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Dirty Secrets: The Corporations' Campaign
for an Environmental Audit Privilege

by

Christopher Bedford


A Publication of Environmental Action Foundation, the Good Neighbor Project for Sustainable Industries and Communities Concerned About Corporations February 1996

For additional information, including press materials email to Mike Fogelberg -- The Good Neighbor Project mfogelberg@igc.apc.org

Hard copies of the full report can be obtained from Environmental Action Foundation at a cost of $5 each (includes postatge).Dirty Secrets is not copyrighted. Please reproduce this report as many times as you need, crediting the author and sponsoring organizations. For a hard copy of the report, send $15


"The greater portion of evidence of wrongdoing by an organization or its representatives is usually found in the official records and documents of that organization. Were the cloak of the privilege to be thrown around these records and documents, effective enforcement of many federal and state laws would be impossible."

US Supreme Court in Braswell v. US, 108 S. Ct. 2284 (1988)


TABLE OF CONTENTS
Executive Summary
A Nationwide Campaign for Secrecy and Immunity
The Corporations Behind the Privilege
Corporate Activity at the State Level
The Corporate Disinformation Campaign
Secret from Whom?

For more information contact:

Environmental Action Foundation
6930 Carroll Avenue, Suite 600
Takoma Park, Maryland 20912
301-891-1100 + 891-2218 FAX

Communities Concerned about Corporations
#5104 42nd Avenue,
Hyattsville, Maryland 20781-2013
301-779-1000 + 779-1001 FAX

Good Neighbor Project for Sustainable Industries
#160 Second Street
Cambridge, Massachusetts 02142
617-354-1030 + 876-6903 FAX

EXECUTIVE SUMMARY

Corporations and associations representing some of our nation's most toxic and environmentally destructive industries have launched a nationwide legislative campaign:

[1] to make voluntary internal environment audits conducted by corporations privileged or secret from government regulators, communities and workers,

[2] to make corporations that self-disclose noncompliance with environmental laws immune from most civil and criminal penalties.

Since Oregon adopted the first state law creating audit secrecy and immunity in 1993 a total of 14 states have passed similar legislation. In 1995, twenty-four states considered without passage or rejected this legislation.

Proponents of this legislation claim that secrecy is necessary to encourage corporations to conduct routine environmental audits to identify incidences of noncompliance with regulations.

"Dirty Secrets" concludes that granting audit secrecy actually may discourage corporations from from cleaning up their environmental performance by allowing "bad actors" to hide their failures from regulatory and public scrutiny, gaining an unfair competitive advantage over corporations that comply with environmental laws.

State Attorneys General, the National District Attorneys Association and the US Environmental Protection Agency have opposed both immunity and audit secrecy created by this legislation.

Of particular concern is the effort by corporate lobbyists to define "environmental audits" broadly to allow corporations to characterize almost any environmental information [memos, maps, computer files, sampling data, photographs, charts, etc.] it chooses to conceal from enforcement officials and the public.

"Only the business with something to hide would benefit from a law that turns data gathered from environmental audits into secret information," wrote Arizona Assistant Attorney General David Ronald.

This report looks at the corporations behind the audit secrecy legislation and the "dirty secrets" they may want to hide. Many of the corporations active in the push for this legislation [primarily from the chemical, oil, paper, and waste disposal industries], face controversy growing out of public and regulatory scrutiny of their operations.

Working through three national coalitions and with the legislative assistance of the corporate supported American Legislative Exchange Council [ALEC], these corporations have engaged in a campaign of disinformation and deflection about their true intentions.

"Dirty Secrets" reveals corporate motivations that have little to do with improving environmental performance including how the legislation will undermine not only the public's right-to-know but also discourage community and worker dissent.

Legislation modeled after Colorado's law includes provisions to punish community members and workers who reveal privileged or secret corporate information with $10,000 fines and a year in jail even if they didn't know the information was privileged at the time they disclosed it. Thus, this legislation may scare workers and neighbors out of using any information about a company for which they do not know its source.

"Dirty Secrets" concludes that audit privilege laws will hamper both government and citizen enforcement. In a period of shrinking government oversight, audit secrecy legislation may leave communities defenseless by effectively blocking legal and other actions by victims of toxic pollution.

DIRTY SECRETS: THE CORPORATIONS' CAMPAIGN
FOR AN ENVIRONMENTAL AUDIT PRIVILEGE

by
Christopher Bedford

The current wave of environmental audit secrecy legislation and legislative efforts seeks to establish an extraordinary new set of rights for corporations with potentially unhealthy and environmentally destructive operations. In essence, audit secrecy advocates ask elected state and federal representatives to shield critical environmental corporate documents in exchange for a simple assertion by management that, "you can trust us to clean up our own affairs."[1]

Under a number of current environmental audit legislative proposals, corporations can self-define what constitutes the audit information to be designated privileged or secret - allowing management to sequester virtually any information it wants from the government, citizens and its own workers. In states that have passed immunity provisions, corporations that self-disclose violations are protected from criminal and most civil penalties.

Prosecutors at both the state and federal levels have opposed the current legislative proposals. The legislation, according to US EPA enforcement chief, Steve Herman, "potentially shields from the government and the public virtually all factual information and environmental non-compliance -- including facts underlying a self- evaluation that might be crucial in holding violators accountable for their actions."[2]

Perhaps more importantly, this legislation sequesters internal corporate information from citizens seeking redress or protection from harmful corporate practices. Workers who attempt to exercise their rights under federal labor law and citizens who bring civil tort suits would be blocked from obtaining internal corporate documents by audit privilege legislation.

In this report by the Environmental Action Foundation, the Good Neighbor Project for Sustainable Industries, and Communities Concerned about Corporations, we set out to investigate this nationwide push to establish the audit secrecy privilege and create corporate immunity for self-disclosed violations.

What corporations are the leading advocates of this legislation? What information might corporate managers want to keep secret from the government and the public? For what reasons? And how realistic is the corporate assertion to "trust us" to clean up our own environmental act? The highly paid corporate consultants lobbying for environmental audit and immunity legislation claim secrecy is needed to encourage corporations to review their operations thoroughly and to correct and disclose any violations they find. Lack of secrecy, these corporate proponents argue, inhibits the candor, frequency and even the existence of such audits.

These arguments ignore the existing widespread use of audits by industry. Recent studies indicate that many corporations currently are conducting these audits without the secrecy protection created by the legislation because they make good business sense.

A 1992 Arthur Andersen survey of corporate general counsels found that 60% of the corporations surveyed had performed an environmental compliance audit within a two year period.[3]

A 1994 survey by the Investor Responsibility Research Center reported 85% of the corporations surveyed had established audit programs.[4]

In addition, audit secrecy advocates cite a fear of internal audits being used to fine and convict corporations. This argument is predicated on a view of the corporation as a victim of over zealous regulation. "With the overwhelming weapons now in the government's arsenal, companies ...can be bludgeoned into unfair guilty pleas and convictions," wrote Sheldon Krantz in an article in the Spring, 1994 issue of Criminal Justice, entitled "The Corporate Victim of the War on Crime". However, a look at the actual use of internal corporate audits in criminal and civil prosecutions indicate that these fears are almost totally unfounded.

NO REGULATORY ABUSE

An internal review of EPA files from 1986 onward found "no Agency request for an audit report from a regulated entity before the Agency had an independent basis for believing that a violation had occurred." US EPA is not basing its enforcement decisions on information gathered from voluntary audits.[5]

A 1994 survey of cases in all 50 states by the National Association of Attorneys General found only one civil case and two criminal prosecutions that were based on information gathered from a voluntary environmental audit.

Environmental audits are being used proactively by many corporations to avoid compliance problems with environmental regulations. A 1993 study by Coopers and Lybrand of corporations found 66% had established audit programs "to avoid becoming a target [of government investigation] and being indicted in the first place."[6]

Secrecy rewards scofflaw corporations by allowing them to hide their environmental skeletons in the privilege closet and to throw away the key. Likewise, immunity enables corporations in non-compliance to turn themselves in, come into compliance and get off virtually scot free. In both instances, responsible corporations are put at a disadvantage by corporations seeking competitive advantage by cutting environmental corners. The effect of these secrecy and immunity bills may be to reward bad actors, encouraging behavior exactly opposite to that secrecy advocates claim they want.

"It is unclear why anyone should believe that polluters are likely to develop environmental consciences if legislation is passed allowing them to shield potentially damaging evidence contained in environmental audits. ... [Only] a business with something to hide would benefit from a law that turns data gathered from environmental audits in to secret information."[7]

Do the corporations behind the audit secrecy legislation have something to hide? In 1995, thirty-one states considered legislation to allow corporations to conceal environmental and safety studies ("audits") from scrutiny by the government, the public at large and members of the workforce. Nine states passed legislation establishing some version of an environmental audit privilege in 1995 making a total of 14 states since Oregon adopted the first statute in 1993. Twenty-four states considered without passage or rejected this legislation in 1995.

Environmental audits are management tools used by corporations to review their operations to identify opportunities to improve environmental and health and safety performance.

Almost everyone engaged in the current legislative debate believes environmental audits are desirable and should be encouraged.

The question is,"Does this legislation actually encourage corporations to clean up their operations? And what cost will society pay if these bills are enacted?"

Specifically, does the creation of a new legal privilege that makes secret environmental self-audit efforts actually encourage corporations to review the environmental performance of their facilities candidly -- and make improvements without regulatory or civil intervention?

Likewise, do immunity provisions, which eliminate most civil and criminal penalties for environmental failures that corporations self- report and correct, encourage compliance with environmental and health and safety regulations?


AUDIT PRIVILEGE makes voluntary internal corporate environmental "audits" privileged or secret.

IMMUNITY makes a corporation immune from criminal and civil penalties for self-disclosed violations of environmental regulations.


THE CORPORATIONS BEHIND THE PRIVILEGE.

The environmental audit secrecy legislation at the national and state levels has been initiated and pushed by a highly select group of corporations and industries. These corporations and industries have some of the worst environmental and health and safety records, and use critically dangerous processes to produce potentially damaging and unhealthy substances.

The simultaneous appearance of environmental audit secrecy legislation in 38 states is the product of an orchestrated nationwide campaign by the corporations most at risk in non-compliance investigations and corporations with the most to hide from public oversight .

This campaign is coordinated and supported, in most states, by the American Legislative Exchange Council, a national conservative legislative organization supported by corporations seeking a weakening of regulations governing their operations.

These corporations coordinate and support their efforts nationally through three industry coalitions based in Washington, D.C. The membership of these groups reads like a "Who's Who" of corporations facing increased public criticism and scrutiny of their environmental and occupational health and safety practices.

The groups include: the Compliance Management and Policy Group, the Corporate Environmental Enforcement Council and the Coalition for Improved Environmental Audits.

The Compliance Management and Policy Group is the oldest of the trio. Since 1991 CMPG has beat the drum for creation of an environmental audit and immunity privilege at the national level. Its membership includes associations representing the most toxic industries in the US plus four individual corporations embroiled in high profile and continuing environmental controversies.

CMPG played a critical role in the intiation of the current environmental audit privilege campaign by polluting industries. The US EPA's 1991 criminal prosecution of Weyerhaeuser for environmental violations at its Aberdeen, Washington Plant is described as one reason for the founding of CMPG. The group's spokesperson, Jim Moore, plays a leading role in the current environmental audit privilege campaign.[8]

General Electric faces continuing legal exposure from PCB contamination of communities. Browning Ferris Industries [BFI] and Waste Management [WMX] both have long records of criminal and civil charges against them for environmental violations. Monsanto is embroiled in a growing controversy over its development and marketing of BGH [Bovine Growth Hormone].

