1. Responding to a Federal Investigation
NHOA August 2017 Conference
John Klein, SBA
Christine Williams, Outlook Law, LLC

2. John Klein
John Klein, Associate General Counsel for procurement law United States SBA Principal Legal Advisor to senior Agency officials and their staffs with respect to the 8(a) Business Development program; the Agency’s Government Contracting programs, including the small business set-aside, subcontracting and Certificate of Competency programs; the HUBZone program; the Small Business Innovation Research program; the Size Standards program; the Service Disabled Veteran- Owned Small Business program; SBA’s internal contracting procedures; and Suspension and Debarment Official for SBA

3. Christine Williams
Adjunct Professor of Law, Seattle University, Government Contracting, Best Lawyer in America-2018-Government Contracting, Founder, Outlook Law, LLC Christine concentrates on Government Contracting from counseling on qualifications and administration to disputes and crisis. She is often involved in sensitive internal investigations and frequently interacts with Government agencies when a company faces a tough situation. Christine is known for her deep experience with the SBA programs and understands the unique challenges that may be faced by companies that they often encounter when it comes to Government Contracting on a national basis.

4. Government Investigation Types
Administrative
Civil
Criminal
Parallel Proceedings
Admin – Agency or DCAA
Inquiry by agency, contracting officer
May be preliminary or informal
Often an audit
Civil – often False Claims Act
Elements of the FCA are also potentially criminal offenses if the intent requirement is met
Government determine whether to sue
Contractor assess potential exposure
Criminal Investigations
Indictment decision
Higher intent standard and proof requirements
Parallel proceedings
Government may be considering it s options
Government may be closed about whether its civil or criminal
Agencies share information – USDOJ Memo on coordination – see p. 81 of Seyfarth Shaw book
Can become quite expensive 2

5. Government Investigation Issues
General contracting issues
Mischarging of time or material
Accounting mischarging
Defective pricing
8(a) program issues
Eligibility
Work share
Investigation of Agencies
Implementation of regulations
Integrity
Policy issues
Document Retention – FAR 4.7, (b), 3

6. Investigating and Interested Entities
Main Justice
AUSA
Investigative
Agencies
Contracting
Officer
Agency Resources /
OIG
Contractor
Suspension and
Debarment Official
SBA
DCAA 4

7. Investigating and Interested Entities (Qui Tam Scenario)
Main Justice
AUSA
Investigative
Agencies
Contracting
Officer
Agency Resources /
OIG
Contractor
Suspension and
Debarment Official
SBA
DCAA
Qui Tam Relator 5

8. Private Practioner Perspective: General Rules
Develop facts in a thorough and reliable way
Promote credibility and avoid the appearance of conflicts
Report findings clearly
Use the findings to protect the business
Do no harm

9. Comply and Avoid Obstruction of Justice
False Statements (18 U.S. Code § 1001) and other related offenses
Obstruction of Justice (18 U.S. Code Chapter 73)
Avoid Obstruction of Justice. Obstruction of Justice is outline in several statutes.
False Statements, 18 USC 1001
18 USC Chapter 73 – Obstruction of Justice
Obstruction of Federal Audit, 18 USC 1516
Obstruction of Judicial Proceeding, 18 USC 1503
Witness Tampering, 18 USC 1512
Obstruction of pending administrative proceeding, 18 USC 1505
Perjury and False Declarations Under Oath
Perjury, 18 USC 1621
False Declarations Statute, 18 USC 1623 7

10. Protect the Company's Interests
Retain counsel immediately
Attorney-Client Privilege
Avoid corporate communications about the investigation because they are not privileged
Easier to make the case that communications are privileged if they involve outside counsel
Retain counsel immediately in responding to any of the tools to allow legal advice and communications to come under the privilege
Keep privilege in mind in responding to requests for information – do not turn over privileged documents, and instruct witnesses not to answer if privileged information is at issue. 8

11. Investigation Tools Investigative Audit
Subpoena or Demand for Documents
Interviews or Oral Testimony
Interrogatories
Grand Jury Subpoenas
Search Warrant
Other
Documents and Testimony
Others can include wiretaps and sting operations. Use of a contractor to exploit what investigators think is a corrupt contractor. 9

12. Private Practioner Perspective: Initial Steps
Do not allow any misconduct to continue
Have a plan
Have a team: internal and external: points of contact
Who are the players: Government, agencies, media, GAO, Inspector Generals, DOJ
What has been done: Civil investigatory demand, internal complaint, subpoena, search warrant….

