Scott Goss

The News Journal

A Wilmington company was ordered to pay $3.5 million in fines and other penalties last week after admitting its employees conspired to violate city, state and federal environmental laws for 20 years.

Two employees of International Petroleum Corp. of Delaware are facing conspiracy and other criminal charges.

IPC first began recycling used motor oil at a plant along the Christina River in 1992 following intense opposition from environmental and civic groups.

That year, company President H. Clark Dantzler assured the public in an op-ed piece that the new facility “meets the highest standards for recycling while paying strict attention to the needs of the community.”

Yet court records show plant managers and operators at the facility on South Market Street almost immediately began tampering with a monitoring device, submitting manipulated wastewater samples and making false statements to Wilmington officials – all to give the appearance that the company was meeting permitted limits for chemicals discharged into the city’s sewer system.

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Starting in 2011, the company also knowingly violated a state permit by taking in polluted liquids from the Delaware City Refinery’s landfill and fly ash ponds, according to court records.

IPC then falsified documents to mislead city officials about that waste stream, illegally stored hazardous waste generated from the treatment of those materials and then shipped that material out of state in violation of federal law, court records show.

"IPC staff, known to the United States Attorney, conspired and agreed with each other to commit offenses against the United States," according to charging documents filed in court. Those offenses include knowingly tampering with monitoring methods and a monitoring device, knowingly making "false material statements in reports, records and documents," and knowingly misleading and making false statements to the city.

Matt DelPizzo, president of the Delaware Audubon Society, said the case is a prime example of the abuses that can occur when enforcement of environmental regulations hinge on companies' monitoring their own systems.

“I understand the financial straits the state is in, but without more active oversight from DNREC, these bad actors are going to continue doing illegal things that affect our health and poison our clean water,” he said. “We have to have better protections than the fox guarding the henhouse.”

IPC, through its parent company Illinois-based Heritage-Crystal Clean, pleaded guilty Thursday to conspiring to violate the Clean Water Act and transporting hazardous waste without a manifest.

The same day, U.S. District Court for Delaware Judge Gregory M. Sleet ordered the company to pay a $1.3 million fine and $2.2 million in restitution to the city.

The city’s portion of the fines will be deposited in Wilmington’s water and sewer fund to help pay for planned and emergency infrastructure improvements.

“This successful culmination of a very complicated case is the result of years of collaboration among federal, state and city agencies,” Wilmington Mayor Mike Purzycki said through a spokesman. “I am very appreciative of the painstaking work that was conducted to protect the health of our citizens and our environment.”

The case against IPC reportedly began when former employees notified the U.S. Environmental Protection Agency that the company was manipulating the wastewater samples it was providing to the city every six months.

An EPA special agent then installed a covert sampling device at the company’s sewer connection, according to a source familiar with the case.

An examination of those samples by an independent lab reportedly showed results that were drastically different from those provided by the company. That led EPA investigators to conduct a search of the facility in March 2012.

Court records show IPC submitted falsified wastewater reports as late as Dec. 31, 2012, indicating the company continued its conspiracy even after it knew a federal investigation had been launched.

At least five times in December 2012, IPC discharged wastewater into the city sewer system that violated the city’s permit limits for cyanide; ammonia; and a class of chemical compounds known as phenols, which are typically used to process wood and plastics, according to court records.

The exact amounts of those chemicals discovered in IPC’s wastewater were not disclosed in court records.

A full accounting of the types and amounts of chemicals released into the sewer system by IPC since 1992 may never be known because of the length of time the company was able to get away with falsifying its samples and reports. But, officials said, it is likely some of those chemicals passed through the city’s wastewater treatment plant and ended up in the Christina River, which feeds into the Delaware River and Bay.

Sources said Heritage-Crystal Clean, valued at $335 million, has halted all operations at the IPC plant. Company officials did not return messages seeking comment.

Heritage-Crystal Clean purchased IPC in late 2014 – after the environmental crimes had occurred – and cooperated with the EPA’s investigation, DOJ officials said.

The U.S. District Attorney’s Office is expected to pursue criminal charges against individual employees of IPC.

Ricky C. Mitchell, a former contractor who became plant manager of the South Wilmington facility, was indicted in late 2015 on charges he conspired to violate federal environmental law and made false statements to city officials. He pleaded guilty and is awaiting sentencing.

John L. Lowery III, a lead plant operator and former acting plant manager, was indicted on conspiracy and tampering charges in April. He has pleaded not guilty, according to a source familiar with the case.

IPC’s sentencing last week is the latest chapter in a 20-year saga that began even before the company began operating in Delaware.

Environmental and civic groups that opposed the project in early 1992 pointed to the spotty environmental record of the business’s Florida-based parent company, International Recovery Corp., and its subsidiaries.

They also questioned the wisdom of allowing an industrial recycler that imports waste oil by barge to a location on the riverbank, which then was targeted for recreational use.

State environmental officials approved permits for the project following a failed legal appeal from two labor unions and two citizens groups, along with objections from Wilmington City Council.

One of the loudest voices of opposition at that time was Greg Lavelle, then-vice president of the Browntown Community Association and current Republican state senator from Sharpley.

IPC became the center of controversy again 14 years later when an untended hose used to transfer waste oil between tanks ruptured, spilling 2,100 gallons into the Christina River. The spill, which oiled dozens of birds, spread along 7 miles of the river and nearly 2 miles of the Brandywine, affecting Port of Wilmington operations near the Delaware River.

Officials eventually sought a $194,011 environmental damage settlement from the company.

Just months before the EPA raided the plant in 2012, IPC also found itself in hot water with the Delaware Department of Natural Resources and Environmental Control.

DNREC issued a rare cease-and-desist order to the company in October 2011 after inspections earlier that year turned up 32 alleged environmental law violations related to the illegal storage of hazardous solvent wastes.

The company later missed a deadline for responding to and correcting the violations. A follow-up visit turned up 16 additional citations.

“To say what they were able to get away with for 20 years is unfortunate would be an understatement,” Lavelle said Monday. “In the '90s, a lot of us opposed this company for a lot of reason, and it now appears every one of them has come true.”

Staff writer Christina Jedra contributed to this story.

Contact business reporter Scott Goss at (302) 324-2281, sgoss@delawareonline.com or on Twitter @ScottGossDel.