FYI

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I thought the listservice might be interested in my lastest report.

Cheers,
Donald Sutherland
Member of the Society of Environmental Journalists
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EPA Reveals US Publicly Traded Corporations Hide Environmental
Debt in SEC Filings to Shareholders By Donald Sutherland

WASHINGTON, D.C., February 12, 2002 -The US Environmental
Protection Agency (EPA) has disclosed seventy four percent of US
publicly traded corporations they surveyed openly violate the US
Securities and Exchange Commission's (SEC) environmental
financial debt accounting regulations.

The findings are based on a 1998 EPA study of corporate
compliance with the SEC's Regulation S-K mandating quarterly
and annual financial reporting of corporate environmental liability
and debt exposure in incidences of violation of US environmental
laws.

While the US Congress tries to unravel the Enron Corporation
accounting scandal where hundreds of millions of dollars of debt
was hidden illegally from shareholders, none of the investigating
House or Senate investigating subcommittees contacted were
aware of the EPA's charge of gross financial environmenatal debt
departures in the US stock exchanges.

The hiding of corporate environmental debt from shareholders is a
significant issue in the stock market where corporate exposure to
environmental financial costs involving compliance, cleanup, and
legal fees is estimated by the insurance underwriting industry at
over one hundred billion dollars.

A.M.Best Company a global insurance service firm with corporate
headquarters in Oldwick, New Jersey reported in November 2001
they expect the property-casualty industry to ultimately incur
upwards of $121 billion in net asbestos and environmental (A&E)
losses.

Officials at the EPA state the high percentage of publicly traded
corporations hiding their environmental debt from shareholders and
the lack of enforcement by the SEC for its' environmental
accounting filing regulation is rewarding corporate noncompliance
to US environmental laws.

"This departure from SEC mandated disclosure puts good
companies at a disadvantage in the absence of reporting EPA legal
proceedings," says Shirin Venus, attorney for the EPA's Office of
Planning, Policy, Analysis and Communications.

"Enforcement would give assurance disclosures are being made
correctly and provide incentives for better performance," she says.

In Jan.2001, the EPA Office of Planning, Policy Analysis and
Communications and Office of Regulatory Enforcement directors
sent the SEC's Division of Corporation Finance and Division of
Enforcement directors notice of the EPA's national campaign
(Guidance on Distributing the "Notice of SEC Registrants' Duty to
Disclose Environmental Legal Proceedings" in EPA Administrative
Enforcement Actions) to promote environmental SEC disclosure
with references to their 1998 study.

It is the SEC's job to administer and enforce the federal securities
laws of the United States in order to protect investors and to
maintain fair, honest, and efficient markets.

But in the last twenty years the SEC has only once enforced its'
Reg.S-K financial environmental accounting regulation, setting a
precedent for other financial debt departures in the stock market.

Currently, all companies publicly traded on U.S. stock exchanges
must file reports on their significant environmental material
expenses both quarterly and annually to shareholders under SEC
laws.

The SEC threshold reporting requirements of Item 5 of SEC
Regulation S-K mandates disclosure of: 1.. all environmental
proceedings, including governmental proceedings, which are
material to the business or financial condition of the registrant

2.. damage actions, or governmental proceedings involving potential
fines, capital expenditures or other charges, in which the amount
involved exceeds 10 percent of current assets

3.. governmental proceedings, unless the registrant reasonably
believes such proceedings will result in fines of less than $100,000
This requirement has been criticized by environmental
organizations for allowing corporations too much leeway for
interpretation of what is financially material when it comes to
disclosure of environmental liability and cleanup costs to
shareholders.

A coalition of more than 60 organizations is spearheading an effort
to have the Securities and Exchange Commission (SEC) strictly
enforce and improve securities law requiring corporate filing of
significant environmental material expenses. The group, called the
Corporate Sunshine Working Group, covers the spectrum from
money management firm Kinder Lydenberg & Domini to the United
Steelworkers of America, to Friends of the Earth.

The Corporate Sunshine Working Group argues the non-disclosure
of environmental liabilities and cleanup costs by publicly traded
companies does make a real difference in a company's share
price. They cite a class action lawsuit filed by shareholders of U.S.
Liquids against the firm for concealing material environmental
information which resulted in an artificially inflated share price.

"This company claimed that its liquid waste management services,
which generated more than 90 percent of the U.S. Liquids revenue,
would result in 20 percent earnings per share growth," said
Michelle Chan-Fishel, international policy analyst for Friends of the
Earth.

"Little did investors know that the company was concealing its
illegal dumping activities," she says, "and when one of the
company's most important facilities was heavily fined and
temporarily shut down, share value fell by over 50 percent."

The  World Resources Institute (WRI), a not-for-profit organization
based in Washington,D.C., released reports in 2000 supporting the
contentions of the Corporate Sunshine Working Group showing
pulp and paper companies reviewed are not disclosing
environmental risks that may significantly affect their financial
performance.

"This lack of disclosure infringes Securities and Exchange
Commission (SEC) rules and directly threatens investors in pulp
and paper companies," said WRI economists Robert Repetto and
Duncan Autin in their reports, "Coming Clean: Corporate Disclosure
of Financially Significant Environmental Risk, and Pure Profit: The
Financial Implications of Environmental Performance.

