U.S. OIL TANKER FIRM TO PAY $10 MILLION AS PART OF LARGEST-EVER PENALTY FOR CONCEALING VESSEL POLLUTION

U.S. Justice Department - June 20, 2007

WASHINGTON—Overseas Shipholding Group Inc. (OSG) was sentenced today in Beaumont, Texas to pay $10 million as part of a $37 million criminal settlement with the United States involving 33 felony counts, 12 oil tankers and ports located in Beaumont, TX, Boston, MA, Portland, ME, San Francisco, CA, and Wilmington, NC, announced Ronald J. Tenpas, Acting Assistant Attorney General for the Justice Department’s Environment & Natural Resources Division, and John L. Ratcliffe, U.S. Attorney for the Eastern District of Texas.

The total $37 million penalty is the largest-ever involving deliberate vessel pollution and was announced on Dec. 19, 2006 in Boston. The charges involving 12 OSG oil tankers range from June 2001 to March 2006 and include violations of the Clean Water Act, as amended by the Oil Pollution Act of 1990, the Act to Prevent Pollution from Ships, conspiracy, false statements, and obstruction of justice. In pleading guilty, OSG admitted that it deliberately falsified the Oil Record Book of various ships, a required log in which all overboard discharges are to be accurately recorded, made discharges at night, and concealed bypass methods used to circumvent required pollution prevention equipment during U.S. port calls so that the Coast Guard would not discover the criminal activity.

The $37 million penalty includes a $27.8 million criminal fine and a $9.2 million organizational community service payment that will fund various environmental projects coast-to-coast. For the part of the case in East Texas, U.S. District Court Judge Thad Heartfield today approved the proposed plea agreement with federal prosecutors and sentenced OSG to pay a total of $7 million ($5.3 million criminal fine and $1.7 million in community service) immediately for making false statements to the Coast Guard. OSG was ordered to pay another $3 million in escrow for additional charges that will bring the total to $10 million in the Eastern District of Texas.

In accordance with the plea agreement, Judge Heartfield sentenced OSG to make $1.7 million in community service payments to the National Park Foundation and National Fish and Wildlife Foundation for the explicit goal of funding environmental projects and initiatives designed to benefit, preserve and restore the environment and ecosystems in the Eastern District of Texas, including the waters along the counties of Jefferson, Orange, Hardin, Liberty, Tyler, Jasper and Newton. Funds were designated for various projects including environmental education to be conducted by the Environmental Learning and Research Center at Lamar University and to further the acquisition of land to be added to the Big Thicket National Preserve by the Conservation Fund. A total of $2 million ($540,000 in East Texas) is designated to fund a satellite surveillance pilot program to monitor ships off the U.S. coast.

Prosecutors credited OSG’s self-disclosures, cooperation and compliance measures taken by proposing fewer charges and reduced criminal fines. OSG is a U.S. corporation headquartered in New York and is one of the largest publicly traded tanker companies in the world. OSG was sentenced to serve a three-year term of probation during which it must implement and follow a stringent environmental compliance program that includes a court-appointed monitor and outside independent auditing of OSG ships trading worldwide.

At the sentencing hearing today, Judge Heartfield termed the regular circumvention of pollution prevention equipment and falsification of ship logs to be “a serious string of events that allowed the company to avoid large scale costs and continue to enjoy substantial pecuniary gain.” The sentence of criminal fines, community service and probation “will promote just punishment and respect for the law,” said Judge Heartfield

The investigation and prosecution was conducted through the combined efforts of the U.S. Coast Guard units in each port, including Port Arthur and Houston, Texas, the Coast Guard Investigative Service, Coast Guard Office of Maritime and International Law, Coast Guard Office of Investigations and Analysis. The case was prosecuted by the Environmental Crimes Section of the U.S. Department of Justice and the U.S. Attorney’s Offices in the affected districts.

See US Justice Department Statement