With the trial of Senator Ted Stevens of Alaska in the news and the admission from his friend, the contractor, that he gave Stevens improvements to his home in exchange for favorable opportunities, I have seen other contractors' collars tighten. Times are tough, and good jobs are hard to come by, but could a little show of gratitude or friendship somehow be misinterpreted as unlawful or unethical and land you in the newspaper?
The answer is a resounding “Yes.” While this kind of murky conduct has been going on for a long, long time - the trend toward transparency, which led to the Freedom of Information Act, Open Records and Sunshine Laws, creates fodder for our Internet-wired world. What you might have considered innocent, innocuous behavior has been flashed across the Web and broadcasted by media not knowing what the word “retraction” means. Now, however, the stakes are higher than ever for contractors.
Late last year, the federal government adopted new Federal Acquisition Regulations, FAR 52.203-13(b), to impose new obligations on most federal contractors with contracts or subcontracts of more than $5 million. These new FARs require the contractors to have a Code of Ethical Business Conduct and train all employees working on federal projects as to what they can and can't do, including education on the following acts:
The False Claims Act, 31 U.S.C. §3729: Civil penalties of treble damages and $5,500 to $11,000 (adjusted for inflation since 1990) for each claim (which could mean each invoice), and criminal penalties of up to five years imprisonment.
The False Statements Act, 18 U.S. C. §1001: A criminal statute that imposes up to five years imprisonment.
The Anti-Kickback Act, 41 U. S. C. §54: Penalties of double the amount of the kickback at $11,000 per kickback, and criminal penalties of up to 10 years imprisonment.
Bribery and Gratuities, 18 U. S. C. §201-208: Statutes which impose criminal penalties of treble the amount of the bribe, and up to 15 years imprisonment for bribes and two years for illegal gratuities.
If an employee of a contractor is found to have violated one of these laws, even innocently, the company's failure to educate the employee is grounds for finding the company liable for the violation. And, of course, any claims it might have against the government get forfeited too.
Contractors are not only required to have this ethics training program, they have to establish a toll-free hot-line number where people can call to report suspected violations anonymously, turn the company in if a violation is uncovered and protect whistle-blowers from any retaliation. If a company doesn't want to set up such a hot-line, no worries; it can direct its employees to call the Department of Homeland Security's toll-free number to report their observations.
You don't do federal work, you say? The federal government is not the only one to have such a program. In an election year, what politician with an instinct for survival wouldn't vote for an Ethics in State Procurement law which assures citizens that greedy, unscrupulous contractors will be caught and hung from the nearest bridge? The additional cost, after all, falls on the contractors to set up compliance programs and not on the state government, which only has to get involved when it gets a hot-line call or wants to challenge a claim. You can expect to see such legislation in your state, county and city soon.
You don't do public work, you say? Well, check out the Web sites of large corporations who may hire you. Large consumers of construction services, such as Wal-Mart, have strict policies in place prohibiting any type of gratuity to their employees. General contractors who do a lot of work for the federal government and these large commercial consumers pass these strict requirements on to their subcontractors as a matter of course. They proudly post their policies on their Web sites, so that the world will know how ethical they are.
The cost of complying with these programs is not cheap:
A lawyer or consulting firm that specializes in developing good governance programs will need to be hired to train employees (make sure that it is a firm that specializes in training to meet the requirements of your customer - not all of them include federal law training). New employees have to be trained as they come on board.
A senior-level employee will have to be trained to monitor and oversee the program. The hot-line will need to be monitored regularly and logs maintained (confidentially) of reported violations.
A protocol will need to be developed for dealing with the hot-line calls. Which ones have to be reported to your customer? Which ones are really just crank messages or mean-spirited gossip?
If a violation is really reported, not only will it have to be dealt with, but the part of your system that was vulnerable enough to allow it to happen will have to be examined and corrected.
The whistle-blower will have to be protected.
Of course, none of this will protect your company if it was the company president who was bribing the senator, but absent that, having an ethics awareness system in place will certainly help most companies from finding themselves on the hot-seat before a congressional committee or grand jury (at worst), or from being cut out from further work by a promising customer.
Susan McGreevy is a partner at Stinson, Morrision, Hecker LLP, Kansas City, Mo., 816/842-4800, e-mail [email protected].