Corporations often hide their financial environmental risks from their
SEC filings by stating the costs and claims will not have a material
adverse effect on operations and financial position.

Executives argue that pending litigation cann't be qualified and the
assessed financial risks are too small to spell out given the
company's size.

And the US accounting auditing bodies issuing clean financial audit
opinions for those firm's SEC filings agree with that stance.

In February 1997, three environmental groups (Friends of the Earth,
Sierra Club, and Citizen Action) sent a letter to the SEC,
demanding an investigation of the entertainment giant Viacom Inc.
for failing to report an alleged $300 million in superfund clean up
liabilities in their annual report to shareholders.


Price Waterhouse LLP, who audited Viacom's annual report also
issued a clean opinion for Viacom's financial report to shareholders
minus the questionable superfund liability figures.

Viacom executives claim the EPA and environmental groups were
over stating the clean up costs.

Martin Freedman, professor of accounting at the College of
Business and Economics at Towson University in Maryland
believes Viacom's Superfund accounting departure is not unusual.

"My 1996 study of the Environmental Protection Agency's list of
900 publicly traded potentially responsible parties listed on the
National Priority List found most companies make little or no
disclosure effort on environmental expense/liability reporting," he
says, "and it's getting more and more overt."

In 1998 the SEC issued a bulletin for companies to abide more
strictly by SEC rules in completely revealing corporate material
expenses.

The aim of the Commission's bulletin was to stop the practices of
some corporations that seek by accounting strategies to cover up
financial losses so these losses do not bring down share prices.

"The SEC sees a growing problem with a lot of companies just
passing off required generally accepted accounting principles
(GAAP) as immaterial right in front of our faces," said Bob Burns,
chief counsel in the SEC's Office of Chief Accountant.

"It's an attitude which comes across as telling us keeping good
books is immaterial, and right now our primary focus isn't the
environment, but in preparing financial statements in general," said
Burns.

Four years after release of the bulletin SEC officials still maintain
a reluctance to review corporate failures to file 10-K form filings
detailing significant environmental material expenses.

"The Office of the Chief Accountant has not recently reviewed and
is not in a postion to comment on the Environmental Protection
Agency study," says John M. Morrissey, Deputy Chief Accountant
for the SEC.

"The Commission's Division of Corporation Finance selectively
reviews filings with the Commission for compliance with the SEC's
disclosure requirements, including disclosure related to
environmental legal proceedings," says Morrissey.

Under current federal securities law, "material" information is
anything that an average investor ought reasonably to be informed
of before buying a security.

The definition of environmental materiality as anything affecting air,
land, water or public health is considered an old-fashioned definition
in many corporations.

Instead, many auditors and their business clients today define
environmental materiality as any event or news which will affect a
company's revenues by a 10 percent threshold level.

According to Bob Burns, "senior management in a lot of firms
excuses departures from GAAP at 3 to 10 percent levels."

The Corporate Sunshine Working Group claims under these
reporting conditions shareholders are often left out of the loop of
unreported controversies which can ultimately effect the corporate
financial position.

"Our objective is to have the SEC uniformly enforce their current
environmental accounting regulations and create more clarification
for existing rules," says Sanford Lewis, an attorney and of the
Corporate Sunshine Working Group.

"Part of the problem with the current SEC regulations is they are
just vague enough that corporate council can easily provide boiler
plate language that eliminates meaningful disclosure of these
issues," says Lewis.

Does the SEC's nonenforcement of its financial accounting
regulations undermine EPA operations to encourage corporate
compliance with US environmental regulations and laws?

"These financial environmental accounting departures effect the
EPA's operations," says Venus.

"Market mechanisms which require full transparency are
undermined by these departures and it sets a disinsentive for
others to comply if competitors aren't," she says. (C)Donald
Sutherland 2002

References:

SEC S-K regulations
http://www.law.uc.edu/CCL/regS-K/index.html
October 1, 2001 US EPA alert on SEC disclosure
http://es.epa.gov/oeca/ore/sec.pdf

Notice on Public Company Requirements to Disclose
Environmental Legal Proceedings
http://es.epa.gov/oeca/main/strategy/oppac_notice.html

http://es.epa.gov/oeca/oppa/secguide.html

http://es.epa.gov/oeca/oppa/notice.html

http://es.epa.gov/oeca/oppa/17cfr229.html

A.M.Best Company
http://www.ambest.com/

Corporate Sunshine Working Group
http://www.foe.org/international/cswg/
http://gnp.enviroweb.org/secpress.htm

WRI report on financial environmental departures by US
publicly traded pulp manufacturers
http://www.wristore.com/pureprofit.html
http://www.wristore.com/comingclean.html

Superfund Transaction Costs
http://www.bergen.org/AAST/Projects/ES/SF/trans.html

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+++++++++++++++++++++
Michael R. Meuser,
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http://www.mapcruzin.com/
Environmental & Social Cartography, WebMaps
Environmental Justice, Right-to-Know Advocacy

Maps, Data CDs, and Free Mapping Tutorial
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