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United States v. WRW Corp.

Citation: 23 ELR 21252
No. No. 91-6253, 986 F. Supp. 138/(6th Cir., 02/17/1993)

The court holds three officers and directors of a dissolved corporation, all of whom have been criminally prosecuted and one of whom is bankrupt, personally liable for a civil penalty assessed against the corporation for violations of the Federal Mine Safety and Health Act. The court first holds that imposition of the civil penalty does not violate double jeopardy. Congress intended the penalty to be civil, rather than criminal, and the penalty satisfies the requirements that it not involve an affirmative disability or restraint, has not been historically regarded as a punishment, does not require a finding of scienter, is not coextensive with the criminal provisions regarding the same activities, may readily be ascribed to the remedial purpose of promoting mine safety, and is not excessive in relation to the expenses the federal government incurred. The court holds that it is appropriate to pierce the corporate veil to recover the penalty from the individual defendants after the corporation went out of business. The corporation was undercapitalized and failed to observe corporate formalities, and defendants commingled their money with that of the corporation and guaranteed its liabilities in their individual names. That the corporation never distributed any dividends to defendants and the absence of evidence that they siphoned off corporate funds do not mitigate against piercing the corporate veil. The court also holds that the subsequent bankruptcy of one of the defendants does not act to discharge his liability for the penalty. The penalty is a "penalty" under Bankruptcy Code § 523(a)(7), which may not be discharged unless it is compensation for actual pecuniary loss. Although the penalty at issue is rationally related to the goal of making the federal government whole by approximately compensating it for its investigative and prosecutorial expenses, it does not compensate for actual pecuniary loss.

Counsel for Plaintiff-Appellee
David Middleton, Ass't U.S. Attorney
U.S. Attorney's Office
Federal Bldg., Limestone & Barr Sts.
P.O. Box 1490, Lexington KY 40591
(606) 233-2661

Counsel for Defendants-Appellants
Stephen M. Miller
150 Second Ave. N., Ste. 400, Nashville TN 37201
(615) 255-4447

Before: GUY and NORRIS, Circuit Judges; and PECK, Senior Circuit Judge.