Owner of ship agrees to pay $3.2M fine, but may go to trial anyway

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When the MV Marguerita arrived in Portland Harbor on July 7, 2017, the U.S. Coast Guard was ready for it.

Court documents show a Coast Guard inspector boarded the 606-foot cargo ship that same day and found evidence of what had already been reported to American officials. His inspection report states that the crew on the Marguerita had been dumping oily water into the ocean, a violation of an international treaty, and falsifying required records of oil discharges. 

The German shipping company that managed the ship has a long history with the paper industry in Maine. Now the state would be the site of its criminal prosecution.

The Coast Guard immediately detained the ship in Portland, and the environmental crimes unit of the U.S. Department of Justice filed charges against the shipping management company MST Mineralien Schiffarht Spedition und Transport and ship owner Reederei MS “Marguerita.”

The indictment alleges that the ship entered U.S. waters and ports at least eight times with a false and misleading oil record book available for inspection by the Coast Guard. It also includes one charge of obstruction of justice. 

Earlier this year, the company reached a plea agreement with the U.S. government that would have included a $3.2 million fine and four years of probation. But in an unexpected twist, a federal judge in Portland rejected it Thursday because there was no reward for the whistle-blower, a seaman from the Czech Republic named Jaroslav Hornof.  

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“People are not going to take risks that Mr. Hornof took if they’re going to be kicked in the shins at the end of the day,” U.S. District Judge Nancy Torresen said. 

The case is now scheduled for trial next month unless the parties reach a new agreement. The federal government routinely prosecutes vessel pollution, but trials are rare because most cases end with plea deals.

Prosecutors from the Department of Justice declined to comment after the hearing, and a spokesman did not respond to a request for comment. A lawyer for the German company left the hearing quickly and later did not respond to requests for comment. The Coast Guard did not return a request for comment Friday.

The German shipping company MST has quietly transported clay slurry to Maine for use in the paper mill industry for more than two decades. When it was time to christen the newly built Marguerita in 2016, the ceremony took place in Portland’s Ocean Gateway Terminal. The ship is named after a New York City woman, Marguerita DeLuca, whose husband, Matthew, a shipping broker, has known MST’s founder for more than 45 years. It is registered and flagged by Liberia.

The naming offered a glimpse of the global maritime industry that makes Portland Harbor one of the state’s busiest ports. 

“People notice all the cruise ships and tankers, but this cargo ship represents the other side of Portland Harbor. They slip in under the cover of darkness, before they ship out again,” Capt. Shawn Moody, agency operations manager with Chase, Leavitt & Co. of Portland, said at the time.

Moody said Friday that the agency still works with MST, and a cargo ship from the company calls in Portland monthly. Moody doesn’t have any involvement in the company beyond coordinating its stops in Maine, so he did not have any details about the criminal case. But legal trouble does not seem to have affected the company’s business in the state’s ports.

This is second time MST has been charged with environmental crimes.

In 2016, the company pleaded guilty in federal court in Minnesota to a similar obstruction of justice charge on another ship, the MV Cornelia. MST paid a $1 million fine for covering up significant leakages of oily waste water into the Great Lakes, and $200,000 of that money went to the protection of Lake Superior and its watershed. The agreement also included three years’ probation, which was still in effect when seaman Hornof first boarded the Marguerita in the Panama Canal in May 2017.

Hornof joined the crew as third engineer and quickly became aware of the illegal discharges, court documents say. 

More than 170 countries have joined an international treaty to prevent pollution at sea, and the United States has regulations in place that dictate how shipping vessels handle their oily wastewater. Crews are supposed to remove the oil before sending the water into the ocean, and they are required to record all of those discharges. In American ports, Coast Guard officials inspect the ship to make sure the records are truthful, and a record book with false information could be the basis for criminal charges.

Last year, the Department of Justice imposed more than $50 million in penalties in vessel pollution cases. Those included a $40 million fine – the largest ever – for Princess Cruise Lines. Other fines were smaller, like the $1.9 million paid by two shipping companies based in Singapore and Egypt for covering up the illegal dumping of oily water and garbage.

In an affidavit, Hornof said he learned one of the chief engineers on the Marguerita was using extra pipes to discharge oily water directly into the ocean and falsifying records. When that employee denied doing anything illegal, Hornof began to collect evidence and make secretive videos. He gave his findings to higher-ups in the company, who investigated and eventually alerted the U.S. government to the problem. The chief engineer who had allegedly orchestrated the illegal discharges was fired and replaced in Brazil. The ship’s next American port was Portland, where it was detained by the Coast Guard. 

The company was indicted in August 2017, and the case has gone on for more than a year. On Thursday, the parties appeared at two hearings in Portland that could have ended it. The government and MST had reached a plea deal, which needed the judge’s approval. 

In the courtroom, Torresen credited Hornof for making the videos, saying the government would not have had a case without him.

“Watching that videotape is like watching a Jason Bourne movie,” Torresen said. “You can tell watching that video that he is taking risks.” 

Whistle-blowers sometimes receive a portion of the penalties paid in such cases, but Hornof was not mentioned by name in the plea deal. Under the agreement presented to the court, MST would plead guilty to the charge for obstruction of justice, pay the multimillion-dollar fine and submit to four years of probation. The company would also be required to create an environmental compliance plan.

Hornof and two others who worked on the Marguerita had filed a challenge to the plea agreement. Their lawyer, Edward MacColl, argued that they should be considered victims in the case, which could make them entitled to money from their former boss. The three men were detained in Portland from July until September 2017, unable to return to their homes in Europe because they were material witnesses in the government’s case. They were finally allowed to make video depositions and leave Maine, but they returned in May for a trial that was then delayed. None of the three men works for MST now, and they did not travel to the United States for last week’s hearings.

The judge ruled that Hornof and his former colleagues should not be considered victims in the case, and she supported a hefty fine against the company.

“The loss is the harm to the environment, it is the harm to the system,” Torresen said. “That loss is very elusive, and that $3.2 million fine captures it.” 

But she pushed back when the Department of Justice lawyers said there was no whistle-blower award for Hornof. The prosecutors argued that he had not made his report directly to the Coast Guard and that he had been uncooperative later in the investigation. Torresen cannot force the company or the government to pay Hornof, but she asked them to consider it.

When they refused to budge, she rejected the plea agreement, which sent the parties back to negotiations or on to trial. 

“I’m not going to put my blessing on this agreement,” Torresen said. “I don’t think it is fair.” 

MacColl on Thursday focused on the judge’s decision not to treat the three seamen as victims, rather than her defense of Hornof alone. He planned to appeal her order. 

“I would really be pleased if I could get some justice for all my clients,” he said.

Meanwhile, the Marguerita still travels the high seas. It was allowed to sail out of Portland, leaving behind the detained crew members like Hornof, and has made regular trips back to Portland Harbor since then. The ship most recently called in Portland on Sunday.

The MV Marguerita in port Sunday at the Sprague Terminal in South Portland. (Carl D. Walsh/Portland Press Herald)

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