ETHICS: Sink or Swim 1

Acquisitions Fraud & Ethics Crooks 2

Objectives Acquisition Fraud Acquisition Ethics Conclusion 3 Types Management Remedies Acquisition Ethics Basic Principles Sources of Standards Government Ethics Regulation Gifts From Outside Sources Conflicting Financial Interests Procurement Integrity Act Representational Restrictions Contracts with Government Employees Conclusion 3

Acquisition Fraud Types DEFECTIVE PRICING TINA requires contractors to disclose and certify expected costs. If not accurate, may lead to investigation. COST MISCHARGING Over charging gov’t (i.e., $1K for hammer) PRODUCT SUBSTITUTION Cases where contractors deliver goods which do not conform to contract requirements w/out informing the gov’t (ie., Bragg parachute case) FALSE INVOICE CLAIM Contractor submits monthly claim w/out performing the work according to contract terms $ 4

ACQUISITION FRAUD MANAGEMENT RESPONSIBILITY SECRETARY OF THE ARMY ASA THE JUDGE ADVOCATE GENERAL PROCUREMENT FRAUD DIVISION MACOM PROCUREMENT FRAUD COORDINATOR MAJOR SUBORDINATE COMMAND PROCUREMENT FRAUD ADVISOR CONTRACTING OFFICER US ATTY DOJ DCAA DODIG CID DCIS DCIS = investigative arm of IG Debarring Official = Commander, US Army Legal Services Agency (delegated by JAG) 5

Remedies TERMINATION FOR DEFAULT NONRESPONSIBILITY DETERMINATION DEBARMENT/SUSPENSION 6

TOPICS Basic Principles Sources of Standards Government Ethics Regulation Gifts From Outside Sources Conflicting Financial Interests Procurement Integrity Act Representational Restrictions Contracts with Government Employees Conclusion 7

Basic Principles Preserve the public trust Place loyalty in the Constitution, laws, and ethical principles over private gain What you Should v. Must do? The Rule of Law 8

Sources of Standards (1-2) Statutory Standards 5 C.F.R. 2635.204 (Gifts from Sources) 18 U.S.C. 207/208 (Conflicts of Interests) 41 U.S.C. 423 (Procurement Integrity Act) Regulatory Prohibitions Executive Orders Agency Guidance Local Policies 9

Government Ethics Regulations (2-2) Office of Government Ethics Regulations Published at 5 CFR Part 2635 DoD 5500.7-R, Joint Ethics Regulation Applies to civilian employees, military officers, and enlisted members (bold face print only) Federal Acquisition Regulation (FAR), Part 3 - Improper Business Practices and Personal Conflicts of Interest 10

Gifts From Outside Sources 5 C.F.R. 2635.202 (1-5) An employee shall not directly or indirectly, solicit or accept a gift: from a prohibited source given because of the employee’s official position. FAR 3.101-2 11

Definition: “Prohibited Source” (2-5) Means any person or entity: Seeking official action by the employees agency; Doing or seeking to do business with the employee’s agency; Regulated by the employee’s agency; Substantially affected by the employee’s official duties, or; A majority of whose members fit into one or more of these categories. 12

Gifts Include: 5 C.F.R. 2635.203 (3-5) Gratuity Favor Discount Entertainment Hospitality Loan Forbearance Item of Monetary Value Services Training Transportation Local Travel Lodging & Meals Purchase of Tickets Payment in Advance 13

Gifts Do Not Include: 5 C.F.R. 2635.203 (4-5) Coffee and Donuts Greeting Cards Plaques, Trophies Discounts Available to Public Anything for which fair market value is paid for by the employee 14

Gift Exceptions: 5 C.F.R. 2635.204 (5-5) Unsolicited Gifts of $20 or less per occasion. Annual restriction - not to exceed a total value of $50 from a single source. Gifts based on a personal relationship. 15

Conflicting Financial Interests 18 U.S.C. 208 (1-3) Employee may not participate in a matter in which he or she has a financial interest. De Minimus: Publicly traded securities; $5,000 or less. Seek waiver, disqualification, or divestiture 16

Conflicting Financial Interests 18 U.S.C. 208 (2-3) Violation can result in: Imprisonment up to one year If willful: five years In addition: a fine of $50,000 to $250,000 Civil Penalties provisions provided by 18 U.S.C. 216 17

