Audit, Compliance and Risk Blog

By Paul Marshall and Karen Masullo

Earlier this year, the US Department of Justice (DOJ) Fraud Section issued additional enforcement guidelines to US Attorneys, entitled “Evaluation of Corporate Compliance Programs.” DOJ’s US Attorneys perform these evaluations to weigh whether and how severely an organization might be charged for illegal conduct by directors, officers, or other employees. But individuals may be committing crimes to further the organization’s goals (remember Volkswagen’s recent use of fraudulent means to defeat emission requirements), or for their own purposes despite organizational efforts. For readers in organizations that aren’t encouraging criminal behavior, these guidelines provide important guidance to the design (and implementation) of effective compliance programs.

How long can a new President’s policy changes take? I’ve been writing about President Trump’s attempts to roll back environmental requirements, and cautioning that some changes can be fast (like immediate repeal of his predecessor’s executive orders regarding climate change) while others will require multi-year rulemakings to revise finalized regulations (like EPA’s review of the greenhouse gas emission limits under the Clean Air Act, both extremes appear in a recent Executive Order I discussed here). On April 11 the federal Court of Appeals for the D.C. Circuit issued a reminder that regulatory changes can take a long time. The Court revoked several environmental reporting exemptions adopted by EPA in the last month of George W. Bush’s administration (December 2008, effective on the day of President Obama’s inauguration January 20, 2009) – culminating a year-long rulemaking and setting of 8 years of administrative and judicial appeals. So this regulation-reducing effort took 9 years to fail.

EPA Administrator Scott Pruitt has been on a tour to publicize his efforts to get EPA “back-to-basics.” He launched the tour with a visit to a Pennsylvania coal mine in April. The agency issued a press release about that visit, which also summarized its “Back-to-Basics Agenda.” The press release summarizes the Agenda as “Protecting the environment; engaging with state, local and tribal partners; and creating sensible regulations that enhance economic growth.” The Agenda provides a convenient rhetorical framework for the new Administrator’s efforts to re-boot EPA’s activities.

In Re Hornby Residences Ltd. (2017 BCSECCOM 17), the British Columbia Securities Commission had to determine whether a real estate development corporation and its principal had violated the BC Securities Act s. 57(b) prohibition against fraud in connection with the issuance of a security when the funds invested were used to pay the principal and other corporations controlled by the same principal, Brendan James Schouw. Schouw was a real estate developer and the sole director of Hornby, and of Grace Residences Ltd. and Homer Residences Ltd. Schouw was also connected with Drake Residences Ltd., although the Commission was not provided with information about its directors and officers.

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The biggest difference between Presidents Obama’s and Trump’s environmental policies relate to regulation of greenhouse gases (GHGs) that most scientists and policy-makers believe contribute to climate change – a proposition which President Trump and his appointees do not embrace. On March 15, the Environmental Protection Agency (EPA) announced its reconsideration of GHG emission standards from “light duty” vehicles such as automobiles and small trucks, for model years 2022-2025. These standards were set in 2012 by EPA, in cooperation with the (US federal) National Highway Traffic Safety Administration (NHTSA) and the California Air Resources Board (ARB). Three days before President Obama left office, on January 17, EPA reaffirmed the 2022-2025 standards, determining them to be technically and economically feasible for auto makers to meet and cost-effective for customers.

On March 16, President Trump released his initial budget proposal for the 2018 federal Fiscal Year. Among its many provisions is a proposal to zero out budgeting for the Chemical Safety and Hazard Investigation Board (more often referred to as the Chemical Safety Board or CSB).

On February 28, President Trump issued Executive Order (EO) Number 13778, ordering the Environmental Protection Agency (EPA) and the Army Corps of Engineers (Corps) to review their current regulatory definitions of “waters of the United States” – sometimes called “navigable waters.” (I blogged about this definition here). The EO strongly points toward a narrower definition that would reduce the agencies’ jurisdiction, reversing rules issued in 2015 during President Obama’s administration.

Candidate Trump promised to reverse President Obama’s climate initiatives, which he variously described as based on uncertain science and/or as a “war on coal.” Since taking office, President Trump has moved expeditiously to make good on those promises. On March 28 he issued an executive order (EO) “Promoting Energy Independence and Economic Growth,” packaging a large set of repeals and re-directions to move US federal policies firmly away from climate change and toward domestic fossil fuels.