USA. v. Hong, 00-4335

• Decision Date: 08 December 2000
• Docket Number: N,No. 00-4335,No. 00-4502,00-4335,00-4502
• Citation: 242 F.3d 528
• Parties: (4th Cir. 2001) UNITED STATES OF AMERICA, Plaintiff-Appellee, v. JAMES MING HONG, Defendant-Appellant. UNITED STATES OF AMERICA, Plaintiff-Appellee, v. JAMES MING HONG, Defendant-Appellant. UNITED STATES OF AMERICA, Plaintiff-Appellee, v. JAMES MING HONG, Defendant-Appellant. o. 00-4462, . Argued:
• Court: U.S. Court of Appeals — Fourth Circuit

Page 528

242 F.3d 528 (4th Cir. 2001)

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. JAMES MING HONG, Defendant-Appellant.

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. JAMES MING HONG, Defendant-Appellant.

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. JAMES MING HONG, Defendant-Appellant.

No. 00-4335, No. 00-4462, No. 00-4502.

UNITED STATES COURT OF APPEALS, FOR THE FOURTH CIRCUIT.

Argued: December 8, 2000.

Decided: March 8, 2001.

Appeals from the United States District Court for the Eastern District of Virginia, at Richmond.

James R. Spencer, District Judge; David G. Lowe, Magistrate Judge. (CR-99-269) COUNSEL: ARGUED: John Fontana Cooney, VENABLE, BAETJER, HOWARD & CIVILETTI, L.L.P., Washington, D.C., for Appellant. John Staige Davis, V, Assistant United States Attorney, Michael R. Fisher, Special Assistant United States Attorney, Richmond, Virginia, for Appellee. ON BRIEF: Joseph G. Block, Gregory S. Braker, VENABLE, BAETJER, HOWARD & CIVILETTI, L.L.P., Washington, D.C., for Appellant. Helen F. Fahey, United States Attorney, Richmond, Virginia, for Appellee.

Before WILKINSON, Chief Judge, and WILKINS and KING, Circuit Judges.

Affirmed in part, vacated in part, and remanded by published opinion. Judge Wilkins wrote the opinion, in which Chief Judge Wilkinson and Judge King joined.

OPINION

WILKINS, Circuit Judge:

James Ming Hong appeals his convictions and sentence for violating the Federal Water Pollution Control Act, commonly known as the Clean Water Act (CWA). See 33 U.S.C.A. S 1319(c)(1)(A) (West Supp. 2000). The Government cross-appeals, arguing that the district court erred in vacating the fine imposed by the magistrate judge who convicted and sentenced Hong and instructing the magistrate judge to impose a fine of no more than $25,000 each for 12 of Hong's 13 convictions. We conclude that Hong's challenges to his convictions and term of imprisonment are without merit but that the district court erred in vacating the fine initially imposed by the magistrate judge. Accordingly, we affirm in part, vacate in part, and remand for reimposition of the original fine.

I.

In September 1993, Hong acquired a wastewater treatment facility at Second and Maury Streets in Richmond, Virginia from Environmental Restoration Company, Inc. Hong initially operated the facility under the name ERC-USA but subsequently made several changes to the company name, eventually calling it Avion Environmental Group (Avion). Hong also moved the company's operations to a new facility on Stockton Street in Richmond. Hong avoided any formal association with Avion and was not identified as an officer of the company. Nevertheless, he controlled the company's finances and played a substantial role in company operations. For example, Hong negotiated the lease for the Stockton Street facility,¹ participated in the purchase of a wastewater treatment system (discussed further below), reviewed marketing reports, urged Avion employees to make the company successful through the use of various marketing strategies, and controlled the payment of Avion's various expenses. Hong maintained an office at Avion from which he conducted business.

In late 1995, Hong and Robert Kirk, Avion's general manager, began to investigate the possibility of obtaining a carbon-filter treatment system for the Stockton Street facility, which lacked a system to treat wastewater. Hong and Kirk were specifically advised that the treatment system they were considering was designed only as a final step in the process of treating wastewater; it was not intended for use with completely untreated wastewater. Nevertheless, after purchasing the system, Avion used it as the sole means of treating wastewater. The system quickly became clogged. Hong was advised of the problem by Avion employees and inspected the treatment system himself on at least one occasion. Additionally, Bruce Stakeman, who sold the filtration media necessary for the system, advised Hong that the treatment system would not function properly unless it was preceded by an additional filtration mechanism. No additional filtration media were purchased, nor was an additional filtration system installed.

