Prosecutorial discretion – a tale of 2 companies

In my last blog, I discussed the factors an agency such as EPA would use to determine if it wants to proceed with criminal investigation. That’s step one of a two-step process. Once an agency completes its investigation, it may then refer the case to the prosecutors for prosecution.

Will the prosecutor exercise its prosecutorial discretion? That’s the second step.

The best way to demonstrate how a prosecutor decides whether to prosecute a case or not is by the following example of a tale of two companies.  The US Department of Justice issued a memo some time ago outlining the factors a US Attorney should consider in targeting a company for criminal prosecution of environmental crimes.

The memo gives the examples of two companies – Company A and Company Z. A tale of two companies.

Here is what Company A does:

1. It regularly conducts a comprehensive audit of its compliance with environmental requirements.

2. The audit uncovered as information about employees disposing of hazardous wastes by dumping them in an unpermitted location.

3. An internal company investigation confirms the audit information. (Depending upon the nature of the audit, this follow-up investigation may be unnecessary.)

4. Prior to the violations the company had a sound compliance program, which included clear policies, employee training, and a hotline for suspected violations.

5. As soon as the company confirms the violations, it discloses all pertinent information to the appropriate government agency; it undertakes compliance planning with that agency; and it carries out satisfactory mediation measures.

6. The company also undertakes to correct any false information previously submitted to the government in relation to the violations.

7. Internally the company disciplines the employees actually involved in the violations, including any supervisor who was lax in preventing or detecting the activity. Also, the company reviews its compliance program to determine how the violations slipped by and corrects the weakness found by that review.

8. The company discloses to the government the names of the employees actually responsible for the violations, and it cooperates with the government by providing documentation necessary to the investigation of those persons.

According to DOJ, Company A would stand a good chance of being favorably considered for prosecutorial leniency, to the extent of not being criminally prosecuted at all.

At the opposite end of the scale is Company Z, which does the following:

1. Because an employee has threatened to report a violation to federal authorities, the company is afraid that investigators may begin looking at it. An audit is undertaken, but it focuses only upon the particular violation, ignoring the possibility that the violation may be indicative of widespread activities in the organization.

2. After completing the audit, Company Z reports the violations discovered to the government.

3. The company had a compliance program, but it was effectively no more than a collection of paper. No effort is made to disseminate its content, impress upon employees its significance, train employees in its application, or oversee its implementation.

4. Even after “discovery” of the violation the company makes no effort to strengthen its compliance procedures.  For example, If the company had a long history of noncompliance, the compliance audit was done only under pressure from regulators, and a timely audit would have ended the violations much sooner, those circumstances would be considered.

5. The company makes no effort to come to terms with regulators regarding its violations. It resists any remedial work and refuses to pay any monetary sanctions.

6. Because of the noncompliance, information submitted to regulators over the years has been materially inaccurate, painting a substantially false picture of the company’s true compliance situation. The company fails to take any steps to correct that inaccuracy.

7. The company does not cooperate with prosecutors in identifying those employees (including managers) who actually were involved in the violation, but it resists disclosure of any documents relating either to the violations or to the responsible employees.

Under these circumstances, leniency by the DOJ is unlikely.

The only positive action by Company Z is the so-called audit, but that was so narrowly focused as to be of questionable value, and it was undertaken only to head off a possible criminal investigation. Otherwise, the company demonstrated no good faith either in terms of compliance efforts or in assisting the government in obtaining a full understanding of the violation and discovering its sources.

Which company are you? Company A or Company Z?

A Blueprint for Environmental Compliance

Have you ever wondered why some companies never seem to get into trouble with the EPA or OSHA? You never see any bad press about them on TV or read about them in the newspaper. And then you see some other companies that seem to be constantly in trouble with the agencies for environmental violations. What sets these companies apart? Simple. The good companies do things that that bad companies don’t.

 

Here are some practical tips on how to avoid compliance nightmare.

