CFTC ORDERS MORGAN STANLEY TO PAY FINE FOR UNLAWFUL NONCOMPETITIVE TRADES

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION
CFTC Orders Morgan Stanley & Co. LLC to Pay $5 Million Civil Monetary Penalty for Unlawful Noncompetitive Trades
Morgan Stanley had inadequate supervisory systems and controls to detect and deter the unlawful conduct that occurred repeatedly over 18-months
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an order filing and settling charges that, over an 18-month period, Morgan Stanley & Co. LLC (Morgan Stanley), a registered futures commission merchant (FCM), unlawfully executed, processed, and reported numerous off-exchange futures trades to the Chicago Mercantile Exchange (CME) and Chicago Board of Trade (CBOT) as exchanges for related positions (EFRPs). The CFTC order requires Morgan Stanley to pay a $5 million civil monetary penalty and to cease and desist from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged.

According to the CFTC order, because the futures trades were executed noncompetitively and not in accordance with exchange rules governing EFRPs, they constituted “fictitious sales” and resulted in the reporting of non-bona fide prices, in violation of the CEA and CFTC regulations. The order also finds that Morgan Stanley had related supervisory and recordkeeping violations.

The commodity futures trading laws generally require that futures trades be executed on a futures exchange. The laws allow for exceptions to that requirement, such as when the futures trade is part of an EFRP, which is where parties exchange futures contracts for a related cash or over-the-counter (OTC) derivative position, such as an option or a swap. As long as the legal requirements are met, parties are permitted to execute EFRPs away from an exchange but then must report their EFRPs to an exchange after execution.
“The laws requiring that futures trades be executed on an exchange serve important price discovery and transparency principles,” said David Meister, Director of the CFTC’s Division of Enforcement. “As today’s action should demonstrate, when an FCM reports that it properly conducted an off-exchange futures trade as part of an EFRP, that report had better be accurate. In all cases, firms must have appropriate systems and controls in place designed to detect and prevent the conduct described in the order.”
According to the CFTC’s order, from at least April 18, 2008 through October 29, 2009, Morgan Stanley noncompetitively executed numerous futures trades and improperly reported them as EFRPs, since they did not have the required corresponding cash or OTC derivative positions.

The order finds that Morgan Stanley’s supervisory systems and internal controls were not adequate to detect and deter the noncompetitive trading of futures contracts improperly designated as EFRPs. For example, although Morgan Stanley’s Futures Operations department had the responsibility to report EFRPs to the CME and CBOT, that department was not required to verify that the EFRPs had the required corresponding related cash or OTC derivative positions, nor was any other operations department required to do so. The order further finds that Morgan Stanley failed to ensure that its employees involved in the execution, handling and processing of EFRPs understood the requirements for executing bona fide EFRPs. Moreover, the order finds that Morgan Stanley lacked sufficient surveillance systems to identify trades improperly designated as EFRPs. The order also finds that Morgan Stanley failed to designate the trades as EFRPs on all orders, records, and memoranda pertaining to EFRPs, as required.

The order recognizes Morgan Stanley’s significant cooperation in the Division of Enforcement’s investigation of this matter.

In a related proceeding, the CME Group is issuing a notice of disciplinary action against Morgan Stanley today. The CFTC thanks the CME Group for its assistance.
CFTC Division of Enforcement staff members responsible for this case are Brian G. Mulherin, Timothy M. Kirby, Brandon T. Tasco, Gretchen L. Lowe, and Vincent A. McGonagle.

AUTO PARTS COMPANY AND EXECUTIVE PLEAD GUILTY TO PRICE FIXING

FROM:  U.S. DEPARTMENT OF JUSTICE
Wednesday, June 6, 2012
Autoliv Inc. and a Yazaki Corp. Executive Agree to Plead Guilty to Price Fixing on Automobile Parts Installed in U.S. Cars Company Agrees to Pay $14.5 Million Criminal Fine; Executive Agrees to Serve 14 Months in U.S. Prison

WASHINGTON – Stockholm-based Autoliv Inc. has agreed to plead guilty for its role in a conspiracy to fix prices of seatbelts, airbags and steering wheels installed in U.S. cars to one automobile manufacturer and a separate conspiracy to fix prices of seatbelts to another, the Department of Justice announced today.  This is the first case filed relating to occupant safety systems sold to auto manufacturers as part of the department’s ongoing antitrust auto parts investigation.  An executive of Japan-based Yazaki Corporation has also agreed to plead guilty for his role in a separate conspiracy to fix prices of automotive wire harnesses and related products installed in U.S. cars.

