One contractor learned that it’s a bad idea to bribe federal officials

Prison time, restitution, lifetime debarment, loss of your company. That's what can happen if you bribe a federal contracting official, as one contractor found ...

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Prison time, restitution, lifetime debarment, loss of your company. That’s what can happen if you bribe a federal contracting official, as one contractor found out recently. Federal sales and marketing consultant Larry Allen joined Federal Drive with Tom Temin for a recap.

Interview transcript:

Tom Temin: And I guess these types of stories always do amaze and horrify us, because for the most part, it doesn’t happen that much in the American system. We’re not Afghanistan. But still, it does happen from time to time, and the lessons learned are worth reviewing.

Larry Allen: Tom, they are lessons worth reviewing. And the thing that surprises me on one hand, but not on the other, is that companies keep doing this. People keep doing this, even though the downsides of what can happen to you are well documented. And there are plenty of people who you can visit in prison or who just got out of prison for violating the terms of their federal contracts. And yet we continue to see companies and people who work for those companies, you think well, it can happen to me, well it does happen to you. And this case I’m talking about was a HUD contractor that spent a lot of money, over $150,000 at least bribing two different HUD officials for getting inside information on upcoming contracts. Think about that. What happened to the contractor is that they got caught, they got sent to jail for 14 months, or their company was put in jeopardy. And one of the great ironies is that the officials could have spent that $150,000 to improve their market intelligence, hire some outside business development help improve a process internally. They could have gotten them just as competitive over the long term as the money they put together on bribes, and then he would still be here free to pursue a life of government contracting.

Tom Temin: And did anything happen to the HUD employees is little less clear.

Larry Allen: What we were able to tell Tom is that they were reassigned in one case, one worker seems to have been terminated. So there’s a downside for feds here too. Federal employees have ethics training that they’re supposed to take at least once a year. And yet people being people, they like the handbags, they like the free sports tickets, it’s always sports tickets, Tom, even in Washington, DC, where you have to question yourself sometimes why you’d want to pay money to go see a Washington sports team that always seems to trip people up. So if you’re a fed, my advice to you is to listen to that ethics training. Do you really want to get that midfield ticket to go see the Washington Football Team? A maybe, maybe not. But there’s going to be a serious downside risk to that if you get caught.

Tom Temin: Plus, you could be bored to death watching the game too. And that’s even worse.

Larry Allen: Bored to death, you have to pay a mint for parking, pay a mint for your concessions. So it’s something you got to think through.

Tom Temin: But yes, this does happen from time to time. I think the Navy Seventh Fleet is still trying to rebuild in some sense, after the Fat Leonard scandal, which was bribery on an enormous scale. And I think those cases happen rarely, but when they do, they really do stupefy.

Larry Allen: That was on an enormous scale. And it went on for a number of years, and had a lot of people that participated in it because of the duration. And certainly, it’s unadvisable to take bribes, to seek bribes, if you’re a government employee, to offer bribes if you’re a government contractor. But you also have to know that the wider the circle you make it of people who are involved, the more likely it is you’re going to get caught. And that’s exactly what happened in the Fat Leonard scandal.

Tom Temin: And I’ve always thought that ethics training is not needed by the ethical and not headed by the unethical. But nevertheless, the government does need to offer it and they do. We’re speaking with Larry Allen, the president of Allen Federal Business Partners. And moving to some more practical and widespread concerns. There is a bill now to go up to $3 billion from $1 billion for the it modernization fund. This coming from Gerry Connolly of Northern Virginia. What’s the chances of that? And golly, would the agencies be able to use it all? How much money can they absorb?

Larry Allen: Well Tom, I think there’s good news about this provision, and then there’s some questionable news about this provision. The good news is that this bill would provide a billion dollars in new funding for the tech modernization fund. It would also provide $2 billion for a fund controlled by GSA for new technology initiatives, non traditional contractor type stuff, things that would actually also potentially go into enhancing the FedRAMP program or other programs like it. That’s great. The technology modernization fund, as you know Tom, is very popular with government agencies and contractors. And one of the main issues has been making sure it had a proper funding. So Mr. Connolly’s bill for that that’s been attached to the House version of the budget reconciliation measure, that’s a positive step. But wait, there’s more. As we know from looking at the national news reports, there’s a lot of concern about the fate of the budget reconciliation bill, this is a three and a half trillion dollar spending bill that is being hooked up with other bills in a sequence. So passing this bill is really going to be like threading the eye of a needle, Tom fraught with danger, not entirely sure that the entire bill will be passed, or that any of it would be passed. So we’re really going to have to watch that space.

Tom Temin: And if there were $3 billion available for the technology modernization fund, maybe they’ll do it by some other funding mechanism. But that kind of money is, in one sense, if you look at it, it’s only about 3% more than the government is spending on IT generally now, about $100 billion, it’s a big ticket item. So $3 billion only adds 3%. But on the other hand, the specificity of what it’s to be used for means that it’s maybe not as widely sought across the government as just the regular appropriations.

Larry Allen: Well, you see agencies really competing for that money, Tom. They do have to put together a business case, the business case as to show specifically what type of modernization you’re going to pursue and the expected benefits that your agency is going to accrue. Depending on the project, you may have to put together a plan on how you’re going to repay that money. It used to be that all tech modernization money had to be repaid. Congress loosened those rules about a year ago. So not all of it has to be 100% recoverable. But the idea is the tech modernization fund is supposed to be a revolving fund where agencies use the money, they improve their activities, and they pay the fund back over the savings that they realized over a period of time so that another agency can do modernization. And I’m not sure of all of the projects that are being created for this apply. But certainly, overall, we know that modernization in technology in the federal government is a huge priority. We still have legacy systems that date back 30 years to when IT was in its infancy, and I had hair. So as you say whether it gets through this bill or some other mechanism, hopefully this type of legislation will see the light of day.

Tom Temin: Well, you can modernize technology, I don’t know whether we can grow the hair back on the top of you head, that might need a different fund. And of course, that $3 billion, wouldn’t it be ironic if that passed, but regular appropriations did not pass in time, which they are likely not, so I imagine you are now giving the really last, last, last, last minute advice to your clients on car.

Larry Allen: That’s exactly right, Tom. What I’m telling my clients is to expect a government shutdown, I think there’s a slightly better than 50-50 chance we’ll have a shutdown, whether it’s over the CR, which the administration wants to add some goodies to, some of which I think would be supported, but not all. That’s going to take place inside of a debt ceiling vote because we’re having to increase the debt ceiling right around the start of the fiscal year. There aren’t votes for that in the Senate. So it’s going to be, I think, a very bumpy ride as we go into FY-22. And contractors and their government counterparts should buckle up.

Tom Temin: Well, we can’t count on the Taliban to bail us out on that front. Larry Allen is president of Allen Federal Business Partners. Thanks so much.

Larry Allen: Tom, thank you. I wish your listeners happy selling.

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