Businessweek Archives

The First Family Of Pollution


People: DYNASTIES

THE FIRST FAMILY OF POLLUTION

Has the U.S. put the waste-hauling Franks out of business?

The business world has produced few dynasties as perverse as the Franks of New York City. Call them America's first family of water pollution. For 25 years, Frank-owned companies have defied environmental regulators. Time and again, the family's waste-hauling and processing companies were cited, enjoined, and even convicted--but they kept right on polluting. "If you ask me, the Franks are the worst polluters in the history of the United States," says Guy I. Molinari, borough president of Staten Island, a longtime Frank foe.

For years, matriarch Evelyn Berman Frank, 81, commanded the family's tugboats and barges by shortwave radio from her Staten Island home. She became known as "the Dragon Lady" for her belligerence and salty tongue, which could be heard by all who plied the New York waterways. Mrs. Frank, who inherited the marine transport empire her father built up in the 1920s, liked the nickname so much she named one of her tugs Dragon Lady. In time, she was followed into the business by her three children. Although better educated and more refined than their mom, Peter, now 52, Jane, 49, and Susan, 43, compiled a poor compliance record in their own right.

It appears, however, that the federal government has finally slipped a choke hold on the Franks. In late September, a U.S. district court judge in Puerto Rico imposed a $75 million fine on three Frank companies that were convicted last spring of two felonies in connection with a massive 1994 oil spill off San Juan. According to one Justice Dept. prosecutor, this is the largest criminal fine in the history of environmental law. After Peter Frank, the highest officer of the companies convicted in Puerto Rico, failed to appear for sentencing, he was cited for contempt of court and briefly jailed.

In Brooklyn, meanwhile, Jane Frank Kresch and Susan Frank Stamell face sentencing on Nov. 18 on a fraud conviction stemming from the dumping of sewage sludge in New York Harbor by another Frank company. Prosecutors are seeking a minimum of two-and-a-half years in jail for the sisters, who were found to have ordered employees to falsify records to conceal the dumping. Peter Frank was acquitted of the same charges.

The convictions in Brooklyn and San Juan constitute "the most successful environmental prosecution in a long time, especially since the Franks have been able to do pretty much what they want," says Faith E. Gay, an assistant U.S. Attorney for New York's Southern District. Gay makes no secret of the Justice Dept.'s goals: "We want to put them out of business for good and also send a message to others that you can't just treat pollution as a cost of doing business without risking a jail term."

Gay's declaration of victory is a bit premature. The Franks already have filed a notice of appeal in Puerto Rico, and Gerald B. Lefcourt, a noted New York trial attorney who recently signed on as Mrs. Kresch's lawyer, says she is likely to appeal once sentence has been passed. "There are numerous grounds for appeal," he says.

Like her sister, Mrs. Stamell would not comment on her conviction. She is now representing herself, with the help of her husband, Jared Stamell, a Harvard-trained lawyer. The Frank sisters were previously represented by Michael F. Armstrong, a star litigator for Kirkpatrick & Lockhart of New York. After their conviction, a judge granted Armstrong's request to fire his clients for nonpayment. According to Kirkpatrick & Lockhart's court filings, the sisters owe the firm more than $2.7 million.

OUTSPOKEN. Jared Stamell, who filed for personal bankruptcy earlier this year, says he is owed money for legal advice he provided to Frank family companies. He says he hasn't spoken to his brother-in-law Peter for a year-and-a-half, and seems surprisingly uninformed about his wife's legal intentions. "She hasn't told me what she's going to do," he says, while implying that he favors appealing any jail sentence. "After all, she is the mother of four children."

The Stamells' children range in age from 2 to 13; the younger ones appeared frequently at their mother's side during her long trial, in what appeared to be a classic bid for sympathy. But both Frank sisters were outspoken during the proceedings, at times intemperately so. "I think they come across as histrionic," says a source in the U.S. Attorney's office. "But they are both good-looking and well-dressed and can be quite charming, and that gave us some concern going in."

As heirs to a multimillion-dollar fortune, Peter, Jane, and Susan Frank enjoyed a privileged upbringing and initially seemed well-positioned for success in their own right. Peter graduated from Harvard Law School. Susan was just 31 when Mayor Edward I. Koch appointed her New York's commissioner of ports and terminals in 1983, a post she held until 1985. She and Stamell settled into a Park Avenue brownstone. Jane Frank married a doctor and took up residence in even fancier Park Avenue digs.

