66378 Federal Register / Vol. 70, No. 211 / Wednesday, November 2, 2005 / Notices 

1Public Law 109–58, 119 Stat. 594 (2005). 

2We will apply this policy statement on 

enforcement, and the remedies available for any 

given violation, in the same manner for 

jurisdictional market-based rate sellers, natural gas 

pipelines, and holders of blanket certificate 

authority as well as for other entities as described 

by EPAct 2005, including governmental utilities 

and other market participants. We also note that the 

factors will be applied, as appropriate, to 

individuals as well as to corporate entities. 

3Federal Power Act, 16 U.S.C. 791a, et seq. 

(2000); Natural Gas Act, 15 U.S.C. 717, et seq. 

Commissioner E. Shirley Baca, New Mexico 

Public Regulation Commission. 

Commissioner Sam J. Ervin, IV, North 

Carolina Utilities Commission. 

Chairman Jeff Cloud, Oklahoma Corporation 

Commission. 

Vice Chairman G. O’Neal Hamilton, South 

Carolina Public Service Commission. 

Director Pat Miller, Tennessee Regulatory 

Authority. 

Commissioner Julie Caruthers Parsley, Public 

Utility Commission of Texas. 

West Joint Board 

Chair: Commissioner Suedeen Kelly, Federal 

Energy Regulatory Commission. 

Vice Chair: Commissioner Marsha H. Smith, 

Idaho Public Utilities Commission. 

Members: 

Commissioner Marc Spitzer, Arizona 

Corporation Commission. 

Commissioner Dian M. Grueneich, California 

Public Utilities Commission. 

Chairman Gregory Sopkin, Colorado Public 

Utilities Commission. 

Commissioner Thomas J. Schneider, Montana 

Public Service Commission. 

Mr. Richard L. Hinckley, Esq., General 

Counsel, Public Utilities Commission of 

Nevada. 

Commissioner E. Shirley Baca, New Mexico 

Public Regulation Commission. 

Chairman Lee Beyer, Oregon Public Utility 

Commission. 

Ms. Rolayne Ailts Wiest, General Counsel, 

South Dakota Public Utilities Commission. 

Chairman Paul Hudson, Public Utility 

Commission of Texas. 

Chairman Ric Campbell, Utah Public Service 

Commission. 

Chairman Mark Sidran, Washington Utilities 

and Transportation Commission. 

Deputy Chair Kathleen A. ‘‘Cindy’’ Lewis, 

Wyoming Public Service Commission. 

Northeast Joint Board 

Chair: Commissioner Nora Mead Brownell, 

Federal Energy Regulatory Commission. 

Vice Chair: Chairman Paul G. Afonso, 

Massachusetts Department of 

Telecommunications and Energy. 

Vice Chair: Chairman William M. Flynn, 

New York State Public Service 

Commission. 

Members: 

Commissioner Jack R. Goldberg, Connecticut 

Department of Public Utility Control. 

Chairman Kurt Adams, Maine Public Utilities 

Commission. 

Chairman Thomas B. Getz, New Hampshire 

Public Utilities Commission. 

Chairman Elia Germani, Rhode Island Public 

Utilities Commission. 

Chairman James Volz, Vermont Public 

Service Board. 

PJM/MISO Joint Board 

Chair: Commissioner Nora Mead Brownell, 

Federal Energy Regulatory Commission. 

Vice Chair: Commissioner Kevin K. Wright, 

Illinois Commerce Commission. 

Vice Chair: Chairman Kenneth D. Schisler, 

Maryland Public Service Commission. 

Members: 

Commissioner Dallas Winslow, Delaware 

Public Service Commission. 

Chair Agnes A. Yates, District of Columbia 

Public Service Commission. 

Chairman David Lott Hardy, Indiana Utility 

Regulatory Commission. 

Chairman John Norris, Iowa Utilities Board. 

Chairman Mark David Goss, Kentucky Public 

Service Commission. 

Commissioner Laura Chappelle, Michigan 

Public Service Commission. 

Commissioner Kenneth Nickolai, Minnesota 

Public Utilities Commission. 

Chairman Jeff Davis, Missouri Public Service 

Commission. 

Chairman Greg Jergeson, Montana Public 

Service Commission. 

Mr. Paul Malone, Regulatory, Planning & 

Contracts Manager, Nebraska Public Power 

District. 

Commissioner Frederick F. Butler, New 

Jersey Board of Public Utilities. 

Commissioner Sam J. Ervin IV, North 

Carolina Utilities Commission. 

Commissioner Susan E. Wefald, North 

Dakota Public Service Commission. 

Chairman Alan R. Schriber, Public Utilities 

Commission of Ohio. 

Chairman Wendell F. Holland, Pennsylvania 

Public Utility Commission. 

Chairman Gary W. Hanson, South Dakota 

Public Utilities Commission. 

Director Pat Miller, Tennessee Regulatory 

Authority. 

Mr. Howard Spinner, Director, Division of 

Economics and Finance, Virginia State 

Corporation Commission. 

Mr. Earl Melton, Director, Engineering 

Division, Public Service Commission of 

West Virginia. 

Chairperson Daniel R. Ebert, Public Service 

Commission of Wisconsin. 

[FR Doc. E5–6041 Filed 11–1–05; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

[Docket No. PL06–1–000] 

Before Commissioners: Joseph T. 

Kelliher, Chairman; Nora Mead 

Brownell, and Suedeen G. Kelly; 

Enforcement of Statutes, Orders, 

Rules, and Regulations; Policy 

Statement on Enforcement 

Issued October 20, 2005. 

1. The Commission issues this Policy 

Statement to provide guidance and 

regulatory certainty regarding our 

enforcement of the statutes, orders, 

rules, and regulations we administer. 

The Policy Statement discusses the 

factors we will take into account in 

determining remedies for violations, 

including applying the enhanced civil 

penalty authority provided by the 

Energy Policy Act of 2005 (EPAct 

2005).1 Our purpose is to provide firm 

but fair enforcement of our rules and 

regulations and to place entities subject 

to our jurisdiction on notice of the 

consequences of violating the statutes, 

orders, rules, and regulations we 

enforce. 

2. In discussing the factors we will 

take into account in determining the 

severity of penalties to be imposed for 

violations, we also recognize the 

importance of demonstrable compliance 

and cooperation efforts by utilities, 

natural gas companies, and other 

entities subject to the statutes, orders, 

rules, and regulations administered by 

the Commission. We encourage 

regulated entities to have 

comprehensive compliance programs, to 

develop a culture of compliance within 

their organizations, and to self-report 

and cooperate with the Commission in 

the event violations occur.2

3. Contemporaneously herewith, we 

are issuing a Notice of Proposed 

Rulemaking in Docket No. RM06–3–000 

(published in the Federal Register 

October 27, 2005 (70 FR 61930)), 

proposing new regulations to implement 

sections 315 and 1283 of EPAct 2005. 

The proposed regulations would make it 

unlawful for any entity to use or employ 

any device, scheme, or artifice to 

defraud, or to make any untrue 

statement of a material fact or to omit 

to state a material fact, or to engage in 

a fraud or deceit in connection with the 

purchase or sale of electricity, natural 

gas, or related transmission or 

transportation services subject to the 

jurisdiction of the Commission. The 

proposed regulations will provide 

another basis for imposition of civil 

penalties. It is therefore important that 

we articulate how we intend to apply 

our new and expanded civil penalty 

authority, so as to assure the industry 

that we will temper strong enforcement 

measures with consideration of all 

relevant factors, including mitigating 

factors, in determining the appropriate 

remedies. 

Background 

4. We have a variety of enforcement 

tools under the principal statutes we 

administer: the Federal Power Act 

(FPA), Natural Gas Act (NGA), Natural 

Gas Policy Act of 1978 (NGPA), and 

Interstate Commerce Act (ICA).3 If 

Federal Register / Vol. 70, No. 211 / Wednesday, November 2, 2005 / Notices 66379 

(2000); Natural Gas Policy Act of 1978, 15 U.S.C. 

3301, et seq. (2000); Interstate Commerce Act, 49 

App. U.S.C. 1, et seq. (2000). 4See, e.g., Enron Power Marketing, Inc., 103 FERC 

¶ 61,343 P 52 (2003); Fact-Finding Investigation of 

Potential Manipulation of Electric and Natural Gas 

Prices, 99 FERC ¶ 61,272 at 62,154 (2002); San 

Diego Gas & Electric Company, 95 FERC ¶ 61,418 

at 62,548, 62,565 (2001), order on reh’g, 97 FERC 

¶ 61,275 (2001), order on reh’g, 99 FERC ¶ 61,160 

(2002); accord Show Cause Order, 102 FERC 

¶ 61,316 at P 8 & n.10, and cases cited therein. 

5NGA section 20(a), 15 U.S.C. 717s(a); FPA 

section 314(a), 16 U.S.C. 825m(a); NGPA section 

504(b)(5),15 U.S.C. 3414(b)(5). 6FPA section 316A, 16 U.S.C. 825o–1; NGPA 

section 504(b)(6), 15 U.S.C. 3414(b)(6). 7EPAct 2005 section 1284(e)(1), amending FPA 

section 316A(a). 8EPAct 2005 section 314(b)(1), inserting new 

NGA section 22. 9EPAct 2005 section 314(b)(1), inserting new 

NGA section 22(a); EPAct 2005 section 314(b)(2), 

amending NGPA section 504(b)(6)(A); and EPAct 

2005 section 1284(e)(2), amending FPA section 

316A(b). 10EPAct 2005 section 314, amending NGA 

section 21 and NGPA section 504; EPAct 2005 

section 1284, amending FPA section 316. We are 

limited to civil enforcement of our statutes, orders, 

rules, and regulations, but we may also refer matters 

to the Department of Justice for criminal 

prosecution. 

11See, e.g., Dominion Resources, Inc., ‘‘Order 

Approving Stipulation and Consent Agreement,’’

108 FERC ¶ 61,110 (2004) (Stipulation noting that 

‘‘Dominion Resources voluntarily disclosed these 

events to Enforcement in July 2003, virtually 

contemporaneously with the discovery by the 

company. Dominion Resources fully and 

completely cooperated with Enforcement’s efforts to 

investigate and resolve this matter’’). 

12Accounting and Auditing Enforcement, SEC 

Release No. 1470 (October 23, 2001). 

13 Memorandum from Deputy Attorney General 

Larry D. Thompson to Heads of Department 

Components and United States Attorneys, 

‘‘Principles of Federal Prosecution of Business 

Organizations’’ (Jan. 20, 2003). 

14Effective Compliance and Ethics Programs, 

Federal Sentencing Guidelines, Chapter 8, Part B, 

Section 2 (2004). 

15CFTC Policy Statement Relating to the 

Commission’s Authority to Impose Civil Monetary 

Penalties and Futures Self-Regulatory 

Organizations’ Authority to Impose Sanctions, 

‘‘Penalty Guidelines,’’ Comm. Fut. L. Rep. (CCH) 

¶ 26,265 (Nov. 1994). 

16CFTC Enforcement Advisory, ‘‘Cooperation 

Factors in Enforcement Division Sanction 

Recommendations,’’ August 11, 2004. 

17 In addition to the three general areas, the CFTC 

staff noted that it would consider additional factors, 

such as the level or organization at which 

misconduct occurred, whether misconduct was the 

result of pressure from superiors, how long the 

misconduct lasted after discovery, whether the 

company responded with adequate resources, and 

whether actions were taken to mitigate the 

misconduct. 

regulated utilities and natural gas 

companies violate the FPA, NGA, or 

NGPA we can order, among other 

things, disgorgement of unjust profits. 

We have the option of conditioning, 

suspending, or revoking market-based 

rate authority, certificate authority, or 

blanket certificate authority.4 We also 

have the ability to refer matters to the 

Department of Justice for criminal 

prosecution.5

5. Beyond these authorities, we have 

civil penalty authority for violations of 

specific provisions of the FPA and 

NGPA.6 In EPAct 2005 Congress 

recently granted the Commission 

enhanced authority to assess civil 

penalties for violations of the FPA, 

NGA, and NGPA. EPAct 2005 made 

three major changes to our civil penalty 

authority. First, Congress expanded the 

Commission’s FPA civil penalty 

authority to cover violations of any 

provision of part II of the FPA, as well 

as of any rule or order issued 

thereunder.7 Second, Congress extended 

the Commission’s civil penalty 

authority to cover violations of the NGA 

or any rule, regulation, restriction, 

condition, or order made or imposed by 

the Commission under NGA authority.8

Third, Congress established the 

maximum civil penalty the Commission 

may assess under the NGA, NGPA, or 

part II of the FPA as $1,000,000 per 

violation for each day that it continues.9

In addition, Congress expanded the 

scope of the criminal provisions of the 

FPA, NGA, and NGPA by increasing the 

maximum fines and increasing the 

maximum imprisonment time.10

6. In our past enforcement actions we 

have given credit when appropriate for 

cooperative conduct in audit and 

enforcement matters, and orders issued 

in past matters have discussed aspects 

of cooperation.11 With the advent of 

enhanced civil penalty authority, we are 

making our existing practice of 

recognizing cooperation explicit and 

describing some of the factors that we 

will consider when deciding on 

remedies, including penalties, for 

violations. We also discuss the 

importance of creating and maintaining 

effective internal compliance processes, 

of self-reporting violations, and of 

cooperation. 

Enforcement Policies of Other Agencies 

7. In considering the appropriate 

enforcement policy, we have reviewed 

the policies of other Federal agencies for 

guidance. In 2001, the Securities and 

Exchange Commission (SEC) issued a 

decision in which it outlined conditions 

under which it will give credit for selfpolicing, self-reporting, remediation, 

and cooperation when determining the 

appropriate penalty for wrongdoing.12

The SEC noted the importance of 

vigorous enforcement action and the 

imposition of appropriate sanctions 

when violations occur, but also 

recognized the value of cooperation by 

companies when violations occur. 

While not making specific commitments 

or limiting itself to the criteria 

discussed, the SEC provided a list of 

questions it would consider in deciding 

whether to bring reduced or no charges, 

seek lighter sanctions, or provide other 

mitigation of the severity of enforcement 

remedies that would otherwise be 

sought for a violation. 

8. In 2003, the Department of Justice 

issued a memorandum to all United 

States Attorneys entitled ‘‘Principles of 

Federal Prosecution of Business 

Organizations,’’ with guidance on 

charging corporate entities along with 

individuals in corporate fraud cases.13

The memorandum stated that credit 

may be given for corporate cooperation 

in detecting and correcting wrongdoing, 

and outlined nine factors to be 

considered when weighing whether to 

bring criminal charges against business 

entities. In 2004, the Federal Sentencing 

Guidelines were amended to include a 

detailed discussion of effective 

compliance and ethics programs and the 

impact that such programs can have on 

the calculation of the culpability score 

used to determine the sentence to be 

imposed after conviction of a 

corporation or other business entity.14

9. In 1994, the Commodity Futures 

Trading Commission (CFTC) issued a 

policy statement with guidelines 

regarding the CFTC’s authority to 

impose civil penalties and the authority 

of CFTC-supervised, self-regulating 

organizations to impose sanctions.15

The CFTC policy statement set out 

various factors to be considered with 

respect to the gravity of the offense, the 

financial condition of the business 

entity, and various other considerations 

that may bear on the appropriate 

penalty to be imposed. In 2004, the 

CFTC enforcement staff announced a 

policy of giving credit for cooperation in 

futures trading investigations.16 Noting 

that consideration of cooperation is 

discretionary and depends on the 

circumstances presented, the CFTC staff 

identified three general areas of 

cooperative factors to be taken into 

account in deciding whether staff 

should recommend reduced sanctions to 

the CFTC: (1) The nature of a company’s 

efforts to uncover and investigate 

violations, (2) the quality of a 

company’s efforts in cooperating and 

managing the aftermath of misconduct, 

and (3) a company’s efforts to prevent 

future wrongdoing.17

10. In adopting enforcement policies, 

the SEC and the CFTC declined to 

establish a penalty schedule or formulas 

for how certain factors would be 

weighed for given violations. Instead, 

they emphasized the importance of 

considering a range of factors that may 

lead to different penalty decisions 

66380 Federal Register / Vol. 70, No. 211 / Wednesday, November 2, 2005 / Notices 

18 16 U.S.C. 825o–1(b) (2000). 

19 18 CFR 385.1505 (2005). 

20 18 CFR 2.500 (2005). 

21See sections 21–21C of the Securities Exchange 

Act, 15 U.S.C. 78u–78u–3 (2000). The CFTC can 

revoke or suspend a registration, suspend or 

prohibit certain trading, issue cease and desist 

orders, order restitution, and seek equitable 

remedies (injunction, rescission, or disgorgement), 

all in addition to imposing a monetary fine. 7 U.S.C. 

13a & 13b (2000); Comm. Fut. L. Rep. (CCH) 

¶ 26,265, p. 42,247. 

22 In considering all available remedies for a 

violation, we are mindful that the new and 

enhanced civil penalties are applicable only to 

violations on and after August 8, 2005. To the 

extent a previous violation is continuing, however, 

the new and enhanced penalties are applicable to 

that violation as of August 8, 2005. 

23 Investigation of Terms and Conditions of Public 

Utility Market-Based Rate Authorizations, ‘‘Order 

Amending Market-Based Rate Tariffs and 

Authorizations,’’ 105 FERC ¶ 61,218 (2003), reh’g 

denied, 107 FERC ¶ 61,175 (2004); Order No. 644, 

Amendment to Blanket Sales Certificates, FERC 

Stats. & Regs. ¶ 31,153 (2003), reh’g denied, 107 

FERC ¶ 61,174 (2004). 

24See FPA sections 316 and 316A, 16 U.S.C. 825o 

and 825o–1; NGA sections 21 and 22, 15 U.S.C. 

717t; and NGPA section 504, 15 U.S.C. 3414. We 

note that in EPAct 2005 section 1284(d), Congress 

repealed FPA section 316(c), which previously had 

exempted FPA sections 211, 212, 213, and 214 from 

the criminal sanctions of FPA section 316(a) and 

(b). Thus, in addition to extending civil penalty 

authority to all matters under FPA part II, Congress 

made clear that both civil penalties and criminal 

sanctions apply to violations of any rule or order 

issued under FPA part II. 

25See, e.g., 18 U.S.C. 1001 (2000). 

26EPAct 2005 section 314(b), inserting new NGA 

section 22(b); FPA section 316A(b), 16 U.S.C. 825o–

1(b) (2000). 

27 16 U.S.C. 823b (2000). 

depending on the circumstances 

presented by each case. 

Relation of Existing and New Civil 

Penalty Authority 

11. Existing section 316A of the FPA 

provides that ‘‘[i]n determining the 

amount of a proposed penalty, the 

Commission shall take into 

consideration the seriousness of the 

violation and the efforts of such person 

to remedy the violation in a timely 

manner.’’ 18 Section 314 of EPAct 2005 

includes identical language in new 

section 22(c) of the NGA. Thus, the 

seriousness of the violation is the first 

touchstone for our determination of the 

level of penalty to be imposed. Second, 

the actions by an entity that has engaged 

in misconduct are relevant to deciding 

whether the penalty should be reduced 

or even eliminated. These requirements 

are reflected in our existing regulations 

governing imposition of civil penalties 

under section 31 of the FPA for 

violations related to hydropower 

projects.19 The guidance of this Policy 

Statement is consistent with the existing 

rule on factors we consider in the 

context of hydropower project 

violations and penalties. In addition, we 

have a generally applicable policy for 

considering reductions or waivers of 

penalties for small entities.20

12. Our enhanced civil penalty 

authority will operate in tandem with 

our existing authority to require 

disgorgement of unjust profits obtained 

through misconduct and/or to 

condition, suspend, or revoke certificate 

authority or other authorizations, such 

as market-based rate authority for sellers 

of electric energy. This is similar to the 

ability of the SEC to require an 

accounting and disgorgement to 

investors for losses and also to impose 

penalties for the misconduct, or of the 

CFTC to order restitution or obtain 

disgorgement and also to impose fines 

for violations.21 In doing so, we intend 

to take the full range of possible 

remedies into account in determining 

whether a penalty should be imposed in 

addition to other remedies and, if so, the 

appropriate amount of the penalty.22

Entities faced with enforcement thus 

will be subject to the full array of 

possible enforcement tools, but we will 

exercise our discretion to apply 

remedies in a fair, reasonable, and 

appropriate manner. 

13. We noted that the practice of the 

SEC and CFTC is to decide on remedies 

on a case-by-case basis, and not to create 

a schedule of penalties. Likewise, we 

will not prescribe specific penalties or 

develop formulas for different 

violations. It is important that we retain 

the discretion and flexibility to address 

each case on its merits, and to fashion 

remedies appropriate to the facts 

presented, including any mitigating 

factors. 

14. In the Notice of Proposed 

Rulemaking issued in Docket No. 

RM06–3–000 today we propose rules to 

implement the anti-manipulation 

provisions of EPAct 2005 while 

retaining Market Behavior Rule 2 issued 

in 2003.23 We note there that we will 

not seek duplicative sanctions for the 

same conduct in the event it violates 

both the new rules and the Market 

Behavior Rules. This is because both 

rules, although different in scope and 

application, address manipulation. In 

other contexts, violations of more than 

one statute, order, rule, or regulation 

may result in separate penalties. 

Moreover, under our enhanced civil 

penalty authority, we will develop a 

consistent approach to the amount of 

penalties for misconduct so that the 

penalties are similar in analogous cases, 

and are evenhanded for similar conduct, 

taking all relevant factors into account. 

15. We do, of course, reserve the right 

to impose remedies, including civil 

penalties, and also to refer a violation 

for criminal prosecution if the facts of 

the case so warrant. There is no doubt 

that entities and individuals are subject 

both to prosecution under criminal 

provisions of our statutes and to civil 

remedies.24 Moreover, perjury, 

obstruction, and making false 

statements to members of the 

Commission staff are criminal 

offenses.25 If the misconduct is serious 

enough, we may refer the matter for 

criminal prosecution to provide 

adequate punishment and deterrence. 

We will take all factors into account in 

deciding what cases should be referred 

for criminal prosecution, including the 

seriousness of the violation, the extent 

of the harm done, the evidence of 

willful behavior, and the strength of the 

evidence of wrongdoing. 