13. Private Practioner Perspective: Data Collection
Quickly and quietly
No obstruction (do no harm)
Keep confidentiality
Word may spread be prepared
Assemble data and prepare for interviews

14. Private Practioner Perspective: Interviews in General
Where is the harm coming from and who is likely the main cause, if any
Has it spread
Capacity to be surprised
Capacity to understand context and out of context statements, s, etc.

15. Private Practioner Perspective: Interviews
Be prepared
Two interviewer rule
Give Upjohn at all interviews
Document the interview, keep opinions out
Whether or not to record the interview
Be prepared for employee questions they always come

16. Private Practioner Perspective:
Reports and how to do them
Corrective measures, if needed, in place/recommended
Decisions regarding the Government (if not already involved)
Mandatory Disclosure
Voluntary Disclosure
Compliance with the law certifications
8(a) Good Character

17. Suspension and Debarment Perspective: Types
Administrative
Procurement (Federal Acquisition Regulation)
Non-Procurement (Non-Procurement Common Rule)
Government-wide effect (E.O )
Statutory

18. Suspension and Debarment Perspective: FAR 9.4 Policy
Protect the U.S. Government
Integrity of contracting process
Quality goods and services
In the public interest
Not punishment

19. Suspension and Debarment Perspective: Causes for Suspension FAR 9
Suspension and Debarment Perspective: Causes for Suspension FAR Adequate Evidence of:
Fraud or crime in connection with a public contract
Antitrust violation relating to submission of offers
Embezzlement, bribery, false statements, tax offenses, etc.
Drug-Free Workplace violation
False “Made in America” inscription
Unfair trade practice
Delinquent taxes
Failure to disclose credible evidence of criminal or False Claims Act violation or overpayments
Any other offense affecting present responsibility

20. Suspension and Debarment Perspective: Causes for Debarment FAR 9.406-2
Conviction or Civil Judgment
Fraud or crime in connection with a public contract
Antitrust violation relating to submission of offers
Embezzlement, bribery, false statements, tax offenses, etc.
False “Made in America” inscription
Any other offense affecting present responsibility
Preponderance of Evidence
Serious violation of Gov’t contract terms
Drug Free workplace violation
Unfair trade practice
Delinquent taxes
Failure to disclose credible evidence of criminal or FCA violation or overpayment

21. Suspension and Debarment Official (SDO)
Understand the SDO's responsibility
Not to punish, but to protect the federal agency
Assess the present responsibility of the named party
Once the SDO has suspended a party or proposed a party for debarment, the practical burden to demonstrate responsibility shifts to the named party

22. Suspension and Debarment Official (SDO) (cont)
Recognize the SDO's discretion
Responsibility is a subjective assessment
SDO final action is subject to review, but historically difficult to reverse
SDO has authority to debar for extended periods – one Army debarment was for 14 years

23. Agency Options Show Cause Letters / Requests for Information
Administrative Agreements
Narrow scope of the debarment
Expand scope of debarment
Affiliates
Imputation
Joint Venture

24. Government Coordination of Remedies
Suspension and debarment activity is monitored by Government fraud counsel
Early suspension and debarment can “enhance” parallel criminal and civil proceedings for Government or vice versa
Government does not have a policy of global settlements

25. FAR Mitigation Factors
Debarment – FAR 9.406
Suspension – Uses the same factors as debarment
A contractor has to consider which mitigation factors it has satisfied or can satisfy prior to presentation of its position and then implement the mitigation factors, as appropriate in the individual case

26. FAR Mitigation Factors (cont)
The existence/nonexistence of any single mitigating factor is not necessarily dispositive
Contractor must demonstrate to SDO's satisfaction that it is presently responsible and that suspension or debarment is unnecessary
Sentencing guidelines also can come into play

