It does not matter if you purposefully decided not to look at the results of an audit, you could still be found culpable. Let us suppose you have engaged a firm to conduct an audit of your operations. You get the audit report and stick it in a drawer and do nothing to review the results or correct any deficiencies or problems. Are you still liable? More than likely, yes.
In United States v. Uzoaga, No. 16-20211 (5th Cir. 2017), the Fifth Circuit affirmed the use of a “deliberate ignorance” instructions in those situations where the evidence shows that the defendant was aware of a high probability of criminal conduct and still maintains that he/she had no knowledge of the conduct. In Uzoaga, it was a doctor that did nothing to change billing practices, even after a Medicare audit indicated Medicare fraud. The opinion states that: “Uzoaga reviewed the Medicare remittance notices yet refrained from ever inquiring with the treatment provider about the billing or coding used. Under the circumstances here, Dr. Uzoaga had good reason to be suspicious that illegal conduct was occurring in her patients’ treatment. After Dr. Uzoaga’s submission of documents to the audit response, Medicare denied some of the claims submitted. Regardless of the precise basis given by Medicare, the post-audit denial gives rise to a reasonable inference that Dr. Uzoaga was aware of a high probability of illegal conduct.” The Fifth Circuit found that this should have put the doctor on notice of the high probability of illegal conduct.
Uzoaga was a Medicare fraud case. How does that apply to the environmental world? Well, if you do an audit and do nothing to correct deficiencies, the government has an argument that you are culpable by deliberately ignoring the results of the audit and what steps were necessary to correct the deficiencies. It could certainly get a jury instruction that remaining deliberately ignorant when circumstances showed a high probability of illegal conduct may be circumstantial proof of the requisite guilty knowledge. That would be deemed to be the same as a “knowing” violation of the environmental laws.
So, when it comes to audits, make sure there is not only a commitment to conducting the audit, but a commitment to correcting the deficiencies that are identified in the audit report.
And a shout out to my friend Jim Smith for bringing this case to my attention!
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