Assistant Attorney General Todd Kim Delivers Remarks

Assistant Attorney General Todd Kim Delivers Remarks at the American Bar Association’s National Environmental Enforcement Conference’s Section of Environment, Energy and Resources

Remarks as Prepared

(STL.News) Thank you for that very kind introduction, John.  As you know, there is a distinguished list of predecessors who have held this job.  But I don’t know anyone held in higher regard than you.  It’s a privilege to have you introduce me.

Good morning to everyone joining us today.  As just mentioned, my name is Todd Kim, and since July, I have been the head of the Environment and Natural Resources Division (ENRD) of the Department of Justice.

As many of you know, ENRD is one of the litigating divisions at the department.  We are sometimes called the “world’s largest environmental law firm,” with over 600 employees, including more than 400 attorneys.  The division has a busy docket, roughly split between affirmative civil and criminal enforcement on one side and defensive cases on the other.  These cases arise under around 150 federal environmental and natural resource laws—laws like the Clean Air Act, Clean Water Act, CERCLA, NEPA and laws governing the management of public lands and resources held in trust for Indian tribes.  As I’m now experiencing firsthand, attorneys in the division deal with a remarkable breadth of issues, statutes, federal agencies and federal agency actions, all across the country.

Many of you likely are most familiar with the division’s enforcement work.  The division’s largest section is the Environmental Enforcement Section, with nearly half of the division’s attorneys and the responsibility of seeking civil judicial enforcement of the nation’s pollution control and environmental cleanup statutes.  The division also has a section dedicated strictly to criminal enforcement work.  Our Environmental Crimes Section has 35 federal criminal prosecutors that bring criminal actions under the pollution control laws; laws protecting wildlife, animal welfare and natural resources; and occupational safety and health laws that protect worker safety.

ENRD enforcement actions sometimes proceed against individuals.  But most often, the entity on the other side of the “V.” from the United States is a business organization of some sort and usually a corporation.  I’m sure that’s not surprising to most of you.  It would be hard to overstate the impact of the corporate form on American life.  Large corporations employ most Americans and are responsible for a huge share of the revenue generated in our country.

They also act as the custodians of industries that are responsible for the working conditions of millions of Americans and that generate a huge volume of hazardous and toxic inputs and byproducts.  In many ways, decisions made in the day-to-day operation of corporations can control the environmental health of the American people.  Considering the dramatic impact of the corporate form on both the daily lives of American citizens and on the economy, corporate environmental compliance is vital.

Today, I will discuss how ENRD, as the lead enforcer of our nation’s environmental laws, can encourage and incentivize compliance by private-sector business entities.  It’s a challenging subject in many ways, not least because a central function of a corporation is to limit legal liability for itself and the individuals that comprise it.  So how do you incentivize compliance by entities designed to limit liability from non-compliance? How can we motivate corporations to not only comply with environmental requirements, but also respect the need to balance private benefits with the public good?

An important part of the answer is that enforcement should promote a corporate culture that fosters strict attention to law.  Such a corporation tends to be stable, and a stable corporation is more likely to succeed and be profitable over the long term.  Enforcement serves to ensure that unlawful practices are both unprofitable and unsustainable.  Vigorous and robust enforcement is necessary to ensure appropriate deterrence and thereby protect the public health and the environment, as well as create a level playing field for businesses that obey the law.

Multiple tools are available in criminal and civil environmental enforcement that can be used to incentivize compliance and promote a law-abiding corporate culture.  One such tool was highlighted in an October memo from Deputy Attorney General Monaco that announced the creation of a Corporate Crime Advisory Group at the department that will solicit input from both public and private sources and consider topics such as: cooperation credit, corporate recidivism, and factors relevant to whether a company will qualify for deferred prosecution agreements or non-prosecution agreements.

The new policy will revise some existing criminal policy and procedures, including a reinstatement of prior guidance that to be eligible for any cooperation credit, corporations must provide the department with all relevant, non-privileged information about the individuals involved in corporate misconduct.  And so a company must identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status or seniority.

I want to stress that enforcement of the criminal provisions of the environmental laws is a priority for me.  This accords with the Deputy Attorney General’s direction that fighting corporate crime is a priority of the Department of Justice as a whole.  Vigorous criminal enforcement is critical to the proper functioning of the overall enforcement scheme under the environmental statutes.  It also expresses our values as a society, and is an appropriate response to the most egregious and harmful conduct.

Although we may have fewer criminal cases than civil cases, criminal prosecutions are an indispensable and powerful deterrent to illegal behavior.  A genuine threat of criminal prosecution can and will change the conduct of individuals and corporations who would not be deterred by the threat of civil enforcement alone.  For many of these reasons, ENRD will prioritize prosecuting individuals who commit and profit from corporate malfeasance.  Only individuals can go to jail, and we have found that criminal corporate accountability starts with accountability for individuals responsible for criminal conduct.

I should add that criminal enforcement in this sphere is not restricted to the criminal provisions of the environmental statutes.  Other criminal laws often come into play, most notably the so-called “Title 18” crimes of fraud, conspiracy and obstruction of justice when they are committed alongside environmental violations.  The division aggressively charges these related crimes where appropriate.

