TROUBLE HAS DOGGED ESCO MARINE'S RICHARD JAROSS

(Ed.'s note: Following our post on the closing of Esco Marine shipbreakers at the Port of Brownsville, one of our four readers sent us this link to a Pulitzer Prize winning series into the industry published in 1997. We thank the contributor for remembering the series and include the link at the bottom of this excerpt to read the entire series.)

By Gary Cohn and Will Englund
Baltimore Sun Staff

When the U.S. Navy began its great sell-off of surplus ships in 1991, Richard Jaross was among the first to see an opportunity.

He began dismantling Navy ships at a California scrapyard, where workers were exposed to lead and asbestos. He came to Baltimore to help put together the ill-fated Coral Sea project. He then set up a scrapyard in Wilmington, N.C., but the state shut it down for mishandling asbestos, polluting a river and contaminating the soil with oil and lead.

Troubled history: "It's not like we're running around like wild men trying to break the law," says Richard Jaross. But his trail of legal problems is typical of the shipbreakers. (photo by Perry Thorsvik: Sun Staff)

Troubled histories, it turns out, are not uncommon among the shipbreakers to whom the Navy has entrusted its ships. Among the others are:
Andrew Levy: His company managed a maritime union retirement plan in the 1980s and lost more than $20 million, according to the U.S. Department of Labor. A federal court permanently barred him from managing private-sector benefit plans. He later became involved in the Coral Sea project and in a scrapping operation that was closed down in Rhode Island.

*Kreso Bezmalinovic: Before he got into shipbreaking, he pleaded guilty to paying off a government inspector. Later, he was convicted on federal fraud charges involving asbestos-abatement companies he controlled.

*Emilio Sanchez: A South Texas businessman with many interests, in 1994 he tried to negotiate in Mexico two stolen U.S. Treasury checks -- each made out to him for $10 million. Never prosecuted, he has bought the scrapping rights to several Navy ships since then.

*Kerry L. Ellis: The owner of a Baltimore company scrapping the Coral Sea, he tried to fool any inspectors who came around. Prosecutors finally caught up with him, leading to his conviction in May for mishandling asbestos and dumping oil and debris into the Patapsco River.

Kerry L. Ellis, owner of a Baltimore scrapping firm, was convicted of mishandling asbestos and dumping debris into the Patapsco River. (Sun Photo 1995)

The shipbreaking industry, which involves about a dozen key operators, has left a dismal record of spills, accidents, deaths, lawsuits, bankruptcies and indictments at ports across the country.

"The history of ship scrapping in the United States in the past five years has been terrible in all ways," said E. Grey Lewis, a former Navy general counsel. "The people involved in it are one-night stands. They've been indicted or they've had to flee the area. And, of course, the United States Navy is now on notice that these people are not obeying the law."

The negligence at the scrapyards has been abetted by the Navy's and Defense Department's lack of vigilance. There is virtually no meaningful monitoring of the shipbreaking industry. Prosecutors and regulators from a disjointed network of agencies sometimes have stumbled upon violations at individual scrapyards, but the Defense Department agency that administers
the scrapping program has done little to address its failings.
That agency, the Defense Reutilization and Marketing Service (DRMS), said it has raised standards for selecting scrappers. But critics say that is hardly enough.
In 1994, Jaross went to Wilmington, N.C., to scrap more Navy ships. He had promised to set up a model yard, but what he delivered was far different.

Emilio Sanchez, a South Texas businessman, bought scrapping rights to Navy ships; two men were killed on the project.(photo by Perry Thorsvik: Sun Staff)

One worker was killed, another seriously injured. A minesweeper sank. Asbestos, oil and lead contaminated the site. Oil spilled into the river.
It was next to impossible to keep track of the people and companies involved in the scrapping operation. Over two years, at least 16 companies and partnerships had a financial stake in the ships or the yard.

In July 1996, the state finally shut the operation, forcing the Navy to reclaim 12 ships. If it hadn't been for anonymous tipsters, state officials said, they never would have known of the problems at the yard. DRMS, the Defense agency, had turned up some of the violations, but it didn't alert the proper enforcement agencies.

"They sell a ship ... then all hell breaks loose," said F. Browne Gregg, whose company participated in a scrapping venture. "They literally lose control of the ship."
To read the rest of the article, click on link: http://www.pulitzer.org/archives/6146