1. Make sure you have an environmental policy that is signed by the CEO and communicated to all your employees. You should post it on your company website. An environmental policy is a simple declaration by senior management on how it plans to conduct its business in the context of the environment. The latest buzz word is “sustainability”. It means do no harm to the environment and save it for the next generation.
2. You should have a designated senior company officer whose job it is to oversee environmental and safety compliance. This person should have the confidence of senior management and can muster the necessary financial resources and institutional commitment to implement the company’s environmental policy and plans.
3. Make sure that you have a simple and straightforward emergency response plan. The main purpose of such a plan is to tell your employees what they need to do when something goes wrong. It must be concise, realistic and easy to understand. Do not make the same mistake that a major oil company did with its Oil Spill Response Plan in the Gulf of Mexico that failed to identify the worse case scenario and was lacking in realistic responses. None of the efforts made by the company following a massive oil spill was contained in the original plan even though it was over 580 pages long.
4. Make sure that your employees have ownership of your company’s environmental plans. In other words – the employees who have been charged with the responsibility of implementing an environmental plan should have been involved in some manner in the development of the plan. That is the only way they will have ownership of the plan and without ownership, nothing will be done.
5. Be sure to perform environmental due diligence prior to shipping your hazardous wastes to your Treatment Storage and Disposal Facility (TSDF). Check up on their compliance history by going to EPA’s Environmental Compliance History Online (ECHO) webpage. Never cede this responsibility to your transporter. If you ship wastes to a site that turns into a Superfund site, your company could be responsible for the entire cleanup cost of that site.
6. If you are planning on leasing a piece of property, make sure you perform a baseline environmental study on the site to identify any pre-existing conditions. In this way, when you return the leased property back to your landlord at the end of the lease, you only need to return it in the same condition that it was in when you started the lease.
7. Always maintain a good, cordial and professional relationship with the regulatory agencies. Do not waste your limited financial and human resources in constant battles with the agencies. Always negotiate with them in good faith.
8. Train and retrain your employees. The companies that stay in compliance are the ones that make sure their environmental professionals receive the necessary training to do their job. The companies that are constantly having environmental violations are in that situation because their employees are not trained and equipped to do the job.
9. Never automatically go with the lowest bidders when hiring vendors or consultants. Always go with the most qualified contractors to ensure compliance with environmental laws and safety standards.
10. Designate an employee whose job is to review Material Safety Data Sheets prior to storing any new chemicals. Many chemical accidents are caused by mis-placement of new chemicals that are not compatible with existing ones.
11. Stay on top of emerging new environmental regulations by subscribing to agencies’ free e-mail services. You can also subscribe to commercial services to keep abreast of the latest regulatory developments.
12. Always know your chemical spill reporting requirements before the actual spill occurs. Many states have additional spill reporting requirements that are more stringent than the federal requirments. Do your homework. You should match your inventory of chemicals against EPA’s List of Lists and determine the reportable quantities of each of these chemicals. So when you actually do have a chemical spill in the middle of the night, you will know exactly if the reportable quantity has been exceeded thereby triggering a reporting obligation.
13. Instruct your employees to never lie to an agency inspector. Tell them they should always be forthright with an inspector. Answer all questions truthfully when asked but never volunteer any information or speculate.
14. Be very careful with your e-mails. Always assume that your e-mails will appear on the front page of your local newspaper the next morning. If you do not want people to know about something, don’t put it in your email. For example, if you have just conducted a mock inspection of your facility in anticipation of an actual inspection and you have found a number of violations, it is absolutely not necessary for you to send out a broadcast e-mail to everyone stating that you have uncovered contained violations. What you want to do is to focus on fixing the problems you have uncovered rather than broadcasting your problems to the world in writing. The same strategy should apply after you have had a bad inspection. Instead of sending out an e-mail to everybody stating that the inspector has found numerous violations during the inspection, you should send out an e-mail to everybody reminding them of all the things that they should be tending to without making any reference to the inspection. In that way you achieve the same goal-getting people to improve their performance-without admitting to those violations.
15. Always follow up on your internal audits. Never perform an internal audit unless you have the financial resources and management commitment to fix any problems that might come up during the audit.
16. Voice objection as soon as you are made aware of potentially illegal activities within your organization. If anyone within your organization – especially at the senior management level -should suggest any kind of illegal activities, you must speak up against it forcefully. Remember: silence means acquiescence.

If you follow the above suggestions, you should be able to avoid environmental compliance nightmare.

How Green Do you Want to be?

