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The criminalization of environmental law.

Behavior that once would have triggered only civil proceedings resulting in fines may now set in motion criminal indictments as well.

Environmental regulation is increasingly being driven by the threat of criminal prosecution -- prosecution of corporations and corporate managers. Prosecutors at all levels of government believe that the public expects willful violations of the burgeoning number of environmental statutes to be prosecuted criminally. Prosecutorial offices across the country are meeting this expectation by acquiring an ability to prosecutre environmental derelictions that had previously been the exclusive province of bureaucratic regulators. Civil enforcement actions are now often eclipsed by criminal proceedings.

Whatever the desirability of this exercise of state power, it is clear that the criminalization of environmental law is a fact that has an impact on day-to-day corporate management.

Today's manager must be prepared to deal with the environmental aspect of the criminal justice system. Behavior that once would have triggerd only civil proceedings resulting in fines may now set in motion criminal indictments as well.

Between 1983 and 1991, the federal government alone increased the number of indictments brought against coporations and individuals over 300% (40 in 1983; 125 in 1991). Conviction rates for federal prosecutions have been no less impressive -- consistently over 50%. This trend will continue, as states and the federal government devote more resources to environmental prosecutions.

Prosecutors increasingly are bringing indictments against managers as well as against the corporation. In 1983, for example, corporate officers were charged in 81% of cases where the corporation was charged, and these rates have continued. Individuals charged have included occupants of the executive suite (presidents, vice presidents, directors, comptrollers), technical staff (chief engineers, chemists, certified pesticide applicators), and supervisory personnel and lower-level managers (ships masters, foremen).

Conviction inevitably raises the specter of jail for individuals and onerous fines for the corporation. Though jail sentences have been much lower than permitted by statute, there is continuing pressure to impose stiffer sentences. Alos, the 1989 Sentencing Guidelines for United States Courts sharply reduced the discretion of judges to suspend sentences, a common practice for environmental crimes prior to 1989.

Above all, as one federal court observed, unlike civil proceedings the mere presentment of an indictment "will often have a devastating personal and professional impact that a later dismissal or acquittal can never undo."

The number of state and federal statutes criminalizing infractions of environmental regulatory programs soared in the 1970s and 1980s. The criminal provisions in these statutes fall into three broad categories:

* Those imposing substantive prohibitions and standards;

* Those forbidding false reports, falsification of records, or tampering with monitoring devices; and

* Those requiring the immediate notification of incidents to the proper response authority.

Corporations and their managers can face criminal prosecution for knowingly exceeding permit limitations, storing hazardous wastes without a permit, or failing to immediately report exceedances and spills.

Ominous Trend

The trend has been to elevate infractions from misdemeanors to felonies. For example, the 1972 amendments to the Clean Water Act provided misdemeanor penalties of up to one year of imprisonment and a $25,000 fine (per day of violation) for the "willful" or "negligent" violation of the effluent limitations prescribed by the Act, or of the conditions or limitations in permits issued by the United States Environmental Protection Agency or the states.

However, by 1987 Congress had left the concept of misdemeanor far behind. The Water Quality Act of 1987 contains several new provisions for criminal sanctions. A knowing violation of permits and standards, as opposed to a negligent violation, is a felony with possible sanctions of up to three years imprisonment and a fine of $50,000 (per day of violation). Similarly, the 1990 amendments change the Clean Air Act's original misdemeanor penalties dramatically, and are typical of legislative changes made in the 1980s: Knowing violations of the Act are now punishable by potentially devastating fines and lengthy periods of incarceration. Moreover, almost all "knowing" infractions of the various federal statutes regulating hazardous waste now carry stiff felony fines and jail provisions.

The current federal and state criminal statutes generally distinguish criminal activity from civil violations by some requirement that the proscribed actions be done intentionally or "knowingly." However, prosecutors have given the old canard "ignorance of the law is no excuse" new meaning in the environmental crimes arena. Courts have bought government arguments that a manager can be guilty even if the manager does not know the regulation or that corporate behavior violates a nuanced interpretation of it.

What Courts Believe

This is particularly true in the area of hazardous wastes, where courts tend to believe that managers should know of the regulatory provisions if they are handling toxic or hazardous wastes. Old-fashioned environmental criminals, such as the "midnight dumper," knew that what they were doing was wrong. Today, managers can become criminals by violating one of a myriad of "mind-numbing" regulations. ("Mind-numbing" was the adjective used by the D.C. Circuit Court of Appeals to describe the hazardous waste regulations.)

A single incident can lead to both state and federal criminal liability. For example, many states have analogues of the federal Resource Conservation and Recovery Act (RCRA) governing the disposal, transportation, and storage of hazardous wastes. A criminal violation of RCRA may also constitue a criminal violation of the state analogue. The standard of liability under a state analogue need not be the same as the standard under the federal statute. A prosecutor bringing a RCPA prosecution must show that the offense was committed "knowingly." Some states are more lenient, allowing the prosecutor to prove merely that the hazardous waste offense was reckless or negligent. Others are stricter, making the prosecutor prove that the offense was willful.