The Corporate Environmental Enforcement Council's eighteen members include corporations that have played a leading role in the state level effort to pass environmental privilege and immunity legislation. These politically active corporations have been the targets of much citizen environmental concern

Owens-Corning faces continuing controversy over silicon breast implants. Recently, Hoechst Celanese joined Dupont and Shell to pay $750 million to replace defective leaking polybutylene piping. BF Goodrich, Elf Atochem, and Kaiser Aluminum Chemical Corporation are chemical users and manufacturers using and producing potentially dangerous and unhealthy products. Weyerhaeuser and Georgia-Pacific are large wood product corporations at the center of preservation and endangered species, pesticide use and dioxin controversies. DuPont is the largest US chemical corporation with public exposure across a whole range of environmental controversies from waste disposal to herbicide/pesticide production to ozone destruction.

Proctor & Gamble's corporate counsel, James O'Reilly, plays a leading role in the broad campaign to shield corporations from citizen oversight. P&G reaches out aggressively to defend the use of disposable products [specifically diapers] and dioxin producing paper products through programs like Project Earth, a controversial junior high school environmental education curriculum that critics charge promotes unsustainable consumption.

CORPORATE ENVIRONMENTAL ENFORCEMENT COUNCIL

AT&T
BF Goodrich
Caterpillar
Coors Brewing Company
Dupont
Elf Atochem, North America Inc.
Georgia Pacific Corporation
Hoechst-Celanese Corporation
ITT Corporation
Kaiser Aluminum & Chemical
Kohler Corporation
3M Corporation
Owens-Corning
Pfizer, Incorporated
Polaroid
Procter & Gamble
Westinghouse Electric
Weyerhaeuser

COALITION FOR IMPROVED ENVIRONMENTAL AUDITS

ASARCO
Bell Atlantic
Caterpillar
Dow Chemical
Hoechst-Celanese
Weyerhaeuser
American Automobile Manufacturers Ass.

COMPLIANCE MANAGEMENT AND POLICY GROUP

American Forest & Paper Ass.
American Petroleum Institute
Chemical Manufacturers Ass.
National Solid Waste Management
Association
Browning Ferris Industries [BFI]
General Electric
Monsanto
Waste Management [WMX]
The Coalition for Improved Environmental Audits [CIEA]

The Coalition for Improved Environmental Audits promotes the corporate campaign for environmental audit privilege at the state level. CIEA tracks the development of audit privilege and immunity legislation across all 50 states, providing its members summaries of legislative initiatives as well as a model bill "for your use in preparing and refining environmental audit privilege and voluntary disclosure legislation."

CIEA's six corporate and one industry association members constitute a particularly active sub-group within the audit secrecy groups. Their desire for secrecy appears to be motivated by both environmental and other factors.

ASARCO, a metals smelting and refining corporation, offers one example of the role CIEA's members have played in the audit secrecy advocacy campaign in Tennessee. ASARCO with total TRI releases in 1993 of over 57 million pounds and operations at Strawberry Plains, Tennessee, hired attorney Scott Thomas to lobby specifically for audit secrecy and immunity.[9] The Corporate Environmental Enforcement Council [CEEC] "ASARCO seems to be the driving force behind this anti-enviroment, anti- consumer bill," reported Tennessee Citizen Action's Brian McGuire. "With all these investigations and violations, I can understand why they want the legal protections the bill has for them."[10]

In March, 1995, investigators from EPA's Criminal Investigation Division raided the ASARCO's smelter in East Helana, Montana seizing records and taking environmental samples. The investigation sought evidence of reported illegal disposal of hazardous waste, illegal discharges into East Helana's wastewater treatment plant and false statements made to enforcement agencies.[11]

ASARCO's century old Globeville, Colorado plant has been sued by neighbors for not cleaning up lead, cadmium and arsenic that has contaminated local yards and neighborhoods for years. The Denver Housing Authority was forced to close a 226 unit section of homes in 1990 because of this contamination. These are some of the most recent examples in ASARCO's extensive record of non-compliance.[12]

THE COMPLIANCE MANAGEMENT & POLICY GROUP [CMPG]
State Groups[sample]

Associated Industries of Florida
Florida Chamber of Commerce
Ohio Chamber of Commerce
Ohio Manufacturers Association
Louisiana Chemical Association
Mid-Continent Oil & Gas Association
Louisiana Ass. of Business & Industry
Tennessee Ass. of Business
Pa. Chamber of Business & Industry
Michigan Manufacturers Association
Michigan Chemical Council
Texas Chemical Council
Georgia Textile Manufacturers Ass.
West Virginia Manufacturers Ass.

CORPORATE ACTIVITIES AT THE STATE LEVEL

In the 14 states reviewed for this report, with few exceptions, the leading public proponents for environmental audit privilege were state and regional representatives of the industries participating in the three national audit secrecy coalitions.

But in most of the states surveyed, one or two individual corporations played a critical role in the audit secrecy effort. Some of these corporations are prominent members of the three national coalitions. Others played behind-the-scenes roles that were seldom reported in public.

Almost all of these corporations face or have faced prosecution and/or significant civil litigation because of their environmental and occupational health and safety compliance records.

How would the proposed legislation benefit these corporations? What do they have to gain? And what does the public have to lose?

The two stories of state audit secrecy campaigns that follow[Louisiana & West Virginia] offer a glimpse of the interests behind the legislation.Louisiana Environmental audit privilege legislation came up for the first time in the Louisiana legislature's 1995 session. The House Bill #2085 was introduced very quietly in House Judiciary Committee "A" [instead of the Environment Committee] by Representative John Siracusa of a district which includes Morgan City, Louisiana. The goal appeared to be to introduce and pass the audit privilege bill with as little public attention as possible. The initial bill included a provision [Section 2515(A)] which fined any citizen $10,000 who used privileged internal corporate information while participating in a public forum and could not prove that the information released did not come from a privileged environmental audit report.

