The summer of 2006 brought forth more than normal attention and debate concerning ethical failures in contracting. In June, the office of general counsel of the Department of Defense issued its 110-page “Encyclopedia of Ethical Failure,” cataloging dozens of incidents of malfeasance and their consequences.
A thematically related bit of summertime ethics activity surfaced in mid-July when Senators Charles Grassley, R-Iowa; John McCain, R-Ariz., and John Warner, R-Va., complained publicly that Attorney General Alberto Gonzales failed to state that the $615 million settlement of various claims against Boeing — stemming from the multi-billion dollar tanker scandal and alleged misappropriation of Lockheed Martin trade secrets — were “fines and/or penalties” that could not be deducted from taxes owed. Grassley has suggested that legislation may be forthcoming to clarify any concerns about the settlement being interpreted to be a tax-deductible expense, “thereby leaving the American taxpayer to effectively subsidize its misconduct.”
It now seems to be a good time to contemplate past lapses in judgment and to speculate about why, long after the “Ill Wind” scandal and the advent of stiffer federal sentencing guidelines, companies and individuals continue to be blind to the dividing line between appropriate and inappropriate behavior.
The Defense Department’s encyclopedia is a good place to start. Its 110 pages are organized by type of infraction at issue with anecdotes briefly discussing pertinent facts and applicable penalties. While designed to inform federal employees of “do’s and don’ts” by way of true stories, its accounts of some of the better known and more egregious infractions are sanitized to a degree that one not having heard or seen reports on television might wonder what all the “hoopla” was about.
In condensed form, some of the more noteworthy and ironic examples are digested below:
• A not-so-bright supervisor at the Bureau of Indian Affairs had BIA purchase excessive quantities of overpriced light bulbs in exchange for $21,000 in bribes (as well as one year and nine months in prison and a fine of $72,000).
• An offshore safety inspector found much of the rig equipment then in use to be in violation. He referred the rig operator to his brother-in-law’s repair shop. Upon investigation, the FBI discovered that in exchange for each referral, the brother-in-law was treating the inspector to an evening with a lady of dubious morals. His defense, that he did not receive a “thing of value” in exchange for the referrals, was rejected.
• A number of instances of congressional aides found guilty of corrupt activities are described in the report — many concerning aides taking money for assistance in obtaining permanent U.S. residency. In one case, the aide also proved to be a successful missionary by convincing potential clients that if they joined his church they would become eligible for permanent resident status, even though that status is reserved only for church workers. In his case, approximately $400,000 was collected from hundreds of aliens.
• Another congressional staffer was tape-recorded and filmed while accepting solicitations from an undercover FBI agent to assist what he thought was a citizen with a workman’s compensation claim. First, he denied ever having met the citizen. Then, when shown a photograph of the meeting, he admitted knowing her. He next denied accepting any payments from her, but when informed that she was in fact an FBI agent, he quipped, “I guess I’m in a lot of trouble aren’t I?”
• In another case, 96 boxes of outdated Oracle software were stated falsely to have been destroyed in place when in fact the software was provided for cash to a company for re-sale (by a now-convicted Air Force officer).
• A former contracting officer for the Iraqi coalition plead guilty to accepting more than $1 million in bribes in the form of cash, cars, jewelry and sexual favors for steering lucrative contracts to a particular contractor. E-mails sent on his government computer included such statements as “I love to give you money!”
• One of the more ironic crimes described in the encyclopedia was committed by procurement workers who bought 100,000 rolls of red tape for the government. They paid more than twice its normal price in exchange for kickbacks. (Whether they filled out the purchase orders in triplicate is not stated.)
• One macabre fact pattern was a Veterans Administration clerk who was earning kickbacks for referring abandoned bodies to a funeral home where another VA employee was moonlighting.
• Under the heading “What’s Wrong With This Picture?” a Social Security Administration attorney in her spare time represented clients in claims against the very same agency. As credit to her admirable self-restraint, there was no evidence to suggest that she also sought to get appointed to decide those cases she was arguing and/or defending.
• A Navy vice admiral organized a private golf tournament using government property and subordinates on official time, while providing the winners with prizes improperly solicited and accepted from contractors.
• The Transportation Security Administration paid 500,000 taxpayer dollars for a party to celebrate the 24-month anniversary of its existence.
• An investigation revealed that a number of FBI officials had traveled to Washington, D.C., at government expense to attend an official’s retirement party — claiming that the purpose of the trip was to attend an “ethics conference.”
When one contemplates infractions large or small with an eye towards understanding how they came about, a few common elements emerge. The perpetrators, no matter how stupid their ideas, are convinced that somehow they are entitled and will get away with it. Thus, ego plays one part. To the extent that ego alone might falter, greed seems to bolster the resolve to forego any further introspection. In those instances where still more pretense is needed, one can imagine rationalization filling in the gaps — because it’s “good” to convince non-resident aliens to join your congregation or it’s important for the balance of trade and local employment that your company secure the cash flow. When the truth emerges, the result is the same — angst, expense and reputation damage that falls on the shoulders of all at the company or agency involved, often after the real offenders have departed.
Paul F. McQuade is a shareholder in the Tysons Corner office of Greenberg Traurig LLP, where he heads the intellectual property group and is a member of the government contracts practice. The views expressed are solely those of the author.