Transcript Alex Shissias

BOARD OF DIRECTORS
DUTY TO INVESTIGATE
John J. Fantry Jr. – The Shissias Law Firm, LLC
Of Counsel
Mens Rea
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The concept of mens rea developed in
England during the latter part of the
common-law era (about the year 1600)
when judges began to hold that an act
alone could not create criminal liability
unless it was accompanied by a guilty
state of mind.
Mens Rea
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A fundamental principle of Criminal Law a crime consists of both a mental and a
physical element. Mens rea, a person's
awareness of the fact that his or her
conduct is criminal, is the mental element,
and actus reus, the act itself, is the
physical element.
“Mens Rea In the CWA” author Brook A.
Andrews – July 2016 SC Lawyer.
BUSINESS JUDGMENT RULE
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'Under the business judgment rule, a
court will not review the business
judgment of a corporate governing
board when it acts within its
authority and it acts without corrupt
motives and in good faith.” Kuznik v.
Bees Ferry Associates, 342 S.C. 579,
538 S.E.2d 15 (S.C. App., 2000)
Courts apply the business judgment
rule to protect corporate directors.
BUSINESS JUDGMENT RULE
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The business judgment rule applies to
intra vires action of corporation, not to
ultra vires acts. Ass'n v. Pelzer, 292 S.C.
343, 356 S.E.2d 411 (Ct.App.1987)
A corporation's actions taken within the
scope of the powers granted it are
considered intra vires acts; acts beyond
the scope of its powers, however, are ultra
vires acts.
BUSINESS JUDGMENT RULE
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S.C. Code Ann. § 33-31 830 (Supp.2006), is the standard
of review for the decisions made by corporate directors and
officers:
(a) A director shall discharge his duties as a director,
including his duties as a member of a committee:
(1) in good faith;
(2) with the care an ordinarily prudent person in a like
position would exercise under similar circumstances; and
(3) in a manner he reasonably believes to be in the best
interests of the corporation and its shareholders
Duty to Investigate
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“[The Board] had a duty to investigate[,] when presented with
evidence which would show or reasonably show that an individual
[co-owner's] neglect in maintaining his or her [u]nit has resulted
in damage to the common elements “ Fisher v. Shipyard Vill.
Council of Co-Owners, Inc. Supreme Court Opinion No. 27603,
January 27, 2016
Employers are presumed to be familiar with standards that affect
their business; therefore, ignorance or even misunderstanding of
the standards does not excuse noncompliance. Havens Steel Co.
v. Occupational Safety and Health Comm'n, 738 F.2d 397, 401
(10th Cir. 1984). As cited in Burriss Electrical, Inc. v. Office of
Occupational Safety and Health, Opinion No. 2008-UP-070 (S.C.
Ct. App. 1/23/2008)
Duty to Investigate
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One cannot be aware of the existence of regulatory
standards, have the means to review and learn them,
consciously fail to do so and then use lack of knowledge as
an excuse. To willfully turn one's head to knowledge and to
understanding the requirements of the law after being
exposed to a similar citation in the past is tantamount to a
conscious act, a conscious disregard, which would meet the
definition of a willful act. One's act of avoiding knowledge
or completely disregarding it might also be labeled as an
intentional and voluntary act. Burriss Electrical, Inc. v.
Office of Occupational Safety and Health, Opinion No. 2008UP-070 (S.C. App. 1/23/2008)
Legal Liability Trends
Alexander G. Shissias. – The Shissias
Law Firm, LLC
Historical Criminal Liability Trends
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The rest of the world- when terrible calamities
happen, and there is loss of life, someone must
be prosecuted.