A second major point from Deputy Attorney General Monaco’s memo is that our assessment of corporate culpability will be informed by any documented history of wrongdoing.  For ENRD’s purposes, a corporation’s relevant track record may not be limited to its environmental misdeeds.

One way to illustrate these policies can be seen in the need for a corporation to exercise due care throughout its supply chain.  If a corporate supply chain originates from a criminally-tainted source, then my division will consider the criminal responsibility of all parts of that supply chain.  A corporation seeking credit for cooperation will need to identify all individuals involved in misconduct, including individuals outside the company in a supply chain.

You can see this dynamic in action in our prosecutions under the Lacey Act.  In 2008, Congress amended this century-old statute to broaden its coverage to include illegally-harvested plants and their products, including timber.  The Lacey Act requires that importers file a declaration with the United States government upon importation of plant products.  This declaration forces those who trade in timber to take responsibility for their products and fully know their supply chain – thus enabling them to ensure legality.

A corporate actor can be held responsible where it knew, or in the exercise of due care should have known, that that there is unlawfully-sourced timber in its supply chain.  There is no single protocol for satisfying this “due care” obligation.  The prohibition is fact-based and cannot be evaded by simply obtaining a piece of paper saying the wood is legal.  Rather, to satisfy its legal obligations, a company can determine itself the most efficient manner of ensuring legality in its particular sector and supply chain.

Criminal violations of the Lacey Act are punishable by five-year prison terms and half-million-dollar fines.  Related charges may include smuggling, conspiracy, false statements and money laundering, many of which carry even stiffer sentences.  A corporation would be well advised to protect itself and its investments by exercising due care over its supply chain in light of the prospect of criminal sanction; the potential seizure and forfeiture of illegally-sourced timber, goods, vessels and other equipment; and the unavailability of an innocent owner defense.

It is worth pointing out that a benefit from the real threat of criminal enforcement – beyond directly incentivizing corporate compliance – is that our client agencies’ administrative and civil enforcement programs themselves become more effective.  Agency queries are taken more seriously, and inspectors get more respect and greater cooperation on-site.  In this way, criminal enforcement leads to greater civil compliance.

So, turning now to civil enforcement, I want to talk a bit about sector-wide enforcement.  Depending on the circumstance and the public need, ENRD and our client agencies may focus enforcement resources on particular facilities in a given industrial sector or, indeed, on the entire nation-wide sector.  If all or most of an entire sector is in noncompliance, then individual facilities within that sector are likely to draw enforcement attention.

Successfully deployed, such initiatives can spotlight compliance problems, publicize the government’s enforcement plans and objectives for a sector and, hopefully, catalyze proactive compliance steps by other sources in the sector, including cultural changes, to avoid becoming enforcement targets.

An example of this approach is the Petroleum Refinery Initiative that we have worked on with EPA over the course of many years.  Since 2000, the United States has entered into 37 settlements with companies that refine over 95% of the nation’s petroleum.  These settlements cover 112 refineries in 37 states, and have substantially reduced emissions of nitrogen oxides and sulfur dioxide.  They have also required the investment of billions of dollars in control technologies, and the outlay of hundreds of millions of dollars in civil penalties and payments to fund supplemental environmental projects.

Several other tools are available in both civil and criminal contexts to promote enforcement and incentivize compliance, including corporate compliance.  Such tools include: corporate monitors, policies for compliance audits and implementation of compliance plans and the ability to give credit for self-reporting and other forms of cooperation.

Looking first at corporate monitors, many of our enforcement actions against corporations reveal employees engaged in a pattern of wrongdoing, which can indicate systemic breakdowns in compliance programs and internal control systems, as well as a corporate culture not conducive to continued compliance.  These all suggest the utility of corporate monitors, as recently highlighted in the Deputy Attorney General’s memo.

One important factor in determining whether to seek a monitor as part of a corporate resolution of liability is whether DOJ can have confidence that the company’s compliance program is effective in detecting and preventing misconduct and will remain effective in the future.  Accordingly, when DOJ reaches a settlement or plea agreement with a corporation or otherwise resolves a corporate investigation, it may require enhancements to these internal safeguards and require the company to retain and pay for an independent corporate monitor to examine and evaluate these efforts.

Monitors evaluate the effectiveness of the company’s internal accounting controls, record-keeping and financial reporting policies and procedures as they relate to the company’s ongoing compliance with the plea agreement or settlement and United States law.  The monitor then conveys any relevant information to DOJ, and, in some agreements, the court, investigative agency or probation office.

This role can be especially important in environmental cases, where highly regulated and complex chemical, physical and technical processes may be at issue.  Handling such subjects and voluminous data can challenge the capacities of prosecutors and government agencies monitoring and supervising cases.

ENRD uses, and will continue to use, monitors where appropriate in civil cases as well as criminal ones.  We have found that monitors can increase the likelihood of compliance with consent decree obligations and can be an effective complement to other standard settlement provisions for recordkeeping and reporting, stipulated penalties, self-certification under penalty of perjury and government oversight.

