This release is very standard for law enforcement agency employment -- when you want to work in state or federal law enforcement you basically have to give them the right to examine everything about you and your life if they choose to do so and you have no right to refuse their inquiries or refuse to sign this release if you want to be considered for the job at all (the federal government is even worse than this disclosure if you seek employment with them). Basically, the answer is "yes" - they can terminate you up to one year after this disclosure if any information is brought to their attention about your background that does not meet their criteria for hiring. The lawsuit concern that you are asking about in the release means that you are releasing from a lawsuit any person, party or agency that provides information to the department regarding you or your background (again, this is a standard part of these releases -- the department wants other third party people or companies to be able to talk about you freely with them withou a fear of lawsuit from you -- but the fact is that such lawsuits never generally get far anyway). Finally, the department should have a policy that they will not disclose any of the information gathered to anyone outside of the department (unless they are the subject of a court order to do so).
All things considered, while this release seems like a tough release, it is not as bad as some releases in other states and the one that you would have to sign if you wanted to work in a federal government law enforcement capacity. They can also refuse to hire you if you refuse to sign it because any employer (including state governments) have the right to set their own hiring conditions on any job or position and they are within the law unless they discriminate against applicants based upon race, gender, age, disabilit, religion or sexual orientation.
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It could be released to a third party but I doubt that it will be released. Generally once the law enforcement agency has the information it will stay within their department.
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