Autoliv has agreed to pay a $14.5 million criminal fine and to cooperate with the department’s ongoing investigation.  Kazuhiko Kashimoto, a Yazaki executive, has agreed to serve 14 months in a U.S. prison, to pay a $20,000 criminal fine and to cooperate with the department’s ongoing investigation.  The plea agreements for both Autoliv and Kashimoto are subject to court approval.

“By meeting in secret and agreeing to allocate the supply of various automotive parts, the conspirators colluded to rip off automotive manufacturers in the United States and abroad,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s criminal enforcement program.  “These conspiracies eliminated competition and resulted in inflated prices to automotive manufacturers for parts in cars sold to U.S. consumers.”

According to a two-count felony charge filed today in the U.S. District Court for the Eastern District of Michigan in Detroit, Autoliv engaged in conspiracies to rig bids for, and to fix, stabilize and maintain the prices of seatbelts, airbags and steering wheels sold to automakers in the United States and elsewhere.

According to court documents, Autoliv’s involvement in the conspiracy to fix prices of seatbelts, airbags and steering wheels lasted from at least as early as March 2006 until at least February 2011, and its involvement in the second conspiracy to fix prices of seatbelts lasted from at least as early as May 2008 to at least February 2011.  Autoliv and its co-conspirators carried out the conspiracies by agreeing, during meetings and conversations, to allocate the supply of seatbelts, airbags and steering wheels on a model-by-model basis.  The department said that Autoliv and the co-conspirators sold the occupant safety parts at noncompetitive prices to automakers in the United States and elsewhere.

According to a one-count felony charge also filed today in the U.S. District Court in Detroit, Kashimoto, along with co-conspirators, engaged in a conspiracy to rig bids for, and to fix, stabilize and maintain the prices of automotive wire harnesses and related products sold to a customer in the United States and elsewhere.  Automotive wire harnesses are automotive electrical distribution systems used to direct and control electronic components, wiring and circuit boards.  Related products include automotive electrical wiring, lead wire assemblies, cable bond, automotive wiring connectors, automotive wiring terminals, electronic control units, fuse boxes, relay boxes and junction blocks.

According to court documents, Kashimoto’s involvement in the automotive wire harness conspiracy lasted from on or about January 2000 until at least September 2007.  During the time of the conspiracy, Kashimoto held various management positions in Columbus, Ohio, and Japan for the Honda Sales and Honda Business Unit of Yazaki.  Kashimoto and his co-conspirators carried out the conspiracy by agreeing, during meetings and conversations, to allocate the supply of automotive wire harnesses on a model-by-model basis and to coordinate price adjustments requested by an automobile manufacturer in the United States and elsewhere.  The department said that Kashimoto and the co-conspirators sold automotive wire harnesses at non-competitive prices and engaged in meetings and conversations for the purpose of monitoring and enforcing adherence to the agreed-upon bid-rigging and price-fixing scheme.  In order to keep their conduct secret, Kashimoto and his co-conspirators used code names and met at private residences and remote locations, the department said in court documents.      

Including Autoliv and Kashimoto, six companies and 10 individuals have been charged in the department’s ongoing investigation into price fixing and bid rigging in the auto parts industry.  Furukawa Electric Co. Ltd, DENSO Corporation, Yazaki Corporation and G.S. Electech Inc. pleaded guilty and were sentenced to pay a total of more than $750 million in criminal fines. Fujikura Ltd has agreed to plead guilty.  Additionally, seven of the individuals–Junichi Funo, Hirotsugu Nagata, Tetsuya Ukai, Tsuneaki Hanamura, Ryoji Kawai, Shigeru Ogawa and Hisamitsu Takada–have been sentenced to pay criminal fines and to serve jail sentences ranging from a year and a day to two years each.  Makoto Hattori has agreed to plead guilty and Norihiro Imai has pleaded guilty and awaits sentencing.

