SEC's Dirty Secret

["Protect All Children's Environment" <pace@mcdowell.main.nc.us>]

  Our organization was able to trigger an investigation into Waste Management
  Inc. by filing a stock holder complaint.  It didn't seem to matter that our
  stock holder held only one share of stock...but the fact that the complaint
  was filed by a stock holder seemed to be the irrefutable issue.  It may
  save time and legal expense to buy one share of stock from each of the
  suspect companies and file a shareholder complaint.  Shareholders seem to
  have greater standing in these issues.  Just a guess.  E.M.T. O'Nan
  
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  > From: Tony Tweedale <ttweed@wildrockies.org>
  > To: Multiple recipients of list <dioxin-l@essential.org>
  > Subject: Re: The SEC's Dirty Secret (ENS)
  > Date: Thursday, August 21, 1997 9:28 AM
  >=20
  > >The SEC's Dirty
  > >Secret
  > >
  > >Posted to the web: Fri Aug 15 19:27:42 EDT 1997
  > >
  > >
  > >
  > >By Donald Sutherland
  > >
  > >WASHINGTON, DC, August 15, 1997 (ENS) -
  > >Information on the environmental liabilities of
  > >corporations is being withheld from investors
  > >and from the general public, but little is being
  > >done to bring light into these dark corners.
  > >
  > >In February of 1997, three environmental
  > >groups - Friends of the Earth, Citizen Action,
  > >and the Sierra Club - sent a letter to the U.S.
  > >Securities and Exchange Commission (SEC)
  > >asking for an investigation of the
  > >entertainment giant Viacom Inc. The groups
  > >want the SEC, a federal government agency, to
  > >look into why Viacom failed to disclose over
  > >$300 million in Superfund liabilities at more
  > >than 30 sites in the firm's 1995 SEC 10-K form
  > >to stakeholders.
  > >
  > >Susan Duffy, a spokeswoman for Viacom, told
  > >the Wall Street Journal in March that the
  > >environmental groups grossly exaggerated
  > >Viacom's Superfund liabilities, but she
  > >declined to give the actual accrued value of the
  > >company's liabilities.
  > >
  > >Viacom assumed the superfund liabilities of
  > >Gulf & Western, which changed its name to
  > >Paramount Communications in 1989, and was
  > >acquired by Viacom in 1994.
  > >
  > >To date, the SEC has yet to repond to the
  > >request by the three environmental groups.
  > >
  > >Financial researchers in the field of
  > >environmental 10-K disclosure point out that
  > >the Viacom case is by no means unique in the
  > >U.S. stock market.
  > >
  > >"Only once in the last twenty years has the SEC
  > >enforced environmental GAAP in 10-K filing,"
  > >said Martin Freedman, professor at the School
  > >of Management at Binghamton University in
  > >New York.
  > >
  > >GAAP stands for Generally Accepted
  > >Accounting Principles. While it is the SEC's
  > >responsibility to enforce the GAAP, the
  > >American Institute of Certified Public
  > >Accountants (AICPA) and the Financial
  > >Accounting Standards Board (FASB) are the
  > >not-for-profit, membership organizations
  > >which write the standards for accounting
  > >models in the United States.
  > >
  > >The GAAP arrangement is a government-private
  > >partnership that is unique in the world. Most
  > >governments control standards; but in the U.S.
  > >the function is supposed to be covered by a
  > >government-private partnership.
  > >
  > >Martin Freedman and A.J. Stagliano, of the
  > >College of Business and Administration at
  > >Saint Joseph's University in Philadelphia, Pa, in
  > >a 1996 report, randomly chose 26 firms from
  > >the Environmental Protection Agency's list of
  > >900 publicly traded potentially responsible
  > >parties (PRPs) listed on the 1993 National
  > >Priority List. The report found only 12 made
  > >any sort of environmental expense/liability or
  > >legal matter disclosure.
  > >
  > >Freedman says his findings support previous
  > >research studies which state that despite the
  > >legal obligation to provide qualitative and
  > >quantitative assessment of a firm's estimated