Today, the siblings preside over a shriveled remnant of the empire founded by their grandfather. The worst environmental offender among the Frank companies, Standard Tank Cleaning Corp. of Bayonne, N.J., was liquidated by court order in 1994 after a judge concluded it was beyond rehabilitation. First Marine Shipyard has been operating under Chapter 11 for five years, as has New England Marine Services, one of the companies convicted in Puerto Rico. In recent years, the Frank fleet has shrunk from about 30 vessels to 9.

The marine transport industry has been waning for years, but testimony given in Puerto Rico suggests the siblings may have accelerated their companies' decline by diverting corporate funds for their own use, beginning in 1987. "The Franks would take cash out of company funds, and these `draws' would be recorded by bookkeepers," U.S. Magistrate Aida M. Delgado-Colon found in a 1995 opinion. "At the end of the year, the bookkeepers would total up the draws and record them as loans or expenses or simply write them off." Lawyers for the Franks did not respond to this allegation in court, and Peter Frank did not respond to a request for an interview.

CARROTS. All along, the Franks were embroiled in disputes with environmental regulators. For more than two decades, state and federal officials fought a running battle with Standard Tank over unauthorized discharges of untreated wastes, including toxic heavy metals, into the harbor. But while regulators were ineffectually taking a stick to Standard Tank, municipalities throughout New Jersey and New York were handing the Franks carrots in the form of million-dollar contracts to haul sewage sludge to a federally authorized dumping site 106 miles off Cape May, N.J.

The first criminal prosecution of the Franks themselves came in 1989, when a New Jersey grand jury charged Evelyn Frank and five employees with having dumped sewage sludge in inland waterways at least 25 times during 1987-8, thus saving the expense of the 48-hour round-trip to the ocean dump. Mrs. Frank insisted she had never told any employee to dump sludge. But tugboat captain George Malonn told a grand jury that Mrs. Frank had ordered crews to complete their task in 12 hours. Mrs. Frank pleaded guilty to one felony and agreed to withdraw from management of the family business. "I can only tell you we're living in Nazi Germany," she told The New York Times shortly before her sentencing. "I have a reputation in this business that's absolutely flawless."

Mrs. Frank got a suspended five-year sentence, but later was imprisoned for nine months for violating her probation by making unauthorized trips to West Palm Beach, Fla., and failing to sever all her ties to the business. In January, she was released from the Edna Mahan Correctional Facility for Women in Clinton, N.J.

Despite her indictment, municipalities continued to hire the Franks. Sludge hauling is not exactly a glamour business, and municipal officials apparently feared that if the Franks closed up shop, no operator would fill the void.

Meanwhile, Frank vessels continued to transport large quantities of waste oil around New York Harbor. Over the years, several of their barges came to catastrophic ends--among them, a striking number named for family members. In 1980, an explosion and fire aboard the Peter Frank killed an employee. In 1984, the Lindsey Frank II exploded, killing a tankerman. In 1990, the Sarah Frank went down at the family's shipyard on Staten Island, spilling an estimated 50,000 gallons of oil.

FIGHTING BACK. As was his custom, Borough President Molinari rushed to the scene. "We've had many spills over the years, and I'd always been given wonderful cooperation by everyone involved--except the Franks," he recalls. When Molinari arrived at the Frank facility, he found the gates padlocked. Not until TV cameras arrived did Peter Frank admit him. "He told me his version of what happened, and then the Coast Guard captain came and gave an account totally at odds with what Frank had just told me," Molinari recalls. Within a month, New York State summarily revoked the licenses of all 19 Frank barges operating locally.

The Franks fought the state-mandated shutdown, but by 1992 they had effectively been expelled from New York Harbor. So they redeployed their remaining fleet along the Atlantic seaboard from Boston to San Juan. Now more than ever, policing the Franks was a federal matter. And when the improperly repaired towing cable securing the Nathan Berman snapped one night in 1994, causing the barge to crash into a coral reef off San Juan and spill its entire 750,000-gallon cargo into the sea, the Justice Dept. had an ideal opportunity to nail the Franks.

All $19.1 million in known Frank assets have been frozen by court order, and with the Puerto Rico conviction in hand, the U.S. attorney's office can start searching for additional hidden assets. If the $75 million fine is upheld, the Franks will probably be stripped of all they own. The tale of the polluting Franks of New York City is a horror story too long by half, but it appears to be nearing its conclusion at last.By Anthony Bianco in New YorkReturn to top


Ebola Rising
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus