Three and one-half years after the inception of its retooled Voluntary Disclosure Program, EPA has proposed some slight improvements. Most noteworthy, the Agency is attempting to alleviate concerns that the 10-day disclosure deadline prevents companies from effectively identifying the scope of compliance problems before disclosing.
This tension between “prompt versus thorough” disclosure has left companies with the Hobson's choice: (1) disclose on time but face criticism (and even dismissal from the Program) later on for providing an incomplete disclosure; or (2) take more than 10 days to perform the internal investigation required to make a thorough disclosure but face criticism (and even denied entry into the Program) for failure to disclose on time. EPA proposes extending the disclosure deadline to 21 days in an effort to resolve the problem.
This significant improvement aside, most of the regulated community's major concerns with the Program remain. Three and one-half years into the new Program, there continues to be little concrete basis upon which to judge the Program, as meaningful information on the many cases that have failed to satisfy Program requirements is not readily available. EPA proclaims that, as of March 1999, 470 companies have disclosed violations at more than 1,880 facilities, resulting in reduced or waived penalties for 166 companies at 936 facilities. While many of the unaccounted for 470 companies and 1,880 facilities are still under consideration, a significant number have failed to satisfy program requirements. By comparison, most other federal voluntary disclosure programs (such as the Department of Defense program for disclosing contracting fraud) boast a near 100% acceptance rate and, more importantly, provide instructive information about the few cases that fail to satisfy program requirements. This is not to say that EPA's approval rate must approach 100% for the Program to be a success; rather, the Agency simply needs to communicate more clearly the bases for denying companies access to the Program so that the regulated community can more completely understand the ground rules.
Furthermore, individuals remain completely unprotected under the Program. In fact, the Program almost certainly assures that they are more vulnerable than ever. Not only are individuals still subject to criminal prosecution under the watered down standard of “knowing” (and even “negligent”) conduct, but they are likely to be subject to intense scrutiny because of the extensive disclosures and waivers of privilege often required of the company under the Program's all too vague condition of “cooperation.” Again, this is not to suggest that individuals should never be prosecuted, but rather that the standard for referring criminal cases against individuals should parallel the heightened standard of intent (“willful” conduct) that applies to the disclosing company. Such protections for individuals exist under at least one other federal voluntary disclosure program, DOJ's antitrust program. (Indeed, the Program's failure to address individuals remains a bit of mystery. While, from a short-term perspective, it may greatly bolster the government's ability to build criminal cases, the long-term effects may be devastating. As the trend of giving companies penalty breaks in exchange for deputizing them against their own employees plays out, the ability of companies to carry out meaningful compliance audits and internal investigations in the future will rapidly diminish. As a result, the ability of the company to identify and correct compliance problems will actually regress, and the ability of the government to effectively investigate potential violations will necessarily suffer.)
In addition, as already mentioned, EPA's condition of company “cooperation” remains largely undefined. This is particularly disconcerting in light of prominent U.S. Attorneys publicly stating that all corporate targets wishing to obtain credit for their “cooperation” must completely waive their attorney-client privilege.
Finally, there has also been significant confusion about what qualifies as a “voluntary” disclosure, particularly in the context of disclosures by companies with multiple facilities and a wide variety of environmental compliance issues. In other words, if a triggering event (i.e., government investigation, third party claim, whistleblower report, etc.) has already occurred at one facility concerning a particular environmental problem, what types of environmental violations can the company “voluntarily” disclosure at other facilities?
Now that EPA has the comments of the regulated community in hand, we will hopefully know shortly whether more answers are on the way.
This significant improvement aside, most of the regulated community's major concerns with the Program remain. Three and one-half years into the new Program, there continues to be little concrete basis upon which to judge the Program, as meaningful information on the many cases that have failed to satisfy Program requirements is not readily available. EPA proclaims that, as of March 1999, 470 companies have disclosed violations at more than 1,880 facilities, resulting in reduced or waived penalties for 166 companies at 936 facilities. While many of the unaccounted for 470 companies and 1,880 facilities are still under consideration, a significant number have failed to satisfy program requirements. By comparison, most other federal voluntary disclosure programs (such as the Department of Defense program for disclosing contracting fraud) boast a near 100% acceptance rate and, more importantly, provide instructive information about the few cases that fail to satisfy program requirements. This is not to say that EPA's approval rate must approach 100% for the Program to be a success; rather, the Agency simply needs to communicate more clearly the bases for denying companies access to the Program so that the regulated community can more completely understand the ground rules.
Furthermore, individuals remain completely unprotected under the Program. In fact, the Program almost certainly assures that they are more vulnerable than ever. Not only are individuals still subject to criminal prosecution under the watered down standard of “knowing” (and even “negligent”) conduct, but they are likely to be subject to intense scrutiny because of the extensive disclosures and waivers of privilege often required of the company under the Program's all too vague condition of “cooperation.” Again, this is not to suggest that individuals should never be prosecuted, but rather that the standard for referring criminal cases against individuals should parallel the heightened standard of intent (“willful” conduct) that applies to the disclosing company. Such protections for individuals exist under at least one other federal voluntary disclosure program, DOJ's antitrust program. (Indeed, the Program's failure to address individuals remains a bit of mystery. While, from a short-term perspective, it may greatly bolster the government's ability to build criminal cases, the long-term effects may be devastating. As the trend of giving companies penalty breaks in exchange for deputizing them against their own employees plays out, the ability of companies to carry out meaningful compliance audits and internal investigations in the future will rapidly diminish. As a result, the ability of the company to identify and correct compliance problems will actually regress, and the ability of the government to effectively investigate potential violations will necessarily suffer.)
In addition, as already mentioned, EPA's condition of company “cooperation” remains largely undefined. This is particularly disconcerting in light of prominent U.S. Attorneys publicly stating that all corporate targets wishing to obtain credit for their “cooperation” must completely waive their attorney-client privilege.
Finally, there has also been significant confusion about what qualifies as a “voluntary” disclosure, particularly in the context of disclosures by companies with multiple facilities and a wide variety of environmental compliance issues. In other words, if a triggering event (i.e., government investigation, third party claim, whistleblower report, etc.) has already occurred at one facility concerning a particular environmental problem, what types of environmental violations can the company “voluntarily” disclosure at other facilities?
Now that EPA has the comments of the regulated community in hand, we will hopefully know shortly whether more answers are on the way.