Imputed Interests (3-3) An interest belonging to an employee’s spouse, minor child, general business partner, an organization in which the employee serves as an officer, director or employee, or a party with whom an employee is negotiating for employment 5 CFR 2635.402 18

Procurement Integrity Act FAR 3.104 (41 U.S.C. 423) (1-7) Procurement information Employment restrictions Post-government employment Penalties 19

Procurement Integrity Act (2-7) Restriction on Disclosing or Obtaining procurement information Contractor Bid or Proposal information Source Selection Information Coverage: persons, agency officials, and former officials FAR 3.104-4(a) 20

Procurement Integrity Act Employment Restrictions (3-7) Non-Federal employment? Promptly report employment contact Reject employment or seek disqualification FAR 3.104-4(c) 21

Negotiating For Employment (3-7) Same as buying stock in the company; any discussion (i.e., going to lunch to discuss future prospects), however tentative is negotiating for employment. An employee is not seeking employment if he or she makes an unsolicited commo for the reasons of: requesting a job application submitting a resume or employment proposal only as part of an industry or other discrete class. 22

Procurement Integrity Act Post-government Employment (4-7) One-Year ban on accepting compensation Time Begins (i.e., PCO, ACO, SSA, SSEB, Chief, etc) 1yr from date of K award. Time Begins (i.e., Supervisors, those who make decisions about award) 1yr from date of decision to award K. Contracts or contracting decisions in excess of $10 million FAR 3-104-4(d) 23

Procurement Integrity Act Criminal Penalties (5-7) 5 years in jail and a fine, for improperly disclosing or obtaining procurement information. 24

Procurement Integrity Act Civil Penalties (6-7) Civil Penalty up to $50,000 (individuals) and $500,000 (organizations) plus twice the amount of compensation received or offered. 25

Procurement Integrity Act Penalties to Contractors (7-7) Loss of profit or fee Termination Rejection of bid or proposal Suspension/debarment 26

Representational Restrictions (Switching Sides) 18 U.S.C. 207 (1-5) Applies to all former officers and civilian employees Lifetime Prohibition Two year Prohibition One Year Prohibition for “Senior employees” (0-6 & GS15 above) 27

Representational Restrictions 18 U.S.C. 207 (2-5) Lifetime Prohibition Matters in which the former employee was personally and substantially involved Two year Prohibition Matters formerly under the employee’s official responsibility 28

Representational Restrictions 18 U.S.C. 207 (3-5) One Year Prohibition for “Senior employees” Matters involving the former employee’s agency (GOs going back to Pentagon as civilian contractor reps) What Do You Think About This? 29

Representation Restrictions 18 U.S.C. 207 (4-5) Criminal Penalties: 5 years confinement $250,000 fine $50,000 civil Penalty 30

Representational Restrictions 18 U.S.C. 207 (5-5) Does not prohibit an employee from working for any entity Restricts how an former employee may work for the entity May not communicate or appear with the intent to influence a particular matter On behalf of anyone other than the government Does not bar behind the scenes involvement 31

Contracts with Government Employees FAR 3.6 (1-3) General Rule: A KO shall not knowingly award a contract to a Government employee or to a business concern.... FAR 3.601. The agency head, or a designee not below the level of the HCA may authorize an exception to the policy in 3.601 only if there is a most compelling reason to do so . . . . FAR 3.602. 32

Dealing with Contractors FAR 3.101-1 (2-3) Conduct government business above reproach Strictly avoid any conflict of interest or appearance of a conflict of interest in Government - contractor relationships Will become even more difficult to accomplish b/c contractors now work in the government workplace. 33

Release of Acquisition Information FAR 14.203-2 (3-3) Furnish identical information to all prospective contractors. Release information as nearly as simultaneously as possible through designated channels. Do not give out information concerning future solicitations. Some pre-contract contacts with industry are permissible and encouraged (i.e., negotiating method of contracting). 34

The Ethical Path Public Service: a position of trust and a duty of integrity Avoid conflicts of interest Avoid an appearance of any conflict of interest Conduct yourself so that you would not hesitate to make a full public disclosure. 35

Questions? Contact your local agency E/C. “Always do right. This will gratify some people and astonish the rest” Mark Twain 36