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B&G Diversified Inc - Order, August 15, 1994

Order, August 15, 1994

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of

Alleged Violations of Article 17 of the Environmental Conservation Law

- by -

B & G DIVERSIFIED, INC.
Utica, Oneida County

Respondent

ORDER

Case No. R-6-1373-93-10

WHEREAS:

  1. This matter was previously decided by an order of the Commissioner dated June 12, 1992. Noting the Respondent's default, that order assessed a $25,300 civil penalty for the following violations related to B & G's operation of a now-defunct gas station at 531 Oriskany Street West in Utica, New York:

    - - Failure to register a petroleum bulk storage facility with the Department prior to December 26, 1986, in violation of 6 NYCRR 612.2(a)(1); and

    - - Failure to perform tightness testing on two petroleum bulk storage tanks, each of unknown age, prior to December 27, 1987, in violation of 6 NYCRR 613.5(a)(1)(ii).

  2. The order was appealed by the Respondent in a proceeding pursuant to CPLR Article 78. The matter was then remanded here by Judge Tenney of the State Supreme Court, Oneida County, in a decision dated August 30, 1993. The matter was remanded so the Respondent could apply for opening the default judgment which was previously taken. By an order dated November 13, 1993, the default was opened, but only on the issue of civil penalty.
  3. A hearing on the civil penalty issue was held on May 25, 1994, at the Department's Region 6 sub-office in Utica, New York. DEC Staff appeared by Judy Drabicki, Region 6 Attorney, Watertown, New York. The Respondent appeared by Gustave DeTraglia, Jr., Esq., of Utica, New York.
  4. Upon review of the record in this proceeding and the Supplemental Hearing Report prepared by ALJ Buhrmaster (copy attached), I hereby adopt the report's findings, conclusions and recommendation as my own.

NOW, THEREFORE, have considered this matter, it is ORDERED that:

  1. The Respondent, B & G Diversified, Inc., is assessed a civil penalty in the amount of TWENTY FIVE THOUSAND THREE HUNDRED DOLLARS ($25,300), apportioned as follows: SEVEN THOUSAND ONE HUNDRED DOLLARS ($7,100) for violation of 6 NYCRR 612.2(a)(1), and EIGHTEEN THOUSAND TWO HUNDRED DOLLARS ($18,200) for violation of 6 NYCRR 613.5(a)(1)(ii).
  2. This civil penalty shall be due and payable to the Department within 30 days of service of a conformed copy of this order.
  3. All communications between the Respondent and the Department in this matter shall be made to the Department's Region 6 Director, State Office Building, 317 Washington Street, Watertown, New York, 13601-3787.
  4. The provisions, terms and conditions of this Order shall bind the Respondent, its officers, directors, agents, servants, employees, successors and assigns and all persons, firms and corporations acting for or on behalf of the Respondent.

For the New York State Department
of Environmental Conservation

_____________/s/_____________
By: LANGDON MARSH, COMMISSIONER

Dated: Albany, New York
August 15, 1994

TO: Frank Bruzzese, President
B & G Diversified, Inc.
400 State Street
Utica, New York 13501

Gustave J. DeTraglia, Jr., Esq.
1425 Genesee Street
Utica, New York 13501

Judy Drabicki, Esq.
NYSDEC - Region 6
State Office Building
317 Washington Street
Watertown, New York 13601-3787

STATE OF NEW YORK
DEPARTMENT OF ENVIRONMENTAL CONSERVATION

50 WOLF ROAD
ALBANY, NEW YORK 12233-1550

In the Matter

- of -

Alleged Violations of Article 17 of the Environmental Conservation Law

- by -

B & G DIVERSIFIED, INC.
Utica, Oneida County,

Respondent

Case No. R-6-1373-93-10

SUPPLEMENTAL HEARING REPORT

- by -

____________/s/_____________
Edward Buhrmaster
Administrative Law Judge

BACKGROUND

This matter was remanded upon an order of the Commissioner opening the default judgment he had previously taken against the Respondent, B & G Diversified, Inc. In the order, dated November 13, 1993, the default was opened, but only on the issue of civil penalties.

