United States v. Michael Panyard , 403 F. App'x 17 ( 2010 )

NOT RECOMMENDED FOR PUBLICATION
File Name: 10a0695n.06
FILED
No. 09-1594 Nov 10, 2010
LEONARD GREEN, Clerk
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
United States of America, )
)
Plaintiff-Appellee, )
)
v. ) ON APPEAL FROM THE UNITED
) STATES DISTRICT COURT FOR THE
Michael G. Panyard, ) EASTERN DISTRICT OF MICHIGAN
)
Defendant-Appellant. )
)
)
BEFORE: MERRITT, GIBBONS, and COOK, Circuit Judges
MERRITT, Circuit Judge. Defendant Michael G. Panyard was sentenced to fifteen months
in prison after a jury found him guilty of all nine counts brought against him. Two of the counts
were for violating provisions of the Clean Water Act, six were for making false statements or
writings, and one was for conspiracy. Defendant now appeals from the district court’s denial of his
motion, pursuant to Federal Rule of Criminal Procedure 29, for a judgment of acquittal on all counts,
and challenges the sufficiency of the Government’s evidence presented at trial. For the reasons listed
below, we AFFIRM the district court’s denial of Defendant’s motion.
I.
This case arises out of an investigation of Comprehensive Environmental Solutions, Inc.
(“the Company”). The Company operates an industrial waste treatment, storage, and disposal facility
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in Dearborn, Michigan. While its business model had purportedly been to treat industrial wastewater
received from clients before discharging that water into municipal sewers, evidence uncovered as
part of an investigation by federal and state regulatory agencies revealed that the Company had in
fact been dumping millions of gallons of wastewater directly into the municipal sewers, without any
treatment at all, in violation of the Clean Water Act (“the Act”).
The Act prohibits discharging pollutants into publicly owned sewers, except in accordance
with a National Pollutant Discharge Elimination System permit (“discharge permit”). 33 U.S.C. §§
1311(a), 1317(b)(1), 1342. The Act sets up a regulatory scheme whereby states, under the
supervision of the Environmental Protection Agency, issue discharge permits to wastewater
treatment facilities like the one run by the Company. Id. § 1342(b). The Act makes it a federal
crime knowingly to violate any requirement imposed by permits issued pursuant to these EPA-
approved state and local programs. Id. § 1319(c)(2)(A). The Company operated under a discharge
permit issued by the relevant Michigan environmental authority, which required that wastewater be
treated with a specific process before it was discharged into the municipal sewer system.
The investigation revealed that the Company was in stark violation of the requirements
imposed by its discharge permit. Most notably, the Company had actually removed and never
replaced a necessary piece of treatment equipment in April 2001, but continued to accept and store
wastewater for some time thereafter. Without the ability to treat the waste, the Company’s storage
tanks eventually became full. In order to continue accepting waste from the Company’s clients, the
Company discharged untreated waste into the municipal sewers, entirely bypassing the pretreatment
process required by its discharge permit.
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Defendant Panyard served as the Company’s environmental coordinator and head of sales
during the relevant period in this case. Panyard was indicted by a grand jury and charged with two
substantive violations of the Act (one for bypassing the required treatment process in making the
discharges, and one for tampering with a monitoring device or process), six counts of making false
statements to regulatory authorities, and one count of conspiracy. At trial, the Government alleged
that Panyard played a critical role both in the Company’s decision to violate the Act by knowingly
disregarding the terms of its discharge permit, and in the Company’s subsequent efforts to cover up
its violations by misrepresenting the nature of the facility’s discharges and making false statements
to various governmental officials.
At the close of the Government’s case, Defendant moved for a judgment of acquittal on the
grounds of insufficient evidence. The court reserved judgment on this motion and submitted the case
to the jury, which returned a conviction on all counts against Defendant. Defendant then renewed
his motion for a judgment of acquittal. The district court denied that motion. Defendant now
appeals.
II.
With one apparent exception, all the issues raised by Defendant on appeal are essentially
factual: he maintains that the Government failed to introduce evidence sufficient to sustain his
conviction. We review a district court’s denial of a motion for acquittal on the grounds of
insufficient evidence de novo, and the district court’s decision is to be affirmed “if the evidence,
viewed in the light most favorable to the government, would allow a rational trier of fact to find the
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defendant guilty beyond a reasonable doubt.” United States v. McGee, 529 F.3d 691, 696 (6th Cir.
2008) (internal citations omitted).
A. Clean Water Act Charges
The principal legal issue raised in Defendant’s appeal concerns Count 2 of the indictment,
which charged him with knowingly bypassing the pretreatment requirements imposed by the
discharge permit. Defendant contends that the federal government is “without jurisdiction” over this
charge, as the pretreatment requirements were imposed by the state department issuing the discharge
permit, not the EPA or any other federal authority.1 As the district court recognized, this contention
is without merit. No constitutional argument denying federal regulatory powers is raised. The plain
language of the Act incorporates the requirements contained in permits issued by state authorities:
it provides that it is a federal crime to “knowingly violate[] . . . any permit condition or limitation
. . . in a permit issued under section 1342 of this title [authorizing states to issue discharge permits].”
