Incentives for Self-Policing: Discovery, Disclosure, Correct  
  
[Federal Register: December 22, 1995 (Volume 60, Number 246)]  
[Notices]                 
[Page 66705-66712]  
>From the Federal Register Online via GPO Access
[wais.access.gpo.gov]  
  
  
  
[[Page 66705]]  
  
_________________________________________________________________
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Part III  
  
  
  
  
  
Environmental Protection Agency  
  
  
  
  
  
_________________________________________________________________
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Incentives for Self-Policing: Discovery, Disclosure, Correction
and   
Prevention of Violations; Notice  
  
  
[[Page 66706]]  
  
  
ENVIRONMENTAL PROTECTION AGENCY  
  
[FRL-5400-1]  
  
   
Incentives for Self-Policing: Discovery, Disclosure, Correction  

and Prevention of Violations  
  
AGENCY: Environmental Protection Agency (EPA).  
  
ACTION: Final Policy Statement.  
  
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SUMMARY: The Environmental Protection Agency (EPA) today issues
its   
final policy to enhance protection of human health and the
environment   
by encouraging regulated entities to voluntarily discover, and
disclose   
and correct violations of environmental requirements. Incentives  

include eliminating or substantially reducing the gravity
component of   
civil penalties and not recommending cases for criminal
prosecution   
where specified conditions are met, to those who voluntarily
self-  
disclose and promptly correct violations. The policy also
restates   
EPA's long-standing practice of not requesting voluntary audit
reports   
to trigger enforcement investigations. This policy was developed
in   
close consultation with the U.S. Department of Justice, states,
public   
interest groups and the regulated community, and will be applied  

uniformly by the Agency's enforcement programs.  
  
DATES: This policy is effective January 22, 1996.  
  
FOR FURTHER INFORMATION CONTACT: Additional documentation
relating to   
the development of this policy is contained in the environmental  

auditing public docket. Documents from the docket may be obtained
by   
calling (202) 260-7548, requesting an index to docket #C-94-01,
and   
faxing document requests to (202) 260-4400. Hours of operation
are 8   
a.m. to 5:30 p.m., Monday through Friday, except legal holidays.  

Additional contacts are Robert Fentress or Brian Riedel, at (202)
564-  
4187.  
  
SUPPLEMENTARY INFORMATION:  
  
I. Explanation of Policy  
  
A. Introduction  
  
    The Environmental Protection Agency today issues its final
policy   
to enhance protection of human health and the environment by   
encouraging regulated entities to discover voluntarily, disclose, 
 
correct and prevent violations of federal environmental law.
Effective   
30 days from today, where violations are found through voluntary  

environmental audits or efforts that reflect a regulated entity's
due   
diligence, and are promptly disclosed and expeditiously
corrected, EPA   
will not seek gravity-based (i.e., non-economic benefit)
penalties and   
will generally not recommend criminal prosecution against the
regulated   
entity. EPA will reduce gravity-based penalties by 75 0.000000or
violations   
that are voluntarily discovered, and are promptly disclosed and  

corrected, even if not found through a formal audit or due
diligence.   
Finally, the policy restates EPA's long-held policy and practice
to   
refrain from routine requests for environmental audit reports.  
    The policy includes important safeguards to deter
irresponsible   
behavior and protect the public and environment. For example, in  

addition to prompt disclosure and expeditious correction, the
policy   
requires companies to act to prevent recurrence of the violation
and to   
remedy any environmental harm which may have occurred. Repeated  

violations or those which result in actual harm or may present
imminent   
and substantial endangerment are not eligible for relief under
this   
policy, and companies will not be allowed to gain an economic
advantage   
over their competitors by delaying their investment in
compliance.   
Corporations remain criminally liable for violations that result
from   
conscious disregard of their obligations under the law, and
individuals   
are liable for criminal misconduct.  
    The issuance of this policy concludes EPA's eighteen-month
public   
evaluation of the optimum way to encourage voluntary
self-policing   
while preserving fair and effective enforcement. The incentives,  

conditions and exceptions announced today reflect thoughtful   
suggestions from the Department of Justice, state attorneys
general and   
local prosecutors, state environmental agencies, the regulated   
community, and public interest organizations. EPA believes that
it has   
found a balanced and responsible approach, and will conduct a
study   
within three years to determine the effectiveness of this policy. 

