United States v. Lucas, 516 F.3d 316 (5th Cir. 2008).

Sarah Spigener, 3L, University of Mississippi School of Law

In February, the Fifth Circuit Court of Appeals upheld the convictions of Robert Lucas, Jr., Robbie Lucas Wrigley, and M.E. Thompson, Jr. for Clean Water Act violations, conspiracy, and mail fraud. Lucas, Wrigley, and Thompson sold uninhabitable mo­ bile home lots in Vancleave, Mississippi after misrepresenting the wetland characteristics of the lots and improperly certifying the septic tanks, many of which later failed.

Background
Robert Lucas, Jr., through his companies Big Hill Acres, Inc. (BHA, Inc.) and Consolidated In­ vestments, Inc., bought a large tract of land in Jackson County, Mississippi which he called Big Hill Acres (BHA). The property was subdivided for development as mobile home lots that would be sold under long-term installment plans. Lucas’ daughter, Robbie Lucas Wrigley, was in charge of advertising and selling the lots.

Since the property was not connected to a municipal waste system, Jackson County law required Lucas to install individual septic systems on each lot. Prior to sale, the septic systems must be certified by an engineer with the Mississippi Depart­ ment of Health (MDH) or an independent licensed engineer. Lucas ran into trouble almost immediately. Lucas’ first engineer, who worked for MDH, discovered the lots were on saturated soils and the agency withdrew its preliminary approvals. Lucas subsequently hired M.E. Thompson, Jr., a private licensed engineer, to approve the systems.

In 1997, Lucas received a letter from the MDH ordering him to cease and desist from installing septic tanks that did not comply with state and federal statutes. Letters from the Army Corps of Engineers (Corps) and the Environmental Protection Agency (EPA) instructed Lucas to end the unpermitted filling of wetlands in 1999. When Lucas failed to comply, the federal government filed indictments against Lucas, the companies, Thompson, and Wrigley (collectively, the “Defendants”) alleging violations of the Clean Water Act (CWA) A7 404 (dredge and fill) and A7 402 (NPDES program), mail fraud, and conspiracy to commit mail fraud and to violate the CWA.

The jury convicted the Defendants on all charges. Lucas was sentenced to 108 months of imprisonment, a fine of $15,000, and three years probation. Thompson and Wrigley were each sentenced to 87 months of imprisonment, a fine of $15,000, and three years probation. BHA, Inc. was fined $4.8 million and Consolidated Invest­ ments, Inc. was fined $500,000. Moreover, both companies were sentenced to five years probation. An additional $1,407,400 in restitution was assessed against each defendant. The Defendants appealed their convictions to the Fifth Circuit.

Clean Water Act
One of the Defendants’ primary arguments was that there was insufficient evidence to establish jurisdiction over the property under the CWA. The CWA grants the Corps and EPA jurisdiction over the “waters of the United States” or navigable waters. Wetlands adjacent to navigable waters qualify as “waters of the United States.”1 The jurisdictional reach of the CWA was most recently addressed by the Supreme Court in Rapanos v. U.S.2 A four-justice plurality defined waters of the U.S. as “relatively permanent, standing or flowing bodies of water” and wetlands with “a continuous surface connection” to such waters.3 Justice Kennedy, in a concurring opinion, argued that jurisdiction is only proper if there is a “significant nexus” between a wetland and a traditional navigable water.4 A significant nexus can be determined by investigating whether “wetlands, alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other covered waters more readily understood as navigable.”5

The Fifth Circuit concluded that the evidence presented at trial was sufficient to prove jurisdiction under either of the above tests. First, the plurality was satisfied because there was “flowing open water” on portions of the property and “a continuous band of wetlands and streams and creeks that lead from the site to [the navigable] Tchoutachabouffa River, the Pascagoula River, and the Mississippi Sound.”6 The court also determined that Justice Kennedy’s test was satisfied because the BHA wetlands control flooding in the area and prevent pollution in downstream waters.

NPDES Permitting
The Defendants also argued that their convictions for violations of A7 402 were improper because they were not required to obtain National Pollutant Discharge Elimination System (NPDES) permits for the septic tanks. The CWA requires permits for the discharge of pollutants from point sources into waters of the U.S. “Point sources” are defined as “any discernible, confined, and discrete conveyance85from which pollutants are or may be discharged.”7 Owners or operators of treatment works treating domestic sewage must meet additional sewage sludge requirements.8 Septic systems are excluded from the definition of “treatment works.”9 The Defendants claimed that the exclusion of septic systems from the sewage sludge requirements excluded septic systems from the entire NPDES program. The Fifth Circuit disagreed. The exclusion of septic systems from the additional sewage sludge requirements does not necessarily mean they are not a point source. In this case, the BHA septic systems are containers that discharge pollutants due to improper installation. The court held there was sufficient evidence to support a finding that the septic systems were point sources subject to NPDES permitting.
       
Mail Fraud and Conspiracy
The Defendants also appealed their convictions for mail fraud and conspiracy. A conviction for mail fraud requires: (1) a scheme to defraud; (2) use of the mails to execute that scheme; and (3) the specific intent to defraud.10 The court concluded that there was clearly a scheme to defraud the buyers. First, the Defendants advertised the lots as “2 Acres – High & Dry land, [with] well, septic & power pole”11 when the lots were obviously not “high and dry.” The Defendants then used the mail to receive payments and send receipts for the fraudulent sales. The government presented sufficient evidence to support a conviction for mail fraud. The Fifth Circuit also upheld the Defendants’ convictions for conspiracy.

Conclusion
This case clarifies that developers should not take the advice or warnings of the EPA, the Corps, or state agencies lightly. Felony convictions do sometimes result from violation of federal and state environmental laws, especially when there is also evidence of other criminal activity such as fraud.

Endnotes
1.   See, U.S. v. Riverside Bayview Homes, Inc., 474 U.S. 121 (1995).
2.   547 U.S. 715 (2006).
3.   Id. at 742.
4.   Id. at 759.
5.   Id. at 780.
6.   United States v. Lucas, 516 F.3d 316, 326 (5th Cir.  2008).
7.   40 C.F.R. A7 122.2.
8.   Id. A7 122.1(b)(2).
9.   Id. A7 122.2.
10. Lucas, 516 F.3d at 339.
11. Josh Clemons, Trio Convicted in Big Hill Acres Case: Long-Suffering Residents See Justice Done, Water Log 25:1 at 6 (May 2005).