Business Regulation

Business Regulation

University of Phoenix

Enterprise Risk

MBA/560

Business Regulation

Introduction

Alumina Inc, a US based international aluminum maker, was accused by 38-year-old single mother, Kelly Bates, of repeatedly contaminating the waters of Lake Dira ,and has alleged that the contaminated water is the major of her 10- year-old daughter's leukemia. 5 years prior to the allegation, the EPA charged Alumina to be in violation of environmental discharge norms during a compliance evaluation. Alumina promptly ordered a clean up of Lake Dira and has been in compliance with EPA regulations ever since. This report will identify the key facts, regulations, and legal issues of Ms. Bates allegations. The author will also identify Alumina's values, stakeholders and any ethical dilemmas surrounding the alleged incident. Finally, the author will consider and recommend alternative solutions to Alumina's situation.

Summary of Events

In April 2002, The Erehwon Reporter reported that Kelly Bates, accused Alumina of repeatedly contaminating Lake Dira with carcinogens, and her 10- year-old daughter developed leukemia from consuming the contaminated Lake Dira water and that her daughter's disease coincides with Alumina's documented EPA violation. In response to the allegations, Alumina conducted an independent site study and found that it was indeed well within compliance of EPA standards. Another study, published in a peer reviewed scientific journal, cited that traffic was the cause of pollution in Lake Dira.

May 2002, the Erehwon Reporter did a follow on article that brought up Alumina's 1997 EPA violation. The EPA notified Alumina that the environmental audit was requested by Ms. Bates. Alumina allowed partial release of the environmental audit, under the Freedom of Information Act (FIOA). The community backlash was mild and Alumina's reputation remained intact. Despite the community's reaction, Ms. Bates, still contended that her daughter's leukemia was a result of the 1997 violation, and threatened a lawsuit against Alumina. Alumina decided to use mediation by a neutral third party to resolve Ms. Bates' claim and facilitated a win-win outcome. AAA negotiated a confidential settlement providing Bates with reimbursement of her past medical expenses, a lump sum for future medical care and an education fund for Bates' daughter. Bates has signed a strict confidentiality agreement and a release of all claims. (University of Phoenix [UoP], 2002)

Basic concepts of regulatory law

Administrative agencies are organizations regulate business through administrative law and create and enforce the majority of all laws constituting the legal environment of business. Most administrative agencies exists to solve societal problems, specifically to provide specificity, expertise, protection, regulation and services (Reed, Shedd, Morehead, & Corley, 2005, pp. 350-351). Administrative agencies function similar to the Executive, Legislative and Judicial branches of government and have the power to create regulations, advise government and businesses, and investigate illegal activities and practices (Reed et al., p. 356). Businesses are required to be aware and comply with laws and regulations that Administrative agencies enforce (UoP, 2002).

The Environmental Protection Agency, EPA, is a federal agency that enforces environmental regulation and companies like Alumina must comply with the EPA's regulations regulating water pollution. The EPA provides incentives through reductions of civil penalties and a determination not to recommend criminal prosecution to business that "voluntarily discover, disclose, and correct violations of environmental laws" (UoP, 2002, p. 21). Alumina under the jurisdiction of region 8 of the EPA, was reported to be in violation of environmental discharge norms in 1997. The EPA ordered a clean up and Alumina promptly complied, and has subsequently had a good environmental regulation compliance record (UoP, 2002).

Risk Assessment

The leadership of Alumina may want to explore alternative solutions to address the situation that was brought up by Ms Bates. One alternative solution would be to ignore the situation altogether and hope it resolves on its own. This would not be a good solution because Alumina would risk exposure to additional suits and would be good for public relations. Ignoring the situation may even lead to an escalation of problem and more bad publicity. The poor publicity and PR would hurt the companies standing in the community and law suits would be costly and time consuming Ignoring the problem has few mitigation techniques will prevent the consequences; instead Alumina should respond to the news story quickly and ensure that the accusations are baseless.

Alumina could hire an outside investigator to find out information and exposing their findings anonymously and publicly to discredit Ms Bates. This would be a bad decision because Alumina could be exposed for its actions, the tactic could back fire and Alumina could be charged for criminal action. A large company going after a single mother would damage the company's public image and expose the company for further legal action, including criminal charges. Alumina should refrain from a smear campaign of Ms. Bates, and attempted to mitigate the risks put the company at risk for a cover up, exposing it to even more bad press.

Finally Alumina could fight the allegations in court; however, the Ms Bates could prevail and receive a large monetary judgment. Alumina also would be exposed to a lengthy and costly court battle that it may not win, even if Alumina is in compliance Alumina should do a cost and benefit analysis of the situation and determine a court battle is worth the cost to go to court or use an alternative solution.

Evaluation of Alumina's Decisions

When the Erehwon Reporter alleged that Alumina was polluting Lake Dira with carcinogens, Alumina responded with an immediate press release and conducted an independent site survey. The EPA allows self-policing and encourages voluntary discloser of violations. Alumina could not say for sure if the allegations were true, so systematic fact finding will allow the organization to decide on how to proceed, respond to the allegations and defend itself it finds the allegations true (University of Phoenix [UoP], 2006). Had the allegations been true, Alumina should