On December 2, 1995, the U.S. EPA issued its final policy on "Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations." This Audit Policy made three primary benefits available to entities that make disclosures under the terms of the Policy:
- eliminating and/or reducing gravity-based civil penalties;
- declining to recommend criminal prosecution;
- refraining from routine audits.
After five years of practice, the Audit Policy along with a Small Business Policy (100 or fewer employees) was recently revised and became effective on May 11, 2000. The key revisions include:
- lengthening the amount of time from 10 to 21 days that entities have to disclose a violation after discovery;
- clarifying that a facility may qualify for audit policy credit even if another facility owned or operated by the same parent organization is already subject to and inspection, investigation, or information request for U.S. EPA;
clarifying how prompt disclosure and repeat violations apply to newly acquired companies.
How does the program work?
The audit policy is complex because it must appease the objectives of three separate contingents; corporations, interest groups, and the EPA. Furthermore, individuals having only a conceptual understanding of the policy's intent may erroneously assume that entities can be exculpated. For example, in order for a company to be eligible for full penalty mitigation nine conditions must be met. The policy does not protect against civil enforcement (toxic torts) from interest groups, other harmed parties and/or state and local governments.
Furthermore, companies should not expect the EPA to act credulously when reviewing voluntary disclosure requests. The agency maintains a fiduciary responsibility to protect the environment and ensure a "level playing field" for law-abiding competitors. Therefore, any economic gain realized by a company during a period of noncompliance cannot be mitigated under the terms of the audit policy, only gravity-based penalties can be reduced. Gravity-based penalties reflect the violator's egregious behavior and constitute the punitive portion of the penalty.
Although there is some protection from criminal prosecution within the policy, our multifaceted legal system can lead even the most environmentally conscientious companies to be hesitant when considering methods of disclosure. In accordance with the EPA's Investigative Discretion Memo dated January 12, 1994, the EPA generally does not focus its criminal enforcement resources on entities that voluntarily discover, promptly disclose and expeditiously correct violations, unless there is potentially culpable behavior that merits criminal investigation. However, while the EPA may not recommend criminal prosecution for disclosing entities, ultimate prosecutorial discretion resides with the U.S. Department of Justice, which will be guided by its own policy on voluntary disclosure and by its 1999 Guidance on Federal Prosecutions of Corporations.
The nine conditions that a company must meet prior to a company being eligible for the full incentive provided in the policy are as follows:
1. The entity must uncover the violations through a systematic discovery provided by an environmental audit or a compliance management system. In order for this condition to be met a series of activities primarily consisting of written processes and procedures for continuous compliance monitoring, auditing, internal enforcement with disciplinary mechanisms and procedures for prompt correction must be completed.
2. The violation must have been identified voluntarily, and not through a monitoring, sampling, or auditing procedure that is required by statue, regulation, permits, judicial or administrative orders, or consent agreement.
3. Prompt disclosure in writing to the EPA within 21 calendar days from the date an employee or agent of the facility has an objectively reasonable basis for believing that a violation has, or may have, occurred.
4. Discovery and disclosure must be independent of government or third-party plaintiff.
5. The entity must remedy any harm caused by the violation and expeditiously certify in writing to the appropriate Federal, State, and local authorities that it has corrected the violation.
6. Steps must be taken to prevent recurrence.
7. Under the repeat violations exclusion, the same or a closely-related violation must not have occurred at the same facility within the past three years.
8. Policy benefits are not available for serious actual harm to the environment.
9. The regulated entity must cooperate as required by EPA and provide information as requested.
Despite the administrative burden designed into the policy, use of the program has been widespread. As of October 1, 1999, approximately 670 organizations had disclosed actual or potential violations at more than 2700 facilities.