  
B. Public Process  
  
    One of the Environmental Protection Agency's most important  

responsibilities is ensuring compliance with federal laws that
protect   
public health and safeguard the environment. Effective deterrence 
 
requires inspecting, bringing penalty actions and securing
compliance   
and remediation of harm. But EPA realizes that achieving
compliance   
also requires the cooperation of thousands of businesses and
other   
regulated entities subject to these requirements. Accordingly, in
May   
of 1994, the Administrator asked the Office of Enforcement and   
Compliance Assurance (OECA) to determine whether additional
incentives   
were needed to encourage voluntary disclosure and correction of  

violations uncovered during environmental audits.  
    EPA began its evaluation with a two-day public meeting in
July of   
1994, in Washington, D.C., followed by a two-day meeting in San  

Francisco on January 19, 1995 with stakeholders from industry,
trade   
groups, state environmental commissioners and attorneys general,  

district attorneys, public interest organizations and
professional   
environmental auditors. The Agency also established and
maintained a   
public docket of testimony presented at these meetings and all
comment   
and correspondence submitted to EPA by outside parties on this
issue.  
    In addition to considering opinion and information from   
stakeholders, the Agency examined other federal and state
policies   
related to self-policing, self-disclosure and correction. The
Agency   
also considered relevant surveys on auditing practices in the
private   
sector. EPA completed the first stage of this effort with the   
announcement of an interim policy on April 3 of this year, which 
 
defined conditions under which EPA would reduce civil penalties
and not   
recommend criminal prosecution for companies that audited,
disclosed,   
and corrected violations.  
    Interested parties were asked to submit comment on the
interim   
policy by June 30 of this year (60 FR 16875), and EPA received
over 300   
responses from a wide variety of private and public
organizations.   
(Comments on the interim audit policy are contained in the
Auditing   
Policy Docket, hereinafter, ``Docket''.) Further, the American
Bar   
Association SONREEL Subcommittee hosted five days of dialogue
with   
representatives from the regulated industry, states and public
interest   
organizations in June and September of this year, which
identified   
options for strengthening the interim policy. The changes to the 
 
interim policy announced today reflect insight gained through
comments   
submitted to EPA, the ABA dialogue, and the Agency's practical   
experience implementing the interim policy.  
  
C. Purpose  
  
    This policy is designed to encourage greater compliance with
laws   
and regulations that protect human health and the environment. It 
 
promotes a higher standard of self-policing by waiving
gravity-based   
penalties for   
  
[[Page 66707]]  
violations that are promptly disclosed and corrected, and which
were   
discovered through voluntary audits or compliance management
systems   
that demonstrate due diligence. To further promote compliance,
the   
policy reduces gravity-based penalties by 75 0.000000or any
violation   
voluntarily discovered and promptly disclosed and corrected, even
if   
not found through an audit or compliance management system.  
    EPA's enforcement program provides a strong incentive for   
responsible behavior by imposing stiff sanctions for
noncompliance.   
Enforcement has contributed to the dramatic expansion of
environmental   
auditing measured in numerous recent surveys. For example, more
than   
9012f the corporate respondents to a 1995 Price-Waterhouse survey
who   
conduct audits said that one of the reasons they did so was to
find and   
correct violations before they were found by government
inspectors. (A   
copy of the Price-Waterhouse survey is contained in the Docket as 
 
document VIII-A-76.)  
    At the same time, because government resources are limited,
maximum   
compliance cannot be achieved without active efforts by the
regulated   
community to police themselves. More than half of the respondents
to   
the same 1995 Price-Waterhouse survey said that they would expand 
 
environmental auditing in exchange for reduced penalties for
violations   
discovered and corrected. While many companies already audit or
have   
compliance management programs, EPA believes that the incentives 
 
offered in this policy will improve the frequency and quality of
these   
self-monitoring efforts.  
  
