Region 5 - Office of Regional Counsel

Introduction

Bertram C. Frey and Matthew J. Sanders

Introduction and Summary

This article serves a dual purpose. It seeks first to examine what the term "cooperation" means in several major federal policies, 24 state audit privilege/immunity laws, and 13 state self-disclosure policies and rules in existence as of February 1998. This synopsis, provided in table format to allow for easy comparisons, should prove useful to legal practitioners concerned with the issue of what constitutes cooperation with government agencies under those statutes, rules and policies. Secondly, in examining how cooperation is treated in each of those laws, rules, and policies, this article seeks to pose—but does not answer or even discuss—questions about what role cooperation with government agencies should play when a regulated entity self-discloses violations of environmental laws to those agencies, and how precisely the term should be defined in order to fulfill effectively the goals underlying the statutes, policies and rules. This article does not comment on the desirability of a particular cooperation definition or on the desirability of the environmental audit privilege/immunity laws, rules, and policies themselves.

TABLE I: Federal Policies

There are four federal policies which deal specifically with, or have strong implications for, environmental audits and disclosures.(1) All four of those policies make cooperation a necessary condition or factor to be considered before receiving some or all of the benefits they confer. The United States Environmental Protection Agency (EPA) Self-Disclosure and Criminal Implementation Policies explicitly define "cooperation," while the United States Department of Justice (DOJ) Criminal Prosecution Policy elaborates on the term and the EPA Small Business Policy offers no elaboration or definition. The extent of cooperation required by the policies is addressed but left largely undefined, leaving room for broad discretion and flexibility in applying the requirements or factors.

The EPA Self-Disclosure and Criminal Implementation Policies do not require that attorney-work product or attorney-client privilege information be submitted to the government in order to meet the "cooperation" requirement. The other two U.S. government policies do not address this question. While none of the policies addresses explicitly whether audit information or related material beyond the initial disclosure must be disclosed, all but the Small Business Policy address that issue in at least a broad manner. Again, except for the EPA Small Business Policy, each of the federal policies either explicitly or broadly addresses the question of whether "cooperation" must include access to one or more of the following: 1) all individuals who conducted the audit, 2) employees directly responsible for activities leading to the violations disclosed in the audit, 3) all employees of the disclosing facility, 4) all requested documents. The federal policies do not address whether a partial disclosure meets, at least in part, the requirements for "cooperation," but the DOJ Criminal Prosecution Policy does seem to offer some flexibility.(2) If, and how, cooperation applies differently in criminal, civil, and administrative contexts is not expressly addressed in the federal policies, except, of course, that the DOJ and EPA criminal policies are written specifically to apply in a criminal enforcement context. Likewise, only the Small Business Policy expressly examines how cooperation applies to small businesses.

TABLE II: State Audit Privilege/Immunity Laws

A total of 24 states have passed laws providing a qualified privilege for audit reports and associated documents and/or penalty immunity for violations for regulated entities which voluntarily disclose their violations.(3) Of those 24 laws, nine make cooperation a requirement or condition for receiving some or all of the benefits they confer,(4) but what they define as "cooperation" remains largely unclear. With the exception of Rhode Island,(5) those laws neither specifically define "cooperation" nor provide much information about the requirements of "cooperation" or whether it must include access to audit-related information and/or individuals.

For example, six of the laws broadly indicate that cooperation is required in connection with or regarding the "issues identified in the disclosure."(6) None of the laws addresses whether, as a requirement of cooperation, attorney-work product or attorney-client privileged material, or audit information or related material beyond the initial disclosure, must be disclosed. Similarly, most of the laws do not address whether cooperation includes access to the individuals who conducted the audit, the employees who may be directly responsible for the violations, all employees of the disclosing entity, and/or all requested documents.(7) None of the laws addresses the issue of to what extent a partial disclosure meets the requirements (if they are defined) for "cooperation." The laws also leave unanswered the question of how "cooperation" may apply differently in criminal, civil, or administrative enforcement contexts, or to small businesses.

TABLE III: State Audit Rules

Only one state, Oklahoma, has adopted an audit rule. It formerly had a policy, which was superseded when the rule was promulgated. Though with less force than a law, Oklahoma’s rule binds the Oklahoma Department of Environmental Quality to the procedures outlined in the rule. Oklahoma’s rule does include "cooperation" as a necessary condition for receiving some or all of the benefits that it confers, but there is little information provided as to a definition or applicability of "cooperation." In this regard, Oklahoma’s rule follows more closely the state laws than the state policies, the latter of which tend to be more explicit and specific about what they mean by "cooperation."

TABLE IV: State Self-Disclosure Policies

While only 12 states have adopted self-disclosure policies,(8) compared to 24 states with enacted audit privilege/immunity bills, all but two of these state policies—North Carolina and Washington—make "cooperation" a necessary condition for receiving some or all of the benefits they confer. In addition, nearly half of the policies that require "cooperation" with a government agency specifically define the term (by using a definition which is the same as, or very close to, that set forth in U.S. EPA’s Self-Disclosure Policy). Though there is a myriad of requirements and applications of "cooperation" in these nine state policies, they generally address more categories in the following tables, and do so more extensively, than most of the state laws.