As we all know, there are hundreds – if not thousands – of environmental standards out there. Every environmental group has its own idea of what is good for the environment. And every group wants its own standards to be adopted by as many companies as possible.

If a company does not act now, the great danger is that some one may end up defining a set of standards for the company. Your competitors may define it for you.

There is an excellent article in the November 2010 issue of Harvard Business Review on this topic. It is entitled “Winning in the Green Frenzy”. In this article, the author talks about 4 basic approaches a company can take to survive in these uncharted water and uncertain climate.

A company can adopt existing standards if it finds that those standards are compatible with its own corporate culture and philosophy.  It can also co-op an emerging set of standards by working with the organization to influence the development of these standards. It is better to be part of the solution than having the solution ramped down its throat. Another approach is to define your own standards and make your competitors follow your standards. The fourth approach is to break away from existing standards and declare that yours is much better.

For example, if your gadget is very energy efficient and yet your industry does not seem to place a lot of emphasis on energy usage, you can break away from such standards and set new standards that emphasize energy usage. In that way, you are forcing your competitors to compete with you on your terms and against your strength.

Remember these four options: adopt, co-op, define and break away. How green do you want to be? It is up to you if you act sooner rather than later.

Check out our 2-day environmental seminars for 2011.

Root Cause Analysis in an Audit – a simple example

When you perform an environmental audit and uncover anomalies, you should also do a simple root cause analysis. How do you do it? Here is a simple example:

Let’s say you are inspecting a hazardous waste storage area and you discover that one of the drums has no “hazardous waste” label on it. You do a root cause analysis. There are basically three possible reasons why the label is missing. One reason is that no one cares about the containers in the storage area. Another reason is that the label has simply fallen off. The third reason may well be that the plant personnel is not aware of the requirement to have a label on every container. You talk to the employees at the plant and you determined that the people there are pretty conscientious about the requirement and that they have received the necessary annual refresher training is required under RCRA. So the only plausible explanation is that the label had fallen off the container.

Then you ask the next question: Why did the label fall off the container? Once again there are several possible reasons. One — the container has been sitting around for so long that the adhesive power of the label has worn off. That does not seem to be a possible explanation since the plant personnel are quite conscientious about moving the drums off the premise before the 90-day time limit is up.

The other reason may well be that the label is of such low quality that it has very limited adhesive power thereby causing it to fall off the container after a short period of time. That seems to be the more plausible explanation.

Then you asked the next question: How did the plant end up with such low quality adhesive labels. In talking to the purchasing department, you discover that in an effort to save money, the purchasing agent decided to purchase the least expensive labels with the least amount of adhesive power.

Now you have the root cause of the problem-the lack of a hazardous waste label on a container. The remedy to this situation is for the purchasing agent to purchase a higher quality label.

By asking mostly open-ended questions, you should be able to find the root cause of most environmental problems.

Key Elements of an Effective Environmental Management System

In its “Compliance-focused Environmental Management System-enforcement Agreement Guidance” document dated December 2001, EPA outlines the 12 elements of an effective environmental management system.

The US EPA model includes 12 elements which are summarized below:

1. Environmental policy.
2. Organization, personnel and oversight of EMS
3. Accountability and responsibility
4. Environmental requirements
5. Assessment, prevention and control
6. Environmental incident and noncompliance investigations
7. Environmental training, awareness and competence
8. Environmental planning and organizational decision-making
9. Maintenance of records and documentation
10. Pollution prevention
11. Continuing program evaluation and improvement
12. Public involvement and community outreach.

Of all these 12 key elements, three of them are paramount. The first one is accountability. For an EMS to be effective it must have accountability. There must be a system within which bad behaviors by employees are penalized and environmentally proactive actions are rewarded. Without accountability on both end of the spectrum, employees may falsify reports due to fear of management retribution. There would be no incentive for employees to identify environmental problems and suggest solutions.

The second key element of an EMS is program evaluation and improvement. An effective EMS must provide for periodic independent auditing of environmental functions with well defined procedures to correct any deficiencies that are uncovered in the audit. It is pointless to go through an elaborate auditing process if there’s not going to be a well -defined set of procedures to follow through with remedial actions. Without follow through, the audit would just be a meaningless paper exercise. Read my earlier post on what happens when you fail to implement your own audit findings. By the way – do not use audits to establish an attorney-client privileged condition in order to hide environmental noncompliance. This will not work since only the actual audit report itself is protected under attorney-client privilege and not the underlying facts.

