When a gasoline spill and explosion killed three young people in Whatcom County in 1999, officials announced a record penalty against a gas-pipeline company: $3 million to send the message that such tragedies "must never happen again."

When nuclear labs around the country were found exposing workers to radiation and breaking other safety rules, assessments totaling $2.5 million were ordered.

When coal companies' violations were blamed for deaths, injuries and risks to miners from Alabama to West Virginia, the companies were slapped with more than $1.3 million in penalties.

What happened next with these no-nonsense enforcement measures? Not much.

The pipeline tab was eventually reduced by 92 percent, the labs' assessments were waived as soon as they were issued, and the mine penalties largely went unpaid.

The amount of unpaid federal fines has risen sharply in the past 10 years.

Individuals and corporations regularly avoid large penalties for wrongdoing, sometimes through negotiations, sometimes because companies go bankrupt, sometimes due to officials' failure to keep close track of who owes what under a decentralized collection system.

These are conclusions of an examination of federal financial-penalty enforcement across the nation, which also found:

• The government is owed more than $35 billion in fines and other payments from criminals and in civil cases, according to Justice Department figures. This is almost five times the amount uncollected 10 years ago.

A decade ago, Congress mandated that fines be imposed regardless of defendants' ability to pay, which has added to outstanding debt.

• In 2004, federal authorities ordered $7.8 billion in 98,985 fines, penalties and restitution demands in criminal and civil cases but collected less than half of that.

• White-collar-crime cases account for the largest amount of uncollected debt. In a study, Government Accountability Office (GAO) investigators found that 7 percent of restitution in such cases is paid.

"Fines and orders to pay restitution are an important part of how we punish convicted criminals. When so little effort is made to collect that money, we allow convicted criminals to avoid punishment for their crimes, weaken our criminal-justice system and ultimately deny justice to the victims of crimes," said Sen. Byron Dorgan, D-N.D.

The mechanisms of financial-penalty enforcement are complex. Freedom of Information Act requests were filed with a dozen federal agencies, seeking records on why and how they issue and collect administrative penalties and other assessments.

Although the government does collect billions each year in fines, penalties and restitution, success rates vary from agency to agency, region to region, case to case.

In many high-profile cases, authorities tout fines as proof they are cracking down. Yet frequently those orders are quietly negotiated to just a fraction of their original amounts.

Documents provided by the Labor Department's Employment Benefits Security Administration, whose job is to protect pension and welfare benefits, showed that $2,000 was the maximum amount paid on nearly a dozen penalties ranging from $86,500 to $180,000. These were for various violations, from failure to file reports to self-dealing by pension-fund managers.

Why the reductions? Officials said compliance is the agency's goal and that the law allows penalties to be reduced when companies make amends. Violators who don't comply risk being referred to the Treasury Department, which can seize federal benefits.

The Occupational Safety and Health Administration's written policy explains to inspectors that they can reduce penalties by up to 95 percent, "depending upon the employer's 'good faith,' (25 percent) 'size of business,' (60 percent) and 'history of previous violations' (10 percent)."

Internal documents from U.S. Immigration and Customs Enforcement show that dramatically large fines may be cut sharply.

Agency files listed, for example, a $60,911,316 "commercial fraud" assessment for one company; the case ended with a $15,000 collection by customs. The company explained some paperwork was not in order: "no major problem," according to the files.

Federal law exempts the national nuclear laboratories from most financial liability, but the Energy Department has issued some $2.5 million in fines against Los Alamos, Livermore and Argonne national laboratories since 2000. The fines — issued and waived in the same sentence — involved 31 workers who inhaled or touched radioactive or toxic materials.

"This is kind of an exercise in absurdity," said Greg Mello, who heads the Los Alamos Study Group, a nuclear-disarmament activist organization in Albuquerque, N.M.

Even so, the Energy Department includes the fines in its annual reports to Congress and often announces them in news releases.

Rules tightened
Last year, Congress tightened the rules so that as nuclear-laboratory contracts are renewed, the fine waivers are eliminated. Eventually, said Energy Department spokesman Jeff Sherwood, nuclear labs will have to pay imposed fines.

The reason Energy Department issued fines it could not collect was to show what the problems were and how bad, he said: "A $1 million fine says something different than a $10,000 fine."

In June 1999, a Bellingham pipeline ruptured, pilling 230,000 gallons of gasoline into Whatcom Creek. The fuel exploded into a fireball that ravaged the surrounding woods. It killed two 10-year-olds playing in the woods and an 18-year-old who had gone to the stream to fish.

Authorities vowed to punish those at fault, and indeed some company officials eventually served prison time.

But on June 2, 2000, the U.S. Transportation Department issued a news release, announcing a $3.05 million administrative penalty against the pipeline owner, Olympic Pipe Line. This, it said, was the largest in the history of the federal pipeline-safety program.

"Tragic events like this pipeline failure must never happen again," then-Transportation Secretary Rodney Slater said. "This civil penalty is one of a series of actions we have and are taking to help protect the people and environment."

Last year, the penalty was quietly reduced to $250,000.

"They let them off with a slap," said Carl Weiner, who heads the Bellingham-based Pipeline Safety Trust.

Olympic Pipe Line officials disagreed, saying they paid $11 million in state and Justice Department assessments and $15 million in restoration and improvements.

The recent West Virginia coal-mine deaths focused new criticism on enforcement trade-offs made by mine-safety inspectors.

During hearings in January, Sen. Arlen Specter, R-Pa., voiced outrage at how coal operators can cut fines. He cited assessments by the Mine Safety and Health Administration (MSHA) against a company in an Alabama mine accident in which 13 people were killed in 2001. Penalties were reduced from $435,000 to $3,000 in what Specter called "a decision that harms workers and erodes MSHA's authority."

The Labor Department later announced plans to raise fine amounts; in a case it called "precedent-setting," it sought an injunction against a Kentucky mine operator and two companies he owns, which paid nothing on $200,000 in penalties.

The Freedom of Information filing turned up numerous cases in which administrative penalties were ordered against mining companies for dangerous laxness in following rules, yet records showed many went unpaid.

Sometimes, in the narrow-margin world of small coal companies, the violator escaped paying by declaring bankruptcy or ceasing operations.

When agencies can't get debtors to pay, the Justice Department may get the task of collecting a penalty. But the process is decentralized. The collection legwork falls to the 93 U.S. Attorney Offices around the country.

Although the backlog of uncollected debt has increased, from $6 billion in 1995 to more than $35 billion in 2004, the number of financial-litigation-unit lawyers has remained steady, usually one or two per prosecutor's office, supplemented by paralegals.

Reviewing the adequacy of staffing was one of 14 recommendations made by the GAO in 2001 to improve collection. A follow-up report two years ago found "fragmented processes and lack of coordination."

Coordination progress
The Justice Department office overseeing U.S. attorneys said it has made strides toward better coordination.

The 1996 Victims Mandatory Restitution Act requires judges to order payments regardless of a defendant's ability to pay. It's no coincidence, said Natalie Collins of the U.S. Attorney's Office in Las Vegas, that the uncollected debts have soared since the law was passed.

Many people leave prison with a large debt they can't pay, she said. "We can't squeeze blood out of a turnip."

© 2006 Associated Press

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