Environmental audits or self-audits are undertaken by a company or specialists it hires to evaluate its compliance with environmental laws and regulations, uncover any problems and correct them.

The incentive for companies to conduct such audits is the ever-present possibility of future lawsuits from environmental groups or criminal prosecution by the Environmental Protection Agency (EPA). However, any information a company gathers from such voluntary efforts can be used against it in court; therefore companies are reluctant to conduct them.

A solution supported by many businesses and legislators is to bar the use of audit evidence when the company acts in good faith, promptly reports any violations and acts to correct them.

• Fourteen states have now passed laws limiting or barring the use of audit evidence.

• But EPA Administrator Carol Browner has threatened to take control of federal environmental programs delegated to states that adopt such policies.

• The EPA itself adopted a policy in December 1995 that in cases that met certain strict conditions, it would reduce some financial penalties and forgo criminal prosecutions for violations uncovered, reported and corrected to its satisfaction.

• The new policy sets such high hurdles for companies that some experts think it will discourage self-policing even more than before.

Bills before Congress (H.R. 1047 and S. 582) would give audit information a limited privilege from discovery or admission into evidence in civil lawsuits and provide limited immunity when an audit is disclosed to the government.

Self-assessments are also performed by companies with respect to employment discrimination, securities law, health and safety. There is support for extending the concept of privilege and immunity to those types of audits as well.

Source: "Self-Audits and Self-Plaudits," Judicial/Legislative Watch Report, Vol. 17, No. 3, March 1996, National Legal Center for the Public Interest, 1000 16th Street, NW, Suite 301, Washington, DC 20036, (202) 296-1683.