The third major key element is thorough investigation of any environmental incident in a timely manner. An effective EMS should immediately trigger a thorough investigation when an environmental incident occurs. Such investigation should be designed to find the root causes of the incident and to demonstrate promptness and completeness in your responses to the incident.

One last point:  Whatever environmental management system you may use, it needs to be enforced by management at all levels. Like all environmental plans, your EMS must be performance-based. Having a well written EMS document is just a start. It is meaningless if it is not communicated to all your employees and enforced throughout the organization.

How to do an environmental hazard analysis

As environmental professionals, there is much we can learn from our colleagues on the health and safety side.

An essential part of an effective health and safety program is job hazard analysis. The purpose here is to identify safety issues that may be present during the performance of a specific task. The hazardous analysis takes the form of a series of five questions:

• What can go wrong?
• What are the consequences?
• How could it happen?
• What are other contributing factors?
• How likely is it to happen?

For example, if you were to perform a job hazard analysis at a job where an operator is working with a stationary rotating blade, you would ask the question “What can go wrong?”. The operator’s sleeve could get caught by the rotating blade. What are the consequences? His arm or wrist could be amputated. How could it happen? There are no machine guard to prevent such accident. What are other contributing factors? The operator may be fatigued due to long working hours. He may be careless and not paying attention to the blade. Or he may be distracted by talking to his fellow employees while working. How likely is it to happen? Without machine guards or other forms of engineering control, such accident is likely to happen sooner rather than later.

You can apply the same job hazard analysis approach to your environmental program. Let’s call it environmental hazard analysis. Here are a couple of examples:

Example 1: You walk through the plant and you notice some severe signs of corrosion at the base of one of your aboveground storage tanks where you store some pretty hazardous chemicals.  You ask the five questions:

What can go wrong?	The structural integrity of the tank can fail.
What are the consequences?	The tank could rupture and cause a massive spill of hazardous chemicals.
How could it happen?	The tank could fail if no action is taken to address the corrosion of the tank.
What are other contributing factors?	Strong wind, minor earthquake or any external forces on the tank could contribute to its structural failure.
How likely is it to happen?	It is likely to happen if nothing is done.

Example 2: You are reviewing your plant’s Spill Prevention Control and Countermeasures (SPCC) plan and notice that there is no record of any inspection being carried out even though the plan calls for weekly inspections. You ask the five questions:

What can go wrong?	The SPCC plan is not being implemented as planned.
What are the consequences?	Spills could have occurred without anyone noticing it. An EPA inspector may issue a citation against your plant for failure to implement it.
How could it happen?	The inspection team was not made aware of the weekly inspection requirement.
What are other contributing factors?	The people responsible for implementing the plan were not involved in its development. There is a lack of ownership. There is a failure of communication.
How likely is it to happen?	The failure to implement the plan is likely to happen if employees are not properly trained and involved in the plan.

Example 3: You notice that there are drums of hazardous waste in your central storage area that do not have the proper labels on them. The ones with labels do not have accumulation start dates. You ask the five questions.

What can go wrong?	You can exceed your maximum storage time limit without knowing about it.
What are the consequences?	You could be fined for operating a hazardous waste facility without a permit if an inspector finds out.
How could it happen?	The operator had not been told about the labeling requirements.
What are other contributing factors?	There is no one individual responsible for making sure the label is on the container and it is properly filled out. The weekly inspection has not been carried out or it has not been done properly.
How likely is it to happen?	It is very likely to happen.

This simple environmental hazard analysis can help you identify small problem before it festers into a much larger and more costly one. Once you have determined that the problem is likely to happen, you need to take immediate steps to stop it. It is like doing an internal audit. There is no point in doing an audit unless you have the commitment and resources to fix the problems you uncover.

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A few words about “satellite accumulation area”

Have you ever been in a situation where you find yourself lugging buckets of hazardous waste from the place where your generate it to your central storage area? There is a much easier way around this problem. It is called the satellite accumulation area (SAA).

