A California paving contractor, allegedly bribed city officials with gifts to obtain valuable contracts with the city.
Even though the contractor disputed the charges, small business owners and leaders can learn from this situation. Legislators in the United States passed anti-bribery laws to facilitate fair bidding practices.
Upon completion of this Case Study, participants should:
- Understand how employee conduct can lead to a federal investigation
- Describe how to avoid federal investigations resulting from avoidable conduct
- Explain why smart businesses develop Best Practices and urge employees to follow them
- Define debarment and identify its consequences
State of the Industry
People that do not view themselves as “criminals” frequently find themselves accused of white-collar crimes. In this case, we see how authorities have targeted a company for bribery. Learn how to avoid these illegal practices.
Small business owners and leaders should take calculated measures to avoid being involved in a federal criminal investigation. These measures include developing best practices for any company and the industry the business serves. Business leaders should make decisions with a complete understanding of how government investigators perceive them.
At Compliance Mitigation, we want to eliminate instances where people state that they did not know their employees unwittingly made bad decisions. Their choices led to them becoming victims, which certainly can be how federal government investigators view matters. Knowledge of the consequences of poor decision-making results in people making fewer decisions that could make them vulnerable to investigations and prosecutions for white-collar crimes.
This case study profiles a contracting company located in Southern California. All information in this background comes from a news article on the subject. According to reports, the contractor has been a paving contractor in San Diego, California for several decades.
One of the company’s employees, allegedly, became involved in a bribery scheme. The company obtained city contracts in exchange for personal benefits to the officials working for the awarding authority.
Bribery refers to the offering, giving, soliciting, or receiving of any item of value as a means of influencing the actions of an individual holding a public or legal duty. Proof of bribery requires demonstrating a “quid pro quo” (or something for something) relationship in which the recipient directly alters behavior in exchange for the gift.
Almost a year after issuing a contract, the City of San Diego’s auditors report described a year-long gift-giving scheme between the contractor and a city employee. The city of San Diego took steps to debar the contractor from obtaining any further City of San Diego work.
Lawyers for San Diego filed a complaint in state administrative law court seeking to ban the contractor from future city work. The contractor had previously received millions of dollars in city work.
Debarment excludes or disqualifies a person or company for a specific time. Debarment has a government-wide effect applying to all Federal programs and procurement. The contractor denied the accusations and filed a lawsuit contending the city withheld documents it sought under the state Public Records Act that the company needed to defend the charges.
A recent court filing against the contractor provides more details on how the city says the company bilked taxpayers by exploiting contracting rules. For instance, under the rules, the city can exercise an option clause in contracts, allowing the city to extend the contract, but only for the same overall contract value and original prices for materials that would have been part of the bid. The city says the contractor colluded with the city employee to increase those prices by raising the per-square-foot price in the option.
Slight increases can result in large payouts because the contracts usually cover millions of square feet. The city has not publicly identified the employee who allegedly received the gifts. The employee received a trip to a San Francisco 49ers football game in December 2014. The employee had entrance fees to golf tournaments paid by the contractor and repair work done on his home.
A decade before the contractor had been debarred, lawyers for the City of San Diego said the company bribed a San Diego city worker with numerous gifts. In return, they got the worker’s help to bilk taxpayers on slurry seal contracts. The relationship may have been first reported to a confidential city fraud hotline in 2015. At that time, the city referred the matter to the FBI and the District Attorney’s Office. Neither entity filed charges. However, this close call did not stop the contractor’s employees from continuing the illegal behavior.
Lawyers for the contractor indicate the contractor has done nothing wrong and said the debarment caused more harm than good for both the contractor and the city. In court papers, the company said that the city had recently bid out 11 construction projects the contractor would have normally competed for but could not because of the debarment. After reviewing the winning bids, the contractor indicated that in 10 of those jobs, they would have been the low bidder. Using the contractor’s services would have saved the city about $914,000 combined.
At Compliance Mitigation, we recommend more and better training for white-collar professionals by profiling the personal stories of people who broke the law during business operations. When people understand how authorities view crimes like bribery, they tend to make law-abiding decisions. At this stage, while there may be no charges pending against anyone profiled here, the creation of Best Practices, training, and education can assist every company in complying with the law.
While the company being profiled in this case study disputes the allegations by the City of San Diego, other small and mid-sized business owners and leaders can learn from this situation. Small businesses occasionally have employees who participate in unethical or illegal activities. While it is not clear why the contractor allegedly paid bribes to city officials, crime will never be the answer to any situation in which one finds themselves. Normal people often turn to criminal behavior while not fully understanding or even contemplating the consequences to themselves or others.
- City details fraud case against streets contractor in move to ban company from city work – The San Diego Union-Tribune