2.4 million fine and serve three years probation, subject to an environmental compliance plan that includes audits by an independent third party auditor.

According to court documents, the investigation into the M/V Capitola was launched on May 3, 2010, at the Port of Baltimore, after a crew member informed a clergyman, who was on board the Capitola on a pastoral visit, that there had been "monkey business in the engine room," which involved a "magic pipe."

The magic pipe proved to be a bypass hose that allowed the dumping of waste oil overboard, circumventing pollution prevention equipment required by law. The crew member asked the minister to alert the Coast Guard and to pass on a flash drive bearing video taken in the ship's engine room. That triggered an inspection of the Capitola, and, ultimately, to Wednesday's guilty plea.

An investigation confirmed that there had been an illegal discharge system on the Capitola as depicted in the whistleblower's video. It showed a black hose tied in several places to overhead piping in the Capitola's engine room. The hose connected one of the vessel's waste oil tanks to a valve that opened directly to the ocean.

During its inspection, the Coast Guard interviewed members of the Capitola's engine room crew, including the whistleblower. Three of these crew members had served on the Capitola for more than six months and during that time had witnessed multiple occasions when a hose was used to discharge the waste oil, sludge and water that had accumulated in the separated oil tank overboard, as directed by a senior engineering officer. None of these illegal discharges were recorded in the Oil Record Book, as required by law.

Investigators also learned that there had been a document called the Daily Sounding Record on the Capitola, and that it had tracked how much waste oil, sludge and bilge water was in each waste tank, on a daily basis. This record would have been useful during the Coast Guard's inspection of the Capitola in that it could have shown when the levels of the waste tanks changed, which could be compared to entries in the Oil Record Book. Sudden, unexplained drops in the measurements could have indicated specific dates when wastes were discharged overboard. The Daily Sounding Record was not produced to the Coast Guard. The senior engineering officer who kept these records told the Coast Guard that the only record of waste tank levels that he had were undated scraps of paper in his office.

Cardiff Marine Inc. released a statement saying that it is its "policy to operate vessels under its management in compliance with MARPOL and other applicable international and domestic requirements. Despite Cardiff Marine's longstanding policies requiring full compliance, certain crew members aboard the M/V Capitola unfortunately disregarded these policies and discharged oily water and oil residues, but did not record those operations in the ship's Oil Record Book.

"Because under U.S. law Cardiff Marine is vicariously liable for violations committed by crewmembers of the ships under its Shipmanagement, on February 23, 2011, Cardiff Marine pled guilty to two charges - failing to maintain an accurate oil record book in which all operations were accurately recorded and obstructing the U.S. Coast Guard's MARPOL investigation. Based on the recommendations contained in the plea agreement, the court ordered Cardiff Marine to pay a $2.4 million fine and implement an Environmental Compliance Plan to strengthen the company's commitment to environmental compliance in every phase of its operation.

"We are pleased to bring closure to this investigation against our company, and we look forward to strengthening Cardiff Marine's commitment to environmental compliance," stated Mr. Koukoulas, acting General Manager. "Cardiff Marine will implement the agreed upon Environmental Compliance Plan that is comprehensive and rigorous. The changes that we are implementing based on what we learned from this investigation support our goal to provide quality service to our customers while helping to protect the marine environment."

Gregory F. Linsin and Jeanne M. Grasso of Blank Rome LLP represented Cardiff Marine.

February 25, 2011

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