There is a rule under EPA’s RCRA regulations that allows you to accumulate up to 55 gallons of hazardous wastes at or near the point of generation without “activating” the 90-day or 180-day storage time limit. That’s your SAA. You can have more than one SAA but each one cannot have more than 55 gallons. So if you are generating two incompatible waste streams at one location, you can have two separate containers to accumulate the two wastes but the total volume cannot be more than 55 gallons. (Note: If you have acute hazardous wastes, the total volume at your SAA is one quart.)

To take advantage of this special rule, you must following a few requirements:

First of all, the SAA must be “at or near the point of waste generation” and also “under the control of the operator of the process generating the waste.” The commonly accepted interpretation of the phrase “under the control of the operator” is that the waste container must be in the line of sight of the operator . That’s also EPA’s interpretation. If the waste has to be stored out of sight of the operator due to safety reason – say in a shed outside the building but near the place of generation – then access to the shed must be through a lock controlled by the operator.

The container must also be in good condition (40 CFR 265.171) and wastes stored at the SAA must be compatible (40 CFR 265.172) and the containers must be kept closed (40 CFR 265.173 (a)).

The requirement to keep container “closed” except when adding or removing waste is a problematic one for many generators. The rule says that “a container holding hazardous waste must always be closed during storage, except when it is necessary to add or remove waste”. It does not specifically define the word “closed”.  However, when EPA came up with the rule back in 1980, it intended the word “closed” to mean “vapor tight and spill proof”. So if you screw a large funnel into the bunghole of a container and pour your waste into the drum through the funnel, is that vapor tight and spill proof? If you are storing some highly volatile solvents in the container, is that funnel system vapor tight? If the container gets tipped over, is the funnel system spill proof? Whether you will be cited depends on the content in your container and your state inspector’s interpretation of the word “closed”.  To be on the safe side, you may want to consider putting a shut-off valve between your funnel and the drumhead.

The container should also be labeled “hazardous waste”.

Once the 55-gallon container is full (or the 55 gallon limit is reached if you have more than one container), you have three days to move any excess waste to your central storage area where you will start your regular 90 or 180 days storage time limit. That’s what the regulations say. In reality, it means that unless you remove your 55 gallons from your SAA – either to your central storage area or directly to a final treatment and disposal facility – you will not be able to accumulate any more waste in your SAA for longer than 3 days. So that’s what most people do. They move the 55 gallons to the central storage area and start accumulating in the SAA anew. The net effect is that the SAA extends your on-site accumulation time for the 55 gallons by a significant amount.

Note; If you are in California, state rule (Title 22 CCR 66262.34 (e)(1)(B)) limits the time you can keep your waste at the SAA to one year or when the 55 gallons volume is full – whichever comes first. That is just one of the many additional state environmental requirements you have to live with for being in California.

Another benefit of the SAA is that you do not need to conduct weekly inspection at the site as you do at your central storage areas. (By the way – failure to conduct weekly inspection at the central storage area is one of the most frequently cited CRA violations.) Some generators actually ship their wastes that have been accumulated at the SAA directly out the door thereby skirting the weekly inspection requirement altogether. The disadvantage of this arrangement is the additional shipping costs.

There is an excellent EPA guidance document on this topic.

Just exactly what is “used oil”?

Used oil is defined as any petroleum-based or synthetic oil that has been USED. When you use oil, impurities or contaminants such as dirt, metal scrapings, water or other chemicals can get mixed in with the oil. such impurities may make your oil less effective as a lubricant for example.

Some examples of used oil are engine oil, transmission fluid, refrigeration oil, compressor oils, metal working fluids and oils, laminating oils, electrical insulating oil, industrial process oils, etc. Waste oil is not used oil. Oil that has been spilled is not classified as used oil because it has not been used for its original purpose.

You should recycle your used oil by re-conditioning, re-refining or burning it for energy recovery. EPA has specific management standards that you should comply with if you handle used oil in your business. You should label all containers and tanks as “Used Oil”. Keep these containers in good condition. You are not permitted to store used oil in lagoons, pits or surface impoundment.

If your used oil is mixed with hazardous waste, you may have to dispose of the mixture as hazardous waste. So make sure you store your used oil away from other hazardous wastes.

Always check with your state agencies because they may have more stringent used oil regulations.

