What Do They Know? DOJ Keeping Secrets About BAE Probe
Sue Reisinger – Corporate Counsel – March 17, 2010
Just what does the Department of Justice know about Britain’s giant defense contractor BAE Systems that it’s not telling? Apparently plenty, according to a statement tucked away in the bribery-related plea deal that BAE signed on March 1.
In one section about the government-imposed independent monitor lies one sentence that warns the company to listen to its monitor. It states that if BAE rejects a recommendation, the Justice Department could decide to “bring relevant facts to the attention of other parts of the U.S. government.”
Justice prosecutors, including deputy chief Mark Mendelsohn of the criminal fraud section, declined to comment on exactly what “relevant facts” they have and what “other parts” of the government they would refer them to. Larry Byrne, a partner in Linklaters’ New York office who signed the plea deal for BAE, didn’t return calls for comment.
But the relevant facts must have turned up during the nearly three-year federal investigation of BAE’s alleged bribes to officials in Saudi Arabia and elsewhere. Under the deal, such facts could be turned over to other government agencies that might seek even tougher penalties than the $400 million fine that BAE has agreed to pay.
Richard Grime, a veteran defense attorney in foreign bribery cases and partner in the Washington, D.C., office of O’Melveny & Myers, observed, “It’s an unusual provision. I haven’t seen that before.”
Did he consider it a threat?
“I wouldn’t say it’s a threat, but rather just DOJ being transparent about what it could do,” added Grime, an ex-assistant director at the Securities and Exchange Commission for nine years. “It is probably more along the lines of the department making it clear that … it is just one of several agencies vested in making sure that the company follows through with remedial recommendations.”
Michael Koehler, an assistant professor of business law at Butler University and editor of the FCPA Professor Blog, found the sentence to be “unusual and kind of weird.”
Koehler explained in an interview with CorpCounsel.com, “I think what it means is that DOJ is not the government agency that makes the debarment decisions. That decision is left to the government agency that contracts with the company.”
In this case, he added, the agencies deciding on debarment would be the Department of Defense for military or national security contracts, and the State Department for export licenses. The sentence might also refer to the Securities and Exchange Commission, which presumably could still charge BAE with violations of the Foreign Corrupt Practices Act, since BAE was not directly charged with violating that act.
Instead the company pleaded guilty to one count of “conspiring to commit offenses against the United States,” including false statements to the government about its anti-bribery compliance.
The plea deal makes clear that it is binding only on the Justice Department, and not on any other “foreign, state or local prosecuting, administrative, or regulatory authority.” That means if Justice does indeed have evidence of bribery, the other agencies are free to act on it.
Koehler had this thought about the unusual warning: “I think it’s Justice saying: ‘If you don’t play nicely with us, we’ll tell mommy and daddy about your bad behavior.’” (Click HERE for original article)
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This whole thing ticks me off on so many levels, I am having trouble coming up with the words to adequately express my disgust. First of all why are these companies, who are admitted criminals, still allowed to bid on government contracts, let alone win them? They have been caught, they have been indicted, they have plead guilty and paid a fine. Hello DoJ, this is not traffic court, these are serious crimes! Meanwhile, the DoD keeps rewarding these same admitted criminals handsomely, by awarding them millions in taxpayer funded contracts. Where is the incentive for these bandits to change their ways?
Other Related Posts From Ms Sparky
- DoJ settlement $1 million, new US Government contract $30 million & the deterrent is???
- DoD awards Agility $25M contract extension after suspension
- ‘Badass bloggers,’ the defense rests, dubious contract awards & ‘spooks panic’ – the news
- KBR will not protest LOGCAP IV contract awards in Afghanistan
- Court documents say KBR will pay $402 million bribery fine
Deb
Here is where the process trips up. By working with the Government and reaching a DEAL – the company has not actually plead Guilty – they actually admitted to making a Mistake.
FAR Part 9 States the following:
“The serious nature of debarment and suspension requires that these sanctions be imposed only in the public interest for the Government’s protection and not for purposes of punishment. Agencies shall impose debarment or suspension to protect the Government’s interest and only for the causes and in accordance with the procedures set forth in this subpart”
“The existence of a cause for debarment, however, does not necessarily require that the contractor be debarred; the seriousness of the contractor’s acts or omissions and any remedial measures or mitigating factors should be considered in making any debarment decision. Before arriving at any debarment decision, the debarring official should consider factors such as the following:
(5) Whether the contractor has paid or has agreed to pay all criminal, civil, and administrative liability for the improper activity, including any investigative or administrative costs incurred by the Government, and has made or agreed to make full restitution.”
Since EVERY major contractor has at one time or another done something that would potentially qualified them for debarment – it would not be in the PUBLIC INTEREST to actually debar all these companies – there would be no one left to do the work and the number of people put out of work would be horendous.
According to POGO’s Worst 100 Contractors, the worst of the worst is Lockheed Martin with 50 istances alone followed close behind by Boeing and Honeywell. So it is easy to see that if all of these companies were prevented from doing business with the Government – there biggest client – well there would be no one left with the financial where with all to do the work.
Additionally, if the ‘act’ that was committed was not directly related to performance on a US Government contract – then it is not a debarable offense.
In a black and white world does this seem right? That would probably be a no. However, business does not operate in a strictly black and white world. If it did AIG would not be using their Gov’t bail out to pay out billions in bonuses to people who caused the company to go under in the first place.
In my work at Rock Island I dealt with BAE for production of artillery and ammunition for the Army. Other Army procurement offices buy communications equipment and services from BAE. Other services also buy from BAE. It is not in the Government’s best interest, at this time, to institute debarment and suspension proceedings against BAE.
Just another instance of too big to fail. Frankly, BAE is no better or worse than many other defense contractors.
I am at a loss regarding how to improve this system. We just do not have the production requirements to keep two sources for every item. without that competition and existence of an alternative if a contractor is suspended, then threats are hollow. Contractors will act in their own preceived interests, which may include bribes if the situation appears to warrant it.
I have taught business ethics to aspiring busness majors and MBA candidates. Most of these students have already decided that the financial interests of the company are more important than any decision based on an ethical position.
Charles,
Thanks for the insight, it appears that they also may have been or currently are under suspicion of illegal arms deals, in both the ME and South America.