Likewise workers who reported environment violations that were privileged as a result of the audit secrecy legislation faced both jail and a $10,000 fine. This legislation placed the burden of proof on citizens exercising First Amendment rights, not on the corporation claiming the violation of audit privilege.

The bill passed out of the Committee and into the full House on May 17, 1995, where it passed 86 to 16 with two absent.

Senator Mike Foster, who also represented the Morgan City area of Louisiana, introduced the audit privilege legislation in the Senate. Though the bill was similarly routed through Senate Judiciary Committee "A", the wraps were off. Louisiana environmental advocates and trial lawyers sounded the alarm at an emergency press conference on June 14, 1995, just before the end of the session.In the flurry of lobbying the followed, the principal corporate advocates for the legislation were the Louisiana Chemical Association and the Mid-Continent Oil and Gas Association, two organizations which represented the state's who most toxic and potentially destructive industries. [Mid-Continent actually had authored their own secrecy bill, House Bill 2184 introduced by Rep. Donelon. It died in the House.]

Louisiana accounts for 23% of all petrochemical production in the US [as a percentage of gross sales]. "The industry presence during the session is overwhelming," reports Willie Fontenot of the Louisiana Attorney General's Office."They had over a hundred lobbyists working the floor."[13]

Environmental and trial lawyer opponents to the Foster Bill were able to get it tabled in the Senate at the very end of the Louisiana legislative session. Subsequently, on November 18, 1995 Senator Mike Foster was elected governor of Louisiana. Environmental activists believe the environmental audit privilege legislation will be introduced again, perhaps in a special session called by Foster after his inauguration in January, 1996.

MSP BEHIND THE SCENES

That is the public story of the effort to pass environmental audit privilege legislation in Louisiana in 1995. There is another story: the behind-the- scenes story which involves Marine Shale Processors [MSP], one of the most investigated and indicted corporations in the United States for non-compliance with environmental regulations. While MSP has not, to our knowledge, publicly advocated for secrecy legislation, the corporation clearly stands to gain from its passage.

Marine Shale Processors was founded in Morgan City, Louisiana in 1982 by Jack Kent. From the beginning, Kent used money to secure favored treatment. Kent made a $75,000 contribution to then, Governor Edwards campaign to help secure permits.[14]

Marine Shale built and continues to operate today a cement kiln to burn hazardous chemical waste. Claiming that it produces a product called aggregate under the "recyling loophole" in RCRA [the Resource Conservation and Recovery Act], MSP operates, the nation's largest hazardous waste incinerator, without formal incinerator permits. MSP's operations have come under intense srutiny by US EPA and Louisiana Department of Environmental Quality.

In 1988, under the Administration of Governor Roemer, MSP was fined $4.5 million for air and water violations. All its permits were suspended. The FBI raided the corporation's offices twice, seizing thousands of documents.[15] In spite of this, Marine Shale's incinerator continues to burn 100,000 tons of hazardous waste a year without required environmental controls while its EPA and state DEQ violations are appealed through the courts.

Is it a coincidence that the two sponsors of the environmental audit bill represent Morgan City, Louisiana, the site of MSP's incinerator? Representative John Siracusa, the legislation's 1995 house sponsor, owns and operates a solid waste hauling company with contracts with MSP.


1993 TRI RELEASES* FOR CORPORATIONS ACTIVE IN AUDIT PRIVILEGE LEGISLATION

Dupont206,000,000
Asarco57,000,000
Monsanto54,000,000
Hoechst-Celanese35,000,000
3M Corporation27,000,000
Georgia-Pacific22,000,000
Dow Chemical16,000,000
General Electric11,000,000
Weyerhaeuser9,000,000
Westinghouse7,000,000

*Toxic Release Inventory in pounds for releases to land, air and water in 1993.


In 1995, John Siracusa ran for and won election to the Senate seat vacated by Mike Foster when he ran for governor. Rep. Siracusa received over $25,000 [85% of his total contributions] in campaign contributions in 1995 from oil and chemical corporate political action committees [PACs].[16]

Mike Foster's Bayou Sale Construction Company does major work for Marine Shale Processors. Indeed, it is reported by Wilma Subra of New Iberia, Louisiana that Mike Foster first ran for the Louisiana Senate at the behest of MSP after the sitting senator, Anthony Guarisco, refused to do the corporation's bidding in Baton Rouge.[17]

The head of DEQ in the Roemer Administration, Paul Templet, recalls that the newly elected Senator Foster came to see him to ask the state to get off "These laws strip away public rights to uncover environmental hazards."

Marine Shale's back. "I told him I don't fix tickets," remembers Templet, now a Professor at LSU. "Foster got real mad and said, 'I'm going to spend the rest of my life trying to get you.'"[18]

In the 1995 Louisiana gubernatorial election, Jack Kent, President of Marine Shale Processors, spent $505,000 on radio and television ads against the candidacy of Buddy Roemer, Mike Foster's prinicipal challenger. Roemer lost in the first election and Foster beat Cleo Fields in the runoff.[19]


-**- Note References for footnotes 20-24 and the text that accompanies -**-
-**- them is missing.  Apparently this text is the "Coors Example      -**-
-**- referred to below                                                 -**-

Marine Shale Processors has dropped its recycling claim for its incinerator and is applying for a formal hazardous waste incinerator permit. Passage of the Louisiana environmental audit privilege bill, sponsored by Siracusa and Foster in 1995, would allow MSP to operate virtually without fear of future criminal prosecution or civil actions.

By self-auditing and defining the scope of the material covered by the audits, MSP could sequester the information needed by prosecutors and regulators to continue to hold the corporation accountable for its actions. The legislation, if passed in 1996 could, in effect, place one of the nation's leading environmental lawbreakers beyond the reach of the law.

OTHER STATES

In state after state, individual coorporations with serious environmental non-compliance problems and toxic litigation exposure have played key roles in the efforts to pass environmental audit privilege legislation.

