WILMINGTON, NC – Overseas Shipholding Group, Inc. (OSG), one of the world’s largest tanker companies, faced significant legal repercussions in 2007 following a multi-district investigation revealing a systemic pattern of deliberate marine pollution and falsified records. While the case spanned six U.S. ports, including investigations in Boston, Los Angeles, and San Francisco, the North Carolina portion of the probe uncovered illegal discharges of oily waste from the M/T Neptune off the coast of the state.
The Environmental Protection Agency (EPA) and the U.S. Coast Guard initiated the investigation in 2006 after receiving credible information regarding intentional pollution practices aboard OSG vessels. Evidence revealed that crew members, under the direction of senior engineers, were actively circumventing pollution control equipment and falsifying official logs to conceal the illegal dumping of oil-contaminated waste into U.S. waters. Specifically, in the North Carolina case, OSG was found to have discharged approximately 2,640 gallons of oily waste and sludge from the M/T Neptune.
The scheme involved manipulating the Oil Water Separator (OWS) system, a crucial component for preventing oil discharges. Crewmen were instructed to bypass the system or trick the Oil Content Meter – designed to detect oil exceeding the 15 parts per million limit established by the MARPOL Protocol – using techniques like flushing the sensor with fresh water. Internal memos and reports, including a “Private and Confidential” memo from an outside auditor detailing observed oil leaks, were discounted by OSG senior management despite clear evidence of ongoing violations.
The broader investigation uncovered similar practices across a fleet of 12 oil tankers, including the deliberate discharge of sludge at night and the concealment of bypass equipment during port inspections. Prosecutors highlighted a disturbing pattern of senior management failing to address repeated allegations of pollution, even after internal warnings and the commencement of the government’s investigation. The motive, according to court documents, was purely financial – saving the costs associated with proper waste disposal and maintaining operational efficiency.
Penalties and Resolution
In December 2006, OSG pleaded guilty to 33 felony counts, including violations of MARPOL Protocol (specifically 33 U.S.C. 1908(a)), making false statements (18 U.S.C. 1001), and related charges under Title 18 of the U.S. Criminal Code. The company ultimately agreed to pay a record $37 million in criminal fines and community service payments. The sentencing, finalized on March 21, 2007, included a three-year probation period, a $3,200 special assessment fee, $2.3 million in community service, and $7.7 million in fines. Notably, $1,050,000 of the fine was awarded to whistleblower crew members who came forward with evidence of the illegal activity.
Key Facts
- Defendant: Overseas Shipholding Group, Inc.
- Location: North Carolina coast (M/T Neptune) and multiple other U.S. ports
- Year: 2007
- Laws Violated: MARPOL Protocol (33 U.S.C. 1908(a)), 18 U.S.C. 1001 (False Statements), Title 18 U.S. Criminal Code
- Pollution Method: Bypassing oil water separators, falsifying records, discharging oily waste and sludge.
- Penalty: $37 million in fines and community service, 3 years probation, $1.05M whistleblower awards.
- Discharge Amount (NC): Approximately 2,640 gallons of oily waste and sludge from the M/T Neptune.
The case serves as a stark reminder of the serious consequences of environmental crime and the importance of robust oversight within the maritime industry. The Coast Guard emphasized a commitment to achieving industry-wide compliance with pollution prevention rules, stating that intentional illegal discharges would no longer be treated as a mere “cost of doing business.”
Source: EPA ECHO Enforcement Case Database
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