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Cargo Ship Owner Fined $1.75 Million In 'Magic Pipe' Case

Photo provided by U.S. Coast Guard

The Balsa-62's former chief engineers pleaded guilty to federal charges, admitting they rigged the ship to bypass pollution controls and discharged the sludge into the ocean.

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By ELAINE SILVESTRINI | The Tampa Tribune

Published: February 24, 2009

Updated: 02/24/2009 01:50 pm

TAMPA - The Japan-based operator of a cargo vessel that dumped oily sludge into the Gulf of Mexico and Atlantic Ocean was sentenced today to three years of probation and fined $1.75 million.

Hiong Guan Navegacion Japan Co. Ltd. pleaded guilty in November to federal charges of conspiracy and to falsifying and failing to properly maintain records meant to ensure environmental compliance.

"We're very sorry about that and we accept all responsibility," company representative Mitsumoto Odagiri told U.S. District Judge Steven D. Merryday. "We will work harder to make sure this doesn't happen again. I just want to say, we apologize."

As part of the probation, the company agreed to an environmental compliance plan in which its 24 ships will be audited by independent inspectors. The plan also involves court-appointed monitors.

The plan "does change the culture of the company, from passively letting things occur to proactively working," defense attorney Michael Chalos. "I think we're going to have a very compliant company going forward."

U.S. Attorney A. Brian Albritton said his office, the Department of Justice and the Coast Guard are doing their best, through the compliance program, to prevent this from happening again.

"We certainly wanted to send a message that this is just not acceptable in our waters or any waters for that matter," Albritton said.

Assistant U.S. Attorney Cherie Krigsman said she will notify the court within the next two weeks of as many as three whistleblowers who should receive a portion of the financial penalty as reward for alerting authorities to the pollution. The whistleblowers are in the Philippines, she said.

In a sentencing memorandum, prosecutors said the company has agreed to pay $400,000 of the $1.75 million fine to a charity named by the government. The prosecution recommended that charity be the National Fish and Wildlife Foundation. The prosecution also recommended that the company not be allowed to claim a tax deduction for the donation or claim it was a voluntary contribution.

Prosecutors say chief engineers falsified an oil record book kept aboard the Balsa-62, a 9,000-gross-ton bulk cargo vessel registered under the flag of Panama. Federal and international law requires ships pass the sludge through filtering equipment aboard the vessel or burn it in the ship's incinerator.

Federal law also requires ships to record every disposal and to make those records available for the Coast Guard when the vessel is within U.S. waters, prosecutors said.

On Oct. 14, the Balsa-62's former chief engineers pleaded guilty to federal charges, admitting they rigged the ship to bypass pollution controls and discharged the sludge into the ocean.

From June 2007 to February 2008, Francisco Bagatela was the ship's chief engineer. He and other senior engineering officers and crew installed a "magic pipe" to bypass the pollution prevention equipment, according to a plea agreement Bagatela signed.

The pipe consisted of a length of plastic hose with flanges at either end and was used to transfer oily sludge and mixtures from a holding tank through a valve in the side of the ship and overboard.

Robert Rancho replaced Bagatela as chief engineer in February 2008 and continued bypassing pollution controls, prosecutors said.

Bagatela was sentenced to three years of probation and ordered to pay a $1,500 fine; Rancho was sentenced to a year of probation and ordered to pay a $1,000 fine.

The sludge was dumped at night while the vessel was underway, authorities said.

The ship docked in the Port of Tampa on May 31, according to court documents.

Reporter Elaine Silvestrini can be reached at (813) 259-7837 or esilvestrini@tampatrib.com.

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