Thursday, May 12, 2011

Now That's a Lot of Water

The Department of Justice announced yesterday that an Army contracting officer pleaded guilty to accepting $400 thousand in bribes from a company in exchange for awarding that company a two-year contract to supply bottled water to U.S. troops in Iraq. You can read the entire press release here. Although the press release did not indicate the value of the contract, we can assume that it was substantial if the contractor was willing to spend that kind of money in order to secure the contract. This particular contracting officer now faces 10 years in prion, must pay back the $400 thousand, and also pay fines.

The DoJ announcement does not give the fate of the contractor. Presumably the contractor has been at least debarred - prevented from obtaining future Government work. Its possible, but doubtful, that the acts were perpetrated by rogue elements within the organization without management knowledge. The announcement does not indicate how the kickback scheme was uncovered. Since this incident was part of a wider scheme that involved other parties and more than $9 million in bribes, there could have been a whistle-blower involved or perhaps a company that didn't appreciate being shook-down came forward.

Government contractors are required to develop and maintain ethics programs. One of the fundamental elements of such a program is for management to set a proper "tone at the top". When management does not set and adhere to ethical principles, employees notice and soon begin to believe that it is fine to bend rules. Employees might even find there are rewards to bending rules in the form of promotions, recognitions, and bonuses.

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