Multinational Monitor

MAY 1998
VOL 19 No. 5


The Corporate Right to Cover Up: The Environmental Audit Privilege and the Public Interest
by Sanford Lewis

Veggie Libel: Agribusiness Seeks to Stifle Speech
by Ronald K.L. Collins

First Amendment Follies: Expanding Corporate Speech Rights
by Robert Weissman

Canadians Ungagged: A Victory for Free Speech in Daishowa v. Friends of the Lubicon
by Virginia Rose Smith


SLAPPing Back for Democracy
an interview with George Pring


Behind the Lines

Corporations and Free Speech

The Front
Rejecting the IMF - Milking the Media

The Lawrence Summers Memorial Award

Money & Politics
Corporate Tax Magic

Their Masters' Voice
The Small World of Lobbyist Ann Wexler

Names In the News

Book Notes


The Corporate Right to Cover Up:
The Environmental Audit Privilege and the Public Interest

by Sanford Lewis

Should corporations be allowed to police themselves? A new trend sweeping the United States is encouraging corporate self-policing, despite grave concerns about its implications by environmentalists and legal experts.

New laws, currently enacted in 24 states and pending in several others, encourage corporations to conduct environmental studies of their own activities, known as environmental "audits." To induce such studies, these new audit laws grant corporations rights to conceal a wide range of environmental information from public and government eyes. Industries become entitled to keep the content of environmental studies secret (privileged), if the firms commit to engaging in corrective action when they find any violations. And, under many of the laws, if the corporations choose to disclose their violations to government officials, they can receive outright immunity against government prosecution.


Corporate lobbyists assert that a growing fear of lawsuits and regulatory enforcement is deterring companies from assessing their compliance with environmental and other laws, or when they do conduct such reviews, from putting their findings in writing. The new secrecy rights, they claim, will overcome the trepidation that internal documents will later appear as incriminating evidence in a lawsuit, and encourage more aggressive corporate self-scrutiny.

For instance, a chemical company representative recently asserted to a Congressional hearing that the Texas law has encouraged his firm to do audits that it would not otherwise have performed.

"While Sterling had conducted some audits in the past, we did not conduct as in-depth and extensive reviews as we now do under the Texas audit law," Samuel Z. Chamberlain II, director of corporate legislative, regulatory and environmental affairs for Sterling Chemicals, Inc., a Texas-based company, recently told a Congressional committee by way of illustration. Out of six recently conducted audits, he said, only one "would have been conducted in the absence of the Texas audit law."

Chamberlain and others argue that the audits allow companies to correct items of non-compliance that would not have been discovered in inspections by government or third-party consultants.

But environmental groups, labor unions, law enforcement agencies and others see far greater risks than potential benefits in the new laws.

"It is clear that only a business with something to hide would benefit from a law that turns data gathered from environmental audits into secret information," says David Ronald of the Arizona Attorney General's office.

By cloaking an array of routinely generated corporate information in secrecy, the critics note, these laws are based on an assumption of good faith -- that corporations will not abuse concealment opportunities to avoid correcting conditions harmful to the environment and dangerous to public health. Skeptical of corporations' good faith, they fear corporations will use the privileges of these laws as a new "dumping ground" for all sorts of corporate dirty secrets. Under these laws, they expect corporations to "study" issues as an "audit" and then to use the concealment rights to "game the system" -- making it harder for anyone outside the firm to force the issue of corrective environmental action or victim compensation.

The broad definitions of "audit" in these laws will enable companies to "audit" a wide range of problems, in order to keep essential evidence out of the hands of anyone who might otherwise have legal recourse against environmental wrongs. The kinds of information firms may conceal under these laws include pollution prevention opportunities, accident safety assessments, certain emissions test data and even some assessments of groundwater pollution and cleanup needs. In most cases, no one outside the corporation will ever know what information is being hidden behind this classification. With these exemptions in place, there is less chance for a prosecutor or affected residents to find and identify environmental and public safety abuses or to dialogue with companies regarding solutions.

"One place we can clearly expect to see a proliferation of 'privilege' labels is in the offices of those sham environmental experts," says Linda Spahr, chair of the environmental subcommittee of the New York State District Attorneys Association. "In any kind of fraud case which involves routine forgery or falsification of records, the key to the investigation is the records themselves. If the records bear privilege labels, and they no doubt will if the target company is in the environmental field, they will have to be sealed without reviewing them. Computers used to forge documents cannot be accessed, for they would have in them information relating to presumptively privileged documents. No investigation can be done. None of the exceptions set forth in the various privilege laws would apply so as to allow use of the documents in evidence against the scam consultant without the consent of the companies involved."

