United States v. Citgo Petroleum Corp.

• Decision Date: 20 December 2012
• Docket Number: Criminal Action No. C–06–563.
• Citation: 908 F.Supp.2d 812
• Parties: UNITED STATES of America, Plaintiff, v. CITGO PETROLEUM CORPORATION, CITGO Refining and Chemicals Company, L.P., Defendants.
• Court: U.S. District Court — Southern District of Texas

908 F.Supp.2d 812

UNITED STATES of America, Plaintiff,

v.CITGO PETROLEUM CORPORATION, CITGO Refining and Chemicals Company, L.P., Defendants.

Criminal Action No. C–06–563.

United States District Court,

S.D. Texas,

Corpus Christi Division.

Nov. 6, 2012.

Opinion Denying Reconsideration Dec. 20, 2012.

Howard P. Stewart, James B. Nelson, Lary Cook Larson, United States Department of Justice Environmental Crimes Section, Washington, DC, James L. Turner, Financial Litigation, U.S. Attorneys Office, Houston, TX, Kenneth A. Cusick, Office of U.S. Attorney, U.S. Marshal, U.S. Pretrial SVCS, U.S. Probation, Corpus Christi, TX, for Plaintiff.

Dick Deguerin, Deguerin and Dickson, Catherine Louise Baen, Attorney at Law, James B. Blackburn, Jr., Blackburn Carter P.C., Matt Hennessy, Houston, TX, Daniel D. Birk, Nathan P. Eimer, Eimer Stahl Klevorn & Solberg LLP, Chicago, IL, Ralph F. Meyer, Royston Rayzor et. al., Corpus Christi, TX, Robert Brager, Beveridge and Diamond P.C., Baltimore, MD, for Defendants.

MEMORANDUM OPINION & ORDER

JOHN D. RAINEY, Senior District Judge.

Pending before the Court is the Motion of the United States (“the Government”) to Empanel a Sentencing Jury Pursuant to Fed. R. Crim. P. 23 and 18 U.S.C. § 3571(d) (Dkt. No. 822), to which Defendants CITGO Petroleum Corporation and CITGO Refining and Chemicals Company, L.P. (collectively “CITGO” or the “CITGO entities”) have responded (Dkt. No. 827) and the Government has replied (Dkt. No. 830). The Community Members, as crime victims under the Crime Victims' Rights Act, 18 U.S.C. § 3771, have also filed a brief attempting to join the Government's motion (Dkt. No. 825).

I. Background

On June 27, 2007, the CITGO entities were convicted by a jury on two felony counts each of operating an oil water separator without the proper emission control devices, in violation of the Clean Air Act, 42 U.S.C. §§ 7413(c)(1), 7411(e) and 40 C.F.R. § 60.692–4. Following a separate bench trial, the CITGO entities were convicted on July 17, 2007 on three misdemeanor counts each of unlawfully taking and aiding and abetting the taking of migratory birds in violation of the Migratory Bird Treaty Act, 16 U.S.C. § 703(a).

Upon conviction of violating the Clean Air Act, CITGO became subject to two potential statutory sentencing schemes: (1) a maximum fine of $2,000,000 ($500,000 per entity per count) under 18 U.S.C. § 3571(c)(4) or (2) twice the gross, pecuniary gain derived by CITGO from its offenses under the Alternative Fines Act, 18 U.S.C. § 3571(d).

In the Pre–Sentence Investigation Reports prepared for each defendant, the United States Probation Office (“Probation”) determined that the gross pecuniary gain to each CITGO entity was $4,900,000, which was based on the cost to install roofs on Tanks 116 and 117 in 1994 ($2,000,000) plus interest from 1994 to 2007 ($2,900,000). CITGO objected to this determinationbecause it ignored the fact that CITGO actually spent $5,700,000 installing roofs on the tanks in 2003, which is more than it would have spent had it installed the roofs in 1994. Thus, CITGO argued, it did not realize any “gross pecuniary gain” from its violations. The Government also objected to Probation's determination, but for other reasons. According to the Government, “gross pecuniary gain” should be calculated based on all of the East Plant Refinery's profits derived while CITGO operated Tanks 116 and 117 without roofs from 1994 to 2003, which the Government calculated to be more than $1,100,000,000.

On September 20, 2011, CITGO filed a Motion to Preclude Sentencing under 18 U.S.C. § 3571(d) (Dkt. No. 741) on the grounds that the Supreme Court's holding in Apprendi v. New Jersey, 530 U.S. 466, 120 S.Ct. 2348, 147 L.Ed.2d 435 (2000), applies not only to terms of imprisonment, but also criminal fines. Because the jury did not make a specific, factual finding as to gross pecuniary gain, CITGO argued that the Alternative Fines Act could not be applied at sentencing. In May 2012, the Court decided to delay CITGO's sentencing to have the benefit of the Supreme Court's then-pending ruling in Southern Union Co. v. United States, ––– U.S. ––––, 132 S.Ct. 2344, 183 L.Ed.2d 318 (2012). On June 21, 2012, the Supreme Court issued its decision, holding that “the rule of Apprendi applies to criminal fines,” which means that “ ‘[o]ther than the fact of a prior conviction, any fact that increases” the amount of a criminal fine “beyond the prescribed statutory maximum must be submitted to a jury and proved beyond a reasonable doubt.’ ” Id. at 2350 (quoting Apprendi v. New Jersey, 530 U.S. 466, 490, 120 S.Ct. 2348, 147 L.Ed.2d 435 (2000)).

