This week, the House overwhelmingly passed the Overseas Contractor Reform Act (H.R. 5366). The bill, sponsored by Vermont Congressman Peter Welch, would propose debarment for companies and individuals who violate the Foreign Corrupt Practices Act (FCPA), which prohibits the payment of bribes to foreign officials.
If this legislation becomes law, it would make the FCPA, which is already highly despised by some in the business community, even more terrifying to federal contractors, as POGO learned yesterday at a legal conference on the FCPA sponsored by the International Peace Operations Association, a private security company trade association.
According to Welch’s legislation, the proposal for debarment would be issued within 30 days after a “final judgment” of a violation, which means when all appeals have been exhausted or the deadline to file an appeal has passed. In theory, this means that a contractor found guilty of violating the FCPA could continue receiving new contracts for many years while its case slowly makes its way through the lengthy appeals process. Furthermore, even when a final judgment is issued, the OCRA allows the head of a federal agency to waive the proposed debarment.
And how would officials in charge of debarment know when a final judgment has been issued so that they can act within that relatively brief 30-day time frame? Somehow, all suspension and debarment officers throughout the government would have to be quickly notified when final judgments in FCPA cases involving federal contractors and grantees have been issued.
Welch says his motivation for the bill came from reading this New York Times story from last November alleging that Xe Services, formerly known as Blackwater, had paid $1 million in bribes to Iraqi officials after the tragic incident in Baghdad’s Nisoor Square in September 2007, when Blackwater guards opened fire on Iraqi civilians. (Of course, since Xe has not yet been found guilty of a FCPA violation, let alone exhausted all of its appeals, the OCRA would allow Xe to continue bidding on and receiving new contracts.)
There have been several other big FCPA cases in recent years: the Oil-For-Food prosecutions of Chevron andTextron, the Nigeria bribery incident involving KBR and Halliburton, and BAE Systems and Daimler AG multi-million dollar settlements of foreign bribery allegations. Presumably, since all of the aforementioned cases have been resolved and none of those companies have filed appeals (as far as we know), the OCRA would have required the government to propose debarment for each of those companies—unless the government issued a waiver.
In fact, the Daimler case, which was resolved through a deferred prosecution agreement under which the Department of Justice promised to “cooperate with” Daimler in suspension and debarment proceedings (see paragraph 21 on page 14 of the agreement), might have resulted in the granting of a waiver, which must be reported to Congress by the head of the agency within 30 days from the date of the waiver, along with an accompanying justification.
Lawyers who participated in yesterday’s International Peace Operations Associations conference pointed out various definitional problems in the OCRA. For example, one former federal prosecutor observed that the OCRA does not define what constitutes a “finding” of a violation. Would a deferred prosecution or non-prosecution agreement constitute a “finding”?
It’s not clear why we even need the OCRA. The Federal Acquisition Regulation (FAR) already makes bribery a debarrable offense. Other catch-all provisions in that section (a “criminal offense in connection with obtaining; attempting to obtain; or performing a public contract or subcontract,” a “commission of any other offense indicating a lack of business integrity or business honesty” and “any other cause of so serious or compelling a nature that it affects the present responsibility of the contractor or subcontractor”) could also apply. With its “final judgment” provision, the OCRA could hinder the government’s power to suspend or debar contractors under the FAR.
When it comes to holding contractors accountable, the problem isn’t that the government lacks the tools. The problem is the government is not effectively using the tools it already has. As Sen. Russell Feingold, D-Wis., recently noted, suspensions and debarments have been steadily decreasing over the last five years, even though incidents of contractor misconduct—he specifically mentioned violations of the FCPA as one example—are increasing.
