Ferry investor Lehman paid $2M for hazard-waste case
WAILUKU » The Hawaii Superferry's major investor, former Navy Secretary John F. Lehman, paid a $1.5 million fine for unsafe handling of hazardous waste by a company he purchased in 1998.
Lehman, secretary of the Navy from 1981-87 under Republican President Ronald Reagan, says he was unaware, when he bought the company, of the unsafe practices and that as soon as he learned about it, it was cleaned up.
Lehman is board chairman of the Superferry and Special Devices Inc.
Special Devices, which makes explosive initiator devices for vehicle airbags, pleaded guilty in January 2001 to three counts of violating federal felony statutes related to treating hazardous wastes. It was sentenced to pay $1.5 million and placed on probation for three years.
It also agreed to pay $412,500 to settle a related lawsuit brought by a whistle-blower, who brought the hazardous waste problem to light, and the U.S. Attorney's Office.
William Carter, now in private practice but then the assistant U.S. attorney and chief of the environmental crime section who handled the prosecution, said the hazardous waste violations occurred with the owners before Lehman bought the firm and continued for a short period after Lehman's purchase.
J.F. Lehman & Co. bought Special Devices on Dec. 15, 1998, and the California state toxic waste inspection that led to federal action took place in August 1999.
Carter said J.F. Lehman apparently had not done a thorough "due diligence" review of Special Devices' compliance with environmental laws.
"My impression is there wasn't sufficient due diligence, because it would have been something clear to anyone if someone had done due diligence at the site," Carter said. "Their waste handling wasn't very sophisticated."
J.F. Lehman, responding to the Special Devices incident, said it will not knowingly invest in companies that are not committed to protecting the environment beyond what is required by law.
The firm said as evidence of its commitment to health, safety and the environment, Special Devices has recently been awarded the Occupational Health and Safety Administration's most prestigious safety award.
The firm said nine years ago it acquired a majority stock in Special Devices through an investment fund.
The firm said it performed thorough due diligence related to business and other matters but that the firm that J.F. Lehman and Co. retained to perform the environmental aspect of due diligence failed to detect improper hazardous materials handling practices.
J.F. Lehman said the mishandling of hazardous wastes predated its investment in Special Devices.
"Once the improper practices were discovered, JFLC immediately shut down production at the facility for a period of time during which steps were taken to address the problems and to establish new, proper procedures," the firm said.
The firm said subsequently it took successful legal action against both the seller and the due-diligence firm that failed to detect the improper material handling practices.
The firm said it ensured that Special Devices complied with its requirements related to the penalties and implemented appropriate procedures for handling hazardous materials.
J.F. Lehman said since that time, Special Devices facilities have received numerous awards for outstanding safety records.