Some of these corporations have been active in the three national audit secrecy coalitions. Some are regional operations with notable non- compliance problems. All stand to benefit from the secrecy and the immunity such legislation offers.

THE WEYERHAEUSER STORY

Jim Moore, Director of the Compliance Management and Policy Group, uses a story involving a Weyerhaeuser paper mill at Aberdeen, Washington to make the case for audit secrecy.

From 1980 to 1989, the Weyerhaeuser mill discharged red paint wastes into the Chebalis River including oil and latex based paints and solvents. This discharge came from the washing of an area where the ends of finished lumber were painted.

An internal corporate audit in 1987 identified the waste water discharge as a potential hazardous waste and water quality violation. Additional internal Weyerhaeuser audits in 1988 and 1989 repeatedly identified this discharge as a potential violation.

In July, 1989, EPA criminal investigators, initially tipped off by an anonymous phone call and supported by other evidence, executed a search warrant of the plant and seized the three [1987-89] internal audit reports with other records.

Moore, then Weyerhaeuser's attorney, initially claimed the audit documents, which clearly established that the corporation knew it was discharging illegally, were protected by attorney-client privilege and filed a motion for the return of the audits.

Weyerhaeuser withdrew its claim for the audits after US EPA had "substantially completed its investigation. These documents did not add anything to [EPA's] understanding of the facts surrounding the violations."

Weyerhaeuser ultimately pleaded guilty to five misdemeanors and paid a criminal fine of $125,625 and an additional $375,000 to restore the slough affected by the paint waste discharges.

US EPA's internal review of the case and the controversy over the audit concludes: "Environmental programs are self-reporting programs which assume that all companies will act in good faith to comply. Such programs are effective only if there is effective enforcement. ... The audit is not a means unto itself. It is one means of ensuring compliance and therefore no prosecution. The issue is really whether a company is willing to commit immediately to addressing any problems raised in an audit."[25][author's emphasis]

DOES CORPORATE SELF-REGULATION WORK?

The Coor and Weyerhaeuser stories raise fundamental questions about the "good faith compliance"claim central to industry arguments for audit secrecy.

In both the Coors and Weyerhaeuser examples corporate managers were made aware of potential violations of environmental standards by internal audits. In both cases, the corporations failed to correct those violations until they were caught by regulators. Can we trust corporations engaged in potentially harmful and dangerous production to be self-regulating? The evidence, at least for the industries and corporations behind the push for audit secrecy and immunity, suggests that we can't.

THE CORPORATE GREENWALL

A 1995 survey by Arthur D. Little, Inc. of environmental, health and safety [EHS] managers working for 185 US and Canadian corporations cited the existence of "a green wall" between EHS staff and business staff.[26]

More than seven out of ten respondents pointed to either a lack of acceptance of environmental, health and safety staff or the existence of a separate EHS "culture" as the major reasons for the "green wall" which prevented EHS functions from being integrated into the business.[27]

Respondents in the study cited "business management's inability to see environmental, health and safety concerns as a business issue" and "EHS being pigeon holed as a cost function without profit or potential value" as additional impediments.[28]

Respondents overwhelmingly reported that the environmental, health and safety staff were commonly viewed "as an outside operation whose sole mission is to 'keep the company out of trouble.'''[29] Whatever leverage "keeping the company out of trouble" gives corporate environmental, health and safety staff, is certainly diminished by the secrecy created by the audit privilege. We believe that without the possibility of outside scrutiny of internal audits and other corporate information, the EHS staff will become even more marginalized.

A LOOK BEHIND THE VEIL

Our research has verified many of the concerns expressed by corporate environmental, health and safety managers in the Arthur D. Little study. When the public or the government has been able to penetrate the corporate veil, they have often found that management attention to problems raised by internal audits is overshadowed by cost cutting considerations.

In two cases, Union Carbide Corporation and the ARCO Chemical Corporation both ignored repeated warnings by corporate EHS staff about dangerous situations. The result, in both cases, was disasters that killed a total of eighteen workers and injured dozens more.

On March 12, 1991 an explosion and fire at Union Carbide's Seadrift, Texas plant killed one worker, injured 32 others and came within minutes killing hundreds. A leaked OSHA document revealed that Union Carbide's environmental, health and safety staff had conducted 7 audits over a period of twenty years, at least three of which had warned explicitedly of dangers which contributed to the disaster. Four of the audits were conducted after the Bhopal disaster and after Union Carbide pushed the Chemical Manufacturer's Association to create the Responsible Care Program of self-regulation. And yet, Union Carbide failed to act on their own EHS staff's recommendations or in accordance with its own Responsible Care rhetoric.[30]

On July 5, 1990 a storage tank at ARCO Chemical's Channelview, Texas plant exploded killing 17 workers[SEE BOX]. According to a report prepared by Communities Concerned about Corporations, internal ARCO environmental, health and safety audits three times in a decade warned about the situation which produced the disaster. But management failed to act on those audits.[31]

ARCO paid, uncontested, $3,481,300 in fines to OSHA and settled with the victims families quickly, some believed, to avoid disclosure of the audits which predicted the causes of the disaster. If audit privilege had been in effect, those audits would have remained secret and we would have been prosecuted for publishing their results.[32]

We believe that there is little historical evidence to suggest that most corporations engaged in production potentially dangerous to the environment and human health and safety take adequate precautions in a timely manner without pressure from regulators, citizens or workers.


"...without the possibility of outside scrutiny of audits, EHS staff will become even more marginalized."


ARCO Channelview Explosion - July 5, 1990 At 11:21PM on July 5, 1990, Tank 68270 at the ARCO Chemical plant in Channelview, Texas exploded killing 17 workers. ARCO Chemical's EHS staff warned about the danger in three memos analyzing the causes of an identical accident a decade before.