U.S.- Traditionally, white collar individuals are
prosecuted for traditional offenses- lying,
cheating, stealing
U.S.- Traditionally, no aggressive search to find a
person to prosecute simply because of a calamity
or loss of life
This is changing
The Rise of the Public Welfare
Statute and Liability Trends
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Under “Public Welfare Statutes” can suspend traditional mens rea
without offending due process; defendant is presumed on notice
that their hazardous activities are strictly regulated. U.S. v. Int’l
Minerals & Chem Corp, (1972)
The category of “Public Welfare Statutes” is ever expanding
First extension to environmental law- Hanousek v. U.S. (1999)
Criminal prosecution of supervisor, under mere (civil) negligence
standard, not traditional criminal negligence standard.
Deepwater Horizon- Robert Kaluzka- Supervisor- charged with 1
count of Negligent CWA violation, faced 1 year prosecution if
convicted. He was quickly acquitted by jury.
His co-defendant, Donald Vidrine instead pled guilty to the CWA
charge
Both had also previously faced 22 manslaughter charges related
to the 11 deaths on the rig, which were thrown out of court.
The Rise of the Public Welfare
Statute and Liability Trends
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7/2016- DOJ ENRD memorandum
New enforcement areas, including worker
safety- shifting from OSHA to DOJ ENRD.
Focus on personal prosecution for
environmental crimes
9/2015- “Yates Memo”- focus on personal
prosecution for corporate wrongdoing of
all kinds
Prosecutions in Flint, MI
Traditional Environmental Crimes
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M. Glasgow-lab and water quality supervisor for Flintaltering 2015 lead report. Tampering with evidence. (Pled
guilty to lesser misdemeanor charge in May)
M. Prysby, S. Busch- MDEQ employees– charged with
misconduct in office, (issuance of permit for noncompliant
system) conspiracy to tamper with evidence, tampering
with evidence, a treatment violation of the Michigan Safe
Drinking Water Act and a monitoring violation of the Safe
Drinking Water Act. Instructed staff to manipulate testing
setup, including ordering 5 minute flushing protocol.
All charged for traditional “lying, cheating and stealing”
actions
S.C. Prosecutions
Traditional Environmental Crimes
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Has historically focused on intentional acts
PCA amended in 1990s- clarified standard from “gross”
negligence as opposed to “negligence” (type of negligence
formerly unspecified)
Illegal dumping (Upstate PCB matter)
Fraudulent test data
Asbestos “rip and run” cases
Recent Pb/Cu prosecutions for water company employees
taking samples in office
Search to see whether the crime is limited to “rogue”
employee, or whether it includes management
Voluntary Disclosure Act does not specifically cover criminal
acts, but co-operation with assistance of counsel is advised
Pb/Cu Testing “Games”
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“Knocking out” bad samples with more data (MI,
NH)
Throwing out bad samples (MI)
Cherry Picking parts of system known to have
newer pipe and better water (MI)
Denying knowledge of locations of lead pipe
Refusal to disclose locations of lead pipe on
“security grounds”
Asking employees to take samples from their own
residences (IL, PA)
Misinterpretation (?) of Regulations
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Aerators
Pre-Stagnation “Flushing” vs prestagnation “normal use”
Narrow vs wide mouth jars- affects flow
rate
Instructing sampler to fill slowly
EPA guidance has eliminated all thisLeave aerators on, no flushing, wide
mouth jars, rapid flow rate
A Word on Consent Agreements and
Compliance vs Enforcement
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“Enforcement”- punishment for improper conduct
“Compliance”- instruction and regulatory oversight/focus on
process change and return to compliance
Consent Orders/Agreements can serve both functions
CO/CA with specified compliance date carries with it a
target for a return to compliance in situations where
corrective action takes time
Implicit understanding that instances of related
noncompliance during corrective action period will not be
subject to separate enforcement action
Separate, unrelated instances of noncompliance are not
covered by CO/CA, should not be used to lengthen CO,
trigger penalties formerly suspended, etc
Questions?
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John J. Fantry Jr.
Alexander G. Shissias
The Shissias Law Firm, LLC
1422 Laurel Street
Columbia, S.C. 29201
803-540-3090
[email protected]
[email protected]