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United States v. Technic Services,


Defendants (Technic Services, Inc. (TSI) and TSI’s secretary and treasurer Rick Rushing) appealed their convictions and sentences under the Clear Air Act (CAA)[1] and Clean Water Act (CWA).[2] The Ninth Circuit ultimately reversed Rushing’s conviction on Count 8–solicitation of false statements from employees–for lack of evidence. The Ninth Circuit affirmed the remainder of the convictions. With respect to the defendants’ sentences, the Ninth Circuit vacated the enhancement of Rushing’s sentence for abuse-of-trust, but otherwise affirmed the district court’s decision.

TSI, an Alaska corporation, provided asbestos remediation services. TSI won a bid that involved asbestos removal in buildings at a former pulp mill. The work included removal of asbestos insulation on pipes, boilers, and salvageable components. After TSI began work on the mill, the Occupational Health and Safety Administration (OSHA) and the Environmental Protection Agency (EPA) ordered a temporary stop in work after inspections uncovered TSI’s noncompliance with appropriate work standards for asbestos removal. TSI completed the asbestos removal from the powerhouse at the former mill in January 1997. A pulp mill employee, Cle Wade, subsequently certified that the building was clean. However, because of its earlier inspections, EPA was concerned that TSI was washing waste water through the floor drains in the mill buildings and into Silver Bay. In 1998, before TSI demolished the powerhouse and at EPA’s request, Wade reinspected a pipe within the powerhouse and discovered asbestos. The government subsequently began a criminal prosecution against TSI and Rushing.

A jury convicted both defendants on all counts.[3] The court sentenced Rushing to 57 months in jail plus three years of supervised release and a $520,000 fine for CWA violations.[4] TSI was assessed a $600,000 fine, $520,000 for CWA violations, and five years of probation.[5]

The Ninth Circuit first set forth the standards of review. Concerning defendants’ claims of insufficient evidence the standard of review was de novo. Concerning defendants’ claims of a multiplicitous indictment, the standard of review was also de novo. Concerning the defendants’ allegations regarding the district court’s jury instructions and the district court’s decisions regarding evidence, the Ninth Circuit noted that the standard of review was abuse of discretion. Concerning the defendants’ sentencing, the standard of review was abuse of discretion. However, the court reviewed fact finding in sentencing for clear error, and the court’s application of the abuse-of-trust enhancement was reviewed de novo.

The Ninth Circuit first addressed defendants’ argument that Count 1, relating to the work standards for asbestos, was duplicitous. The court noted that Federal Rule of Criminal Procedure 12(b)(2)[6] requires a defendant to raise a duplicity argument before trial, or the argument is waived. Thus, the court found that defendants had waived this argument. With regard to the argument that the evidence was insufficient to support a conviction on Count 1, the Ninth Circuit considered the evidence regarding the regulation of asbestos and visible emissions. The court found that the evidence was sufficient to support a conviction on Count 1 because testimony was provided regarding the concentration of asbestos and testimony and videotape evidence were offered regarding the visible emissions. Finally, with respect to Count 1, the defendants contended that the district erred in its jury instructions. The Ninth Circuit noted that the defendants did not object at trial to the jury instructions at issue. The court conducted a clear error review and considered whether the instructions “prejudiced the defendant’s substantial rights so as to affect seriously the fairness or integrity of the proceedings.”[7] The court found that the instructions did not misstate the law and that the district court did not commit error in giving them to the jury. Thus, the Ninth Circuit affirmed the convictions on
Count 1.

With regard to the criminal convictions for knowingly discharging a pollutant under the CWA[8] (Count 2), the defendants contended that there was a National Pollutant Discharge Elimination System (NPDES) permit in place for the mill, that there was no evidence that pollutants were in the water discharged from the mill, and that the district court abused its discretion by refusing to admit three letters that analyzed the asbestos content of the discharged water. The Ninth Circuit found that the district court did not err with respect to Count 2. The court found that prior to the mill closure there was a NPDES permit to discharge pollutants, but that it was only in effect until the mill closed. Additionally, the court noted that TSI did not have a NPDES permit. Finally, the court explained that a general stormwater permit did not cover the discharge of asbestos that occurred at the mill.

Addressing the defendants’ argument about lack of evidence, the court noted that an EPA representative testified that asbestos was a pollutant under the CWA. In addition, the court considered evidence that defendant Rushing was present at a project meeting where discussions about the floor drains to Silver Bay occurred. Finally, the Ninth Circuit referred to the testimony of TSI employees, which confirmed that asbestos was washed down the drains and into Silver Bay. Thus, the court found that there was sufficient evidence for a jury to conclude that defendants discharged pollutants to the bay. The Ninth Circuit also affirmed the district court’s refusal to admit three letters proffered by the defendants, finding that the defendants had not established a proper foundation for the evidence.