In 1980, a tank that was a little more than 5% of Tank 68270's size exploded, ripping off the tank's welded roof and hurtling it 230 feet into nearby operating production units. The causes of the 1980 accident were determined to be the presence of explosive levels of oxygen and hydrocarbons.

In a September 27, 1983 memo, ARCO engineers recommended the continuous purge of nitrogen to keep oygen levels at around 3%.

In a November 1, 1983 memo EHS staff recommended a vent compressor to recapture vapors. A January 27, 1984 memo warned that if hydrocarbon levels in the Tank 68270 accumulated to a depth of 5 feet or more and there was no nitrogen purge, the tank could explode.

The nitrogren purge and the vent compressor were installed. But workers were not trained to avoid the twin dangers of high hydrocarbon levels and no oxygen dilluting purge.

Managers let hydrocarbon levels rise to almost 20 feet and then turned off the nitrogen purge approximately 19 hours before the explosion. In effect, management recreated the 1980 accident on a more deadly scale.

SECRET FROM WHOM?

Government regulation may not be the principle target of the corporations' audit secrecy and immunity campaign.

The corporations behind the campaign for audit privilege and immunity for self-disclosure also seek to prevent these audits from becoming evidence in civil tort actions and ammunition for citizen critics of corporate environmental practices.

"In addition to advocating privilege for environmental audits," wrote Jim Moore of the Compliance Management and Policy Group [CMPG] in 1994, "industry wants to develop a means to ensure that 'outsiders' such as citizen groups, are not allowed to 'circumvent' the privilege and publicize the results of a self-audit. Companies have also expressed concern that plaintiffs in toxic tort litigation might have access to voluntarily initiated environmental audits."[33]

The additional corporate concerns listed by Jim Moore are not minor motivations. Indeed, we have come to believe that secrecy of corporate information from non-governmental groups, citizens and particularly workers, is the real goal of this legislation; i.e...environmental audit secrecy is about protecting corporate assets and power from citizen oversight, not about eliminating burdensome regulation and certainly not about protecting the environment.

AUDIT SECRECY AND WORKERS' RIGHTS

Workers represented by a union have the same rights of discovery as plaintiffs in a lawsuit. These rights were recently upheld by the National Labor Relations Board decision June 30, 1995 in Detroit Free Press vs. The Newspaper Guild [317 NLRB No. 155]. The case involved access to corporate internal environmental audits by striking Guild members.

"In any kind of contract dispute with management," said Dick Leonard, Director of Special Projects for the Oil, Chemical & Atomic Workers International Union [OCAW], "workers have the right to review all environmental audits, risk assessments, safety investigations, outside insurance investigations, any report that might effect worker health and safety not covered by lawyer/client privilege."[34] Two members of the Coalition for Improved Environmental Audits, Bell Atlantic and Caterpillar both are engaged in labor disputes in which workers brought up environmental and safety issues. The Communications Workers of America [CWA] with Bell Atlantic and the United Auto Workers [UAW] with Caterpillar each have used internal corporate environmental, health and safety information accessible to workers in public efforts to settle contract disputes.

Unions representing workers in the most toxic and potentially dangerous industries, particularly the Oil, Chemical and Atomic Workers [OCAW], the new Teamsters, and the Steelworkers, have used access to environmental audits and other internal corporate information to win spectacular David versus Goliath victories against some of the world's largest, most powerful corporations.

We believe corporations support the audit privilege, in part, to shut down this kind of union activity. In audit privilege bills modeled on the Colorado law, workers who disclose privileged audit face both fines and jail.

WEST VIRGINIA

An example of the potency of worker involvement can be seen in the story of the audit privilege campaign in West Virginia. The campaign for environmental audit secrecy here reveals additional aspects about corporations and their real motives for pushing this legislation.

Opponents of corporate audit secrecy were alerted to industry's plans to introduce this legislation by documents secured by workers at the Oxychem [Occidental Chemical] plant in Belle, West Virginia. This early warning plus the existence of a strong labor environmental coalition pushed the environmental audit secrecy issue out into the open.

West Virginia's special role in the chemical industry's public relations efforts played a role in how corporations approached the issue. The Chemical Manufacturers' Association [ CMA], lead by Union Carbide [a major West Virginia corporation], had made the Kanawha Valley of West Virginia a kind of laboratory for community outreach and education efforts under the CMA's Responsible Care program. "Openness" and "public dialogue" are stated goals of these efforts.

The West Virginia Manufacturers Association ran large ads in the state's newspapers to build public support for the legislation. The public debate forced industry to make so many concessions to environmental and labor opponents that some corporations asked that the bill be withdrawn at the last minutes of the session.

But this is not the whole story. Separate from the Manufacturers Association's efforts, Dupont, represented by Regional Vice-President Craig Skaggs, ran an independent campaign in support of the environmental audit privilege legislation. Dupont has major production facilities in West Virginia, including the corporation's largest plant at Parkersburg.

Two events in 1994 may have made the proposed environmental audit privilege legislation of particular concern to Dupont. On May 27, 1994, the Shell Chemical Corporation plant at Belpre, Ohio just a couple of miles from Dupont's giant Parkersburg facility, exploded, releasing hundreds of thousands of pounds of styrene and other toxic chemicals. Three workers were killed and 1,700 people had to be evacuated as a result of the explosion. All chemical plants in West Virginia came under increased public scrutiny as a result.[35] Dupont had particular reason to worry about the effect s of the Shell/Belpre disaster. In 1994, Dupont's plant at Belle, West Virginia, just a few miles east of the state capitol at Charleston, had been publicly criticized for unsafe maintenance practices, through the leaking of internal corporate documents.[36]

Union workers struggling for a contract at Oxychem's small plant in Belle offered Dupont a much more elaborate example of the danger of corporate audits being made public.

