Billions uncollected in penalties, debts
When a gasoline spill and explosion killed three young people in Washington state, officials announced a record penalty against a gas pipeline company: $3 million to send the message that such tragedies "must never happen again."
When nuclear labs around the country were found exposing workers to radiation and breaking other safety rules, assessments totaling $2.5 million were quickly ordered.
When coal firms' violations were blamed for deaths, injuries and risks to miners from Alabama to West Virginia, the companies were slapped with more than $1.3 million in penalties.
What happened next with these no-nonsense enforcement measures? Not much. The pipeline tab was eventually reduced by 92 percent, the labs' assessments were waived as soon as they were issued, and the mine penalties largely went unpaid.
The amount of unpaid federal fines has risen sharply in the last decade. Individuals and corporations regularly avoid large penalties for wrongdoing — sometimes through negotiations, sometimes because companies go bankrupt, sometimes due to officials' failure to keep close track of who owes what under a decentralized collection system.
The mechanisms of financial penalty enforcement are complex. To glimpse them, the Associated Press filed Freedom of Information Act requests with a dozen federal agencies, seeking records on why and how they issue and collect administrative penalties and other assessments.
Although the government does collect billions each year in fines, penalties and restitution, success rates vary from agency to agency, region to region, case to case.
In many high-profile cases, fines are touted by authorities as proof that they are cracking down. Yet frequently those orders are quietly negotiated to just a fraction of their original amounts — as if drivers, faced with fines for speeding, offered the traffic court judge pennies on the dollar, and the judge agreed.
Documents provided to the AP by the Labor Department's Employment Benefits Security Administration, whose job is to protect pension and welfare benefits, showed that $2,000 was the maximum amount paid on nearly a dozen penalties ranging from $86,500 to $180,000; these were for various violations, from failure to file reports to self-dealing by pension fund managers.
Why the reductions? Officials explained that compliance is the agency's goal, and that the law allows penalties to be reduced when companies make amends. Violators who don't comply risk being referred to the Treasury Department, which can collect by seizing federal benefits.
The Occupational Safety and Health Administration's written policy explains to inspectors that they can reduce penalties by as much as 95 percent, "depending upon the employer's `good faith,' (25 percent) `size of business,' (60 percent) and `history of previous violations.' (10 percent)"
Internal documents from U.S. Customs show that dramatically large fines may be cut sharply.
Agency files released under AP's FOIA request listed, for example, a $60,911,316 "commercial fraud" assessment for one company — but the case ended with a $15,000 collection by Customs. The company explained some paperwork was simply not in order: "no major problem."
Federal law exempts the national nuclear laboratories from most financial liability, but the Energy Department has issued some $2.5 million in fines against Los Alamos, Livermore and Argonne national laboratories since 2000. The fines — issued and waived in the same sentence — involved 31 workers who inhaled or touched radioactive or toxic materials.
Even so, the Energy Department includes the fines in its annual reports to Congress and often announces them in news releases.
The recent West Virginia coal mine deaths focused new criticism on enforcement tradeoffs made by mine safety inspectors.
During hearings in January, Sen. Arlen Specter, R-Pa., voiced outrage at how coal operators can whittle down fines. He cited assessments by the Mine Safety and Health Administration against a company in an Alabama mine where 13 people were killed in 2001 — penalties reduced from $435,000 to $3,000 in what he called "a decision that harms workers and erodes MSHA's authority."
The Labor Department later announced plans to raise fine amounts, and in a case it called "precedent-setting" sought an injunction against a Kentucky mine operator and two companies he owns, which paid nothing on $200,000 in penalties.
AP's investigation turned up numerous cases in which administrative penalties were ordered against mining companies for dangerous laxness in following rules — and yet records showed many went unpaid. Sometimes, in the narrow-margin world of small coal companies, the violator escaped paying by declaring bankruptcy or ceasing operations.
When agencies can't get debtors to pay, the Justice Department may get the task of collecting a penalty. But the process is decentralized. The collection legwork falls to the 93 U.S. Attorney offices around the country.
Although the backlog of uncollected debt has drastically increased, from $6 billion in 1995 to more than $35 billion in 2004, the number of financial litigation unit lawyers has remained steady, usually just one or two per prosecutor's office, supplemented by paralegals.