It should go without saying that a corporation will be in a better position to promptly remediate, maintain compliance, and avoid being the subject of federal enforcement and the imposition of a compliance monitor where it already has a strong internal infrastructure that supports future environmental compliance.  The heart of this infrastructure is a commitment to undertake comprehensive, periodic environmental audits of business operations to verify compliance with environmental requirements, identify any areas of noncompliance, and provide the mechanisms for correcting deficiencies.  It all comes down to this – a corporate culture that fails to be proactive and hold individuals accountable will lead to bad results.

With all this in mind, therefore, it is essential to keep track of the compliance steps you take.  If your company needs to demonstrate to DOJ that a monitor is unnecessary, or that prosecution is unwarranted, it will be in a much stronger position if it has documented and remediated any issues and can demonstrate a consistent and continual effort to improve its compliance program.  Our enforcement attorneys will distinguish between a situation where a company scrambles to react to a problem after it has occurred and might have been preventable, as compared to a corporation with a demonstrated history of good corporate citizenship.

This brings me to yet another tool – giving credit to companies that take a cooperative approach with enforcement authorities.  As enforcers, we are trying to clean up the mess.  If your approach makes that difficult and your company is at fault, we will seek civil penalties that reflect the need to deter that approach.  Penalty policies, however, allow us to consider things like early action, audit policies, self-reporting and cooperation in certain circumstances.  Though we always seek to recover economic benefit and we do not account for cooperation in damage assessments, we often seek lower penalties where the subjects of our investigation are cooperative.

I want to conclude by highlighting two top Administration priorities with a critical nexus to effective criminal and civil enforcement: tackling the climate crisis and promoting environmental justice.  Remember, at its core, enforcement seeks to ensure that certain public values are achieved, and that public goods—indeed, the public’s health—are protected.  Nowhere is that more true than for enforcement efforts that mitigate climate impacts and strive to secure environmental justice.

Through Executive Order 14008, “Tackling the Climate Crisis at Home and Abroad,” President Biden has called on all of our agencies to “hold polluters accountable for their actions,” and to “combat the climate crisis with bold, progressive action that combines the full capacity of the Federal Government.”

Enforcement cases handled by the division directly advance these objectives.  For example:

Cases directly enforcing against violations of regulations of emissions of greenhouse gases;
Cases that help protect carbon sinks, such as illegal logging prosecutions or vessel pollution cases that protect the ocean as a resource; and
Cases that protect the integrity of renewable energy programs by pursuing fraud and similar violations that undermine those programs.
Flaring cases are a good example.  Petro-chemical plants, refineries and chemical plants often use flares to burn off volatile organic compounds, toxics and other pollutants in their waste gases.  We have brought several cases in this area, including a civil enforcement case under the Clean Air Act against Dow Chemical Company for violations at facilities in Texas and Louisiana, and Clean Air Act claims we have settled against domestic subsidiaries of a Dutch chemical company for Clean Air Act violations at six petrochemical facilities in Texas and Iowa.  ENRD also has brought and settled a series of cases for recordkeeping and refrigeration system leak detection violations at several grocery store chains, securing major relief, including at 453 Trader Joe’s stores.

ENRD also is focused intensely on achieving the objectives for environmental justice that are a central feature of Executive Order 14008.  As a quick refresher, EPA has defined environmental justice as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin or income with respect to the development, implementation and enforcement of environmental laws, regulations and policies.”

The Executive Order tasks DOJ to coordinate with EPA’s Office of Enforcement and Compliance Assurance and other agency partners to develop “a comprehensive environmental justice enforcement strategy . . . to provide timely remedies for systemic environmental violations and contaminations, and injury to natural resources.” Development of that strategy is underway, and is something that corporate compliance officers and outside counsel will want to consider upon its release.

But we are not waiting for that.  We know there are communities, including communities of color and low-income communities, that are disproportionately burdened by environmental hazards and harms, and that have struggled to get their concerns about violations addressed.  We are working hard to remedy this situation.  To the extent a corporate actor violates either civil or criminal law in a manner that implicates environmental justice or the climate crisis, corporations should be aware that my division is paying particular attention to these issues.

We have talked about the importance of corporate culture, measures that can foster effective environmental compliance, and the ways that ENRD, in its enforcement capacity, can act to motivate and incentivize greater private sector compliance.  So what are the takeaways for our corporate citizens?

Well, I can tell you what we would like to see from companies.  Integrate environmental compliance into the culture of your company.  Institute systems that foster decision-making that improves environmental and health outcomes.  Ensure that, if environmental problems arise, your company has systems in place to investigate, determine, and document what went wrong, and why.

Finally, establish and enforce systems of accountability all the way up the corporate chain for environmental issues.  By proactively implementing compliance functions and spending resources on anticipated problems, a company can both avoid regulatory actions and receive credit from the government.  By cultivating a corporate culture that fosters compliance, these steps serve the shareholders, our environment and the public.

Thank you for the opportunity to address these important issues.

SOURCE: USDOJ.Today