The small Oxychem plant at Belle is literally surrounded by the much larger Dupont facility. OCAW successfully organized the workers at the Oxychem plant in 1994 as part of a larger effort to organize the Dupont plant's 1200 workers as well. When Oxychem refused to bargain with the newly organized workers in good faith, Oxychem workers began to talk publicly about the environmental performance of the Belle plant. 37

Workers discovered numerous internal corporate environmental audits, risk assessments and other documents that proved that Oxychem Corporation ran its Belle plant in flagrant non-compliance with laws, enforcement orders and agreements signed with state and federal regulators. Faced with an investigation of its activities at Belle and large fines for its non-compliance, Oxychem shut its small [83 workers] plant down.[38]

OCAW was able to secure a settlement for Oxychem's hourly workers equivalent to their lifetime pay had the plant remained open. Many believe this settlement was a strong admission of guilt by Oxychem. Oxychem at Belle, like Coors, Weyerhaeuser, ARCO and Union Carbide used secrecy to hide environmental violations, not fix them.


Workers' Rights to Information"...audit secrecy is about protecting corporate assets and power from public oversight."In 1992, Detroit Free Press management conducted an environmental audit that included "evaluation of safety records, hearing conservation records and procedures for dealing with bloodborne pathogens."

In Detroit Free Press vs. Newspaper Guild Local 22, the National Labor Relations Board [NLRB] ruled that workers had a right to the internal audit, reaffirming a broad set of workers' rights in the process while rejecting a number of management arguments strikingly similar to those made for audit secrecy and immunity legislation. The NLRB ruled: -- the mere potential for litigation does not constitute a legitimate claim of confidentiality.

-- the Act [NLRA] contemplates achieving the highest possible levels of health and safety jointly with the union, not unilaterally by the employer.

-- a balancing test between the employer's right of confidentiality and the union's right to relevent information "is neither necessary nor proper." Workers' right to information outweighs the confidentiality claim. Detroit Free Press, 317 NLRB No. 155, June 30, 1995


AUDIT SECRECY AND TORT REFORM

Many of the same corporations active in the environmental audit secrecy and immunity effort also play an important role in the campaign for so- called tort reform. Current tort reform legislation seeks to limit [a] civil litigation for damages [through the English loser-pays-all lawsuit costs system] and [b] punitive damages awarded plaintiffs.

The connection between the legislative campaigns for audit secrecy and tort reform is obvious. Corporations that produce potentially destructive and unhealthy products want to hold themselves harmless from both government regulators seeking penalties for environmental non- compliance and citizens/workers seeking civil redress for harm caused by corporate practices.

In a number of states [Mississippi, West Virginia, Ohio] where tort reform has been defeated or severely limited, corporations have pushed audit secrecy as a backdoor method of limiting civil litigation against them. The secrecy of self-defined environmental audits can prevent civil plaintiffs from securing, through discovery motions, information critical to proving their case in court. The criminal and civil immunity provisions may give the appearance of no wrongdoing where it, in fact, exists.

Many of the same associations and corporations promoting audit secrecy and immunity are active in the tort reform struggle at the state and national levels. The overlap between the three audit coalitions and the American Tort Reform Association is significant. [SEE BOX].

AMERICAN TORT REFORM ASSOCIATION

[members active in audit secrecy legislative efforts]

Coors Brewing
Chemical Manufacturers Ass.
Dow Chemical
General Electric
Georgia-Pacific
Monsanto
Owens Corning
Pfizer, Inc.
Union Carbide

Eighteen states passed some form of Tort Reform in 1995 effectively limiting the power of citizens, sitting on a jury in a civil trial, to hold corporations accountable for the damage their actions causes.[39]

This effort at limiting the power of citizens to sue for damages is part of a larger effort to hold the corporation outside the law's reach.

SECRET, IMMUNE, UNACCOUNTABLE CORPORATIONS

So serious is corporate concern about such non-governmental groups' use of internal corporate information including audits that Congressman Hoekstra [R- Michigan] has recently held hearings for legislation to make such campaigns by citizen and worker groups illegal. It is worth noting that corporate campaigns conducted by corporations against business rivals would not be limited by this legislation.

Audit privilege legislation will shield corporate actions from view and, with immunity, function as a kind of Get Out of Jail Free card for when corporations think they are about to get caught by regulators, and providing a quick, effective corporate defense against citizen and worker efforts for environmental justice.

The secrecy and immunity protections created by these laws offer little incentive for corporate managers, in the words of the Arthur D. Little "green wall" study, to integrate EHS concerns into business decisions and may, in fact, function as a disincentive.

Audit secrecy and immunity have little to do with protecting the environment and more to do with protecting corporations, their power and their assets.

The campaign for secrecy through audit privilege and immunity for self- disclosure seeks to protect corporate interests by effectively removing the corporation from whole areas of regulation and legal liability while simultaneously denying citizens and workers rights fundamental to the protection of the environment and the fostering of justice.

This campaign is part of a much larger effort by corporate interests to expand secrecy and deny citizens their right to know information critical to their health and safety. [SEE BOX BELOW]

When government regulators cannot prosecute corporations for egregious environmental wrong doing; when workers and citizens cannot secure or use internal corporate documents to speak out against irresponsible acts by corporations; when citizens damaged by corporate decisions cannot seek redress through civil litigation, the rule of law, fundamental to our democracy, is undermined.

END


OTHER ASPECTS OF THE CORPORATIONS' CAMPAIGN FOR SECRECY AND DESTRUCTION OF INDIVIDUAL RIGHTS

Corporations that produce toxic and hazardous materials are conducting a multi-phase campaign to remove their operations from as much government and citizen oversight as possible. These efforts currently include:

-- Passage of Senate Bill 343, that would cut the chemicals listed on the Toxic Release Inventory [TRI] by 90 percent, undermining the Community Right-to-Know. The Wall Street Journal reported that Louisiana Senator [D] Bennett Johnston met with J. Dieter Stein, the CEO and Chairman of BASF, the world's largest chemical corporation, "to discuss specific language that addresses the TRI problem."

-- The Chemical Manufacturers Association [CMA] is suing EPA to remove some of the 152 new chemicals the agency added to the TRI list in 1994.