In a prior proceeding B & G Diversified was assessed a $25,300 civil penalty for the following violations related to its operation of a now-defunct gas station at 531 Oriskany Street West in Utica, New York:

- - Failure to register a petroleum bulk storage facility with the Department of Environmental Conservation ("the Department" or "DEC") prior to December 26, 1986, in violation of 6 NYCRR 612.2(a)(1); and

- - Failure to perform tightness testing on two petroleum bulk storage tanks, each of unknown age, prior to December 27, 1987, in violation of 6 NYCRR 613.5(a)(1)(ii).

The matter was remanded for DEC Staff to demonstrate the basis for the $25,300 penalty, and also to afford the Respondent an opportunity (1) to rebut Staff's assertions which are relevant to its civil penalty calculation and (2) to explain any mitigating factors it wants to have considered.

PROCEEDINGS

On May 25, 1994, Administrative Law Judge ("ALJ") Edward Buhrmaster of DEC's Office of Hearings conducted a hearing on the remanded issues. The hearing was held at the Department's Region 6 sub-office in Utica, New York. DEC Staff appeared at the hearing by Judy Drabicki, Region 6 Attorney, Watertown, New York. The Respondent appeared by Gustave DeTraglia, Jr., Esq., of Utica, New York.

Prior to the hearing Ms. Drabicki submitted:

- - Her own letter dated April 5, 1993 (Hearing Exhibit No. 3) explaining the calculation of DEC Staff's recommended $25,300 civil penalty;

- - An affidavit of Donald Johnson, an engineer in DEC's spill response unit, providing facts to support Staff's penalty recommendation (Hearing Exhibit No. 4); and

- - A matrix that was used to calculate the civil penalty (Hearing Exhibit No. 5).

Mr. DeTraglia submitted his own letter dated April 21, 1994, outlining the Respondent's position in regard to the recommended penalty.

At the hearing Mr. Johnson appeared and was cross-examined. The Respondent presented no witnesses.

POSITIONS OF THE PARTIES

DEC Staff

Referencing the Commissioner's penalty policy, DEC Staff recommends reimposition of the $25,300 penalty based upon the potential harm the violations created and the importance of facility registration and tank tightness testing to the Department's regulatory scheme.

Respondent

The Respondent requests that any penalty be reduced or suspended particularly given the alleged diminished ability of Frank Bruzzese, the corporation's president, to pay any penalty that is assessed.

FINDINGS OF FACT

The Respondent's liability for the violations alleged by Department Staff is not an issue in this proceeding. Those violations have already been established and the default has been opened only on the issue of civil penalties.

The following findings bear on the penalty recommended in this hearing report. They supplement the findings that have already been made in this matter.

  1. Frank Bruzzese, president of B & G Diversified, Inc., contacted DEC in or about the time of January, 1989, to complain about the modification of roads near B & G's gas station at 531 Oriskany Street West. (With the road modification, that address is now 401 State Street.)
  2. During this contact Mr. Bruzzese expressed concern to Donald Johnson, a DEC engineer, that the road modifications would put him out of business.
  3. Mr. Johnson's subsequent search of DEC's files revealed that the gas station had never been registered as a petroleum bulk storage facility and that no tank test reports had been received.
  4. Therefore, on January 18, 1989, Mr. Johnson sent a letter advising Mr. Bruzzese that the facility's tanks should have been registered with DEC by December 27, 1986, and may have been required to be tightness tested by December 1987. (A copy of Mr. Johnson's letter is attached to this report as Appendix "A".)
  5. Mr. Johnson's letter was addressed to Mr. Bruzzese at Beacon Body Shop, an auto body repair shop next to the gas station. Mr. Bruzzese signed a U.S. Postal Service "green card" acknowledging receipt of the letter.
  6. Included with the letter were a set of petroleum bulk storage registration forms and pamphlets explaining the petroleum bulk storage regulations.
  7. The Respondent finally registered the facility in May of 1993.
  8. The tanks were removed from the site in June of 1993. No testing reports were ever received by DEC.

DISCUSSION

This report recommends reimposition of the $25,300 civil penalty initially recommended by DEC Staff. The penalty is consistent with the Commissioner's civil penalty policy and reflects proper application of a matrix (attached to this report as Appendix "B") that was used by DEC at the time of the violations to ensure a uniform approach to penalty assessment.