D. Incentives for Self-Policing  
  
    Section C of EPA's policy identifies the major incentives
that EPA   
will provide to encourage self-policing, self-disclosure, and
prompt   
self-correction. These include not seeking gravity-based civil   
penalties or reducing them by 75, declining to recommend criminal 
 
prosecution for regulated entities that self-police, and
refraining   
from routine requests for audits. (As noted in Section C of the
policy,   
EPA has refrained from making routine requests for audit reports
since   
issuance of its 1986 policy on environmental auditing.)  
1. Eliminating Gravity-Based Penalties  
    Under Section C(1) of the policy, EPA will not seek
gravity-based   
penalties for violations found through auditing that are promptly 
 
disclosed and corrected. Gravity-based penalties will also be
waived   
for violations found through any documented procedure for self-  
policing, where the company can show that it has a compliance   
management program that meets the criteria for due diligence in
Section   
B of the policy.  
    Gravity-based penalties (defined in Section B of the policy) 
 
generally reflect the seriousness of the violator's behavior. EPA
has   
elected to waive such penalties for violations discovered through
due   
diligence or environmental audits, recognizing that these
voluntary   
efforts play a critical role in protecting human health and the  

environment by identifying, correcting and ultimately preventing 
 
violations. All of the conditions set forth in Section D, which
include   
prompt disclosure and expeditious correction, must be satisfied
for   
gravity-based penalties to be waived.  
    As in the interim policy, EPA reserves the right to collect
any   
economic benefit that may have been realized as a result of   
noncompliance, even where companies meet all other conditions of
the   
policy. Economic benefit may be waived, however, where the Agency 
 
determines that it is insignificant.  
    After considering public comment, EPA has decided to retain
the   
discretion to recover economic benefit for two reasons. First, it 
 
provides an incentive to comply on time. Taxpayers expect to pay 
 
interest or a penalty fee if their tax payments are late; the
same   
principle should apply to corporations that have delayed their   
investment in compliance. Second, it is fair because it protects 
 
responsible companies from being undercut by their noncomplying  

competitors, thereby preserving a level playing field. The
concept of   
recovering economic benefit was supported in public comments by
many   
stakeholders, including industry representatives (see, e.g.,
Docket,   
II-F-39, II-F-28, and II-F-18).  
2. 75Reduction of Gravity  
    The policy appropriately limits the complete waiver of
gravity-  
based civil penalties to companies that meet the higher standard
of   
environmental auditing or systematic compliance management.
However, to   
provide additional encouragement for the kind of self-policing
that   
benefits the public, gravity-based penalties will be reduced by
75 0.000000or   
a violation that is voluntarily discovered, promptly disclosed
and   
expeditiously corrected, even if it was not found through an   
environmental audit and the company cannot document due
diligence. EPA   
expects that this will encourage companies to come forward and
work   
with the Agency to resolve environmental problems and begin to
develop   
an effective compliance management program.  
    Gravity-based penalties will be reduced 7512nly where the
company   
meets all conditions in Sections D(2) through D(9). EPA has
eliminated   
language from the interim policy indicating that penalties may be 
 
reduced ``up to'' 75where ``most'' conditions are met, because
the   
Agency believes that all of the conditions in D(2) through D(9)
are   
reasonable and essential to achieving compliance. This change
also   
responds to requests for greater clarity and predictability.  
3. No Recommendations for Criminal Prosecution  
    EPA has never recommended criminal prosecution of a regulated 
 
entity based on voluntary disclosure of violations discovered
through   
audits and disclosed to the government before an investigation
was   
already under way. Thus, EPA will not recommend criminal
prosecution   
for a regulated entity that uncovers violations through
environmental   
audits or due diligence, promptly discloses and expeditiously
corrects   
those violations, and meets all other conditions of Section D of
the   
policy.  
    This policy is limited to good actors, and therefore has
important   
limitations. It will not apply, for example, where corporate
officials   
are consciously involved in or willfully blind to violations, or 
 
