Businesses that undertake voluntary environmental quality as-surance programs could be hurting themselves in dealings with U.S. Environmental Protection Agency (EPA) enforcement officials.

"EPA's present policies are creating a disincentive for industries" that undertake these programs, according to a former EPA and Jus-tice Department lawyer who now heads a coalition of corporations and trade associations.

The regulated community is worried that voluntary, self-initiated compliance programs will make it easier for the government to file civil and criminal charges for past violations and slip-shod practices.

When companies carry out environmental audits and uncover past violations, the law compels them to notify state and federal regulators. As if to rebuff such honest and forthright action, government officials often use the disclosures as a basis for bringing administrative, civil and even criminal charges against the companies reporting violations.

Some lawyers are advising cli-ents to conduct environmental au-dits without taking notes since re-ports, memos and data can end up as Exhibits A, B and C in the prosecution's case against the company. Enforcement officials always try to establish a paper trail that links responsible company officials with knowledge of the problems.

Now EPA is beginning to worry that its zeal to build up enforcement numbers is actually counterproductive, turning corporate environmental compliance officers a- way from self-audits. As a result, the agency held a public meeting in late July to hear from business and industry representatives, state officials and others who have a stake in the agency's self-evaluation program.

Since 1986, when the Environ-mental Protection Agency first an-nounced its audit position, the a-gency has promoted self-audits by promising not to file criminal char-ges for promptly identified and fully corrected violations. However, the agency has never offered to relinquish its civil remedies.

EPA's credibility suffers, in part, on account of the "sins" of the states. In fact, state environmental officials have been accused of one of the worst examples of enforcement of overkill on voluntary self-audits.

WMX Technologies audited one of its municipal solid waste landfills in Pennsylvania and found that certain operating personnel and managers ignored permit limits on incoming waste. Taking the situation in hand, WMX fired several employees who were responsible for the violation and notified the state. The state of Pennsylvania fined the company $4 million - at least 20 times the amount that WMX might have benefited from taking in extra loads.

In short, WMX was penalized for having a system that uncovered misdeeds, punished culpable em-ployees, corrected compliance problems and, ultimately, for being candid with state regulators.

However, change is coming. Col-orado, Oregon, Kentucky and In-diana laws limit the right of environmental officials to use data from self-audits. But companies that operate in several states need more. For example, what if a business operates in an audit-protected state but maintains its headquarters in an unprotected state? Such a company may be vulnerable to disclosures if an environmental group goes to court in the company's home state and asks for information on a self-audit conducted in a state that protects such information.

A number of other jurisdictions, including California, Illinois, Ohio and Pennsylvania, are considering similar audit protection laws. The Minnesota Chamber of Commerce has spent almost two years trying to hammer out an agreement with the state's attorney general and en-vironmental officials that would en-courage, and not penalize, businesses that conduct internal probes for environmental compliance.

Minnesota companies want im-munity from enforcement if they conduct audits; the state, it seems, won't go that far. Although the business community in Minnesota may settle for strong guarantees of confidentiality for environmental self-audit information, the best solution may be to pass legislation. However, proponents of an audit protection bill failed earlier this year to move such a measure from a state House committee to a floor vote.

The U.S. Environmental Protec-tion Agency has asked states to de-fer legislation that would create a safe harbor from enforcement ac-tions for companies that conduct internal environmental check-ups. Instead, the agency wants state of-ficials to participate in an open re- view of its current environmental auditing policy. Environmental Pro-tection Agency officials fear that the trend toward a self-evaluative privilege will weaken state enforcement programs, leaving the underfunded federal agency responsible for seizing the enforcement initiative.