To conduct an environmental audit or not to conduct an environmental audit, that is the question. According to Joe Koncelik of Tucker Ellis, there are lots of good reasons for companies to review and disclose noncompliance to the U.S. Environmental Protection Agency, as well as state agencies. But there also are some good reasons not to.
Here are some of the main issues in-house counsel should consider when deciding for or against an environmental audit:
- Limit Criminal Prosecutions: “Companies that voluntarily disclose violations have the potential to avoid criminal prosecution,” says Koncelik. To do so, companies must prove the audit and disclosure were performed in good faith and that steps have been taken to prevent recurrence of the violation(s). There also are incentives for mitigating civil penalties.
- An M&A Clean Slate: There are big incentives for new owners of companies to perform audits and make voluntarily disclosures. “EPA’s new owner audit policy provides an opportunity to fix problems and make a fresh start post-acquisition,” explains Koncelik.
- It’s Not a Shield: “U.S. EPA’s federal audit policy is simply guidance, not the law,” says Koncelik. This means officials can elect not to provide penalty forgiveness. It’s also not wise to perform an audit unless there are funds to correct the violations once they’ve been uncovered.