16. When we exercise our new civil 

penalty authority under the NGA, and 

the expanded authority under part II of 

the FPA, we are required to provide 

‘‘notice and opportunity for a public 

hearing.’’ 26 While procedures for 

issuing civil penalties are in place under 

the FPA,27 EPAct 2005 is silent with 

respect to procedures under the NGA. 

When we issue civil penalty notices 

under the NGA, we intend to provide 

companies with hearing procedures 

before an administrative law judge. 

Factors Guiding the Selection of 

Enforcement Remedies 

17. Vigorous and even-handed 

enforcement of our statutes, orders, 

rules, and regulations protects energy 

markets and consumers. At the same 

time it is in the best interest of all 

segments of the industry that 

compliance, self-reporting, and 

cooperation in dealings with the 

Commission are emphasized. We 

therefore describe below factors we will 

take into account in determining the 

appropriate level of penalty to be 

imposed for violations of our rules or 

regulations. We recognize that no list 

can cover every possible significant 

factor, and we will consider other 

pertinent factors as appropriate. 

18. In doing so, we first emphasize 

that we must make enforcement 

decisions based on all relevant factors, 

and we therefore must retain the 

flexibility to weigh all relevant 

information and apply the policy in 

light of the facts of each case. This 

Policy Statement does not confer any 

rights or guarantees with respect to 

enforcement actions. We reserve the 

right to impose appropriate sanctions 

based on all the facts presented, and we 

recognize that there may be 

circumstances where the conduct is so 

egregious that the full use of the 

Federal Register / Vol. 70, No. 211 / Wednesday, November 2, 2005 / Notices 66381 

Commission’s penalty authorities is 

necessary regardless of the presence of 

other factors. 

19. In addition, the enhancement of 

our civil penalty authority does not 

mean that we will refrain from ordering 

the disgorgement of unjust profits or 

economic benefits that are the result of 

wrongdoing. To the contrary, companies 

will be expected to disgorge unjust 

profits whenever they can be 

determined or reasonably estimated. 

The purpose of disgorgement is to 

nullify the value of gains acquired 

through misconduct. When evaluating 

an appropriate remedy, above 

disgorgement of profit, the Commission 

will assess the factors described below 

to determine whether and to what 

extent other remedies, including 

suspension or revocation of certificate 

or market-based rate authority and/or 

civil penalties, are warranted. 

20. As mandated by sections 316A of 

the FPA and new section 22 of the NGA, 

the seriousness of the offense is the first 

consideration in determining 

appropriate penalties. Factors that may 

be considered in judging the seriousness 

of the offense include: 

• What harm was caused by the 

violation? Was there loss of life or injury 

or endangerment to persons? Was there 

damage to property or the environment? 

Was the harm widespread across 

markets or customers, or was it limited 

in scope and impact? Did it involve 

significant sums of money? Were others 

indirectly affected by the wrongdoing? 

What benefit did the wrongdoer gain 

from the violation? 

• Was the violation the result of 

manipulation, deceit, or artifice? Did the 

wrongdoer misrepresent material facts? 

Was the conduct fraudulent? Were the 

actions reckless or deliberately 

indifferent to the results? 

• Was the action willful? Was the 

violation part of a broader scheme? Did 

the wrongdoer act in concert with 

others? 

• Is this a repeat offense or does the 

company have a history of violations? Is 

this an isolated instance or a recurring 

problem? Was the wrongdoing 

systematic and persistent? How long did 

the wrongdoing last? 

• Was the wrongdoing related to 

actions by senior management, the 

result of pressure placed on employees 

by senior management to achieve 

specific results, or done with the 

knowledge and acquiescence of senior 

management? Did management engage 

in a cover-up? 

• How did the wrongdoing come to 

light? Did senior management resist or 

ignore efforts to inquire into actions or 

otherwise impede an inquiry into the 

violation? 

• What effect would potential 

penalties have on the financial viability 

of the company that committed the 

wrongdoing? 

Credit for Internal Compliance, SelfReporting, and Cooperation 

21. The second point to be taken into 

account as required by section 316A of 

the FPA and new section 22 of the NGA 

is what efforts the company made to 

remedy the violation in a timely 

manner. This aspect of company 

reaction to wrongdoing involves what 

consideration will be given for steps 

taken by entities to prevent, monitor, 

and immediately stop misconduct, to 

report violations to the Commission, 

and to cooperate with the Commission’s 

enforcement actions. 

1. Internal Compliance 

22. Internal compliance is an 

important proactive tool. We encourage 

companies engaged in jurisdictional 

activities to take steps to create a strong 

atmosphere of compliance in their 

organizations. To this end, the following 

are factors that will be taken into 

account in determining credit given for 

a company’s commitment to 

compliance: 

• Does the company have an 

established, formal program for internal 

compliance? Is it well documented and 

widely disseminated within the 

company? Is the program supervised by 

an officer or other high-ranking official? 