Some of the new laws also forbid and punish whistleblowing. For instance, the Colorado audit law holds individuals personally liable for disclosure of privileged audit information. This would strongly deter whistleblowers. Suppose a neighbor of a plant received information regarding a poisonous discharge from a plant that a consultant or government employee obtained from an audit. If the neighbor were to take recourse through government or the courts, Colorado's environmental audit law would empower the company to sue its whistleblowing consultant for the resultant "damages," and seek criminal prosecution if it were a government employee who informed the local residents of the risks.

Another example "of how an audit privilege and immunity law can seriously impede environmental protection," according to Steve Herman, the U.S. Environmental Protection Agency's director of enforcement and compliance, is when "a criminal investigator receives a tip that waste is being disposed of illegally. If the investigator follows up and finds out that the informant received the information from an environmental audit, the polluter may be able to escape prosecution altogether because of the 'tainted' evidence or some of the most damaging evidence could be excluded from the trial."


An ongoing civic conflict in Cincinnati, Ohio illustrates how environmental audit critics' fears might play out. Waste Management, Inc., the nation's largest waste handling firm, owns and operates a landfill in Cincinnati, Ohio that is adjacent to a low-income, mostly African-American neighborhood.

The Winton Hills and Winton Place communities have been trying to compel meaningful state action on toxic gases coming from the landfill for over a decade.

Reverend Solomon Lundy, a leader of Communities United For Action (CUFA), a local environmental justice group, says that in addition to odors inundating their neighborhood, residents suspected that the landfill was contributing to medical problems in the area -- headaches, respiratory ailments and rashes.

Through the administrative permitting process, CUFA sought to obtain environmental audit reports and other documentation from the company. Waste Management stonewalled CUFA at every turn, and turned over the documents only when ordered to by the state hearing examiner.

The documents turned out to convey critical information. "These audits showed that the gas had been migrating into the low income community for years, that the source of the gas was the landfill (not a neighboring city facility, as had been publicly suggested by landfill proponents), and that the migration could not be corrected without taking a series of corrective steps which the landfill never took in a comprehensive manner," says David Altman, attorney for CUFA. "Most importantly, information withheld from the public showed that the landfill gas, which has been migrating into the lives of thousands of low-income people for over a decade, contained chemicals such as benzene and vinyl chloride, known to cause cancer and other health problems." The documents also show the company was aware of its obligations to stop the gas migration and yet failed to do so.

While CUFA and Waste Management fought over the documents, the Ohio legislature was considering an environmental audit privilege bill.

"The mere fact that the bill was pending in the legislature delayed the disclosure of the information about the gas and the ultimate passage of the law led to an attempt by the polluter to get the information back from the citizens," Altman says.

Waste Management filed a "motion for protective order" with the director of the Ohio Environmental Protection Agency (EPA) asking that CUFA return the incriminating evidence. The company claimed that the information it had turned over to the citizens' group was protected under a common law privilege and Ohio's pending environmental audit privilege bill. The Ohio EPA director denied the company's privilege claim on February 5, 1997, based on the fact that the documents were already part of the public record and that Ohio's environmental audit privilege law (though it did pass the legislature and was signed by the governor) was not yet in effect. The law did not go into effect until March 1997.

If CUFA had not already obtained the documents and Ohio's environmental audit privilege law was in effect, the outcome might have been different and Waste Management's privilege claim might have been upheld.

By securing environmental audits and other documents through discovery in the environmental permit review process, the community produced information that forced the state agency's hand. Ohio EPA issued an order to Waste Management in January 1997 stopping toxic emissions at the CUFA site.

"When we finally resorted to hiring a lawyer, we discovered that Waste Management was holding back secrets from us, and got a better idea of one likely source of our health problems," says CUFA's Lundy. "This is a matter of environmental justice. Thank God we finally know more details about the toxic gas and other pollutants coming from the landfill. Now what we need is for the Ohio EPA to issue a final order for the landfill to be closed."

"We local people have a right to get this information," says Lundy. "To say we shouldn't have it, or should give it back to Waste Management as a result of the new law, is like saying we should lay down and die."

Sanford J. Lewis, an attorney, is the director of the Good Neighbor Project for Sustainable Industries, a project of the Tides Center, and chair of the National Network Against Corporate Secrecy.


Mailing List


Editor's Blog

Archived Issues

Donate Online


Send Letter to the Editor

Writers' Guidelines