In May 1996, Avion employees began discharging untreated wastewater directly into the Richmond sewer system in violation of Avion's discharge permit. Untreated wastewater was discharged numerous other times during the remainder of 1996. Based on these activities, Hong subsequently was charged by information with 13 counts of negligently violating pretreatment requirements under the CWA. See 33 U.S.C.A. S 1319(c)(1)(A). More specifically, Hong was charged with one count of failing to properly maintain and operate a treatment system and with 12 counts of discharging untreated wastewater. Each count of the information alleged that Hong committed the violations "as a responsible corporate officer." E.g., J.A. 19.

The case was tried before a magistrate judge, who found Hong guilty on all counts. The magistrate judge imposed a fine of $1.3 million--$100,000 for each count of conviction--and sentenced Hong to 36 months imprisonment. In calculating the appropriate term of incarceration, the magistrate judge first determined that Hong was subject to a sentencing range of 51-63 months pursuant to the sentencing guidelines. After departing downward four levels to a guideline range of 33-41 months, the magistrate judge concluded that the appropriate sentence under the guidelines was 36 months imprisonment. Because each of Hong's misdemeanor convictions provided a maximum penalty of one year, the magistrate judge imposed sentences of 12 months on Counts One, Two, and Three to be served consecutively to each other, and sentences of 12 months on the remaining counts to be served concurrently with each other and with the sentences for Counts One, Two, and Three. See United States Sentencing Guidelines Manual S 5G1.2(d) (1998).

Hong appealed to the district court, which affirmed his convictions and term of imprisonment but, based upon its conclusion that the maximum fine for each of Counts Two through Thirteen was $25,000, vacated the fine and remanded for imposition of a fine of no more than $300,000 on those counts. Hong now appeals his convictions and term of imprisonment, and the Government cross-appeals the reduction of the fine.

II.

The provision of the CWA under which Hong was convicted applies to "[a]ny person who" negligently violates pretreatment requirements. 33 U.S.C.A. S 1319(c)(1)(A). The CWA defines "person" generally as "an individual, corporation, partnership, association, State, municipality, commission, or political subdivision of a State, or any interstate body." 33 U.S.C.A. S 1362(5) (West 1986). For purposes of S 1319(c), "person" is further defined to include "any responsible corporate officer." 33 U.S.C.A. S 1319(c)(6) (West Supp. 2000). As noted previously, the information charged Hong with negligently violating pretreatment requirements "as a responsible corporate officer." E.g., J.A. 19. Hong argues that the Government failed to prove that he was a responsible corporate officer. Specifically, he maintains that the Government failed to prove that he was a formally designated corporate officer of Avion and that, even if such proof was not required, the Government failed to prove that he exerted sufficient control over the operations of Avion to be held responsible for the improper discharges. We disagree with both contentions.

The "responsible corporate officer" doctrine was first articulated by the Supreme Court in United States v. Dotterweich, 320 U.S. 277 (1943). See United States v. Iverson, 162 F.3d 1015, 1023 (9th Cir. 1998). In Dotterweich, the president and general manager of a drug company argued that he could not be held criminally liable for the company's violations of the Federal Food, Drug, and Cosmetic Act. See Dotterweich, 320 U.S. at 279. The Supreme Court rejected this contention, holding that all who had "a responsible share" in the criminal conduct could be held accountable for corporate violations of the law. Id. at 284; see id. (explaining that "a corporation may commit an offense and all persons who aid and abet its commission are equally guilty").

The Court revisited the responsible corporate officer doctrine in United States v. Park, 421 U.S. 658 (1975). In elaborating on the concept of a "responsible share" in a violation that the defendant did not personally commit, the Court stated that the Government may satisfy its burden of proof by introducing "evidence sufficient to warrant a finding by the trier of the facts that the defendant had, by reason of his position in the corporation, responsibility and authority either to prevent in the first instance, or promptly to correct, the violation complained of, and that he failed to do so." Park, 421 U.S. at 673-74. The Court explicitly rejected the argument that the defendant must have brought the violation about through some "wrongful action." Id. at 673 (internal quotation marks omitted); see Iverson, 162 F.3d at 1025 ("Under the CWA, a person is a `responsible corporate officer' if the person has authority to exercise control over the corporation's activity that is causing the discharges. There is no requirement that the officer in fact exercise such authority or that the corporation expressly vest a duty in the officer to oversee the activity.").

It is evident from these principles that the Government was not required to prove that Hong was a formally designated corporate officer of Avion. The gravamen of liability as a responsible corporate officer is not one's corporate title or lack thereof; rather, the pertinent question is whether the defendant bore such a relationship to the corporation that it is appropriate to hold him criminally liable for failing to prevent the charged violations of the CWA.²

Regarding that question, Hong contends that the Government failed to prove that his relationship to...