“Moving Energy with Integrity:” Whistleblowers Keep the Overseas Shipholding Group in Compliance with Pollution Laws and its Own Company Motto
By Krishna Patel, krishnapmail at gmail.com

“Whistleblowers” are individuals who report misconduct within their company. They protect the public interest because the information from whistleblowers is often the only means by which a particular violation can be brought to light and corrective action taken.

Many employees have faced harassment and discrimination for their actions to bring violations to the attention of their company or to outside regulators. It is unknown how many violations have escaped detection because witnesses were afraid to come forward, but one can hope that the recent treatment afforded whistleblowers in the largest deliberate vessel pollution settlement ever could signal a new trend in rewarding the courage and determination of individuals who report illegal activities.

Overseas Shipholding Group, Inc. (OSG) is a U.S.-based shipping company and the second largest publicly traded tanker company in the world. OSG’s fleet of 104 vessels is engaged in the international transport of crude oil and petroleum products. In March 2007, a federal court in the United States sentenced OSG to pay a $37 million penalty after 12 whistleblowers exposed the company’s “systematic, repetitive, and longstanding” practices of illegally discharging vessel sludge into the sea.

OSG was found guilty of multiple violations between 2001-2006 of the Clean Water Act, as amended by the Oil Pollution Act of 1990 and the Act to Prevent Pollution from Ships, along with conspiracy, false statements, and obstruction of justice.

The acts of engineers, fitters, and oilers on the 12 different oil tankers played a vital role in the successful prosecution. The 12 crew members risked reprisal and firing, especially in cases where they had to report against their superiors, but persisted in efforts to keep OSG environmentally responsible by reporting bad practices to OSG corporate headquarters through clandestine emails and letters. Where this approach failed, the workers alerted the U.S. Coast Guard and turned over evidence to expose false oil record books, night discharges, bypass equipment, and tampering with pollution monitoring devices. One fitter, of the M/T Uranus, made a bypass pipe only after being threatened with dismissal. His indignation at discharges made near New England found outlet in the secret journal he hid within another book and used to record the dates of violations. An engineer on the M/T Overseas Shirley estimated that as many as 40,600 gallons of illegal pollutants had been released by that ship’s chief engineer alone.

The Act to Prevent Pollution from Ships created a whistleblower award of up to half of a criminal fine where information leads to a conviction. OSG’s $37 million penalty consists of a $27.8 million criminal fine that will be distributed to affected areas in the U.S. cities of Boston, Portland, Los Angeles, San Francisco, and Wilmington, and the state of Maine. This penalty also provides the basis for the $437,500 that will be awarded to each of the 12 crew members.

Another $9.2 million in charges will be used to fund marine environment projects. OSG is also awaiting the final results of a January 2007 case for pollution charges in Beaumont, Texas, to which the company has agreed to pay $10 million. OSG’s penalty is augmented by a three-year probation during which it will be subject to a court-appointed monitor and outside auditors.

Whistleblower legislation is vital for the recognition it gives to the risks faced by whistleblowers as they venture to curb illegal activity. The societal motivation needed for whistleblower legislation, without the spurring effect of tragedies like the murder of a whistleblower, could well be the biggest obstacle to laws that codify society’s need for and appreciation of the acts of whistleblowers. The Clean Water Act was the first U.S. environmental act to include a provision protecting whistleblowing employees. 33 U.S.C. §1367. It prohibits discrimination against whistleblowers, provides for investigation and review of discrimination claims, and levies the costs of investigative proceedings against the violator. The government expenditure towards similar provisions or towards an award clause like 33 U.S.C. §1908(a) from the Act to Prevent Pollution from Ships is the time and expense needed to enact the legislation and establish the infrastructural support needed for enforcement.

The whistleblower award is presumably paid as part of OSG’s settlement since the award was motioned for by the prosecution and approved by the court. Those who would like to enact similar incentives for whistleblowers, but who are apprehensive that large environmental settlements and whistleblower awards will devastate businesses, can find solace in OSG’s $992.8 million in revenues for 2006 alone versus the $37 million it paid for five years of polluting.

The successful application of the §1908(a) provision could motivate other witnesses of illegal dumping to act. The conviction requirement for information to garner a reward should help deter false claims. The risks to an individual’s job and even his/her life when he/she chooses to report violations is an important limitation on valid claims. A culture of viewing workers who report information and push for corrective action as providing a valuable service to society, rather than engaging in acts to be punished and ostracized, is ripe for growth. The enactment of whistleblower provisions and compliance with such provisions through examples like court approval of the OSG whistleblower awards are firm steps in the promotion of such an atmosphere.