Long Beach, CA – United Industries LLC, a subsidiary of Caterpillar Inc., was sentenced following a guilty plea to illegally dumping railcar parts into the Port of Long Beach to conceal a multi-million dollar fraud scheme. The company admitted to knowingly conducting inadequate inspections and performing unnecessary repairs on railcars between 2008 and 2014, defrauding railcar operators out of at least $5 million.
According to court documents, United Industries employees routinely replaced functioning railcar parts – dubbed “green parts” – and fabricated repairs without proper inspection. These unnecessary services were then billed to victim companies, including TTX Company, Pacer International, and Greenbrier Company. To cover their tracks and avoid detection of the fraudulent activity, employees disposed of the removed “green parts” by throwing them directly into the navigable waters of the Port of Long Beach from the company’s Terminal Island facility.
The scheme came to light after port authorities received a tip and conducted underwater dives, discovering a “large debris field” of discarded railcar components. Investigators found that the recovered parts showed no signs of wear or damage that would necessitate replacement, confirming the fraudulent repair practices. The investigation was a joint effort by the United States Environmental Protection Agency (EPA), the Federal Bureau of Investigation (FBI), the Federal Rail Administration, and the Los Angeles Port Police.
Federal prosecutors detailed how the illegal dumping was a deliberate attempt to conceal the company’s fraudulent activity and maximize profits. The company has since exited the intermodal railcar repair business and no longer operates facilities on Terminal Island. While the investigation did not reveal any rail accidents directly attributable to the improper repairs, the deliberate deception and environmental violation were met with significant penalties.
Penalties and Legal Violations
On December 8, 2017, United States District Judge Dolly M. Gee imposed a $5 million criminal fine on United Industries LLC. In addition to the fine, the company was ordered to pay $20 million in restitution to the three victim companies. The guilty plea was entered under violations of the **Rivers and Harbors Appropriation Act**, specifically **33 U.S.C. 411** and **33 U.S.C. 407**, which prohibit the unauthorized discharge of pollutants into navigable waters of the United States. The charge was a misdemeanor offense relating to the deposition of refuse in navigable waters.
Key Facts
- Defendant: United Industries LLC (a subsidiary of Caterpillar Inc.)
- Location: Terminal Island, Port of Long Beach, California
- Years of Operation: 2008 – 2014
- Fraud Amount: At least $5 million obtained through unnecessary railcar repairs
- Restitution: $20 million ordered to be paid to TTX Company, Pacer International, and Greenbrier Company
- Criminal Fine: $5 million
- Laws Violated: 33 U.S.C. 411 & 33 U.S.C. 407 (Rivers and Harbors Appropriation Act)
Assistant United States Attorneys Mark A. Williams and Joseph O. Johns of the Environmental and Community Safety Crimes Section prosecuted the case, highlighting the federal government’s commitment to environmental enforcement and corporate accountability. This case serves as a warning to companies that prioritize profits over safety and environmental compliance.
Source: EPA ECHO Enforcement Case Database
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