Both Autoliv and Kashimoto are charged with price fixing in violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine for individuals and maximum penalty of a $100 million criminal fine for corporations.  The maximum fine for both a company and an individual may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

Today’s prosecution arose from an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the automotive parts industry, which is being conducted by the Antitrust Division’s National Criminal Enforcement Section and the FBI’s Detroit Field Office with the assistance of the FBI headquarters’ International Corruption Unit.

SEVERAL PENNY STOCKS GET WHAMMED WITH BRIBERY AND KICKBACK CHARGES

FROM:  U.S. SECURITIES AND EXCHANG COMMISSION
Washington, D.C., June 4, 2012 — The Securities and Exchange Commission today charged several penny stock companies and their officers as well as three penny stock promoters involved in various stock schemes in which bribes and kickbacks were paid to hype microcap stocks and illegally generate stock sales.

These charges are the latest in a series of cases in which the SEC has worked closely with the U.S. Attorney's Office for the Southern District of Florida and the Federal Bureau of Investigation to uncover penny stock schemes. Prior charges were filed by the SEC against other penny stock violators in October 2010, December 2010, and June 2011.

According to the SEC's complaints filed in U.S. District Court for the Southern District of Florida, some of these latest schemes involved the payment of undisclosed kickbacks to a pension fund manager in exchange for the fund's purchase of restricted shares of stock in the various microcap companies. Other schemes involved an undisclosed bribe that was to be paid to a stockbroker who agreed to purchase a microcap company's stock in the open market for his customers' discretionary accounts.

"The company officers and promoters in many of these schemes disguised their kickbacks as payments to phony consulting companies that performed no actual work," said Eric I. Bustillo, Director of the SEC's Miami Regional Office. "These illegal activities were fully intended to artificially inflate the stock volume and prices of these penny stock companies to the detriment of investors."

The SEC's complaints allege the following penny stock companies and individuals perpetrated the various stock schemes:
Angel Acquisition Corp. (AGEL) based in Carson City, Nev., and Carlsbad, Calif. (now known as Biogeron Inc.)
President and CFO Harold Steven Bonenberger of Carlsbad.


Clean Coal Technologies Inc. (CCTC) based in New York City.
President and CEO Douglas D. Hague of Boca Raton, Fla.


Cotton & Western Mining Inc. (CWRN) based in Humble, Texas.
President and CEO Robert L. Cotton of Houston.


Delivery Technology Solutions Inc. (DTSL) based in Boca Raton.
CEO and Chairman Ryan F. Coblin of Boca Raton.


Optimized Transportation Management Inc. (OPTZ) based in San Antonio
CEO Kevin P. Brennan of Pittsburgh.
OPTZ stock promoter Marc S. Page of Tiburon, Calif.
OPTZ stock promoter Donald G. Huggins of St. Petersburg, Fla.


Sure Trace Security Corp. (SSTY) based in Philadelphia.
Chairman and former president Michael M. Cimino of Philadelphia.
President Joseph J. Repko of Hobe Sound, Fla.


US Farms Inc. (USFM) based in San Diego and Fallbrook, Calif.
President and CEO Yan K. Skwara of San Diego.


Wound Management Technologies Inc. (WNDM) based in Fort Worth, Texas, and Fort Lauderdale, Fla.
President, CEO, and Chairman Scott Haire of Fort Worth and Coral Springs, Fla.


The SEC additionally charged a stock promoter involved in pumping the stock of KCM Holdings Corp., a penny stock company charged in the SEC's series of penny stock enforcement actions in June 2011. The SEC alleges that Matthew A. Connor, who lives in Amherst, Va., participated in a fraudulent scheme to hype KCM Holding's stock.
The U.S. Attorney's Office today announced criminal charges against the same individuals facing SEC civil charges.

The SEC's complaints allege that these companies, officers, and stock promoters violated Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking financial penalties, disgorgement of ill-gotten gains plus prejudgment interest, and permanent injunctions against all the defendants. The SEC also seeks penny stock bars against each of the officers and promoters as well as officer-and-director bars against Bonenberger, Brennan, Cimino, Hague, Haire, and Skwara.

The SEC's investigation was conducted in the Miami Regional Office by senior counsels Trisha D. Sindler and Michelle I. Bougdanos under the supervision of Assistant Regional Director Chedly C. Dumornay. The SEC's litigation will be led by C. Ian Anderson, Edward D. McCutcheon, and James M. Carlson. The SEC acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Southern District of Florida and the FBI's Miami Division in these investigations.

