1. FEDERAL SENTENCING GUIDELINES AND THEIR EFFCT ON CORPORATE ENVIRONMENTAL LIABILITY Gary A. Jones, Senior Environmental Counsel Siemens Corporation Franco British Lawyers Society British Institute of International and Comparative Law French and British Environmental Law with North American Comparisons Friday 16 September 2005

2. Federal Sentencing Guidelines Promulgated by the United States Sentencing Commission in 1991 Created to :  Provide Certainty and Predictability in Sentencing  Deter Criminal Activity by Increasing Cost of Corporate Misconduct

3. Federal Sentencing Guidelines Promulgated by the United States Sentencing Commission in 1991 Created to :  Provide Certainty and Predictability in Sentencing  Deter Criminal Activity by Increasing Cost of Corporate Misconduct

4. How the Guidelines Work If Court Requires a Monetary Fine  Mathematical Calculation to Determine “Seriousness” of Offense “Culpability” of Organization  “Culpability” Determined by Mix of Aggravating Factors Mitigating Factors

5. How the Guidelines Work Points May Be Subtracted by:  Proof of Effective Compliance Program  Self Reporting  Accepting Responsibility for the Wrongdoing After Score Determined, Chart Determines Amount of Fine Imposed

6. Elements of “Effective Compliance Program” Compliance Standards and Procedures Must Be Established to Deter Crime High-Level Personnel Must Be Involved in Oversight Substantial Discretionary Authority Must Be Carefully Delegated Compliance Standard and Procedures Must Be Communicated to Employees

7. Elements of “Effective Compliance Program” (Cont’d) Steps Must Be Taken to Achieve Compliance in Establishment of Monitoring and Auditing Systems and of Reporting Systems With Protective Safeguards Standards Must be Consistently Enforced Any Violations Require Appropriate Responses, Which May Include Modification of Compliance Standards and Procedures and Other Preventive Measures

8. How the Guidelines Work – the Thompson Memorandum Issued by Deputy Attorney General Larry Thompson on January 30, 2003  “…whether program is adequately designed for maximum effectiveness in preventing and detecting wrongdoing by employees…”  “…whether corporate management is enforcing the program or is tacitly encouraging or pressuring employees to engage in misconduct to achieve business objectives…”  “…determine whether a corporation’s compliance program is merely a ‘paper tiger’ or …designed and implemented in an effective manner…”

9. Environmental Protection Agency Audit Policy Originally Published December 22, 1995 Revised Version Effective May 11, 2000 Created to Provide Incentives for Regulated Entities to:  Detect  Disclose  Expeditiously Correct Violation of Federal Environmental Requirements

10. How the Audit Policy Works Incentives for Self-Policing  Elimination of Gravity-Based Penalties  75% Reduction of Gravity-Based Penalties  No Recommendation for Criminal Prosecutions  No Routine Requests of Audit Reports

11. How the Audit Policy Works Conditions for Mitigation:  Systematic discovery of the Violation Through an Environmental Audit or a Compliance Management System  Voluntary Discovery  Discovery and Disclosure Independent of Government or Third-Party Plaintiff

12. How the Audit Policy Works Conditions for Mitigation (Cont’d):  Correction and Remediation  Prevent Recurrence  No Repeat Violations  Other Violations Excluded  Cooperation

13. Toward Effective Compliance Management Commission for Environmental Cooperation EMS Guidance Document Developed by Representatives of Canada, Mexico and the United States Published June 2000 Created to Focus on Two Goals:  Compliance With Environmental Laws  Environmental Performance that Moves Beyond Compliance in Both Regulated and Non-regulated Areas Compatible with ISO 14001

14. Toward Effective Compliance Management Compliance Focused Environmental Management System (CFEMS)  Developed by US EPA’s Office of Enforcement and Compliance Assurance (OECA)  Latest Revision: August 2002  Intended to Supplement, Not replace EMS Standards Such as ISO 14001  Promotes Compliance-Focused Approaches  12 Elements  Intended as Part of Enforcement Settlements for Violators – Supplemental Environmental Project (SEP)

15. Toward Effective Compliance Management 12 Elements  Environmental Policy  Organization, Personnel, and Oversight of EMS  Accountability and Responsibility  Environmental Requirements  Assessment, Prevention and Control  Environmental Incident and Noncompliance Investigations

16. Toward Effective Compliance Management 12 Elements (Cont’d)  Training, Awareness and Competence  Organizational Decision-making and Planning  Document Control  Pollution Prevention Program*  Continuing Evaluation and Improvement  Public Involvement/Community Outreach* *Not Part of CEC Guidance Document

17. Implementing an Effective Compliance Program – What to Do Assemble Multi-functional Team – Legal, Human Resources, Operational Areas In Which Exposure is High Survey Business Activities to Identify Problem Areas and Assess Current Compliance Efforts. Benchmark Compliance Programs by Other Companies in Similar Industry Groups Institute New Compliance Plan Based On This Updated Information – Continue to Update

18. Compliance Management Resources Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of violations, Final Policy Statement, Environmental Protection Agency, [FRL 6576-3], May 11, 2000 Guidance Document, Improving Environmental Performance and Compliance: 10 Elements of Effective Environmental Management Systems; Commission for Environmental Cooperation, June 2000 Guidance on the Use of Environmental Management Systems in Enforcement Settlements as Injunctive Relief and Supplemental Environmental Projects; US EPA, June 12, 2003

19. Compliance Management Resources Compliance-Focused Environmental Management System – Enforcement Agreement Guidance; EPA-330/9-97-002R; August 1997, Revised January 2000 The “Thompson Memorandum” – Principles of Federal Prosecution of Business Organizations; Memorandum to Heads of Department Components, United States Attorneys From Larry D. Thompson, Deputy Attorney General, January 20, 2003

20. FEDERAL SENTENCING GUIDELINES AND THEIR EFFCT ON CORPORATE ENVIRONMENTAL LIABILITY Friday 16 September 2005 Gary A. Jones Senior Environmental Counsel Siemens Corporation 170 Wood Avenue South Iselin, NJ 08830 Tel: (732) 321-3866 Fax: (732) 321-3102 Email: gary.a.jones@siemens.comgary.a.jones@siemens.com