There's a reason you go to trial. Sometimes it's the only way to cut through intense publicity, public outrage and even prosecutorial excess to determine whether a crime was actually committed.
The facts stacked against W.R. Grace & Co. in one of the largest criminal environmental cases ever were certainly compelling. The company's vermiculite mine in Libby, Mont., contaminated the town with asbestos over the course of decades. As a result, more than 200 townspeople have died of illnesses related to the contamination, and it has sickened as many as 1,200. The EPA has called it the worst case of communitywide exposure to a toxic substance in U.S. history.
"There's certainly a tragedy of facts here, but that doesn't in and of itself equal a successful criminal prosecution," says Jim O'Toole, a Buchanan Ingersoll environmental litigator who followed the high-profile Grace trial but is not connected to it. "You could see how the government, in bringing this case, would be persuaded by the scope of the injury. But there were some fundamental flaws with their case."
Those flaws proved insurmountable. In May, Grace and three of its executives were acquitted on all criminal charges. The government dropped its case against two other executives before the case even went to the jury. A trial for the remaining indicted employee is pending.
On one hand, the verdict represents a vindication for Grace, which has been in bankruptcy for more than eight years as a result of its asbestos liabilities. On the other, it illustrates the government's determination to criminally prosecute environmental violations, a stance experts do not expect to change.
A Cracked Case
Vermiculite is a strange mineral. It puffs up like popcorn when heated, making it ideal for use as insulation, fireproofing and even as a packing material. But the same geological processes that create vermiculite also produce asbestos under certain conditions, and the vermiculite deposits near Libby are laced with the carcinogen.
The Libby mine dates back to 1913. Grace bought it in 1963 and produced vermiculite products there until 1982. It closed the mine in 1990. A 1999 Seattle Post-Intelligencer report on asbestos-related disease in the town brought national media attention to Libby, stoking the EPA's involvement and leading ultimately to criminal charges in 2005.
"This was not a case involving a sudden catastrophic release," says David Bernick, a Kirkland & Ellis partner and lead trial counsel for Grace. "The conduct at issue took place over a long period of time, and it involved routine operations of the mine during a period when there were standards in place as to what constituted appropriate levels of exposure. The essence of the criminal charges was that the company, even though it
was operating in accordance with those standards, nonetheless was culpable for an effort to defraud the government, to mislead it about the hazardous nature of its operations and to endanger the community."
The prosecutors' case faced challenges almost immediately.
"They had difficulty getting certain evidence admitted that would demonstrate that Grace had knowingly contaminated the site," says O'Toole. "They had real statute of limitations issues related to the Clean Air Act. They also had difficulty with the fact that Grace had taken steps since it had acquired the site to evaluate and mitigate the effects of the mine. It wasn't as if you had total abandonment of responsibility."
The statute of limitations issues led to early dismissals for two of the executives, including Robert Walsh, who once headed the Grace division that ran the Libby mine.
"One of the holes in the case against him was the fact that he left the construction products division in 1989," says Stephen Spivack, a Bradley Arant partner who represented Walsh. "The Clean Air Act did not go into effect until Nov. 15, 1990, yet he was charged with conspiring to violate that act."
Coup de Gr?ce
The deciding blow came with Judge Donald Molloy's blistering jury instructions concerning the prosecution's failure to disclose the depth and duration of its relationship with a key witness, Robert Locke.
"The government took it on the chin with Mr. Locke," O'Toole says. "When a judge says that your main witness can't be trusted, that can't help your cause. This case was difficult when it started, but became all but impossible when it came to light that the government had failed to adequately disclose its relations with the star witness."
The verdict came as a great relief, says Grace General Counsel Mark Shelnitz. The company has already paid out $250 million in asbestos remediation claims, but criminal penalties could have been much higher.
"The government contended it could seek fines up to a billion dollars," Shelnitz says. "The individuals of course were facing loss of liberty. We took that very seriously. Violation of the Clean Air Act would have subjected them to very long prison terms."
Shelnitz believes media coverage--the Post-Intelligencer report called out the EPA for its failure to take earlier action on the Libby disaster--led the government to overreach in the case.
"The media created an alarm at EPA to get something done quickly," he says. "They were initially focused on the remediation effort, but while that was happening, certain people at EPA were looking at this matter from a criminal standpoint. They were looking to expand the provisions of the Clean Air Act, and were looking to this as a test case."
Bernick says the DOJ then picked up the EPA's storyline without testing it.
"It was the same story, the same script, but with a new title," he says. "What used to be a basis for cleanup, where the EPA has broad powers, was now being used as a basis for charging criminality. They took what they thought was an ideal set of circumstances to advance an ambitious agenda, and they didn't really do the diligence that was required."
The Bigger Picture
A spokesman for the Justice Department's Environmental Crimes Section (ECS) declined to comment for this article.
Steven Solow, a Hunton & Williams partner who led the ECS from 1997 to 2000, refrained from direct analysis of the Grace case, but said it would be a mistake to draw too many conclusions from a single prosecution.
"It's important that in-house counsel not be distracted by the result; it's just one case," he says.
Two or three times each week, Solow says, companies' employees around the country are prosecuted and convicted of environmental crimes.
"This case is part of an overall effort that the government has undertaken to look for ways to prosecute what they have called worker endangerment cases," he says. "You can expect, if not identical cases, other cases that raise the issue of endangerment and seek to use environmental criminal laws as a sanction to bring cases by the Department
Solow is not alone in his perspective.
"I don't believe you're going to see the Justice Department or the EPA shy away from criminal prosecutions in the future simply because of some of these missteps in the past," O'Toole says. "The agency's proposed budget is going to have at least a $600 million increase, with $32 million for enforcement alone. They're going to hire 30-plus additional positions just to handle enforcement and investigation: When you have a robust budget and a focused agency, and a commitment supported by the administration, you can't help but think there's going to be greater scrutiny and enforcement across all environmental programs."