MINNEAPOLIS ARSENIC CONTAMINATED SOIL CLEANUP COMPLETED

FROM:  U.S. ENVIRONMENTAL PROTECTION AGENCY
EPA Completes Cleanup of Over 600 South Minneapolis Homes Ahead of Schedule
Chicago (June 5, 2012) -- U.S. Environmental Protection Agency Regional Administrator Susan Hedman today announced that the Agency has finished its cleanup of contaminated soil in a South Minneapolis neighborhood a full year ahead of schedule. Hedman was joined by officials from the Minnesota Department of Agriculture and the city of Minneapolis at an event today for neighborhood residents at the East Phillips Community Center.  

The EPA used $20 million in American Recovery and Reinvestment Act funding, along with other funds, to clean up more than 600 properties. EPA removed more than 50,000 tons of arsenic-contaminated soil, filled the yards with clean soil and replanted plants and grass. The entire cost of the Superfund cleanup was $28 million.

 “EPA is pleased that the people of South Minneapolis can now enjoy their yards safely and without fear of their children being exposed to arsenic," said Hedman. “The infusion of Recovery Act funding allowed EPA to make more yards safe for homeowners, renters and residents of all ages."

EPA began its Superfund cleanup in 2004 and stepped up the process in 2009 when ARRA funding was provided.

“Making Minneapolis a safe place to call home is one of our most important jobs, and that includes making sure the environment we live in is a safe place for kids, families, and everyone,” said Mayor R.T. Rybak. “A cleanup like this is no small project, which is why we’re grateful for the EPA’s long-term partnership and commitment to this cleanup, as well as to the assistance from the Obama Administration’s Recovery Act. Minneapolis is a safer place to live thanks to this important work.”

“Working together, we completed a massive cleanup and we got it right for the residents of the neighborhood,” said MDA Commissioner Dave Fredrickson. “I want to thank everyone who made it happen, especially the residents and community leaders for their patience and assistance.”

The South Minneapolis Superfund site encompasses several neighborhoods near 2016 28th St. E., the location of the former CMC Heartland Partners Lite Yard, where a pesticide containing arsenic was produced.  Contaminated material from an open-air conveyor belt railcar-unloading and product-mixing operation is believed to have been wind-blown into surrounding neighborhoods. Long-term exposure to arsenic has been linked to cancer.

Reflecting the area’s diverse makeup, EPA printed fact sheets in Spanish, Hmong, Vietnamese, and Somali as well as English, and deployed bilingual staff and translators to the neighborhood. Residents – who paid nothing for the cleanup – were able to continue living in their homes throughout the project. Removing contamination also enhances the resale value of these properties.

EPA’s Superfund program managed the cleanup. The federal Superfund program was created in 1980 to clean up uncontrolled hazardous waste sites that pose unacceptable risks to human health and the environment.
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DEFENSE CONTRACTOR PAYS MILLIONS TO RESOLVE FALSE CLAIMS ACT LAWSUIT

FROM:  U.S. DEPARTMENT OF JUSTICE
Friday, June 1, 2012
Virginia-based Defense Contractor Calnet to Pay $18.1 Million to Resolve False Claims Act Lawsuit
Calnet Inc. has agreed to pay the United States $18.1 million to resolve allegations that the company submitted false claims to the Department of Defense, the Justice Department announced today.  Calnet Inc., an intelligence analysis, information technology and language services company, is headquartered in Reston, Virginia.

The settlement with Calnet relates to three contracts under which the company supported the United States? war effort by providing translation and linguist services at Guantanamo Bay and several other facilities beginning in 2005.  Calnet was a subcontractor on one of the contracts, and the prime contractor on the other two contracts.  The United States alleged that Calnet overstated its provisional indirect or overhead rates on each of these contracts and thus submitted inflated claims for payment to the United States.

?Contractors are expected to comply with their statutory obligations and act in good faith when dealing with the United States government,? said Stuart F. Delery, Acting Assistant Attorney General for the Department of Justice?s Civil Division.  ?We will not tolerate false statements and failure to disclose information that is important to the government?s contracting processes.?