Does the compliance official report to or 

have independent access to the chief 

executive officer and/or the board of 

directors? Is the program operated and 

managed so as to be independent? Are 

there sufficient resources dedicated to 

the compliance program? 

• Is compliance fully supported by 

senior management? For example, is 

senior management actively involved in 

compliance efforts and do company 

policies regarding compensation, 

promotion, and disciplinary action take 

into account the relevant employees’

compliance with Commission 

regulations and the reporting of any 

violations? 

• How frequently does the company 

review and modify the compliance 

program? How frequently is training 

provided to all relevant employees? Is 

the training sufficiently detailed and 

thorough to instill an understanding of 

relevant rules and the importance of 

compliance? 

• In addition to training, does the 

company have an ongoing process for 

auditing compliance with Commission 

regulations? 

• How has the company responded to 

prior wrongdoing? Did it take 

disciplinary action against employees 

involved in violations? When 

misconduct occurs, is it a repeat of the 

same offense or misconduct of a 

different nature? Does the company 

adopt and ensure enforcement of new 

and more effective internal controls and 

procedures to prevent a recurrence of 

misconduct? 

23. The answers to these questions 

will indicate what credit, if any, can be 

given for the existence of a compliance 

program when we are considering 

enforcement action and penalties. We 

reiterate that credit extends to penalties, 

compliance plans, and the like but not 

to disgorgement of unjust profits. As 

noted earlier, at a minimum a company 

involved in wrongdoing must disgorge 

any unjust profits resulting from the 

wrongdoing. 

2. Self-Reporting 

24. We place great importance on selfreporting. Companies are in the best 

position to detect and correct violations 

of our orders, rules, and regulations, 

both inadvertent and intentional, and 

should be proactive in doing so. When 

a company self-reports violations to the 

Commission it facilitates remedies to 

affected parties. The following are 

considerations in deciding what level of 

credit to give for self-reporting 

violations to the Commission when 

determining the penalties for violations 

so reported: 

• How did the company uncover the 

misconduct? Was it through a selfevaluation, internal audit, or internal 

compliance program? Did the company 

act immediately when it learned of the 

misconduct? 

• Did the company notify the 

Commission promptly? Did senior 

management actively participate and 

encourage employees to provide 

information to identify the misconduct? 

• Did the company take immediate 

steps to stop the misconduct? Did it 

implement or create an adequate 

response to the misconduct? 

• Did the company arrange for 

individuals with full knowledge of the 

matter to meet with Commission 

enforcement staff? 

• Did the company present its 

findings to the Commission and provide 

all relevant evidence regarding the 

misconduct, including full disclosure of 

the scope of the wrongdoing; the 

identity of all employees involved, 

including senior executives; the steps 

taken by the company upon learning of 

the misconduct; communications among 

involved employees; documents 

evidencing the misconduct; and 

66382 Federal Register / Vol. 70, No. 211 / Wednesday, November 2, 2005 / Notices 

28FPA section 301(b), 16 U.S.C. 825b(b); NGA 

section 8(b), 15 U.S.C. 717g(b); NGPA section 

304(a), 15 U.S.C. 3314(a). 

measures taken to remedy the 

misconduct? 

25. As stated earlier, we cannot 

determine in advance how much credit 

is given for self-reporting. It is possible, 

however, that prompt and full selfreporting of violations, coupled with 

steps to correct the adverse impact on 

customers or third parties from the 

misconduct, may result in a significant 

reduction in the amount of civil penalty 

or no civil penalty being assessed. 

Companies should still expect to 

disgorge any unjust profits. 

3. Cooperation 

26. Cooperation may come in any 

context—a company response to a 

Commission inquiry, audit, or 

investigation, or in voluntary selfreporting of misconduct. We expect 

cooperation, as entities subject to our 

jurisdiction are required to provide us 

with information at our request.28 Still, 

we will give some consideration to 

exemplary cooperation, that is, 

cooperation which quickly ends 

wrongful conduct, determines the facts, 

and corrects a problem. Cooperation 

must come very early in the process, 

however, and must be in good faith, 

consistent, and continuing. No credit 

will be given if a company does no more 

than the minimum, or delays 

cooperation, or purports to cooperate 

but actually engages in conduct that 

impedes the Commission’s activities or 

consumes Commission resources 

unnecessarily. The following are 

indicative of cooperation for which 

credit may be given when we determine 

the appropriate penalty to be imposed 

for wrongdoing. Although these factors 

are similar to those described above 

with respect to self-reporting, they 

remain relevant in the context of 

cooperation because, under appropriate 

circumstances, the Commission will 

consider these factors even for entities 

that did not self-report violations, 

provided that cooperation was provided 

once the violation was uncovered. 

