Educate business owners on ways to prevent rogue employee actions from hurting your business, prevent becoming involved in a federal criminal investigation, and creation of Best Practices for your business.
About the Author:
My name is Jim Keating. I attended college in Philadelphia, PA and law school in Wilmington, DE. Our team at Compliance Mitigation offers services to help people develop mitigation strategies that lead to lower sentences if they’ve been charged with crimes.
Upon completion of this Case Study, participants will be able to:
- 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; and
- Identify Debarment and its consequences.
Small and mid-sized business owners and leaders and government employees in charge of procurement or otherwise spending taxpayer funds.
City Officials, Awarding Authority, Bribery, Best Practices, Debarment
Current State of the Industry:
When some people face challenges or feel pressure, they seek quick solutions without considering all of the consequences. They do not realize the power that comes with big government. Government agencies will investigate wrongdoing. People that do not view themselves as being “criminals” frequently find themselves being accused of white-collar crimes. In this case, we see a company who chose the wrong way to obtain lucrative contracts and we learn how to avoid these illegal practices.
Future State of the Industry:
Small business owners and leaders should take calculated measures to avoid being involved in a federal criminal investigation. This could include developing best practices for your company and the industry your business serves. Business leaders should make decisions with a full understanding of how government investigators will perceive them. At Compliance Mitigation, we want to eliminate instances where people state that they did not know their employees made bad decisions unwittingly resulting in victims, which certainly can be how federal government investigators view matters. Knowledge of consequences of poor decision making may result in people making fewer decisions that could make them vulnerable to investigations and prosecutions for white-collar crimes.
A southern California paving contractor allegedly bribed city officials with gifts in order to obtain valuable contracts with the city. While the contractor disputes the charges, small business owners and leaders can learn from this situation. No one person sits above the law, and legislators in the United States have passed anti-bribery laws to facilitate fair bidding practices where taxpayer funds are at risk. Moreover, even well-intended gifts and favors can now fall afoul of rigid city, state and federal rules against receiving gifts. Creation of complete and thorough Best Practices for your business can help avoid being involved in a federal criminal investigation.
This case study profiles American Asphalt South (AAS), a contracting company located in southern California. All of the information in this background comes from a news article on the subject. According to reports, AAS has been a paving contractor in the San Diego, California area for several decades. AAS and one employee, Tim Griffin, have allegedly engaged in a bribery scheme where 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. This type of action results in matters that should be handled objectively being handled in a manner best suiting the private interests of the awarding authority employee. 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 the City of San Diego’s auditors report described a years-long gift giving scheme between an AAS and an employee, San Diego has taken steps to debar AAS from obtaining any further City of San Diego work. Recently, lawyers for San Diego filed a complaint in state administrative law court seeking to debar, or ban, AAS from any future city work. According to reports from the city, AAS has received tens of millions in city work since 2015 — a total of $65 million. The most significant step that can be taken against a contractor by an awarding authority can be Debarment. Debarment has been defined as an action taken by officials to exclude or disqualify a person or company for a specific period of time. Debarment has government wide implications applying to all Federal programs and procurement. AAS has denied the accusations, and has filed its own lawsuit contending the city withheld documents it sought under the state Public Records Act that the company it needs to defend the charges.
A recent court filing against AAS more greatly details the ways 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, which allows the city to extend the contract, but only for the same overall contract value, and with the original prices for materials that would have been part of the bid. The city says the AAS colluded with the 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 employee who allegedly received the gifts has not been publicly identified by the city. Among the gifts the auditor’s report said the employee received included a trip to a San Francisco 49ers football game in December 2014. The employee also had entrance fees to golf tournaments paid by AAS and had repair work done on his home. The new complaint says only that the employee does not work for the city any longer.
A decade before AAS had been debarred, lawyers for the City of San Diego said the company bribed a San Diego city worker with numerous gifts, and in return 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 later the District Attorney’s Office, neither of which ended up filing charges. However, this close call did not stop AAS employees from continuing this illegal behavior.
Lawyers for AAS claim AAS has done nothing wrong and said the debarment has caused more harm than good for both AAS and the city. In court papers the company said that the city had recently bid out 11 construction projects AAS would have normally competed for but could not because of the debarment. After reviewing the winning bids AAS indicated that in 10 of those jobs AAS would have been the low bidder – and saved the city about $914,000 combined.
At Compliance Mitigation, we recommend all business owners and leaders develop Best Practices as critically important. Simply taking the time to research what you are planning to do in your business and industry and finding the best way to go about getting it done can create stability and longevity within your organization. Establishing your own Best Practices for your own area of expertise or business simply can be a critical of making your business operations work smoothly and efficiently. Best practices can keep evolving as new and better solutions are found or evolve from better awareness, new technology, or simply different ways of looking at things.
Many times, what may be accepted as Best Practices has not actually been fully vetted to determine if they really are best way to accomplish a task or just a good way that has been successfully used for some time. We at Compliance Mitigation can create custom-tailored Best Practices for your business so you can focus on what you do best. Current Best Practices have been shown to be the most efficient way to work.
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 do things that are unethical or illegal. While it is not clear why AAS allegedly paid bribes to city officials, crime will never be the answer to any situation one finds themselves in. Normal people oftentimes turn to criminal behavior while not fully understanding or even contemplating the consequences to themselves or others.
At Compliance Mitigation, we recommend more and better training for white-collar professionals to profile the personal stories of people that broke the law during the course of business. When people understand how authorities view crimes like bribery they may be more inclined to make law-abiding decisions. At this stage, while there may be no charges pending against anyone profiled here, creation of Best Practices, and training and education can assist every company to act in compliance with the law.
- City details fraud case against streets contractor in move to ban company from city work – The San Diego Union-Tribune
- Asphalt Paving and Repair Contractors | Concrete Company Hayward CA 800-541-5559 Serving Greater San Jose Bay Area, CA – Potholes, Crack Filling, Parking Lot Construction. American Asphalt performs asphalt repairs, concrete restoration, pavement patching, sealcoating, slurry seal surfacing and striping. American Asphalt will protect your investment, reduce costs and maintain your pavement for years to come.