?We?re using every tool available to assure the integrity of government contracting,? said U.S. Attorney MacBride. ?This is one of several cases we have pursued to protect against procurement fraud in the Eastern District of Virginia.?

The settlement with Calnet resolves a lawsuit filed in the U.S. District Court for the Eastern District of Virginia under the False Claims Act by former Calnet employee, Kimthy Chao.  Under the False Claims Act, private citizens can bring suit on behalf of the United States and share in any recovery obtained by the government.  Mr. Chao?s share of the Calnet settlement will be $2,669,724.

This settlement was the result of a coordinated effort by the Department of Justice, Civil Division, Commercial Litigation Branch; the U.S. Attorney?s Office for the Eastern District of Virginia; the Defense Criminal Investigative Service and the Defense Contract Audit Agency.  The claims settled by this agreement are allegations only and there has been no determination of liability.

SUNTRUST MORTGAGE AND JUSTICE REACH SETTLEMENT ON ALLEGED LENDING DISCRIMINATION

FROM:  U.S. DEPARTMENT OF JUSTICE
Thursday, May 31, 2012
Justice Department Reaches $21 Million Settlement to Resolve Allegations of Lending Discrimination by Suntrust Mortgage Borrowers Were Charged Higher Fees Based on Their Race or National Origin in 2005-2009 Before the Company Implemented New Policies
WASHINGTON – SunTrust Mortgage Inc., the mortgage lending subsidiary of the nation’s 11th-largest commercial bank, has agreed to pay $21 million to resolve a lawsuit by the Department of Justice that it engaged in a pattern or practice of discrimination that increased loan prices for many of the qualified African-American and Hispanic borrowers who obtained loans between 2005 and 2009 through SunTrust Mortgage’s regional retail offices and national network of mortgage brokers.
The settlement also requires SunTrust Mortgage to continue using policies and practices it adopted to prevent discrimination following the time period at issue in the lawsuit.

The settlement, which is subject to court approval, was filed today in federal court in Richmond, Va., where SunTrust Mortgage is headquartered.  The settlement comes after a two-and-a-half-year investigation by the Department of Justice, which included reviewing internal company documents and data on more than 850,000 residential mortgage loans SunTrust Mortgage originated between 2005 and 2009.  SunTrust Mortgage cooperated fully with the Justice Department’s investigation into its lending practices and agreed to settle this matter without contested litigation.

“Today’s settlement demonstrates that the Department of Justice takes seriously its responsibility to investigate mortgage lending practices during the mortgage boom years and, when the evidence shows the law was broken, to obtain compensation for victims of illegal conduct,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division.  “We will, however, work constructively with responsible lenders like SunTrust Mortgage that are willing to take the necessary steps to ensure equal credit opportunity for all borrowers.  We commend SunTrust Mortgage for taking action to implement strong fair lending policies even before they knew the full results of our investigation.”

The settlement was filed in conjunction with the department’s complaint that alleges SunTrust Mortgage violated the Fair Housing Act and Equal Credit Opportunity Act by charging more than 20,000 African-American and Hispanic borrowers higher fees and interest rates than non-Hispanic white borrowers, not based on borrower risk, but because of their race or national origin.  Specifically, the allegations involve loans made to African-American borrowers between 2005 and 2008 through the more than 200 retail offices directly operated by SunTrust Mortgage in the Southeastern and Mid-Atlantic portions of the United States.  The allegations also involve loans made to African-American and Hispanic borrowers between 2005 and 2009 through SunTrust Mortgage’s national network of mortgage brokers.

“Racial and ethnic bias have no place in the lending market,” said Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia. “We are pleased that SunTrust Mortgage is taking steps to compensate the victims and to ensure fair and equal access to credit in the future.”

SunTrust Mortgage’s business practice during the time periods covered by the lawsuit allowed its loan officers and mortgage brokers to vary a loan’s interest rate and other fees from the price it set based on the borrower’s objective credit-related factors.  This subjective and unguided pricing discretion resulted in African-American and Hispanic borrowers paying more.

Prior to the settlement, SunTrust Mortgage had implemented policies that substantially reduced the discretion of its loan officers and mortgage brokers to vary a loan’s interest rate and other fees from the price it set based on the borrower’s objective credit-related factors, and that required the reasons for variations to be documented and reviewed by a supervisor.  Those policies, operating in concert with rules imposed by the Federal Reserve in April 2011 and incorporated into the settlement, restrict compensating loan officers and mortgage brokers based on the terms or conditions of a particular loan.  Today’s settlement requires SunTrust Mortgage to keep its improved policies in place for at least the next three years, as well as continuing to monitor its lending for signs of discrimination and providing monitoring reports to the United States.

