Environmental Crimes Bulletin November 2023 Week 4

In this issue:

• United States v. XionWei Xiao, et al., No. 3:23-CR-00983 (S.D. Calif.), AUSA Melanie Pierson
• United States v. Emanuele Palma, et al., No. 19-CR-20626 (E.D Mich.), ECS Senior Litigation Counsel Todd Gleason, Criminal Division Fraud Section ASC Michael O’ Neill, White Collar Unit Chief John K. Neal, AUSA Timothy J. Wyse, and ECS Law Clerks Maria Wallace and Amanda Backer
• United States v. Matanuska Diesel, LLC, et al, No. 3:23-CR-00109 (D. Ak.), AUSA Jennifer Ivers and RCEC Karla Perrin
• United States v. Sinister Mfg. Company, Inc., No. 2:23-CR-00168 (E.D. Calif.), ECS Senior Counsel Kris Dighe, ECS Trial Attorney Stephen Foster, and AUSA Katherine Lydon

United States v. XionWei Xiao, et al., No. 3:23-CR-00983 (S.D. Calif.), AUSA Melanie Pierson

On November 17, 2023, a court sentenced Zunyu Zhao to pay a $10,000 fine, complete a three-year term of probation to include 90 days’ home confinement, and perform 300 hours of community service. Zhao will also pay $10,222 in restitution (joint and several) to Procuraduria Federal de Proteccion al Ambiente, the Mexican governmental entity responsible for protecting the environment of Mexico. Co-defendant XionWei Xiao was previously sentenced to time-served followed by three years’ supervised release, and the restitution described above.

The defendants pleaded guilty to conspiring to illegally import sea cucumbers. Zhao also pleaded guilty to smuggling (18 U.S.C. §§ 371, 545).

Between May 2017 and February 2019, Zhao and Xiao conspired to illegally import sea cucumbers, a species protected under Appendix III of the Convention on International Trade in Endangered Species, without the appropriate permits and documentation.

In May 2017, authorities stopped Zhao at the Calexico Port of Entry, where he was attempting to smuggle 11.50 kilograms of sea cucumbers into the United States. In February 2019, Zhao was stopped once again with 2 kg of undeclared sea cucumbers. Between 2017 and 2019, Zhao and Xiao exchanged messages and photos as proof for Xiao of each shipment Zhao smuggled into the United States. Using a calculation of $435 per kilogram, the court determined the total fair market value of the trafficked sea cucumbers to be $10,222.

The U.S. Fish and Wildlife Service Office of Law Enforcement, Homeland Security Investigations, and Customs and Border Protection conducted the investigation.

United States v. Emanuele Palma, et al., No. 19-CR-20626 (E.D Mich.), ECS Senior Litigation Counsel Todd Gleason, Criminal Division Fraud Section ASC Michael O’ Neill, White Collar Unit Chief John K. Neal, AUSA Timothy J. Wyse, and ECS Law Clerks Maria Wallace and Amanda Backer

On November 14, 2023, a court sentenced Emanuele Palma to one day time served. Because he is removable from the United States and has agreed to self-remove to Italy (where he lives and works), Palma was not given a term of supervised release. He was not ordered to pay a fine due to his financial condition.

Palma pleaded guilty to conspiring to violate the Clean Air Act (CAA). Palma and others conspired to withhold information from the United States Environmental Protection Agency regarding the design, calibration, and function of the emissions control systems on more than 100,000 Model Year 2014, 2015, and 2016 Jeep Grand Cherokee and Ram 1500 diesel vehicles, and about these vehicles’ emission of pollutants, fuel efficiency, and compliance with U.S. emissions standards.

Beginning at least as early as 2010, FCA US developed a new 3.0-liter diesel engine for use in FCA US’s Jeep Grand Cherokee and Ram 1500 vehicles (the Subject Vehicles) that would be sold in the United States. Palma, Sergio Pasini, and Gianluca Sabbioni, purposely calibrated the emissions control functions of several “clean diesel vehicles” to produce lower NOx emissions under conditions when the subject vehicles would be undergoing testing on the federal test procedures, referred to as driving “cycles,” and higher NOx emissions under conditions when the subject vehicles would be driven in the real world. Palma and his co-conspirators employed “cycle beating” to achieve best-in-class fuel efficiency and make the subject vehicles more attractive to FCA’ s potential customers, i.e., by increasing fuel economy and reducing the frequency of a required emissions control system service interval.

Pasini and Sabbioni await extradition on the charge of conspiracy to defraud the United States and to violate the CAA and six CAA counts.

In August 2022, a court sentenced FCA US, LLC, to pay a $96,145,784 fine; a forfeiture money judgment of $203,572,892; and complete a three-year term of probation.

The Federal Bureau of Investigation and the U.S. Environmental Protection Agency Criminal Investigation Division conducted the investigation.

United States v. Matanuska Diesel, LLC, et al, No. 3:23-CR-00109 (D. Ak.), AUSA Jennifer Ivers and RCEC Karla Perrin

On November 14, 2023, prosecutors charged Matanuska Diesel, LLC, company owner Mackenzie Spurlock, and former co-owner Brendan Trevors, with conspiracy to violate the Clean Air Act (18 U.S.C. § 371), and multiple substantive violations of the Clean Air Act tampering provision (42 U.S.C. § 7413(c)(2)(C)).

Between July 2020 and June 2022, the defendants removed air pollution control equipment and tampered with federally mandated monitoring devices on diesel vehicles. The process of removing emissions control systems and reprogramming a vehicle’s onboard diagnostic system is known as “deleting” and “tuning.” These unlawful modifications result in a significant increase in pollutants emitted by the vehicle.

The U.S. Environmental Protection Agency Criminal Investigation Division conducted the investigation.

United States v. Sinister Mfg. Company, Inc., No. 2:23-CR-00168 (E.D. Calif.), ECS Senior Counsel Kris Dighe, ECS Trial Attorney Stephen Foster, and AUSA Katherine Lydon

On November 14, 2023, a court sentenced Sinister Mfg. Company, Inc. (Sinister), to pay a $500,000 fine and complete a three-year term of probation. The company pleaded guilty to conspiring to violate the Clean Air Act (CAA) and defraud the United States, and to violating the CAA by tampering with a monitoring device (18 U.S.C. § 371; 42 U.S.C. § 7413 (c)(2)(C)). The company will also comply with the terms of a civil consent decree.

Between 2010 and April 2020, Sinister manufactured and sold parts for use with primarily diesel trucks, to enable “deleting” the trucks’ emissions controls systems by removing or disabling them. Sinister often sold its products as part of “delete kits,” sometimes bundled with “delete tunes.”  The delete tunes were software produced by another company which could alter a diesel truck’s on-board computer to allow a truck with its emissions controls “deleted” to appear to run normally. Through its employees, Sinister reached agreements with other companies that manufactured tuners or tuning platforms to sell their products bundled together.

Though the company sometimes labeled its delete products for “racing” and included disclaimers in marketing materials indicating that its products should be used only in off-road settings, the company knew that most of its delete products were purchased by diesel truck drivers who used those products on public roads, not racetracks.

The U.S Environmental Protection Agency Criminal Investigation Division conducted the investigation with assistance from the Federal Bureau of Investigation.