conceal or condone noncompliance. Since the regulated entity must 
 
satisfy all of the conditions of Section D of the policy,
violations   
that caused serious harm or which may pose imminent and
substantial   
endangerment to human health or the environment are not covered
by this   
policy. Finally, EPA reserves the right to recommend prosecution
for   
the criminal conduct of any culpable individual.  
    Even where all of the conditions of this policy are not met, 
 
however, it is important to remember that EPA may decline to
recommend   
prosecution of a company or individual for many other reasons
under   
other Agency enforcement policies. For example, the Agency may
decline   
to recommend prosecution where there is no significant harm or   
culpability and the individual or corporate defendant has
cooperated   
fully.  
    Where a company has met the conditions for avoiding a   
recommendation for criminal prosecution under this policy, it
will not   
face any civil liability for gravity-based penalties. That is
because   
the same conditions for discovery, disclosure, and correction
apply in   
both cases. This represents a clarification of the interim
policy, not   
a substantive change.   
  
[[Page 66708]]  
  
4. No Routine Requests for Audits  
    EPA is reaffirming its policy, in effect since 1986, to
refrain   
from routine requests for audits. Eighteen months of public
testimony   
and debate have produced no evidence that the Agency has
deviated, or   
should deviate, from this policy.  
    If the Agency has independent evidence of a violation, it may
seek   
information needed to establish the extent and nature of the
problem   
and the degree of culpability. In general, however, an audit
which   
results in prompt correction clearly will reduce liability, not
expand   
it. Furthermore, a review of the criminal docket did not reveal a 
 
single criminal prosecution for violations discovered as a result
of an   
audit self-disclosed to the government.  
  
E. Conditions  
  
    Section D describes the nine conditions that a regulated
entity   
must meet in order for the Agency not to seek (or to reduce)
gravity-  
based penalties under the policy. As explained in the Summary
above,   
regulated entities that meet all nine conditions will not face
gravity-  
based civil penalties, and will generally not have to fear
criminal   
prosecution. Where the regulated entity meets all of the
conditions   
except the first (D(1)), EPA will reduce gravity-based penalties
by   
75  
1. Discovery of the Violation Through an Environmental Audit or
Due   
Diligence  
    Under Section D(1), the violation must have been discovered
through   
either (a) an environmental audit that is systematic, objective,
and   
periodic as defined in the 1986 audit policy, or (b) a
documented,   
systematic procedure or practice which reflects the regulated
entity's   
due diligence in preventing, detecting, and correcting
violations. The   
interim policy provided full credit for any violation found
through   
``voluntary self-evaluation,'' even if the evaluation did not   
constitute an audit. In order to receive full credit under the
final   
policy, any self-evaluation that is not an audit must be part of
a   
``due diligence'' program. Both ``environmental audit'' and ``due 
 
diligence'' are defined in Section B of the policy.  
    Where the violation is discovered through a ``systematic
procedure   
or practice'' which is not an audit, the regulated entity will be
asked   
to document how its program reflects the criteria for due
diligence as   
defined in Section B of the policy. These criteria, which are
adapted   
from existing codes of practice such as the 1991 Criminal
Sentencing   
Guidelines, were fully discussed during the ABA dialogue. The
criteria   
are flexible enough to accommodate different types and sizes of  

businesses. The Agency recognizes that a variety of compliance   
management programs may develop under the due diligence criteria,
and   
will use its review under this policy to determine whether basic 
 
criteria have been met.  
    Compliance management programs which train and motivate
production   
staff to prevent, detect and correct violations on a daily basis
are a   
valuable complement to periodic auditing. The policy is
responsive to   
recommendations received during public comment and from the ABA  

dialogue to give compliance management efforts which meet the
criteria   
for due diligence the same penalty reduction offered for
environmental   
audits. (See, e.g., II-F-39, II-E-18, and II-G-18 in the Docket.)
 