Surviving in lean times for environmental managers

I came across an excellent articleon this topic written by my friend Richard MacLean. It was published in the 2009 summer issue of The Environmental Quality Management Journal. Richard touched on a number of corporate staff reduction issues and offered some common sense recommendations. It is a must read for all environmental managers.

The best part of his article was hisCase Study. Here is a recap. A corporate EHS director was facing an order from senior management to cut staff by 25% across the board. The across the board cut is a somewhat cowardly way of doing it as Richard intimated and I fully concur. The director – with Richard’s help – was able to make a case for a LARGER budget to an influential corporate attorney and garnered her support. She went to bat for the director before the management board and needless to say there was a happy ending.

As someone who has worked in the corporate world for many years, I can attest to the wisdom in the approach described in the Case Study. As an environmental manager, you ALWAYS want to have the corporate legal department on your side. ALWAYS.

It is really not that hard to do even though you may not have a Harvard law degree. Why? Because environmental managers deal with liability every day. Attorneys understand liability. Senior management fear liability. So if you have those attroneys on your side, senior management will start to fear you too.

To be successful, you have to do your homework and be MORE knowledgable about environmental issues than your attorney colleagues. That’s not too hard to do either because many corporate attorneys are not environmental attorneys. But they do know liability! It is their job to minimize corporate liability. So get to know these folks. Do not be afraid of them. Do not let them treat you like a “janitor in a suit”. Take them to the plants. Keep them updated on any on-going environmental issues.

When you are traveling with them, stay at the SAME expensive hotels as they do. Hell – If that hotel is good enough for them, it is good enough for you. The reason you must stay at the same hotel is that it will give you more time to offer them environmental advice. Some call it bonding. That was my excuse and my boss (a vice president) never once questioned my expensive hotel bills. Take them out to expensive dinners on your expense account. They love that. A side note: First year law school teaches law students how to spot expensive restaurants in any town.

In more ways than one, survival in the corporate world is like jungle survival. If you look and act weak, you will be eaten or cut. Try to maintain a certain level of mystique about your work. The Vice President of Manufacturing does not need to know or understand everything you do. No more than you need to know in excruciating details how he makes his widget. All he has to know is that you are helping his plants stay in compliance or save money AND you are the go-to person when something bad happens with the environmental agencies or when he needs an environmental permit in a hurry.

A true story: A newly promoted vice president once asked me to give him an engineering book on waste water treatment design because he wanted to be an expert on it overnight. Those were his exact words and he was a fool. And he did make a fool of himself the next day at the management board meeting. He had one of those MBA degrees.

On a slightly political note: My friend Richard stated in his article that “the George W. Bush era only deepened the assumption that environmental concerns were “under control” and represented a low business priority”. There are no truer words written than those. But then Richard ended his otherwise excellent article by saying that the (regulatory) “demands will only become more difficult in the future, especially if the Obama administration fulfills its promise to enact additional environmental mandates.”

Well – could it be that the Obama administration is simply trying to reverse 8 long years of neglect and delusion? What do you think, readers?

Corporate view of safety program vs environmental protection

As someone who has seen up close and personal how senior management views its health and safety program and its environmental protection program, I would like to share some of my thoughts here with our readers.

Corporate health and safety program gets much higher level of management support for a number of reasons. Cost accounting is the main one. Performance of health and safety is monitored at the corporate level through workers compensation costs. A program that drives down the workers comp costs is viewed as an effective one. And rightly so. When the management board sees an 80% reduction in workers comp cost in a few years after implementation of a safety program, it is going to continue to support it with large budgets and manpower.

Safety performance can be reduced to dollar and cents.

Environmental performance, on the other hand, is much harder to track. Environmental protection budgets are often hidden in O&M. The benefits are even harder to quantify – as opposed to a workers comp cost. An environmental program that is working for the company means the company is not being fined. There isn’t a line item in the monthly budget to senior management that reflects that. On the other hand, senior management only knows that the environmental program has failed when it is hit with a big fine. In other words, senior management does not see a need to maintain or improve the environmental budget until something bad happens.

The key really lies in environmental cost accounting. If a company’s accounting system can show management the financial benefits it is getting from its environmental program, management will continue to support it in the same manner that it is supporting the safety program.

Unfortunately, not too many companies have such an accounting system.