Bribery

Contractors looking for more work might consider bribery. But think twice before you do!

A recent United States Court of Claims decision [K & R Engineering Co. Inc. v. United States, 616 F.2d 469 (Ct. C1. 1980~] emphasized a contractor’s risk in obtaining work or special favors by bribing government officials involved in the contracting process.

That case held that the contractor was (1) not entitled to recover anything for the work it had performed, and (2) the government was entitled to recover payments previously made to the contractor on contracts which had been fully performed. The contractor involved had either procured its contracts or special favors and assistance from an Army Corps of Engineers official directly involved with contracting and contracted work.

The contractor’s arguments that it was at least entitled to payment to the extent that the government had benefited from its work were rejected by the court on the theory that such recovery may have made bribery a risk-free enterprise if the contractor was permitted to recover even its actual costs. The court reasoned that the integrity of the federal procurement process could only be protected by such punishment which, coincidentally, would deter others from similar illegal activities.

According to the decision there was no federal case precedent allowing the United States to recover monies paid under contracts later found to have been tainted with bribery. Instead, the court relied upon state cases from New York, California, Florida, Indiana and Washington.

Any contractor considering bribery as a means of obtaining work or special favors should consider the results of this case: the contractor did not recover any of the $132,000 in damages claimed for the terminated contract, it had to pay back nearly $140,000 received on that contract as well as nearly $150,000 which it had been paid on two earlier contracts which it completed. Additionally, its corporate officials and shareholders became convicted felons, having pleaded guilty to bribery charges.

For the contractor involved in that case, crime certainly did not pay!