-- The Chemical Safety Board, created to investigate industrial chemical accidents in much the same way the National Transportation Board reviews transportation accidents, remains inactive, without funding. It has been reported that the CMA and the American Petroleum Institute met with White House budget officials just prior to the decision not to fund the Board.

-- Congress has abolished the Office of Technology Assessment, the Congressional scientific research arm that has played a major role in advancing citizens' right to information on hazardous production and products.

Industry lobbyists are also pushing for Congressional action to abolish the National Institute of Environmental Health Sciences.

"The nation's basic infrastructure for scientific research, oversight and accountability on chemical hazards is under attack," said Paul Orum of Working Notes on Community Right-to-Know.

In 1996, Congress will take up legislative proposals to establish a national audit privilege which will overrule EPA's current policy against such a privilege.[40]


LIST OF CORPORATIONS BACKING AUDIT PRIVILEGE LEGISLATION

CALIFORNIA
California Manufacturers Assoc
Chevron
Coors
IBM
New United Motor Mfg.
Miller Brewing
NorCal Waste Systems
Solar Turbines
Western States Petroleum Assoc.

SOUTH CAROLINA
Laidlaw
Textile Manufacturers Assoc.

ARIZONA
Intel
Motorola

WISCONSIN
Wisconsin Paper Council

KANSAS
Kansas Petroleum Council
State Chamber of Commerce

OKLAHOMA
Mid-Continent Oil & Gas Assoc
Independent Oil Producers
Conoco
Sun Oil
General Motors
Fort Howard
Oklahoma Natural Gas
Oklahoma Gas & Electric
USPCI/Laidlaw

MISSOURI
Monsanto
Anheuser-Busch
Associated Industries of Missouri
Missouri Chemical Council
Tobacco Institute

NORTH CAROLINA
Manufacturers & Chemical Industry Council of NC
Dupont
International Paper
Duke Power
Carolina Power & Light
Glaxo
Waste Management
RJR Tobacco

FOOTNOTES

1. A privilege is a benefit extended to a relationship or a communication that protects the relationship or communication from disclosure to others. The law recognizes very few such privileges, attorney-client, priest-penitent being two examples.

2. "Big Corporations Organize to Push Environmental Audit Privilege and Immunity from Prosecution for Companies Reporting Violations," Corporate Crime Reporter, April 24, 1995, p. 1.

3. US Environmental Protection Agency internal briefing on audit privilege and immunity.

4. Ibid.

5. Ibid.

6. "1993 General Counsel Survey: Organizational Sentencing Guidelines," Chicago Lawyer, November, 1993, p.1.

7. David W. Ronald, Statement of David W. Ronald, Assistant Attorney General, Arizona Attorney General's Office before the Environmental Protection Agency, July 27, 1994, p. 9.

8. Interview with Jim Moore on December 21, 1995.

9. R-T-K Net 1993 TRI Data.

10. Press Release by Tennessee Citizen Action, May 15, 1995.

11. "Criminal probe aimed at Asarco,"Helena Independent Record, March 3, 1995, p. 1.

12. "Globeville cleanup expansion demanded," The Denver Post, October 28, 1992, p. 4.

13. Interview with Willie Fontenot on November 8, 1995.

14. Ibid.

15. Interview with Paul Templet, November 8, 1995.

16. Information from campaign contribution records for John Siracusa's 1995 campaign.

17. Interview with Wilma Subra, November 14, 1995.

18. Templet, op. cit.

19. "Marine Shale attacks Roemer," New Orleans Times-Picayune, October 30, 1995, p. 2.

20. Letter to Colorado State Senator Claire Traylor from Patricia A. Nolan, MD, Executive Director, Colorado Department of Health dated September 23, 1993.

21. Ibid.

22. Ibid.

23. Letter to Mr. Brian P. Riedel and Mr. Ira R. Feldman, U.S. Environmental Protection Agency from Scott B. Smith, Director, Environmental, Health and Safety Policy, Coors Brewing Company dated July 26, 1994.

24. Unpublished manuscript by Kevin Williams, Western Organization of Resource Councils.

25. U.S.Environmental Protection Agency internal review of Weyerhaeuser case.

26. "'Green Wall' Between Companies Environmental and Business Staffs Major Roadblock to Successful Environmental Management, Arthur D. Little Survey Finds," News Release from Arthur D. Little, December 21, 1995.

27. Ibid.

28. Ibid.

29. Ibid.

30. Memorandum entitled, "Request For Consideration of Approval of an Egregious Case," to Patricia Clark, Director of Compliance Programs, Directorate of Compliance Programs, U.S. Department of Labor Occupational Safety and Health Administration from Gilbert J. Saulter, OSHA Region 6 Administrator dated June 28, 1991.

31. Communities Concerned about Corporations, What really happened on July 5, 1990?, July 8, 1993.

32. Ibid.

33. David W. Ronald, "The Case Against an Environmental Audit Privilege," National Environmental Enforcement Journal, September, 1994, p.23.

34. Interview with Dick Leonard on December 4, 1995.

35. Joel A. Tickner and Hillel Gray, Accidents Do Happen, National Environmental Law Center and the United States Public Interest Research Group, August, 1994, p. 3.

36. Leonard,op.cit.

37. Ibid.

38. Ibid.

39. Association of Trial Lawyers of America, "State Action on Tort Reform in 1995".

40. Compiled by Paul Orum of Working Notes on Community Right-to-Know.

FINANCIAL SUPPORT FOR THE ORGANIZATIONS BEHIND THIS REPORT

Environmental Action Foundation
The Beldon II Fund
Members of EAF
Good Neighbor Project for Sustainable Industries
(A project of the Tides Foundation)
The Beldon Fund
Public Welfare Foundation
Town Creek Foundation
Stern Family Fund
Communities Concerned about Corporations
Members of CCC

Source: RTK Net, Washington DC

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