The department’s investigation into SunTrust Mortgage’s lending practices began after a referral by the Board of Governors of the Federal Reserve to the Justice Department’s Civil Rights Division in December 2009 for potential patterns or practices of discrimination.  SunTrust Mortgage’s parent company, Atlanta-based SunTrust Bank, is a member of the Federal Reserve System, and one of the nation’s largest regional banks with $178 billion in assets and more than 1,600 branches in seven states and the District of Columbia.

“Racial or other illegal discrimination has no place in our credit markets,” said Federal Reserve Board Governor Elizabeth A. Duke.  “We are pleased that this settlement is designed to ensure fair access to credit.”

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF).  President Obama established the interagency FFETF to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.   The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.   The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

The proceeds of the settlement will be used to compensate the victims of SunTrust Mortgage’s discrimination, who were located in 34 states and the District of Columbia when the discrimination occurred.  The proposed settlement provides for an independent administrator to contact and distribute payments of compensation at no cost to borrowers whom the Justice Department identifies as victims of SunTrust Mortgage’s discrimination.  Borrowers who are eligible for compensation from the settlement will be contacted by the administrator.

PLASTICS PRODUCER AGREES TO REDUCE HARMFUL AIR POLLUTION

FROM:  U.S. DEPARTMENT OF JUSTICE
Thursday, May 31, 2012
Plastics Producer SABIC Agrees to Reduce Harmful Air Pollution from Leaking Equipment to Resolve Clean Air Act Violations in Indiana and Alabama
SABIC Innovative Plastics US LLC, and its subsidiary, SABIC Innovative Plastics Mt. Vernon LLC, have agreed to pay an approximately $1 million civil penalty and improve leak detection and t (CAA) at chemical marepair practices to settle alleged violations of the Clean Air Acnufacturing facilities in Mt. Vernon, Ind., and Burkville, Ala., the U.S. Department of Justice and the U.S. Environmental Protection Agency (EPA) announced today. Emissions of hazardous air pollutants (HAPs) from leaking equipment may cause serious health effects including cancer, reproductive issues and birth defects.

“This compliance program continues our efforts to control fugitive emissions and will require SABIC to upgrade its monitoring and maintenance practices to help prevent future violations,” said Robert G. Dreher, Principal Deputy Assistant Attorney General for the Environment and Natural Resources Division at the Department of Justice.

“Communities near large industrial facilities depend on EPA to protect public health and the environment by enforcing our nation’s environmental laws,” said Cynthia Giles, Assistant Administrator for EPA’s Office of Enforcement and Compliance Assurance. “Today’s settlement with SABIC will reduce the potential for future violations and protect residents in Indiana and Alabama from emissions of hazardous air pollutants.”

In addition to paying a penalty, SABIC will implement a comprehensive program to reduce emissions of HAPs from leaking equipment such as valves and pumps. The emissions, known as “fugitive” emissions because they are not discharged from a stack but rather leak directly from equipment, are generally controlled through work practices, like monitoring and repairing leaks. The settlement requires SABIC to implement enhanced work practices, including more frequent leak monitoring, better repair practices, and innovative new efforts designed to prevent leaks.

The program also requires SABIC to replace valves with new “low emissions” valves or valve packing material, designed to significantly reduce the likelihood of future leaks of HAPs. In response to EPA’s inspection of the Mt. Vernon facility, SABIC engineered HAP emission controls for hundreds of drains and trenches and the settlement further requires SABIC to control similar emissions from an oil/water separator. The estimated cost of these controls is almost $4 million. SABIC will also invest an additional $1.3 million to control HAP emissions from certain process vents as a supplemental environmental project. The compliance program and engineered controls will reduce HAP emissions by up to 136.7 tons per year.

According to the 15-count complaint, filed simultaneously with the settlement today in the Southern District of Indiana, SABIC allegedly violated CAA requirements to monitor and repair leaking equipment, demonstrate compliance with regulations applicable to chemical plants, and report known violations to EPA.