For example, though the extent of cooperation required by these policies ranges from an undefined "full" (Delaware, Maryland) to access to all requested documents and assistance in investigations (California, Florida, Massachusetts), all those policies that require cooperation address this issue, if only cursorily. As for what must be disclosed to meet the requirement of cooperation, only California explicitly excludes attorney-work product and attorney-client privileged material. None of the policies expressly addresses whether information beyond the initial disclosure must be submitted to meet the "cooperation" requirement.(9) Many of the policies do address, however, whether cooperation must include access to certain individuals and documents. In six of the policies it is presumably the case that cooperation includes access to all the employees of the disclosing entity, including those employees directly responsible for the violation(s).(10) Five policies state explicitly that cooperation includes access to all requested documents,(11) while in another five policies this item is not addressed. No policy addresses whether or not cooperation must include access to all individuals who conducted the audit (particularly non-employees), or whether a partial disclosure of violations meets some or all of the requirements for cooperation. Only Delaware’s policy addresses the differing applications of cooperation in criminal, civil, and administrative contexts.(12) None of the policies addresses the issue of what "cooperation" means for small businesses.

Notes

1. Department of Justice Criminal Prosecution Policy, U.S. EPA Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations, U.S. EPA Policy on Implementation of EPA Self-Disclosure Policy in Criminal Cases, and U.S. EPA Policy on Compliance Incentives for Small Businesses.

2. See Table I, infra.

3. As of February 1998, Alaska (Alaska Stat. §§ 09.25.450-490 (1997)), Arkansas (Ark. Stat. Ann. §§ 8-1-301 to -312 (1997)), Colorado (Colo. Rev. Stat. § 13-25-126.5 and § 25-1-114.5 (1997)), Idaho (Idaho Code §§ 9-801 to -811 (1997)), Illinois (Ill. Ann. Stat. ch. 415 para. 5/52.2 (1997)), Indiana (Ind. Code Ann. §§ 13-28-4-2 to -10 (1997)), Kansas (K.S.A. §§ 60-3332 -3339 (1996)), Kentucky (Ky. Rev. Stat. Ann. §§ 224.01-040 (1996)), Michigan (Mich. Stat. Ann. §§ 13A.14801 -14809 (1997)), Minnesota (Minn. Stat. §§ 114C.20 -31 (1997)), Mississippi (Miss. Code Ann. § 17-17-29, § 49-2-2, § 49-17-43, § 49-17-427 (1997)), Montana (Mont. Code Anno. §§ 75-1-1201 to -1206 (1997)), New Hampshire (N.H. Rev. Stat. Ann. §§ 147-E:1 - 9 (1997)), New Jersey (N.J. Stat. Ann. §§ 13:1D-125 to -130 (1997)), Nevada (Nev. Rev. Stat. Ann. §§ 445C.020 -120 (1997)), Ohio (Ohio Rev. Code Ann. §§ 3745.70 -73 (1997)), Oregon (Or. Rev. Stat. §§ 468.961 -963 (1996)), Rhode Island (R.I. Gen. Laws §§ 42-17.8.1 -8 (1997)), South Carolina (S.C. Code Ann. §§ 48-57-10 to -110 (1997)), South Dakota (S.D. Codified Laws Ann. §§ 1-40-33 to -37 (1997)), Texas (Tex. Rev. Civ. Stat. Ann. art. 4447cc (1997)), Utah (Utah Code Ann. §§ 19-7-101 to -109 (1997)), Virginia (Va. Code Ann. §§ 10.1-1198 to -1199 (1997)), and Wyoming (Wyo. Stat. §§ 35-11-1105 to -1106 (1997)). Wyoming’s law also provides for immunity from injunctive relief.

4. The nine states with such laws are: Alaska, Colorado, Kansas, Mississippi, Montana, Ohio, Rhode Island, South Carolina, and Texas. It should be noted, however, that Virginia’s law includes a "bad faith" provision. See Table I, infra. "Cooperation" can either be a direct requirement (i.e., it is one of several conditions necessary for receiving privileges and/or immunity) or an indirect one (i.e., it is one condition needed to make a disclosure voluntary, and the voluntariness of a disclosure is one of the requirements for receiving the law’s benefits).

5. The definition of "cooperation" used in the Rhode Island law is the same as that used in U.S. EPA’s Self-Disclosure Policy. See note 14 in Table I, infra.

6. Rhode Island’s law is distinct from these six (but equally as broad) in that it requires cooperation "as requested by the Department," especially with regard to relevant information and individuals. See Table I, infra.

7. Rhode Island’s and Alaska’s laws do address some of these issues. See Table I, infra.

8. As of February 1998, California (Policy on Incentives for Self-Evaluation), Connecticut (Policy on Incentives for Self-Policing), Delaware (Penalty Mitigation Policy), Florida (Incentives for Self-Evaluation by the Regulated Community), Maryland (Environmental Audit Guidance), Massachusetts (Interim Policy on Incentives for Self-Policing: Environmental Audit Policy), Minnesota (Policy on Environmental Auditing), North Carolina (Enforcement Penalty Policy for Self-Reported Violations), Pennsylvania (Policy to Encourage Voluntary Compliance by Means of Environmental Compliance Audits and Implementation of Compliance Management Systems), Tennessee (TDEC Policy Encouraging Self-Policing and Voluntary Correction), Vermont (Incentives for Self-Evaluation and Environmental Compliance), and Washington (Policy 1-26, Adjusting Civil Penalties in Response to Self-Disclosure).

9. Minnesota is the only exception, since under its policy it is presumably not the case that one must submit such information or material. See Table IV, infra.

10. California, Connecticut, Florida, Massachusetts, Tennessee, and Vermont.

11. California, Connecticut, Florida, Massachusetts, and Tennessee.

12. Delaware’s policy states that its provisions do not "affect any criminal liability or penalties." See Table IV, infra.