POGO Neither Admits Nor Denies Any Errors in This Blog Post...

However, to avoid the delay, uncertainty, inconvenience and expense of protracted editing, proofreading and fact-checking of this post, POGO reaches a full and final settlement of readers’ allegations of errors pursuant to the following terms and conditions.

What if POGO were able to get away with any and all misconduct merely by uttering the above magic words and cutting a deal with our accusers? Well, our Federal Contractor Misconduct Database is chock full of examples in which the largest federal contractors were able to escape some serious legal scrapes through similar means.

Of the hundreds of misconduct instances in our database (910 as of today), the vast majority were resolved through criminal, civil or administrative settlement agreements. In almost every one, the contractor was allowed to categorically deny any liability or wrongdoing – using basically the same language you see at the beginning of this post – and remain eligible to receive more federal contracts.

We bring this up because this week, House Committee on Oversight and Government Reform Chairman Edolphus Towns (D-NY) wrote a letter to Attorney General Eric Holder expressing concern that criminal and civil settlements between the Department of Justice (DOJ) and federal contractors are preventing the government from suspending or debarring poorly performing contractors and that some contractors subject to these settlement agreements continue to break the law with impunity. You can tell exactly what prompted Chairman Towns to write this letter, because on the very first page he presents Exhibit A: the recent mishaps and misadventures of KBR.

Chairman Towns is also concerned that, as part of these settlements, DOJ may be inappropriately assisting contractors in suspension and debarment proceedings. For example, auto manufacturer Daimler AG settled a major foreign bribery case last month by paying millions of dollars in fines and entering into a deferred prosecution agreement with DOJ that includes this stipulation on page 14:

With respect to Daimler's present reliability and responsibility as a government contractor, the Department agrees to cooperate with Daimler, in a form and manner to be agreed, in bringing facts relating to the nature of the conduct underlying this Agreement and to Daimler’s cooperation and remediation to the attention of governmental and other debarment authorities, including the MDBs [Multilateral Development Banks], as requested.

Chairman Towns has given Attorney General Holder until May 28 to answer four important questions:

1. Does DOJ consider resolution of charges to foreclose action by other government agencies to suspend or debar companies from contracting?


2. In view of the fact that suspension and debarment is not a penalty, but is an important means for government agencies to protect themselves from unscrupulous and poorly performing contractors, please provide a detailed explanation of whether the Justice Department believes it is in the government’s best interest to continue to award contracts to those with a record of violations of law.


3. Does DOJ consult with federal government contracting authorities when entering into settlement agreements with companies that compete for government contracts?


4. Identify all instances in which DOJ officials intervened in a suspension and debarment proceeding on behalf of government contractors since 2005 and explain the basis for the DOJ intervention.

Recent events, most notably the oil spill in the Gulf of Mexico, have highlighted the disturbing tendency for various federal agencies to get too cozy with the companies they are supposed to be regulating. Has DOJ done the same with regard to the contractors it investigates and prosecutes? We eagerly await Attorney General Holder’s answers to Chairman Towns’ questions to find out.

-- Neil Gordon

Comments

[James Morgan - Puritan Financial Advisor]

You can tell exactly what prompted Chairman Towns to write this letter, because on the very first page he presents Exhibit A: the recent mishaps and misadventures of KBR.