Company Incriminates Employees

When confronted with a criminal investigation for polluting a Minnesota river, Darling International Inc. acted quickly to minimize its own exposure. It sacked the four employees responsible and gave prosecutors incriminating statements made by the men.

The maneuver worked. In exchange for the company's guilty plea, Darling paid a $4 million fine - a fraction of what prosecutors say they were planning to seek at trial. Why? The company helped build a case against the ex-employees. The cooperation "really made the settlement possible," says David Lillehaug, the U.S. Attorney in Minneapolis.

The Darling case is part of a pattern throughout the country. Companies under scrutiny are winning leniency for themselves by "giving up" their employees.

The driving force behind the trend is the U.S. Sentencing Commission guidelines for corporations. Drawn up in 1991, the guidelines greatly increase fines for corporate crimes but give a break to companies that, among other measures, mete out "adequate discipline" to responsible employees.

The business community is feeling the effect of the guidelines. Courts are dishing out harsher punishments to companies that don't play by the rules, say prosecutors and defense attorneys.

"You get a lot more justice a lot more quickly" under the guidelines, says Craig Benedict, a federal prosecutor in Syracuse, N.Y. Last year, after a chemical dumping incident, Benedict declined to press charges against an em-ployer who took "immediate steps" to fire and demote the delinquent employees.

It's often difficult, however, to figure out who is really re-sponsible for corporate crimes. Just because a company decides that certain individuals should take the rap, does not mean the picture is complete. For example, the targeted employees usually will claim that others in the company knew about or participated in the illegalities.

Sometimes, a company that believes it already is, or will soon be, under investigation launches its own internal probe. When the federal government took over the Darling case from state pollution control authorities, it convened a grand jury. Nevertheless, the inquiry went nowhere. In the meantime, the company itself took the initiative by conducting a confidential internal audit.

With the help of outside lawyers, the company thoroughly reviewed its practices and operations, interviewing key pollution management employees. One of the employees, under pressure from the lawyers, admitted his part in illegally dumping pollutants and trying to fool state environmental authorities by rigging monitoring reports. Wiser now, the em-ployee says he assumed the lawyers were on his side and "wouldn't go running to the federal government."

After the lawyers reported their findings to company management, the board of di-rectors instructed them to cooperate with prosecutors. Thus, as Darling steadily un-covered evidence of illegalities, it turned over to the government what it had. The company even hired lawyers to represent the targeted employees.

The company's help pushed the federal investigation "light years ahead," according to the U.S. Attorney. In return, he decided to use aspects of the federal guidelines that permit mitigated penalties for companies that are especially cooperative. He characterizes the outcome as fair because the company paid a steep fine and the four individuals were prosecuted for their actions.

The employees who lost their jobs don't see things quite the same way. Darling got "to pay a measly fine and wash their hands of the rest of us," says the waste-water system manager who confessed to the outside lawyers. He pleaded guilty to one count of conspiracy and agreed to testify against the other employees.

Another employee also pleaded guilty to conspiracy. His attorney observed that employees don't have much choice in cooperating with investigations. If they stonewall, they know for sure they will lose their jobs, he says.

The treatment plant's general manager was convicted of violating the Clean Water Act and, at press time, was a-waiting sentencing. The company's former vice president for environmental affairs will face a trial unless he reaches an agreement with prosecutors.

Prudential Insurance Co. of America calls itself "Rock Solid." However, a lawyer who represents policyholders suing the company for deceptive sales practices probably would take the phrase further - rock solid waste.

Prudential, which was fined $1 million in January for destroying documents relevant to litigation against it, now faces new allegations. More than 1,200 customer documents, including some "central" to policyholder lawsuits, were thrown into a trash container outside a Prudential sales office in Florida, according to an October 3 letter from a St. Pete-rsburg, Fla. attorney to a federal district judge in New Jersey.

For its part, Prudential promised to investigate the matter. "If it happened, it would be a serious violation of company policy," a company spokesperson says.