A new law review article poses a question that POGO and others have been asking: Have the top federal contractors become “too big to debar”? The article, written by South Texas College of Law professor Drury Stevenson and third-year student Nicholas Wagoner, looks at the Foreign Corrupt Practices Act (FCPA) and how it is being enforced against federal contractors caught bribing foreign government officials.
Even though the Department of Justice and the Securities and Exchange Commission have stepped up FCPA enforcement in recent years, the authors discovered that they are limiting their sanctions to fines, civil penalties, and the occasional imprisonment of employees. They have yet to impose a company-wide suspension or debarment on a contractor that violates the FCPA. Instead, the government continues to award them (or reward them?) billions of dollars in contracts, thus nullifying the deterrent effect of the FCPA.
The authors use defense contractor giant BAE Systems as a case study. Last year, BAE reached a $450 million FCPA settlement with the U.S. and British governments. As part of the settlement, BAE also pleaded guilty to criminal charges regarding its financial record-keeping practices. However, it was allowed to keep doing business with the federal government, and since pleading guilty and paying those fines, BAE has received billions of dollars in federal contracts.
In fact, POGO knows of only one FCPA case that resulted in a suspension or debarment. That occurred in 2007 when the U.S. Army debarred an employee of L-3 Communications subsidiary Titan Corporation who pleaded guilty to bribing Iraqi police officials to win contracts. The twenty or so other FCPA instances in our Federal Contractor Misconduct Database include five guilty pleas, two deferred prosecution agreements, and over $780 million in fines and penalties, but, except for that lone L-3/Titan employee, no suspensions or debarments.
The dramatic increase in federal contract spending in recent years, the corresponding decrease in the size of the government’s acquisition workforce, and growing consolidation in the defense and information technology sectors have caused the government to become too dependent on a handful of companies to provide goods and services: L-3 Communications, BAE Systems, BP, and KBR are but a few examples. Barring any of these companies from contracting is either impractical or outright impossible. Additionally, this overdependence undermines the government’s efforts to stamp out foreign bribery and other kinds of corporate misbehavior.
Neil Gordon is a POGO Investigator.
Image: Flickr user rageforst.