33 U.S.C. § 1319(c)(2)(A) (emphasis added); see also United States v. Iverson, 162 F.3d 1015, 1019
(9th Cir. 1998) (interpreting this section of the Act to make violations of state-issued, EPA-approved
regulations a federal crime). It is clear that Congress intended to incorporate the requirements of
these state-issued permits into federal law by making a violation of their terms a federal crime, and
the district court was correct in rejecting Defendant’s argument to the contrary.
1
The district court construed this portion of Plaintiff’s Rule 29 motion as a Rule 34 motion
to arrest judgment, as it does not pertain to the sufficiency of the evidence but rather contends that
the Government either lacked jurisdiction to prosecute or failed to state an offense in its indictment.
We follow the district court’s approach in our analysis.
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Count 4 of the indictment alleged that Defendant further violated the Act by knowingly
tampering with inspection devices and interfering with efforts by regulators to monitor the
Company’s wastewater streams. The Act makes it a crime knowingly to “falsif[y], tamper[] with,
or render[] inaccurate any monitoring device or method required to be maintained” under the Act.
33 U.S.C. § 1319(c)(4). The Government’s allegation at trial was that Defendant violated this
provision by ordering tanks at the facility that purportedly held wastewater to be filled with water
from a nearby fire hydrant when local inspectors arrived seeking samples of material the facility was
discharging. This practice would obviously render any regulatory monitoring of the facility’s
discharges inaccurate, by misrepresenting the nature of the material being discharged. Defendant
argues that his conviction on this count was unsupported by the evidence. At trial, the Government
elicited testimony from a subordinate that the tanks had been filled with water from a fire hydrant
when inspectors arrived, and that the subordinate had discussed with Defendant that this was “what
the procedure was if [the inspectors] had come in onto the property.” An inspector further
corroborated this evidence by testifying that he was asked to wait before obtaining a sample of the
discharge by the same subordinate who testified about the fire hydrant scheme, raising the reasonable
inference that wastewater was being switched out for clean water during that time. This testimony
was sufficient evidence for a rational jury to find Defendant guilty of this charge.
B. False Statement Charges
Count 5 of the indictment alleged that Defendant directed the falsification of discharge logs
in order to conceal the facility’s discharging on certain days, in violation of 18 U.S.C. §§ 1001 and
2. Defendant first challenges his conviction under this count by repeating similar jurisdictional
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arguments made concerning Count 2; he argues that, since the discharge logs were required by the
state permit-issuing authority, and not by the EPA itself, the logs were not a matter within “the
jurisdiction of . . . the Government of the United States” as required by § 1001(a). This argument
fails for the same reason already stated above; the Act plainly makes violations of state-issued
discharge permits a federal crime. Second, Defendant argues that the Government failed to introduce
sufficient evidence to find that he directed the falsification of the logs. Defendant’s core contention
is that at one point in his testimony, the subordinate said that Defendant had told him to be “as
accurate as possible” in recreating the discharge logs, which had disappeared from the facility. But
elsewhere in the record the same subordinate testified that he falsified the discharge logs at
Defendant’s direction on other occasions, and that, on the particular occasion where the “accurate
as possible” statement occurred, Defendant “was screaming to get it done as fast as possible.” This
testimony, especially when viewed in the light most favorable for the prosecution, was sufficient for
a rational jury to conclude that logs were falsified on Defendant’s orders. Finally, Defendant
maintains that the Government failed adequately to demonstrate the materiality of the falsified
discharge logs. A statement is material under § 1001 if it has the natural tendency to influence or
is capable of influencing a federal agency; this is a “fairly low bar for the government to meet” and
requires neither a showing of actual influence or reliance nor that the statements were even directed
to or received by a federal agency. United States v. White, 270 F.3d 356, 365 (6th Cir. 2001). Here,
the Government elicited testimony from local inspectors that they would review discharge logs as
part of their enforcement efforts; this testimony invites the inference that falsified logs would tend
to influence whether enforcement action would be brought against the Company (as, of course, it
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eventually was). This testimony was sufficient for a rational jury to conclude that the falsified logs
were material.
Counts 6 and 7 both charged Defendant with ordering a subordinate to tell inspectors that the
facility was not discharging on two particular occasions when in fact the facility was discharging, in
violation of 18 U.S.C. §§ 1001 and 2. At least two pieces of evidence introduced at trial supported
these charges: (1) testimony from the subordinate that he was sometimes directed by Defendant to
stop discharging upon the arrival of inspectors in order to trick the inspectors into believing no
discharge was occurring, and (2) testimony from an inspector that, on the two particular occasions
identified in the indictment, he arrived at the facility seeking a sample of what was being discharged,
but was told by the subordinate that no discharge was taking place. This evidence was sufficient for
a rational trier of fact to infer that Defendant instructed the subordinate to lie to the inspectors on
these two occasions. On appeal, Defendant’s argument is that the evidence was insufficient because
of an apparent inconsistency in the subordinate’s testimony; while the subordinate testified that he
put “tick” marks next to entries in the discharge log where he had lied to inspectors, the entries on the
two relevant dates lack a tick mark. The district court was correct in rejecting this argument. The
subordinate himself admitted in his testimony that his record keeping was imperfect, and, in any case,
the resolution of this type of inconsistency is a function for the trier of fact. See United States v.