  > >hazardous waste liabilities to stakeholders
  > >many firms make "little or no disclosure
  > >effort."
  > >
  > >The National Environmental Policy Act of 1970,
  > >the Comprehensive Environmental Response,
  > >Compensation and Liability Act of 1980
  > >(CERCLA), and the Superfund Amendments and
  > >Reauthorization Act of 1986 have had a major
  > >impact on businesses identified as PRPs.
  > >
  > >The clean up of hazardous waste sites
  > >mandated under these laws is estimated in the
  > >hundreds of billions of dollars nationwide. But,
  > >most potentially responsible parties have put
  > >off paying the clean up costs with court
  > >litigation that disputes the EPA's
  > >determinations.
  > >
  > >But potentially responsibly parties who try to
  > >defer costs by filing lawsuits are potentially
  > >barking up the wrong tree. The national
  > >environmental accounting requirements under
  > >GAAP, and the SEC's Regulation S-K require
  > >disclosure of environmental liabilities -
  > >whether or not they are contingent on a final
  > >agreement with the EPA.
  > >
  > >"The 1975 Statement of Financial Accounting
  > >Standards No.5 stated you record a liability
  > >when it's probable and the amount is estimable,
  > >but many companies choose not to estimate,"
  > >said Fred Gill, Senior Technical Manager of
  > >AICPA.
  > >
  > >"The new environmental accounting model for
  > >environmental remediation liability Statement
  > >of Position 96-1 now requires corporations to
  > >disclose what they can estimate," said Gill.
  > >
  > >The laws and regulations are in place - the
  > >catch is enforcement.
  > >
  > >Legal experts do not expect the SEC to rule on
  > >the Viacom situation anytime soon because of
  > >the unwritten detente that exists between the
  > >publicly traded companies and the SEC in filing
  > >environmental capital and liability costs.
  > >
  > >"How can the SEC prove Viacom departed from
  > >GAAP when they have allowed mixed practice
  > >in environmental 10-K filing to exist for so
  > >long?" asked Greg Newington, Chief of
  > >Enforcement for the California State Board of
  > >Accountancy.
  > >
  > >"They (the SEC authorities) don't want to end up
  > >like Marcia Clarke and lose a high profile court
  > >challenge to a powerfully financed company
  > >like Viacom," Newington said.
  > >
  > >The Corporation of Finance at the SEC has
  > >refused to cite previous enforcement cases of
  > >environmental 10-K filings. The agency admits
  > >to a policy of confidentiality for corporate
  > >internal environmental audits.
  > >
  > >"Disclosure of internal environmental audits is
  > >neither prohibited nor mandated by the
  > >Commission's rules or staff policies, and the
  > >staff believes that disclosures meeting the
  > >requirements of the securities laws need not
  > >include internal environmental audits," said
  > >William E. Morley, Senior Associate Director of
  > >the Corporation of Finance.
  > >
  > >"Without enforcement of internal
  > >environmental audits to stakeholders, anything
  > >goes in 10-K filing of significant
  > >environmental material expenses," said
  > >Freedman.
  > >
  > >The SEC declined to comment on whether their
  > >policy of confidentiality for corporate internal
  > >environmental audits is a breach of federal
  > >disclosure laws and the Security Exchange Acts
  > >which require full disclosure of corporate
  > >assets and liabilities to stakeholders.
  > >
  > >The environmental groups are not giving up on
  > >their pursuit of the issue of disclosure of
  > >corporate environmental liabilities. "We plan to
  > >follow up our charges on Viacom with the SEC
  > >in September," said Michele Chan-Fishel of
  > >Friends of the Earth, "and this is not the only
  > >company we will be targeting for failure to
  > >report environmental liabilities."
  > >
  > >
  > >                                                        The Environmen=
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