FOR IMMEDIATE RELEASE ENRD

MONDAY, DECEMBER 19, 2005 (202) 514-2007

WWW.USDOJ.GOV TDD (202) 514-1888

SHIP COMPANY TO PAY $10.5

MILLION FOR COVERING UP OIL
POLLUTION
Largest Environmental Criminal Fine in
Massachusetts History
WASHINGTON, D.C. – MSC Ship Management (Hong Kong) Limited—a Hong
Kong-based container ship company—has agreed to plead guilty to charges that it
engaged in conspiracy, obstruction of justice, destruction of evidence, false
statements and violated the Act to Prevent Pollution from Ships, the Department of
Justice announced today. Per the terms of a plea agreement that must be approved
by the court, MSC Ship Management will pay $10.5 million in penalties. This is the
largest fine in which a single vessel has been charged with deliberate pollution and
the largest criminal fine paid by a defendant in an environmental case in
Massachusetts history.

According to the plea agreement, including a joint factual statement, MSC Ship
Management will plead guilty to a criminal information which charges that a
specially fitted steel pipe, referred to as the “magic pipe,” was used on the MSC
Elena, a 30,971 ton container ship, to circumvent required ship pollution prevention
equipment and discharge oil sludge and oil contaminated waste directly overboard.
Upon the discovery of this bypass equipment during a U.S. Coast Guard inspection
in Boston Harbor on May 16, 2005, senior company officials in Hong Kong directed
crew members to lie to the Coast Guard. Additionally, senior ship engineers ordered
that documents be destroyed and concealed.

“This is the largest fine involving deliberate pollution from a single ship in a long
series of similar prosecutions that have been brought as part of a vessel pollution
initiative,” said Sue Ellen Wooldridge, Assistant Attorney General for the Justice
Department’s Environment and Natural Resources Division. “Deliberate vessel
pollution is a serious and persistent problem which we will prosecute to the full
extent of the law.”
“Residents of Massachusetts and particularly those along the Buzzards Bay coastline
have experienced first-hand the devastation to the environment that can result from
accidental oil spills. However, there was nothing accidental about this case,” said
Michael Sullivan, U.S. Attorney for the District of Massachusetts. “The defendant
knowingly violated anti-pollution laws, intentionally dumping oil-contaminated
waste directly into the ocean—and even went so far as to manufacture a so-called
‘magic pipe’ to accomplish the crime. Our hope is that this substantial $10 million
fine will send a strong message to those in the maritime community who would try
to circumvent our Nation's anti-pollution laws.” MSC Ship Management discharged
approximately 40 tons or approximately 10,640 gallons of sludge during a five-
month period in 2004 through a three-piece bypass pipe manufactured on the ship.
An even larger volume of oil-contaminated bilge waste was also discharged with a
rubber hose and portable pump. The MSC Elena made regular voyages from ports
in Europe across the Atlantic to ports in the United States, including Boston.

Under the terms of the plea agreement, MSC Ship Management has agreed to plead
guilty to charges that it made false statements to the Coast Guard denying
knowledge about the existence and use of the bypass equipment; obstructed justice
by directing subordinates to lie to the Coast Guard; concealed evidence; and
concealed oil pollution in a falsified Oil Record Book— a required log in which all
overboard discharges must be recorded.

MSC Ship Management has also agreed to plead guilty to charges that in response
to a Coast Guard inspection, senior ship engineers directed that an “alarm” printout
from the ship’s computer and a log containing actual tank volumes be concealed in
an effort to cover up the falsification of records. Coast Guard inspectors were
presented with fictitious logs containing false entries claiming the use of the Oil
Water Separator and omitting any reference to dumping overboard using the bypass
equipment.

“The Coast Guard is committed to the protection of the marine environment in

Massachusetts, in New England, and throughout the United States. To accomplish
this goal, the Coast Guard ensures that vessel owners and operators comply with the
law and are truthful with our inspectors,” said Rear Admiral David P. Pekoske,
Commander, First Coast Guard District. “This defendant’s crimes, and especially
management’s direct involvement, undermines our entire regulatory system for the
protection of the environment. This successful prosecution and the severe penalties
associated with it should send a message that intentional pollution and lying to the
Coast Guard will not be tolerated.”

Additionally, under the terms of the plea agreement, MSC Ship Management will be
on probation for five years, during which time it must operate under the terms of a
government-approved Environmental Compliance Plan. The plan includes review
by an independent auditor of any of MSC Ship Management’s 81 ships—including
the MSC Elena—that trade in the United States, and a review of those audits by a
court-appointed monitor.
If the plea agreement is approved by the court, MSC Ship Management will pay a
$10 million a criminal fine, and an additional $500,000 to support community
service projects. The projects will be administered by the National Fish & Wildlife
Foundation to fund non-profit organizations that provide environmental education to
seafarers visiting or sailing from Massachusetts ports, including how to report
environmental crimes to the U.S. Coast Guard.

Engine room operations on-board large ocean-going vessels such as the MSC Elena
generate large amounts of waste oil and oil contaminated bilge waste. International
and U.S. law prohibit the discharge of waste containing more than 15 parts per
million oil and without treatment by an Oil Water Separator and oil sensing
equipment—a required pollution prevention device. The Act to Prevent Pollution
from Ships also requires that all overboard discharges be recorded in an Oil Record
Book, which is subject to inspection by the Coast Guard. The waste oil may be
incinerated on board the ship or offloaded in port for proper disposal.

In two related prosecutions, the Chief Engineer of the MSC Elena, Mani Singh, was
indicted in November and has agreed to plead guilty at a hearing scheduled for
December 20, 2005. Aman Mahana, the ship’s Second Engineer, pleaded guilty on
December 1, 2005. Sentencings for Singh and Mahana will take place early next
year.

This investigation was conducted by the Northeast Regional Office of the U.S.
Coast Guard Investigative Service, with assistance from the U.S. Coast Guard Sector
Boston; U.S. Coast Guard First District Legal Office; U.S. Coast Guard Office of
International and Maritime Law; U.S. Coast Guard Headquarters Office of
Investigations and Analysis; and U.S. Coast Guard Office of Compliance. The case
is being prosecuted by Assistant U.S. Attorney Jonathan F. Mitchell in the District
of Massachusetts’ Economic Crimes Unit, Special Assistant U.S. Attorney Luke M.
Reid of the U.S. Coast Guard, and Senior Trial Attorney Richard A. Udell and Trial
Attorney Malinda R. Lawrence of the Justice Department’s Environmental Crimes
Section.

###

05-680