As noted above, this matter was re-opened in part for Staff to explain its civil penalty calculation. Such explanation was not part of the original hearing record and was provided for the first time as part of the re-opened proceeding.

Penalty Calculation

Failure to Register Petroleum Bulk Storage Facility

The Respondent failed to register its gas station as a petroleum bulk storage facility for the period between December 27, 1986, and April 18, 1992. The first date was the deadline for initial registration according to 6 NYCRR 612.2(a)(1). The second date was when the complaint was prepared.

Pursuant to the penalty matrix, Staff calculated a $50 per month penalty for the period during which the Respondent was "without knowledge" of the registration requirement and a $150 per month penalty for the period during which the Respondent continued the violation "with knowledge" of the requirement. As used in the matrix, "without knowledge" means that, as a practical matter, DEC has no evidence of the violator's awareness of the legal prohibitions involved. "With knowledge" means that DEC has the ability, by the preponderance of the evidence, to prove that the violator knew or should have known.

For the registration violation DEC Staff calculated a $7,100 civil penalty. The penalty represents $50 per month for the period between December 1986 and January 1989 ($50 per month x 25 months = $1,250) plus $150 per month for the period between January 1989 and April 1992 ($150 per month x 39 months = $5,850).

The increase from $50 to $150 per month in January 1989 is based upon Mr. Bruzzese, B & G's president, then having received the letter from Mr. Johnson advising him of the duty to register. According to Staff, the increase in per month penalties reflects the increased culpability for the continuing violation.

Failure to Perform Tank Tightness Testing

The Respondent failed to perform tightness tests on two petroleum bulk storage tanks, each of unknown age, for the period between December 27, 1987, and April 18, 1992. The first date was the deadline for initial testing according to 6 NYCRR 613.5(a)(1)(ii). The second date was when the complaint was prepared.

Pursuant to the penalty matrix, Staff calculated a $100 per month penalty for the period during which the Respondent was "without knowledge" of the tank testing requirement and a $200 per month penalty for the period during which the Respondent continued the violation "with knowledge" of the requirement. These penalties were then multiplied by two based on the number of tanks referenced in the charges.

For the tank testing violations Staff calculated an $18,200 civil penalty. The penalty represents $100 per month for the period between December 1987 and January 1989 ($100 per month x 13 months x 2 tanks = $2,600) plus $200 per month for the period between January 1989 and April 1992 ($200 per month x 39 months x 2 tanks = $15,600).

The increase from $100 to $200 per month in January 1989 is based upon Mr. Bruzzese then having received the letter from Mr. Johnson advising him that the tanks may have been required to be tightness tested by December 1987.

Penalty Evaluation

DEC Staff properly applied its penalty matrix in calculating its civil penalties. Use of a matrix ensures uniformity in penalty assessment.

The penalties calculated by Staff are substantially less than those authorized by statute (ECL Section 71-1929). At any rate, consideration of a total penalty greater than $25,300 is foreclosed since that figure was fixed in Staff's relief clause in its motion for summary order, dated April 21, 1992.

The penalties sought by Staff are reasonable since they fairly reflect the potential harm that might have been caused by the violations as well as the relative importance of these violations in the Department's regulatory scheme. These considerations are defined in the Commissioner's penalty policy as "gravity component factors" bearing upon the violations' seriousness.

The record does not show what actual harm was caused by these violations. However, so long as the tanks were not tested, the Respondent could not ensure against petroleum leakage and subsequent groundwater contamination. This is a serious concern, even if the facility is in a non-residential area, and even if Utica gets its water from a lake outside the city, as argued by the Respondent's counsel.

Also, the violations are very important to the Department's regulatory scheme. Unless the Department knows that the facility exists, compliance with all other regulatory requirements cannot be ensured. If tightness testing is not performed, the risk of leakage going undetected is increased.

Apart from the gravity component, Staff must consider the economic benefit of delayed compliance with the law. Consistent with the Commissioner's policy, DEC should not settle for less than an amount equal to this benefit.

In this case, Staff figured the benefit of non-compliance (known as the "benefit component") as $2100. This figure is based on a cost of $250 for registration and $400 per tank for testing, all multiplied by two because two testing and registration cycles, one in 1987 and 1992, were missed. The Respondent did not contest Staff's figures and the penalty actually sought well exceeds the benefit component.

