GPSolo Magazine - September 2004
Preventing an Environmental Violation from Becoming a Criminal Case
An environmental violation can provoke a wide range of responses from the government, ranging from a notice of violation to a criminal prosecution. If a violation becomes the subject of a criminal investigation or prosecution, the impact on a business can be dire. How does the government choose cases for criminal investigation and prosecution? What steps can companies take to avoid becoming the target of a criminal case? The answers lie in how the government will view the company and its personnel post facto.
Investigative discretion: Deciding which case to pursue. The primary agency involved in the investigation of environmental crimes is the EPA’s Criminal Investigation Division (CID). EPA guidance directs agents to focus on violations causing “significant environmental harm,” which is defined by four factors:
• actual harm that has an identifiable and significant harmful impact;
• threat of significant harm by an actual or threatened discharge, release, or emission;
• failure to report an actual discharge, release, or emission, coupled with actual or threatened environmental harm; and
• a single violation that represents a “trend or common attitude within the regulated community.”
What do investigators really consider? A number of factors influencing investigative discretion will not be found in guidance documents. One, which many experienced investigators will concede is critical in determining how a case will be handled, is how a business responds to an investigation. For example, the absence of records sought by the government may be perceived as obstruction, and investigators always prefer to choose a case with evidence of such a “traditional” crime.
Another unnamed factor is whether a given violation falls within one of the areas that have been identified as an “initiative” by a federal agency, a local/state/federal task force, or the Justice Department’s Environmental Crimes Section. Criminal enforcement initiatives proactively target a specific category of environmental violation, such as the Justice Department’s recently announced hazardous materials transportation initiative. Businesses that are the first targets of these enforcement initiatives may be surprised, as law enforcement agencies are likely to announce the existence of an initiative only after the initial indictments have been handed down. Counsel for highly regulated businesses would be well advised to regularly visit the Justice Department and EPA websites to spot trends in the kinds of cases being brought.
Prosecutorial discretion: Choosing cases and determining a fair resolution. One important key to determining whether a prosecutor might take interest in a violation lies in the sentencing guidelines promulgated by the U.S. Sentencing Commission. Prosecutors consider the guidelines to determine what sanctions may be available if the matter is successfully prosecuted. They may also consider declining a case where a company has implemented a comprehensive program to prevent and detect violations of law. Under the existing guidelines, a culpable organization with an “effective program to prevent and deter violations of law” can earn credit to mitigate the penalties it would otherwise receive. But to earn the credit, the components of the compliance program must, at a minimum, meet the standards set forth in the guidelines.
Voluntary disclosures. Decisions about whether, when, and how to voluntarily disclose information about violations to environmental authorities can also have a significant impact upon whether a criminal prosecution is pursued. The Justice Department has a policy that is supposed to encourage companies to establish compliance programs and regularly audit their performance. Ideally, those whose compliance efforts lead to the discovery, disclosure, and correction of misconduct should not be prosecuted in a way that creates a disincentive to implement compliance and audit programs. Among the factors the department will consider are: whether the company’s disclosure was voluntary, timely, and complete; whether the disclosure was made promptly after discovery of the noncompliance; whether the information provided was of sufficient quantity and quality; whether the disclosure substantially aided the government in its investigation; and whether the disclosure occurred before an investigation had already uncovered noncompliance.
A company’s full and prompt cooperation in an investigation has long been given consideration in a determination of whether to prosecute a matter criminally. Elements taken into account include the violator’s willingness to make all relevant information available to the government and the violator’s willingness, “in appropriate circumstances,” to waive attorney-client privilege or provide attorney work product.
Sarbanes-Oxley and new areas of concern. The Sarbanes-Oxley Act creates new liabilities affecting record retention policies and personnel practices that are not limited to the enforcement of securities regulations and that are likely to arise in the context of environmental criminal investigations. Specifically, the law criminalizes the destruction of records regardless of whether there is a pending governmental inquiry at the time the records are destroyed—and even if the documents are destroyed in accordance with an otherwise appropriate document retention program. The obstruction of justice provision allows the government to prosecute an individual for the destruction of documents prior to the existence of an investigation or any official proceeding. Thus, it is now a crime to destroy records “in relation to or in contemplation of any” matter within the jurisdiction of any federal agency.
Sarbanes-Oxley also contains protections for whistle-blowers, creating a felony for anyone who takes retaliatory action against an employee who provides law enforcement with information relating to the commission of any federal offense. In addition, the whistle-blower provisions in Sarbanes-Oxley should spur a close examination of the employee-reporting aspects of any company’s environmental compliance program. It is a felony for any person to cause another to face retaliation for providing information “relating to the commission or possible commission of any Federal offense.” These provisions make it critical for companies to avoid accusations of retaliation against those who complain by implementing effective systems to allow employees to report concerns about compliance issues.
The broad and seemingly still-growing reach of corporate criminal liability for the acts of employees gives investigators and prosecutors tremendous discretion in determining when they will use criminal sanctions for environmental law violations. When looking at a regulatory violation, investigators and prosecutors are often said to seek the “emblems of criminality”—referred to as “lying, cheating, and stealing”—that move a case from a violation to a possible criminal prosecution.
The best defense to this problem is a good offense based on the approaches highlighted above. These include updating existing compliance programs if there are changes in the guidelines. Businesses should review the EPA’s environmental management systems (EMS) guidance and be aware that the August 2002 revision to the guidance now suggests that companies integrate their environmental obligations with their increasing obligations related to homeland security. In response to the new criminal provisions contained in Sarbanes-Oxley, a compliance program should include both a strong records retention and creation program and an effective means for employees to communicate compliance concerns without fear of retaliation. Given the way investigators and prosecutors will scrutinize responses to government inquiries for signs of a “guilty mind,” businesses should have procedures in place to respond calmly, efficiently, and effectively to unexpected government investigation, such as the execution of a search warrant or the receipt of a grand jury subpoena.
Steven P. Solow is a partner with Hunton & Williams in Washington, D.C. He can be reached at email@example.com.
for more information about the Section of Environment, Energy, and Resources
- This article is an abridged and edited version of one that originally appeared on page 19 of Natural Resources & Environment, Spring 2004 (18:4).
- For more information or to obtain a copy of the periodical in which the full article appears, please call the ABA Service Center at 800/285-2221.
- Website: www.abanet.org/environ/.
- Periodicals: Natural Resources & Environment, quarterly magazine; Trends, bimonthly newsletter; The Year in Review, annual summary of legal developments.
- Books and Other Recent Publications: Clean Air Act Handbook, 2d ed.; RCRA Practice Manual, 2d ed.; and the Basic Practice Series with titles including FERC, RCRA, CERCLA, EPCRA, Clean Air Act, ESA, FIFRA, and TSCA.