    EPA may require as a condition of penalty mitigation that a  

description of the regulated entity's due diligence efforts be
made   
publicly available. The Agency added this provision in response
to   
suggestions from environmental groups, and believes that the   
availability of such information will allow the public to judge
the   
adequacy of compliance management systems, lead to enhanced
compliance,   
and foster greater public trust in the integrity of compliance   
management systems.  
2. Voluntary Discovery and Prompt Disclosure  
    Under Section D(2) of the final policy, the violation must
have   
been identified voluntarily, and not through a monitoring,
sampling, or   
auditing procedure that is required by statute, regulation,
permit,   
judicial or administrative order, or consent agreement. Section
D(4)   
requires that disclosure of the violation be prompt and in
writing. To   
avoid confusion and respond to state requests for greater
clarity,   
disclosures under this policy should be made to EPA. The Agency
will   
work closely with states in implementing the policy.  
    The requirement that discovery of the violation be voluntary
is   
consistent with proposed federal and state bills which would
reward   
those discoveries that the regulated entity can legitimately
attribute   
to its own voluntary efforts.  
    The policy gives three specific examples of discovery that
would   
not be voluntary, and therefore would not be eligible for penalty 
 
mitigation: emissions violations detected through a required
continuous   
emissions monitor, violations of NPDES discharge limits found
through   
prescribed monitoring, and violations discovered through a
compliance   
audit required to be performed by the terms of a consent order or 
 
settlement agreement.  
    The final policy generally applies to any violation that is  

voluntarily discovered, regardless of whether the violation is
required   
to be reported. This definition responds to comments pointing out
that   
reporting requirements are extensive, and that excluding them
from the   
policy's scope would severely limit the incentive for
self-policing   
(see, e.g., II-C-48 in the Docket).  
    The Agency wishes to emphasize that the integrity of federal 
 
environmental law depends upon timely and accurate reporting. The 
 
public relies on timely and accurate reports from the regulated  

community, not only to measure compliance but to evaluate health
or   
environmental risk and gauge progress in reducing pollutant
loadings.   
EPA expects the policy to encourage the kind of vigorous
self-policing   
that will serve these objectives, and not to provide an excuse
for   
delayed reporting. Where violations of reporting requirements are 
 
voluntarily discovered, they must be promptly reported (as
discussed   
below). Where a failure to report results in imminent and
substantial   
endangerment or serious harm, that violation is not covered under
this   
policy (see Condition D(8)). The policy also requires the
regulated   
entity to prevent recurrence of the violation, to ensure that   
noncompliance with reporting requirements is not repeated. EPA
will   
closely scrutinize the effect of the policy in furthering the
public   
interest in timely and accurate reports from the regulated
community.  
    Under Section D(4), disclosure of the violation should be
made   
within 10 days of its discovery, and in writing to EPA. Where a
statute   
or regulation requires reporting be made in less than 10 days,   
disclosure should be made within the time limit established by
law.   
Where reporting within ten days is not practical because the
violation   
is complex and compliance cannot be determined within that
period, the   
Agency may accept later disclosures if the circumstances do not
present   
a serious threat and the regulated entity meets its burden of
showing   
that the additional time was needed to determine compliance
status.  
    This condition recognizes that it is critical for EPA to get
timely   
reporting of violations in order that it might have clear notice
of the   
violations and the opportunity to respond if necessary, as well
as an   
accurate picture of a given facility's compliance record. Prompt 
 
