bribery“Your criminal actions raise serious questions as to whether you have the requisite personal integrity and business ethics to be a responsible Government contractor.”

That’s me. I was debarred from being a government contractor, and based on my conduct and offense (FCPA) it was an appropriate and fair decision. The process by which I was suspended and ultimately debarred was also fair and appropriate. Furthermore, the protocol the government afforded me in terms of providing an opportunity to address and appeal the length of the debarment (it was reduced by one year) was also quite reasonable and objective. So what does that have to do with the OECD Foreign Bribery Report? Well, according to the report, of the 427 cases used by the OECD for its data set, two resulted in debarment. The OECD defines debarment as relating “to the additional non-automatic sanction of provisional exclusion from participation in national public procurement processes for a set period.”

Thus, as representing fifty percent of the data set (I am assuming that I am one of the two counted, but I have not asked the OECD for verification), I would like to share a few observations. First, as the OECD has shared, these numbers are surprisingly low “despite the 2009 OECD Recommendation for Further Combating Bribery of Foreign Officials in International Business Transactions” where in fact the OECD recommended the suspension “from competition for public contracts, or other public advantages, enterprises determined to have bribed foreign public officials in contravention of national laws.’”

In my case, debarment, as an extension of my original suspension, will run for two years as a “probationary” period, where the US government will give me the opportunity to “demonstrate that (I) meet that standard of responsibility required of a Government contractor.” Fair? Yes. Appropriate? Yes. So, given that such sanctions are in the toolkit of government penalties and there is a fair process by which the Government will allow an entity to make a case for a reduced period of debarment, why isn’t it being used more often?

As University of Virginia (disclosure, my Masters in Foreign Policy is from UVA and I consider myself a dedicated Wahoo) Professor Brandon Garrett states in Too Big to Jail, (Amazon link here) suspension and debarment “may result in what is a effectively a death penalty for a company, and in many cases prosecutors and regulators are right to want to avoid such severe consequences for the entire company.” Agreed. For example, in my own case, would it have been responsible to have my former employer debarred, with potentially catastrophic economic consequences, for conduct attributable to me? Clearly not, and as Professor Garrett states, “prosecutors are absolutely right to try to avoid collateral consequences of a corporate conviction.”

As Professor Garrett states “if one justification for prosecuting a company in the first place is egregiously bad compliance, then one wonders why so little is typically done to deter or correct it.” So, is debarment the next possible incremental step in increasing corporate and individual deterrence, especially in FCPA cases where “corporate complexity may not only enable crime on a vast scale but also make such crimes difficult to detect, prevent, and prosecute.” If those who participate, condone or intentionally ignore foreign bribery do not see debarment in their calculus of consequences, then perhaps its use is now warranted as part of the continuum of sanctions and penalties that the government has at its disposal.

Alternatives to a Corporate Death Sentence

Debarment is now viewed as an all or nothing scenario, where the economic “death penalty” would be unavoidable for certain firms. However, digging into the details of government contracting, there are incremental options, short of all out termination of contracting. For example, many corporations hold “GSA contracts,” whereby all US Government entities can order from a pre-arranged pricing schedule that reflects “best and preferential pricing” (under the Federal Supply Schedule) to the US Government. It is essentially a commercial price list with a discount schedule. Thus, what about temporarily suspending the GSA schedule as a sanction? Such a suspension would leave large negotiated contracts in place, where end users may be dependent on a product or service, often for security or defense issues.

Export Control Restrictions

Given that the FCPA applies to the bribery of foreign entities, what about being debarred from exporting to public or state controlled entities for a limited period? Many of the companies that were referenced in both the OECD and Professor Garrett’s work were subject to export licensing controls under the jurisdiction of the US State Department (DDTC), and the US Department of Commerce (BIS). Would anyone think it unusual for an entity that bribed foreign officials to be subject to debarment from obtaining export licenses, perhaps to the same countries where the bribe was paid, for a limited time period? Again, all of this as part of “corporate supervision.”

As the OECD report states, “countries need to ensure that entities and individuals found to have bribed foreign public officials in international business can be and are debarred from participation in national procurement contracting.” But, as Professor Garrett well states “suspension and debarment are highly uncommon.” Why? Because there is, in my opinion, a misperception that debarment equates to a corporate death sentence. I hope that by elevating some of the incremental enforcement and policy options that might be available in the context of debarment, that perhaps the “all or nothing” perception might be reassessed. In sum, it is a fair process, and it should be re-considered as a policy option to both increase deterrence and as an appropriate sanction.

For the full post on this issue, please see here.

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