27. Special Considerations for the 8(a) Contractor

28. Special Considerations for the 8(a) Contractor
SBA 8(a) program has certain admission requirements
SBA regulations state that “good character” is required for admission into the program. Good character means: (1) no past / present criminal conduct; (2) no debarment or suspension; and (3) no violations of SBA rules
If statements on admission application are not true there are consequences

29. SBA 8(a) Suspension: 13 CFR 124.305
Following a notice of intent to terminate participation in the 8(a) program, the SBA may suspend a participant when the SBA determines that suspension is needed to protect the interests of the Federal Government
Clear lack of program eligibility
Conduct indicating a lack of business integrity
Biggie: false statements to the Federal Government

30. SBA 8(a) Suspension: 13 CFR 124.305 - Notice
A notice of suspension will provide the following information the basis of the suspension and that
Suspension is immediate and will continue pending:
completion of further investigation
a final program termination determination,
or some other specified period of time;
8(a) contracts, will not be made during the pendency of the suspension unless
it is determined by the head of the relevant procuring agency or an authorized representative to be in the best interest of the Government to do so,
and SBA adopts that determination;

31. SBA 8(a) Suspension: 13 CFR 124.305 - Notice
Company must complete previously awarded section 8(a) contracts
Suspension is effective throughout SBA
A request for a hearing on the suspension will be considered by an Administrative Law Judge at OHA, and granted or denied as a matter of discretion
The program term will resume only if the suspension is lifted or the firm is not terminated

32. SBA 8(a) Suspension: 13 CFR 124.305 - Appeal
A company can appeal a suspension decision
the suspension remains in effect during appeal
On appeal, the SBA has the burden of showing that "adequate evidence" exists for the suspension
"Adequate evidence"
Information in the record before SBA
Sufficient to support the belief that suspension is necessary
SBA need not demonstrate that an act or omission actually occurred

33. SBA 8(a) Termination: 13 CFR 124.303
The SBA can terminate a company’s participation in the 8(a) program if the contractor or its principles is debarred or suspended under the FAR
The SBA may also terminate a company’s participation in the 8(a) program for other reasons, including conduct by the company, or a principal of the company, indicating a lack of business integrity
Such conduct may be demonstrated by information related to a criminal indictment or guilty plea, a criminal conviction, or a judgment or settlement in a civil case

34. SBA 8(a) Termination: 13 CFR 124.303 - Examples
False information on 8(a) application
Failure by the company to maintain its eligibility for program participation
Failure by the company for any reason, to maintain ownership, full-time day-to-day management, and control by disadvantaged individuals- including death; [ownership/control]

35. SBA 8(a) Termination: 13 CFR 124.303 - Examples
Debarment, suspension, voluntary exclusion, or ineligibility of the company or its principals
Conduct by the company, or any of its principals, indicating a lack of business integrity
Willful failure by the Participant to comply with applicable labor standards and obligations
Material breach of any terms and conditions of the 8(a) Program Participation Agreement
Willful violation by a company, or any of its principals, of any SBA regulation pertaining to material issues

36. SBA Mitigating Factors
Likely a lot like the FAR provisions
Intent or mistake
What type
How far reaching

37. Global, Parallel or Coordinated Settlements
Advantages of achieving a global settlement
Burden on contractor to coordinate among settling agencies
Criminal
Civil
Suspension and Debarment Authority
Criminal – counts and size of the fine
Criminal Settlement language can be critical – Prosecutors may (1) agree to recommend against suspension and debarment, (2) permit guilty plea to matter outside the statute of limitations, , or (3) stipulate that the alleged misconduct did not include a government contract.
Take aggressive stance in trying to ensure that Government agrees not to indict affiliates.
Civil Settlement – amount and terms of payment
Entire unit or just the affected part
Qui Tam – Relator can object to the settlement
ADR
Suspension and Debarment – presently responsible – compliance program
May reserve right to suspend or debar if settlement agreement is violated 21

38. Conclusion Understand object(s) and scope of the investigation
Comply and avoid obstruction of justice
Protect the company's interests
Evaluate options
Resolve the matter 24

39. Questions???