disclosure is also evidence of the regulated entity's good faith
in   
wanting   
  
[[Page 66709]]  
to achieve or return to compliance as soon as possible.  
    In the final policy, the Agency has added the words, ``or may
have   
occurred,'' to the sentence, ``The regulated entity fully
discloses   
that a specific violation has occurred, or may have occurred * *
*.''   
This change, which was made in response to comments received,
clarifies   
that where an entity has some doubt about the existence of a
violation,   
the recommended course is for it to disclose and allow the
regulatory   
authorities to make a definitive determination.  
    In general, the Freedom of Information Act will govern the
Agency's   
release of disclosures made pursuant to this policy. EPA will,   
independently of FOIA, make publicly available any compliance   
agreements reached under the policy (see Section H of the
policy), as   
well as descriptions of due diligence programs submitted under
Section   
D.1 of the Policy. Any material claimed to be Confidential
Business   
Information will be treated in accordance with EPA regulations at
40   
C.F.R. Part 2.  
3. Discovery and Disclosure Independent of Government or Third
Party   
Plaintiff  
    Under Section D(3), in order to be ``voluntary'', the
violation   
must be identified and disclosed by the regulated entity prior
to: the   
commencement of a federal state or local agency inspection,   
investigation, or information request; notice of a citizen suit;
legal   
complaint by a third party; the reporting of the violation to EPA
by a   
``whistleblower'' employee; and imminent discovery of the
violation by   
a regulatory agency.  
    This condition means that regulated entities must have taken
the   
initiative to find violations and promptly report them, rather
than   
reacting to knowledge of a pending enforcement action or
third-party   
complaint. This concept was reflected in the interim policy and
in   
federal and state penalty immunity laws and did not prove
controversial   
in the public comment process.  
4. Correction and Remediation  
    Section D(5) ensures that, in order to receive the penalty   
mitigation benefits available under the policy, the regulated
entity   
not only voluntarily discovers and promptly discloses a
violation, but   
expeditiously corrects it, remedies any harm caused by that
violation   
(including responding to any spill and carrying out any removal
or   
remedial action required by law), and expeditiously certifies in 
 
writing to appropriate state, local and EPA authorities that
violations   
have been corrected. It also enables EPA to ensure that the
regulated   
entity will be publicly accountable for its commitments through
binding   
written agreements, orders or consent decrees where necessary.  
    The final policy requires the violation to be corrected
within 60   
days, or that the regulated entity provide written notice where  

violations may take longer to correct. EPA recognizes that some  

violations can and should be corrected immediately, while others
(e.g.,   
where capital expenditures are involved), may take longer than 60
days   
to correct. In all cases, the regulated entity will be expected
to do   
its utmost to achieve or return to compliance as expeditiously as 
 
possible.  
    Where correction of the violation depends upon issuance of a
permit   
which has been applied for but not issued by federal or state   
authorities, the Agency will, where appropriate, make reasonable 
 
efforts to secure timely review of the permit.  
5. Prevent Recurrence  
    Under Section D(6), the regulated entity must agree to take
steps   
to prevent a recurrence of the violation, including but not
limited to   
improvements to its environmental auditing or due diligence
efforts.   
The final policy makes clear that the preventive steps may
include   
improvements to a regulated entity's environmental auditing or
due   
diligence efforts to prevent recurrence of the violation.  
    In the interim policy, the Agency required that the entity   
implement appropriate measures to prevent a recurrence of the   
violation, a requirement that operates prospectively. However, a 
 
separate condition in the interim policy also required that the  

violation not indicate ``a failure to take appropriate steps to
avoid   
repeat or recurring violations''--a requirement that operates   
retrospectively. In the interest of both clarity and fairness,
the   
Agency has decided for purposes of this condition to keep the
focus   
prospective and thus to require only that steps be taken to
prevent   
recurrence of the violation after it has been disclosed.  
6. No Repeat Violations  
    In response to requests from commenters (see, e.g., II-F-39
and II-  
G-18 in the Docket), EPA has established ``bright lines'' to
determine   
when previous violations will bar a regulated entity from
obtaining   
relief under this policy. These will help protect the public and 
 
responsible companies by ensuring that penalties are not waived
for   
repeat offenders. Under condition D(7), the same or
closely-related   
violation must not have occurred previously within the past three
years   
at the same facility, or be part of a pattern of violations on
the   
regulated entity's part over the past five years. This provides  

companies with a continuing incentive to prevent violations,
without   
being unfair to regulated entities responsible for managing
hundreds of   
facilities. It would be unreasonable to provide unlimited amnesty
for   
repeated violations of the same requirement.  
    The term ``violation'' includes any violation subject to a
federal   
or state civil judicial or administrative order, consent
agreement,   
conviction or plea agreement. Recognizing that minor violations
are   
sometimes settled without a formal action in court, the term also 
 
