AUDIT PROGRAM RISK MANAGEMENT: THE ROLE OF PRIVILEGE AND THE NEED TO MANAGE FOR SELF-DISCLOSURE OPPORTUNITIES

摘要

Mining is likely to be targeted by The United StatesrnEnvironmental Protection Agency (“EPA”) as one ofrnits key enforcement targets for fiscal year 2002-rn2003. Identifying the mining industry as anrnenforcement target, coupled with an increase inrnenforcement activity in recent years, places eachrnmining operation at increased risk of receivingrnenforcement attention. A properly developed andrnimplemented Environmental Management Systemrn(“EMS”) tailored for your operation is invaluable inrnreducing the risk of incurring liability for non-compliance.rnAt the heart of an effective EMS is anrnaudit program that checks the company’srncompliance with environmental requirements. Inrnaddition, audit privilege (in select states), voluntaryrnself-disclosure, and the attorney-client privilegernserve as very effective tools for managing thosernliabilities that may arise during auditing a well-developedrnprogram. Of course, these latter tools arerneffective only if the auditing program is properlyrnstructured and properly managed.rnEPA and some states also provide varying degreesrnof immunity for environmental violations that arernvoluntarily disclosed in writing by the company.rnHowever, self-disclosure laws and policies typicallyrnprescribe stringent requirements for parties seekingrnto take advantage of them. For example: U.S. EPArnhas recently extended the time period in which tornprovide full written self-disclosure to 21 days.rnHowever, U.S. EPA’s revised Self-Disclosurernguidance also addresses when a company obtainsrnknowledge of a violation for purposes of triggeringrnthe 21-day clock and specifically extends thernknowledge requirement to include the company’srnagents and consultants. This expansion increasesrnthe difficulty companies may have in clearly definingrnand managing when they obtained knowledge. Thisrndifficulty increases the importance of managingrnfactual development and the strategic use of otherrneffective liability limiting tools such as attorney-clientrnprivilege. Therefore, companies must carefullyrnevaluate the risks and benefits of self-disclosure inrnany given situation and ensure that any disclosurernadheres strictly to the requirements of the applicablernimmunity policy. A well-structured EMS can greatlyrnenhance the company’s ability to maintain thernconfidentiality of its audits and minimize penalties byrnsuccessful self-disclosure.