• Did the company volunteer to 

provide internal investigation or audit 

reports relating to the misconduct? Did 

the company hire an independent 

outside entity to assist the company’s 

investigation? 

• Did senior management make clear 

to all employees that their cooperation 

has the full support and encouragement 

of management and the directors of the 

company? 

• Did the company facilitate 

Commission access to employees with 

knowledge and information bearing on 

the issue, and actively encourage such 

employees to provide the Commission 

with complete and accurate 

information? 

• Did the company identify culpable 

employees and assist the Commission in 

understanding their conduct? 

• Did the company make records 

readily available, with assistance on 

searching and interpreting information 

in the records? 

• Did the company fairly and 

accurately determine the effects of the 

misconduct, including identifying the 

revenues and profits resulting from the 

misconduct and the customers or 

market participants adversely affected 

by the misconduct? 

27. It is possible for an entity to 

comply with the majority of the stated 

factors in part, but without 

wholeheartedly devoting its resources 

and efforts to cooperation. Likewise, it 

is conceivable for an entity to cooperate 

in certain aspects yet hinder 

enforcement investigation in others. 

Lack of cooperation is a serious matter 

and will be weighed in deciding 

appropriate remedies. Uncooperative 

conduct includes such things as failing 

to respond to data requests in a timely 

manner; failing to produce documents 

and witnesses within a reasonable 

period; misrepresenting the nature or 

extent of the misconduct; claiming that 

records are unavailable when they are; 

limiting staff access to employees; 

inappropriately directing or influencing 

employees or their counsel not to 

cooperate fully or openly with the 

investigation; engaging in obstructive 

conduct during investigative testimony 

or interviews; providing specious 

explanations for instances of 

misconduct that are uncovered; failing 

properly to search computer hard drives 

for documents and electronic images; 

and failing to provide documents in the 

way they are maintained in the normal 

course of business. The manner in 

which a company approaches 

cooperation will be an important factor 

in determining whether, and how much, 

credit may be given for cooperation. 

Conclusion 

28. The factors discussed in this 

Policy Statement provide guidance to 

the industry on the approach we will 

take to future enforcement. It is 

consistent with past Commission 

practice, and with the practices of other 

federal agencies with similar powers. 

Entities subject to the Commission’s 

jurisdiction should expect firm but fair 

enforcement in the future, including the 

use, as appropriate, of the substantial 

new civil penalty authority provided by 

EP Act 2005. 

29. At the same time, entities can take 

steps to improve and ensure compliance 

by their officers, employees, and agents 

with our statutes, orders, rules, and 

regulations. We place a high value on 

internal compliance, self-reporting, and 

cooperation. The credit we will give for 

mitigating factors, including proactive 

steps taken by companies, depends on 

many factors and cannot be reduced to 

a predictable quantity. But where many 

of the positive factors of internal 

compliance, self-reporting, and 

cooperation are present, we will take 

those factors into account in 

determining the appropriate penalties 

for violations. 

By the Commission. 

Magalie R. Salas, 

Secretary. 

[FR Doc. 05–21899 Filed 11–1–05; 8:45 am] 

BILLING CODE 6717–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

[OAR–2005–0118, FRL–7993–3] 

Agency Information Collection 

Request Activities: Renewal of the 

Collection Request for the Outer 

Continental Shelf Air Regulation; EPA 

ICR Number 1601.06, OMB Control 

Number 2060–0249 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Notice. 

SUMMARY: In compliance with the 

Paperwork Reduction Act (44 U.S.C. 

3501 et seq.), this document announces 

that EPA has submitted a renewal for a 

continuing Information Collection 

Request (ICR) to the Office of 

Management and Budget (OMB). The 

proposed request was for renewal of an 

existing approved collection which is 

scheduled to expire on October 31, 

2005. Before submitting the ICR to OMB 

for review and approval, EPA solicited 

comments on specific aspects of the 

proposed information collection as 

described below. The EPA received 

comments submitted to the docket from 

the U.S. Department of the Interior 

Minerals Management Service and has 

responded by making certain suggested 

changes and corrections which are 

found in this final document. 

FOR FURTHER INFORMATION CONTACT: 

David Sanders, Ozone Policy and 

Strategies Group, Mail Drop C539–02, 

Environmental Protection Agency, 

Research Triangle Park, North Carolina 

27711; telephone number: (919) 541–