As noted by Staff, the gravity component is more critical to its penalty calculation since the benefit component is calculated merely to ensure that the Respondent does not profit (or "benefit") from having violated the law. Having saved only $2100, the Respondent will not benefit after payment of a $25,300 penalty.

Penalty Adjustment Considerations

Ability to Pay

The Commissioner's civil penalty policy allows for adjustments to the gravity portion of a penalty to provide flexibility and equity in DEC's penalty system. The policy states that in some circumstances DEC may consider the ability of a violator to pay a penalty in arriving at the method and structure for payment of final penalties. According to the policy, it is unlikely that DEC would reduce a penalty where a facility refuses to correct a serious violation, regardless of the violator's ability to pay. However, if it is determined that inability to pay may be a factor, as a last resort, reduction of the penalty may be considered.

As noted above, the Respondent here requests that any penalty be reduced or suspended particularly given the alleged diminished ability of Frank Bruzzese, the corporation's president, to pay any penalty that is assessed. This request should be denied given the lack of supporting evidence, consistent with the Commissioner's penalty policy.

That policy states that the ability to pay adjustment "will normally require a significant amount of financial information specific to the violator. The burden to demonstrate inability to pay rests with the Respondent. If the violator fails to provide sufficient credible information, Department Staff should disregard this factor. An unsupported or inadequately supported claim of inability to pay should not be accepted."

The only evidence offered to support the Respondent's claim was what its counsel alleged to be copies of the 1992 federal income tax returns for Frank and Natalie Bruzzese. Upon the objection of DEC Staff, these documents were refused admission to evidence. There were several reasons for this, including lack of authentication. Respondent's counsel said he got the documents from Mr. Bruzzese's accountant, but neither the accountant nor Mr. Bruzzese appeared to authenticate them or verify their accuracy. The documents were not accompanied by any written certification; beyond that, they were unsigned.

Even assuming the returns were authentic, other problems existed. The returns were for only year, and not for the corporate Respondent, but the corporation's president and his wife. No corporate returns were furnished. The Respondent's counsel said no corporate returns had been prepared or filed for a number of years because the Respondent's accountant had insufficient information to complete them. He said the corporation owns nothing but the now-defunct gas station and has no other income. Again, no corporate official, including Mr. Bruzzese, appeared to verify any of this information.

A penalty adjustment based on inability to pay is unwarranted in this matter because of the lack of corroborating evidence. Also, one must consider the long period of time that the violations continued even after Mr. Bruzzese was informed by letter of his obligations. As noted above, the penalty policy discourages penalty reductions where a facility has refused to correct a serious violation.

Other Considerations

In his closing statement, the Respondent's counsel argued against the penalty proposed by Staff given what he said was the depressed state of Utica's economic climate. He said penalties such as those proposed by Staff put people out of business. Such penalties, he said, were unconscionable, more than what lawmakers had intended.

The Respondent's counsel said part of the reason Mr. Bruzzese did not attend the hearing was because he too is "heading for going out of business." This claim was not supported by any evidence, as the counsel himself acknowledged.

Finally, in its court petition to re-open this matter, the Respondent alleged that in or about July 1986, the state Department of Transportation ("DOT") informed it that the state was in the process of appropriating its property under powers of eminent domain. The petition said that DOT later scaled back its appropriation, taking only part of the parcel, but that the pending condemnation procedures caused considerable confusion as to who owned the property and was therefore responsible for facility registration and tank testing.

This claim was considered by the ALJ as raising an issue that could affect penalty assessment, and figured in his recommendation that the matter be re-opened. However, the Respondent did not pursue this claim at the reconvened hearing. No one from B & G testified. There was no evidence of the land appropriation or the confusion which is alleged to have ensued.

CONCLUSIONS

The $25,300 penalty requested by DEC Staff is based upon proper application of a Department penalty matrix. Also, it is consistent with the Commissioner's penalty policy.

The Respondent has presented no evidence warranting a downward adjustment of this penalty.

RECOMMENDATION

The Respondent should be assessed a civil penalty of $25,300, as calculated in the discussion section of this report.

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