With regard to Count 3, relating to Rushing’s interference with federal proceedings, Rushing claimed that there was insufficient evidence of a federal proceeding. Additionally, he argued that to convict on an obstruction charge, the government must prove that such obstruction occurred in a “proceeding pending before a department or agency of the United States.”[9] The Ninth Circuit found that TSI’s work was investigated by EPA and that “[a]n investigation into a possible violation of the [CAA or CWA], which could lead to a civil or criminal proceeding . . . [was] a kind of proceeding.”[10] The court also noted that Rushing tampered with air monitors that EPA used to determine concentrations of asbestos in the air. Furthermore, the court noted that TSI used the results of the air monitoring to prove its compliance with the federal work product standard. Therefore, the Ninth Circuit found that there was sufficient evidence to support a conviction on obstructing a federal proceeding.

Next, the Ninth Circuit considered Counts 4 through 9, which addressed Rushing’s solicitation of signatures on false statements to EPA. The Ninth Circuit rejected three of Rushing’s four arguments, including: 1) that it was error to admit the statements because the statements were protected under Federal Rule of Evidence 408,[11] 2) that the evidence failed to show Rushing’s role in the statements, and 3) that the district court erred in refusing to consolidate Counts 4-9. The Ninth Circuit rejected Rushing’s first argument because it found that Rushing had stipulated to admission of the statements. In addition, although the evidence concerning the statements was produced during settlement, under Rule 408 the evidence was properly admitted because it was offered for another purpose, “such as proving . . . an effort to obstruct a criminal investigation.”[12] The court noted that the evidence was offered for another purpose in this case because criminal obstruction of an administrative investigation was similar to obstruction of a criminal investigation. Thus, the court rejected Rushing’s first argument.

Concerning Rushing’s second argument, the court noted that testimony of three workers stating that Rushing solicited their signatures to the statements was evidence to show Rushing’s role in the statements. Finally, in rejecting Rushing’s claim that the district court erred in refusing to consolidate Counts 4-9, the Ninth Circuit applied a test for multiplicity. The test was whether each count required proof of an additional fact, which another count does not. In this case, the court explained that proof that Rushing solicited each particular person was required for each count; therefore, the district court was correct in refusing to consolidate the counts.

With regard to Count 8, the court accepted Rushing’s argument that there was insufficient evidence to convict on the obstruction of procuring employee Hildebrand’s signature. The court noted that there was no evidence that Hildebrand signed the statement. There were no witnesses to Hildebrand’s signature and there was no evidence of the circumstances surrounding the signing of the statement if Hildebrand did sign it. Therefore, the court reversed the conviction on Count 8.

The Ninth Circuit then addressed Rushing’s sentencing arguments. Rushing claimed that the district court erred in applying a six-level upward adjustment of his offenses under United States Sentencing Guidelines (U.S.S.G.) section 2Q1.2(b)(1)(A), pertaining to ongoing releases of hazardous substances into the environment that cause contamination.[13] The court referred to the proposition set forth in United States v. Ferrin,[14] which stated that proof of pollutants contaminating the environment was needed for the guideline to apply. In addition, the court cited United States v. Van Loben Sels,[15] which upheld the application of the guideline when a defendant discharged water polluted by benzene into a city sewer system, noting that the court could infer from evidence of the ongoing discharge that the environment was contaminated. In finding that the district court did not err in applying the guideline, the Ninth Circuit noted the evidence presented in the present case. The court considered the lack of containment of the facilities that would allow asbestos to escape into the environment. In addition, the court considered TSI’s regular washing of asbestos down floor drains into Silver Bay. Furthermore, the court considered that workers removed filters in the floor drains allowing contaminated water to drain into the bay. Thus, the court determined that there was sufficient support for the district court’s application of the section 2Q1.2 guideline.

Rushing also argued that the district court erred by adjusting his offense level under U.S.S.G. section 3B1.1(a) based upon his aggravated role. The Ninth Circuit found that because there was testimony by five or more workers stating that Rushing was the leader in perpetrating violations of the CAA, the record supported the district court’s application of U.S.S.G. section 3B1.1(a). This section of the sentencing guidelines authorized the court to increase the defendant’s offense level by four levels “[i]f the defendant was an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive.”[16] Because the court found that Rushing met the first part of the standard, it did not address whether the offense was otherwise extensive.

