By Matt Coker
By R. Scott Moxley
By Charles Lam
By Nick Schou
By Gustavo Arellano
By Gustavo Arellano
By Steve Lowery
By R. Scott Moxley
What likely encouraged the oil companies to ignore leaks is the weak regulatory system. Polluters who release MTBE into the environment are supposed to pay as much as $10,000 per day per leak in penalties. But county inspectors have no authority to enforce the fines. Regulators are left with the glacial tool of litigation: the only way to collect penalties and force cleanups is for state or county prosecutors to file lawsuits. As a result, only a tiny portion of fines are ever paid, cleanup requests are ignored, and MTBE contamination spreads.
But the problem wasn't just callous, politically connected oil executives and powerless regulators. For years, the DA's office, which is responsible for enforcing environmental laws, avoided the subject of MTBE. According to a source in the DA's office, suing the oil companies was considered a "political no-no." In November 1998, however, two environmental groups invoked an obscure provision of the Safe Drinking Water and Toxic Enforcement Act of 1986. Once the provision is raised with government officials, prosecutors have two months to either launch a case or allow private organizations to sue on the public's behalf. Sixty days after OC officials received notices—and two days after he was sworn into office—Rackauckas' staffers filed their lawsuit.
The oil companies were not amused. They called the suit factless, asserted statutes of limitation, and haughtily suggested that the DA did not have the legal authority to prosecute them even if they had polluted. In their court filings, attorneys for the defendants denied "each and every allegation" and vigorously disputed that the public is "entitled to any [financial] relief whatsoever" because the oil companies "did not knowingly discharge any dangerous chemical" into the environment. In fact, an ARCO representative described his company as a good corporate citizen that "conforms to all statutes, government regulations and industry standards."
Spin from the oil companies causes Richard Drury, an attorney with Communities for a Better Environment, to chuckle.
"They are outrageous," he said. In a statewide MTBE case involving his group, Drury helped uncover a critical oil company memo from 1985. In the document, an industry engineering executive noted MTBE's environmental risks and advised oil companies to factor into their budgets the costs of properly monitoring and preventing leakage of the chemical from storage tanks. The executive wrote, "The decision to utilize MTBE . . . should also consider the capital and expense associated with a program to increase monitoring at affected service stations."
Drury says the oil companies ignored such advice, choosing to protect billions of dollars in annual profits over environmental safeguards that would have cost little by comparison.
In Orange County, government officials agree that oil-industry negligence was willful. Prosecutor Michelle Lyman, who supervised the case until she quit in frustration last October, reported that she found systematic corporate neglect. "Records of the [state] Regional Water Quality Control Board and the Orange County Health Care Agency reveal numerous instances of ARCO and Thrifty resisting, delaying and failing to follow agency directives calling for corrective action," Lyman wrote in an October 2000 court filing. "The ineffective response of ARCO and Thrifty in addressing MTBE contaminant plumes has resulted in the spread and migration of MTBE contamination away from the original source into deep soil and groundwater, decreasing the feasibility and increasing the cost of cleanup as well as placing drinking water supplies at risk."
No one can yet determine the full extent of the MTBE damage—other than to say the costs will easily exceed $100 million. But this much is certain: geological maps show that many of ARCO and Thrifty's leaky gas storage tanks in north Orange County were located directly above one of the largest underground drinking water sources in California.
Two attorneys familiar with the details of the case against ARCO said the same thing: "This was the most solid environmental case I have ever seen."
District attorneys often make the evening news crime coverage; DAs themselves are rarely the focus of corruption stories. But Tony Rackauckas soon learned that the public embarrassments of 2000 were only a prologue to the personal humiliations he'd face over the next two years. Instead of modeling himself as the epitome of rectitude, the county's top law-enforcement official seemed to invite controversy. Here's a sampling of more indiscretions:
• In a major consumer-fraud case, Rackauckas ordered staff to delete incriminating evidence from their case against Newport Beach billionaire George Argyros, a Rackauckas friend and political contributor who, at the time of the investigation, was seeking a Bush administration appointment as ambassador to Spain.
• Rackauckas asked his veteran organized-crime investigators to help his friend Patrick Di Carlo, a wealthy Newport Beach businessman who said he was the victim of an extortion plot, only to kill the probe when investigators' suspicions turned toward Di Carlo.
• The DA reluctantly disbanded his secretive, taxpayer-funded Tony Rackauckas Foundation after evidence emerged that, despite its claims, the group gave scant money to charity and wouldn't open its books to public inspection.
• Someone with top-level access to confidential DA files and a motive to embarrass Mike Jacobs left the homicide prosecutor's personnel file on a reporter's doorstep after Jacobs visited the attorney general's office in Sacramento to complain about Rackauckas' ethical misconduct.