State criminal enforcement efforts, though less highly publicized than federal efforts, are numerically more significant. State and local law enforcement authorities have "discovered" the criminal provisions of state environmental statutes, and are showing considerable vigor and imagination in prosecuting environmental crimes. A significant part of the "action" is now occurring at the state level.

Also, state prosecutors have shown a willingness to employ criminal statutes that were not specifically drafted to curtail environmental abuses. In one case, for example, a Pennsylvania court upheld a conviction of individuals involved in hazardous waste transportation on the theory that they violated the racketeering provisions of the Pennsylvania Crimes Code.

Prosecutions so far have been primarily reactive to spills, midnight dumpings, or environmental incidents that start as well-publicized civil matters. The paucity of sophisticated prosecutions is beginning to change as investigators become more experienced and as experienced prosecutors react to more complex issues and look to related environmental areas, such as industrial catastrophes and accidents. Similarly, the increasing problem of solid (as opposed the hazardous) waste and the abuses that may be incident to its storage and disposal will, undoubtedly, receive considerable attention.

Prosecutors assure management groups that their offices have developed systematic programs to detect and prosecute only the true environmental criminals. However, most prosecutions are triggered by fortuitous events: (1) a spill or release of toxic chemicals, (2) an ongoing series of civil investigations, (3) disgruntled or former employees "whistle blowing," or simply (4) an investigator who, for often less than purely professional reasons, is determined to probe until he comes up with something incriminating. Even the best run company is not immune from running afoul of the environmental police.

Some Form of Auditing

How can management deal with this new form of environmental regulation? Management must develop systems to ensure compliance and to deal with the investigation that can occur despite the best intentions.

Initially, management must consider devising methods for corporate accountability through the use of some form of regular auditing. Managers are often cautioned to balance the potential benefits and harms of implementing an environmental control system or environmental audit to prevent inadvertent or intentional violations of environmental regulations. The reason for this caution is that the existence of routine audits can transform a negligent into a knowing violation, increasing the risk of harsher criminal penalties should an infraction remain uncorrected. Hence, implementation of control systems and audits must be accompanied by a commitment to correct infractions vigorously as soon as management becomes aware of them.

Also, the government or private litigants may compel the production of audits as evidence in civil or criminal actions. Though the EPA encourages regulated entities to conduct routine audits, they have not agreed to protect the confidentiality of audits in further government proceedings. Nor have courts generally adopted a privilege protecting audits from disclosurre in civil litigation.

Nonetheless, in most circumstances the risks of not adopting control systems and routing audits far outweigh the potential effects of disclosure on civil or criminal litigation. Management is usally well-advised to confront potential environmental liabilities, both civil and criminal, and deal with them expeditiously.

Achieving Compliance

The audit system should be designed to ensure that personnel with line responsibility comply with all applicable environmental regulations. Compliance may be achieved by:

* Setting up procedures that are in compliance with regulations.

* Ensuring that key personnel receive constantly updated information concerning the content of regulations.

* Providing personnel with access to advice concerning regulations.

* Combinations of the three tactics as appropriate to the circumstances.

The control system should be accompanied by routine environmental audits to monitor compliance.

Not only do control systems and audits reduce the risk of infraction but should one occur, the existence of a control system helps the corporation defend a criminal prosecution and may discourage prosecutions from bringing one. Careful attention must be paid to this process lest the unfulfilled audit becomes the prosecutor's "Exhibit A."

Management cannot rely totally upon even the best constructed audit program, because criminal investigations have random and arbitrary stimuli. Once an investigation is commenced, inadvertent omissions or commissions may appear to take on the shape of heinous crimes. Moreover, the action causing the investigation is often eclipsed by the target's actions during the investigation; prosecutions based on alleged discharges turn into indictments for obstructuring justice, perjury, and for making false statements to government invetigators. Corporations must, therefore, be prepared to deal with such aspects of the criminal process.

Perhaps, the key to a successful "pre-indictment" defense is to keep the investigators away from management until experienced attorney can fully evaluate the matter under investigation. Some individual targets may be better advised to enjoy the tranquility of constitutionally protected silence; others might do better in attempting to explain the circumstances to the prosecutor.

Unfortunately, criminal investigations into alleged environmental crimes often start with sudden and massive searches or, at the other extreme, with innocuous visits from mild-mannered inspectors. The corporation that is not prepared to cope with either eventuality and to understand the implications of the criminalization of environmental law functions at considerable peril.

Daniel Riesel is a member of Sive, Paget & Riesel, P.C., and is an Adjunct Professor of Law at the Benjamin N. Cardozo School of Law, New York. He was an Assistant United States Attorney in the Southern District of New York, where he founded the first environmental protection unit in the U.S. Between 1978 and 1982 he was a contract principal engaged to teach lawyers at the U.S. Environmental Protection Agency how to try enforcement cases. Arthur Jacobson is the Max Freund Professor of Litigation and Advocacy at the Cardozo School of Law, and counsel to Sive, Paget & Riesel. His scholarly work in environmental law has focused on techniques of self-regulation.
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Title Annotation:Meeting the Environmental Challenge
Author:Riesel, Daniel; Jacobson, Arthur
Publication:Directors & Boards
Date:Jun 22, 1992
Previous Article:Managing the transition to proactivity.
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