Beveridge & Diamond
 

Unprecedented Pesticides Criminal Penalty and Civil Settlement Announced

Beveridge & Diamond, P.C., September 12, 2012

On September 7, 2012, the U.S. District Court for the Southern District of Ohio sentenced Scotts Miracle-Gro Company (SMG), the world’s largest marketer of residential use pesticides, to pay a $4 million fine for eleven criminal violations of the federal law which governs the manufacture, distribution, and use of pesticides (the Federal Insecticide, Fungicide and Rodenticide Act or FIFRA).  In a separate consent agreement to resolve related civil pesticide violations with the Environmental Protection Agency (EPA), SMG will also pay more than $6 million in penalties, spend $2 million on environmental projects, and contribute another $500,000 to organizations that protect bird habitat.  (To review a copy of the civil consent agreement, click here).  The total criminal penalty and civil settlement payment of  $12.5 million is the largest payment in the history of FIFRA, according to Ignacia S. Moreno, Assistant Attorney General for the Environment & Natural Resources Division of the Department of Justice (DOJ).  (To review DOJ’s press release, click here).  The criminal indictment and record-breaking fines could signal a new era in the government’s enforcement of the pesticide law.

The criminal case against SMG was investigated by EPA’s Criminal Investigation Division and the Environmental Enforcement Unit of the Ohio Attorney General’s Office, Bureau of Criminal Identification & Investigation.  The civil case was investigated by EPA’s Land and Chemicals Division and Office of Regional Counsel, as well as EPA Headquarters’ Office of Civil Enforcement and the Office of Pesticide Programs.  The investigations were conducted in parallel, and resulted in an 11 count indictment, including 1 count of pesticide misuse, 5 counts of falsification of pesticide registration documents, 2 counts of distribution of a misbranded pesticide, and 3 counts of distribution of unregistered pesticides.  SMG pleaded guilty to all 11 counts in February, 2012.  The civil violations arose after a third party review of SMG’s U.S. pesticide registrations and advertisements.  Based on a compliance review agreement between EPA and SMG, SMG hired the third party, which in turn led to identification of potential compliance issues with over 100 of SMG’s products.

In a plea agreement, SMG admitted to improperly applying pesticides to its bird food products contrary to the pesticides’ labels which warned that the pesticides were toxic to fish, birds, and other wildlife.  SMG apparently used the pesticides to protect against insect infestation during storage. It then sold the illegally treated bird food for a total of 2 years, and continued with sales for 6 months after management was alerted to the situation by employees.  At the time of a voluntary recall in March 2008, SMG had sold more than 70 million units of the illegally treated bird food. 

SMG also pleaded guilty to additional violations of FIFRA, including submission by a SMG federal product manager of false documents to EPA and state regulatory agencies suggesting that numerous pesticides were registered with EPA, when in fact they were not, as well as the illegal sale of unregistered pesticides, and marketing pesticides with false and misleading labels not approved by EPA.  An employee of SMG also pleaded guilty to false statements and falsifying documents, and will be sentenced in October. 

Although FIFRA criminal enforcement is rare and FIFRA criminal penalties or civil fines greater than $500,000 are highly unusual, this matter demonstrates the broad scope of FIFRA and the magnitude of the federal enforcement consequences that can attach to actions involving pesticides.  Under FIFRA, pesticide registrants, applicants for registration and producers who knowingly violate the statute “shall be fined not more than $50,000 or imprisoned for not more than 1 year, or both.”  Registrants, commercial applicators, wholesalers, dealers, retailers or other distributors may also be subject to FIFRA civil penalties of up to $7,500 for each offense.    

For more information about pesticide compliance, enforcement or litigation, please contact Kathy Szmuszkovicz (kes@bdlaw.com or 202-789-6037) or Kate Wesley (kwesley@bdlaw.com or 202-789-6065).  For more information about the government’s criminal enforcement of environmental laws, please contact Nadira Clarke (nclarke@bdlaw.com or 202-789-6069) or Lily Chinn (lchinn@bdlaw.com or 415-262-4012).