Finally, the court considered Rushing’s argument that he did not violate a position of trust and therefore the district court erred in increasing his offense level under the abuse-of-trust enhancement set forth in U.S.S.G. § 3B1.3.[17] The Ninth Circuit held that Rushing did not violate a position of public trust. The court explained that a position of trust is established from the point of the victim. Thus, the court concluded that the victim was the public with respect to the CWA and CAA violations and the victim was the federal government and the public with respect to the obstruction violations. Therefore, the issue was whether the defendant was in a position of trust toward the public or the federal government. The court noted that the record did not support a finding that the defendant was in such a position. The defendant was not a government employee. In addition, the court noted that neither having a government issued licensed to conduct asbestos remediation nor being under a government contract triggered the role of a public trust position for the defendant. However, the court noted that if the guidelines were considered ambiguous as to whether Rushing was in a position of public trust, that the rule of lenity would apply and the abuse of public trust enhancement would not apply.

The Ninth Circuit then considered the argument that Rushing violated a position of private trust. The court remanded this part of the case because of ambiguity concerning what the district court would have found in addressing this aspect of the enhancement. The court noted that the private trust is “characterized by professional or managerial discretion”[18] and that it is likely that Rushing’s role, as secretary and treasurer of TSI would qualify. However, the court did not conclude whether Rushing abused a position of private trust.

Finally, the court addressed the defendants’ arguments concerning the fines for their CWA violations. The Ninth Circuit rejected the defendants’ arguments, finding that Count 2 adequately conveyed the length of the violations: 104 days. Therefore, the district court did not err in computing the fines because it assessed the minimum fine of $5,000 per day and multiplied it for the length of the violation. Thus, the fine of $520,000 assessed by the district court was correct.

The dissent disagreed with the majority’s decision regarding the abuse of public trust enhancement, arguing that the guidelines were not ambiguous, and therefore the rule of lenity would not apply. In addition, the dissent did not find that Rushing was not a government employee to be dispositive of the issue. The dissent argued that the court must look to facts of the defendants’ conduct and determine whether a position of public trust could be inferred.

[1] 42 U.S.C. §§ 7401-7671(q) (2000). Specifically, the conviction was under 42 U.S.C. § 7413(c)(1) (2000).

[2] Federal Water Pollution Control Act, 33 U.S.C. §§ 1251-1387 (2000). Specifically, the defendants were convicted for violation of 33 U.S.C. § 1319 (2000).

[3] Both defendants were charged with several violations including the discharge of pollutants into Silver Bay without a permit. United States v. Technic Services, Inc. (TSI), 314 F.3d 1031, 1037 (9th Cir. 2002). Rushing was also charged under 18 U.S.C. § 1505 for “attempting to ‘influence, obstruct, or impede’ inspection and enforcement proceedings . . . by ‘altering, concealing and deactivating’ personal air-monitoring devices worn by workers,” and soliciting false statements from employees that stated that TSI did not discharge pollutants into the bay. Id. (quoting 18 U.S.C. § 1505 (2000)).

[4] Id.

[5] Id.

[6] Fed. R. Crim. P. 12(b)(2).

[7] TSI, 314 F.3d at 1040 (quoting United States v. Savage, 67 F.3d 1435, 1439 (9th Cir. 1995)).

[8] 33 U.S.C. § 1319(c)(2)(A) (2000).

[9] TSI, 314 F.3d at 1044 (quoting United States v. Price, 951 F.2d 1028, 1031 (9th Cir. 1991)).

[10] Id.

[11] “Federal Rule of Evidence 408 does not require the exclusion of evidence produced in the course of settlement negotiations if that evidence is ‘offered for another purpose, such as . . . proving an effort to obstruct a criminal investigation . . .‘” Id. at 1045 (emphasis in original) (quoting Fed. R. Evid. 408).

[12] Id.

[13] U.S. Sentencing Guidelines Manual § 2Q1.2(b)(1)(A), cmt. n.5 (2002).

[14] 994 F.2d 658, 663-64 (9th Cir. 1993).

[15] 198 F.3d 1161, 1165 (9th Cir. 1999).

[16] U.S. Sentencing Guidelines Manual § 3B1.1(a) (2002).

[17] Id. § 3B1.3. “[A] defendant is eligible for a two-point enhancement ‘[i]f the defendant abused a position of public or private trust, or used a special skill, in a manner that significantly facilitated the commission or concealment of the offense.'” TSI, 314 F.3d at 1048 (quoting the U.S. Sentencing Guidelines Manual § 3B1.3 (2002)).

[18] U.S. Sentencing Guidelines Manual § 3B1.3, cmt. n.1 (2002).

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