covers any act or omission for which the regulated entity has
received   
a penalty reduction in the past. Together, these conditions
identify   
situations in which the regulated community has had clear notice
of its   
noncompliance and an opportunity to correct.  
7. Other Violations Excluded  
    Section D(8) makes clear that penalty reductions are not
available   
under this policy for violations that resulted in serious actual
harm   
or which may have presented an imminent and substantial
endangerment to   
public health or the environment. Such events indicate a serious 
 
failure (or absence) of a self-policing program, which should be 
 
designed to prevent such risks, and it would seriously undermine 
 
deterrence to waive penalties for such violations. These
exceptions are   
responsive to suggestions from public interest organizations, as
well   
as other commenters. (See, e.g., II-F-39 and II-G-18 in the
Docket.)  
    The final policy also excludes penalty reductions for
violations of   
the specific terms of any order, consent agreement, or plea
agreement.   
(See, II-E-60 in the Docket.) Once a consent agreement has been  

negotiated, there is little incentive to comply if there are no  

sanctions for violating its specific requirements. The exclusion
in   
this section applies to violations of the terms of any response, 
 
removal or remedial action covered by a written agreement.  
8. Cooperation  
    Under Section D(9), the regulated entity must cooperate as
required   
by EPA and provide information necessary to determine the
applicability   
of the policy. This condition is largely unchanged from the
interim   
policy. In the final policy, however, the Agency has added that  

``cooperation'' includes   
  
[[Page 66710]]  
assistance in determining the facts of any related violations
suggested   
by the disclosure, as well as of the disclosed violation itself.
This   
was added to allow the agency to obtain information about any   
violations indicated by the disclosure, even where the violation
is not   
initially identified by the regulated entity.  
  
F. Opposition to Privilege  
  
    The Agency remains firmly opposed to the establishment of a  

statutory evidentiary privilege for environmental audits for the 
 
following reasons:  
    1. Privilege, by definition, invites secrecy, instead of the 
 
openness needed to build public trust in industry's ability to
self-  
police. American law reflects the high value that the public
places on   
fair access to the facts. The Supreme Court, for example, has
said of   
privileges that, ``[w]hatever their origins, these exceptions to
the   
demand for every man's evidence are not lightly created nor
expansively   
construed, for they are in derogation of the search for truth.''
United   
States v. Nixon, 418 U.S. 683 (1974). Federal courts have
unanimously   
refused to recognize a privilege for environmental audits in the 
 
context of government investigations. See, e.g., United States v. 
 
Dexter, 132 F.R.D. 8, 9-10 (D.Conn. 1990) (application of a
privilege   
``would effectively impede [EPA's] ability to enforce the Clean
Water   
Act, and would be contrary to stated public policy.'')  
    2. Eighteen months have failed to produce any evidence that a 
 
privilege is needed. Public testimony on the interim policy
confirmed   
that EPA rarely uses audit reports as evidence. Furthermore,
surveys   
demonstrate that environmental auditing has expanded rapidly over
the   
past decade without the stimulus of a privilege. Most recently,
the   
1995 Price Waterhouse survey found that those few large or
mid-sized   
companies that do not audit generally do not perceive any need
to;   
concern about confidentiality ranked as one of the least
important   
factors in their decisions.  
    3. A privilege would invite defendants to claim as ``audit'' 
 
material almost any evidence the government needed to establish a 
 
violation or determine who was responsible. For example, most
audit   
privilege bills under consideration in federal and state
legislatures   
would arguably protect factual information--such as health
studies or   
contaminated sediment data--and not just the conclusions of the  

auditors. While the government might have access to required
monitoring   
data under the law, as some industry commenters have suggested, a 
 
privilege of that nature would cloak underlying facts needed to  

determine whether such data were accurate.  
    4. An audit privilege would breed litigation, as both parties 
 
struggled to determine what material   
.