Blog - Global view

Penny wise, pound foolish

Companies benefiting from government contracts need to take steps to ensure their organisation fulfils the expected organisational criteria. Otherwise, they could be in for a nasty surprise, says Kevin Evans.

Companies need to invest to fulfil their obligations Angela Waye

I returned to the States after having spent a good portion of this year working on matters in India to a call from a technology company with 30 armed federal agents on its doorstep and a search warrant in hand.  “What is going on?  We haven’t done anything wrong.  We are a good company that does good quality work for the Government at substantial cost savings to taxpayers, and they are treating us like common criminals.” 

After spending several months interviewing dozens of persons, reviewing hundreds of thousands of pages of documents, and dealing with the prosecutors and agents (all of whom I have found to be professional and decent), I have arrived at the conclusion that the company is partly right.  It has not done anything wrong – criminally.  The client’s sin, however, is that it did not pay close enough attention to the day-to-day operational details of its business, and did not have the right people with the right experience in the right positions.  As a result, the client ran afoul of citizenship and certain other provisions in Government contracts, and is now forced to defend itself (with several individuals also identified as targets in the grand jury investigation) in an effort to avoid indictment and resolve civil false claims act allegations. 

I am convinced that those in “charge” had no intent to defraud the Government, but the simple reality of, for instance, not having experienced personnel in place now means that the company is spending multiples of what it would have cost to avoid the current situation to try and save the business.  I also am convinced that part of the reason why the company finds itself in the current predicament is that those who were (and I use the word “were” intentionally) in charge thought that they could save a few bucks by playing lawyer and by putting persons with little to no relevant experience in positions for which they were ill equipped. 

Bottom line:  for those doing business and receiving payment from the United States Government, you must at the very least ensure that you have a knowledgeable and experienced contracts administrator, and you must ensure that other key personnel, such as program managers, read and understand the Government contracts on which they are working, including provisions pertaining to citizenship and approval requirements.  Moreover, if you choose not to employ a general counsel, you must associate with experienced outside counsel and use that counsel as the need arises.  You may save a few bucks by not doing such things, but the risk you run can be devastating:  criminal indictment of the company and/or employees, false claims act charges with enhanced damages and penalties and millions of dollars in attorneys’ and expert fees in defense of potential or actual charges, not to mention the emotional turmoil on management and those in the crosshairs.  Is it worth it?  Trust me, it is not.

Posted by:

Kevin
Evans

20 December 2013

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