Following the Supreme Court's decision in Southern Union, the Government conceded that the “total maximum statutory fine” the Court may impose upon the CITGO entities “is $2,090,000” ($2,000,000 for violations of the Clean Air Act and $90,000 for violations of the Migratory Bird Treaty Act) and “recommend[ed] that the Court impose a fine of $2,090,000.” (Dkt. No. 804 at 2.) The Government further recommended that the Court order CITGO to pay $44,000,000 in “community service obligations” to a number of local charities as a condition of probation pursuant to 18 U.S.C. §§ 3563(b)(12), (22). In response, CITGO filed a Motion to Bar the Government from Seeking a Monetary Penalty in Excess of the Statutory Maximum (Dkt. No. 820). In its September 18, 2012 Memorandum Opinion & Order granting CITGO's motion, the Court cited the Government's concession that the total maximum statutory fine is $2,090,000 and concluded as follows:

The maximum statutory fine for the crimes of which CITGO was convicted is $2,090,000. Accordingly, any monetary penalty in excess of that amount—regardless of whether it is categorized as “community service,” “community restitution,” or “monitoring expenses,” or whether the payment is made to a charity instead of the United States Treasury—is impermissible.

(Dkt. No. 823 at 1, 8.)

II. The Government's Motion to Empanel a Sentencing Jury

In light of the Supreme Court's decision in Southern Union that Apprendi applies to criminal fines and this Court's ruling that any monetary penalty in excess of the maximum fine under 18 U.S.C. § 3571(c)(4) is impermissible on the current record, the Government now moves the Court to convene a sentencing jury in order to determine the facts necessary to support a fine based upon CITGO's gross, pecuniary gain pursuant to the Alternative Fines Act, 18 U.S.C. § 3571(d).

As stated supra, the Government claims that CITGO realized a gross pecuniary gain in excess of $1,100,000,000 from operating Tanks 116 and 117 in violation of the Clean Air Act, which represents the CITGO East Plant Refinery's total profits from January 1994 to May 2003. To establish this measure of pecuniary gain, the Government would ask the sentencing jury to answer three questions, beyond a reasonable doubt, along the lines of the following:

(1) During the time frame alleged in the indictment did wastewater generated by all the process units at the CITGO Corpus Christi, Texas, refinery have to pass through tanks 116 and 117?;

(2) During the time frame alleged in the indictment could CITGO have lawfully operated any of its process units without the use of either tank 116 or 117 or both?;

(3) If the answers to questions one and two are yes, then what was the amount of pecuniary gain recognized by the CITGO East Plant refinery during the time frame alleged in the Indictment?

(Dkt. No. 822 at 1.) According to the Government, the evidence necessary to answer Questions One and Two can be “easily presented” based on engineering analysis evidence that already exists and is in the possession of CITGO and the Government. The evidence necessary to answer Question Three is also “easily presented” because it is based on operating profits during the decade CITGO operated Tanks 116 and 117 in violation of the Clean Air Act.

III. Legal Standard

Under 18 U.S.C. § 3571(c), an organizational defendant that has been found guilty of a criminal offense for which no fine amount is specified by separate statute may be sentenced to a maximum statutory fine of $500,000. Under the Alternative Fines Act, however, a higher fine may result:

If any person derives pecuniary gain from the offense, or if the offense results in pecuniary loss to a person other than the defendant, the defendant may not be fined more than the greater of twice the gross gain or twice the gross loss, unless imposition of a fine under this subsection would unduly complicate or prolong the sentencing process.

18 U.S.C. § 3571(d).

Thus, under § 3571, $500,000 is the statutory maximum fine against an organization that has been found guilty of a felony, but an alternative fine applies if the defendant has derived pecuniary gain from the offense, or if the offense has resulted in pecuniary loss to another person. However, if imposing an alternative fine would “unduly complicate or prolong the sentencing process,” the $500,000 maximum applies. 18 U.S.C. § 3571(d).

In United States v. Sanford, the District Court for the District of Columbia “consider[ed] the interaction between the constitutional issues stemming from the Supreme Court's recent decision in Southern Union ... and the appropriate definitions of ‘gross gain’ and ‘derived ... from’ under the Alternative Fines Act, 18 U.S.C. § 3571(d),” as applied to evidence of monetary proceeds offered in a criminal environmental pollution trial. United States v. Sanford, Ltd., 878 F.Supp.2d 137, 140 (D.C.C.2012). In that case, the indictment alleged that, between March 2007 and July 2011, the defendants conspired to fail to maintain an accurate Oil Record Book (ORB) as required by law, failed to maintain the ORB, and knowingly discharged machinery-space bilge waste overboard their fishing vessel without first running such waste through an Oily Water Separator (OWS), in violation of the Act to Prevent Pollution from Ships (APPS). Id. at...