Cecil, 615 F.3d 678, 692 (6th Cir. 2010) (stating that “discrepancies in the testimony are for the jurors
to sort out”).
Count 8 charged Defendant with falsely representing that the facility was meeting pretreatment
standards on its permit application, signed by Defendant and sent to the local regulatory authority, in
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violation of 18 U.S.C. §§ 1001 and 2. On appeal Defendant denies neither that he signed the
document nor that the representations it contained were false, but instead argues that he could not be
guilty of this offense for two reasons: (1) he signed on behalf of the Company’s Chief Executive
Officer, and (2) the permit application could not have been material, because the permit application
indicated that it was signed by the Company’s “authorized representative,” and he was not the
Company’s authorized representative. Both arguments are meritless. As the district court recognized,
the plain language of § 1001 applies to “whoever” makes a false writing, and makes no exception for
writings made on behalf of someone else. As to materiality, Defendant argues that, because he (rather
than the Company’s CEO) signed the document, the document could not have been material because
the EPA would not have relied on statements made by an unauthorized representative. As explained
above, a showing of materiality requires only that a false statement have a “natural tendency” to
influence the relevant governmental body; here, on the permit itself, Defendant listed himself as the
facility’s “Contact Person” and indicated he was the facility’s “Env[ironmental] Coordinator.” On
this basis, a jury could have concluded that a governmental body would have assumed that Defendant
had authority to sign the permit application, and would thereby be potentially influenced by its
contents.
Count 10, another false statement charge under 18 U.S.C. §§ 1001 and 2, charged Defendant
with sending a letter to the local regulatory authority falsely attributing an exceedance by the facility
of the discharge limits set by its permit to a faulty “aluminum sulfate pump.” The Government
introduced evidence sufficient for a jury to find that the real reason for the exceedance was the
facility’s total lack of any operable treatment equipment, a state of affairs known by Defendant at the
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time of the letter. It is unclear precisely what argument Defendant is making against the sufficiency
of the evidence supporting this charge; in his brief on appeal, he refers, without specific citation, to
the testimony of the Company’s chemist and another employee of the Company as “the only
testimony related to this count,” but fails entirely to explain how that testimony supports his claim
that there was insufficient evidence to find that Defendant knew the facility lacked treatment
capability but indicated otherwise when writing the letter. The district court was correct in rejecting
this argument.
Count 12, the final false statement count, alleged that Defendant made false statements to an
EPA investigator during the execution of a search warrant at the facility. Defendant on appeal repeats
the same jurisdictional arguments recounted above. For the reasons already stated, the district court
was correct in rejecting this argument.
C. Conspiracy Charge
Count 1 of the indictment charged Defendant with conspiracy to commit four illegal objects:
(1) to violate pretreatment standards, (2) to render inaccurate monitoring equipment and methods, (3)
to make material false statements and writings, and (4) to obstruct justice. As to the first three
objects, Defendant’s argument on appeal mirrors his arguments against the substantive charges
regarding those objects; he argues that, since the Government failed to introduce sufficient evidence
(or, in the case of the first object, failed to prove a “federal nexus,” apparently a reiteration of the
jurisdictional arguments rejected above), the acts related to those objects cannot be overt acts
sufficient to satisfy the elements of conspiracy. For the reasons described above concerning those
charges, these arguments fail. As to the obstruction object, Defendant argues that the only possible
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overt act committed in furtherance of this object was the building of a cement pad over a drain which
had been used in illegal discharges. The Government charged one of Defendant Panyard’s co-
defendants with obstruction of justice for this act in Count 11 of the indictment, and the jury acquitted
him of that charge. Therefore, Defendant argues, there was no sufficient evidence to sustain his
conviction as to this object of the conspiracy. This argument fails. As the district court recognized,
even though the co-defendant was ultimately acquitted of the obstruction charge, that does not mean
that sufficient evidence was not introduced to support the inference that the building of the cement
pad was an overt act in furtherance of a conspiracy to obstruct justice. Testimony at trial by a facility
employee was sufficient for the jury reasonably to conclude that the cement pad was built over a drain
to conceal its existence after a spill at the facility.
Finally, while Defendant argues that “the district court made no findings as to Mr. Panyard’s
agreement with any other person,” he offers no reason why the jury could not rationally have found
that he agreed with various employees to commit the objects described above. Indeed, significant
evidence introduced at trial—much of it discussed in detail above—supports the inference that
Defendant consistently worked in concert with his fellow employees in achieving the conspiracy’s
objects.
III.
For the foregoing reasons, we AFFIRM the district court’s judgment.
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