Companies Break Law, Still Win Big Government Contracts

For Immediate Release

Contact: Beth Daley (202) 347-1122

beth@pogo.org, http://www.pogo.org

May 6, 2002 -- According to a new report released today, many of the U.S. government's largest contractors have repeatedly broken the law or engaged in unethical conduct. However, they are never even temporarily suspended, let alone debarred, from gaining additional government contracts. Smaller contractors are not so lucky. The report, profiled in U.S. News and World Report today, was published by the Project On Government Oversight (POGO).

"The hard work of our nation's law enforcement officials is undermined by billions of dollars in federal contracts flowing to companies who repeatedly break the law and raid the U.S. Treasury," stated Seth Morris, Research Assistant and primary investigator on the project.

POGO which investigated the issue for more than a year, identified that, from 1990 to the present:

• The government's 43 top contractors paid a total of $3.4 billion in fines/penalties, restitution, and settlements;

• Sixteen of the 43 top contractors have been convicted of a total of 28 criminal violations; four of the top 10 have at least two criminal convictions; and

• Only one of the 43 top contractors were ever suspended or debarred from doing business with the government. That one suspension action, against General Electric, lasted only five days, when typical suspension and debarment actions last 18 months to three years.

Current regulations require that taxpayer dollars be awarded only to "responsible" contractors who have a satisfactory record of "integrity and business ethics." But POGO's data suggests that this is usually not the case. The result is that while crime-fighting branches of the government prosecute lawbreakers, contracting branches reward them.

Representative Carolyn Maloney (D-NY) has vowed to introduce legislation aimed at cleaning up the federal government's contracting system, something she did for New York City as a Councilmember, prior to running for Congress. "The bottom line is that the government should not be awarding contracts to companies who break the law or engage in unethical conduct. I think taxpayers would want to know that the government is being a thoughtful consumer," said Representative Maloney.

In a recent press release on a contractor under criminal investigation, former federal prosecutor Representative Bob Barr stated: "For the federal government to continue to do business with a private company that has a documented record of defrauding the government and abusing taxpayer money is unconscionable."

Here is a summary of the track records for the ten worst offenders from 1990 to the present:

KEY: Contractor (headquarters); # of Violations and Alleged Violations; Total Fines/Penalties Restitution, and Settlements; FY99 Contract Awards

1. General Electric (CT); 63; $982,859,555; $1.6 billion
2. Lockheed Martin (MD); 63; $231,872,404; $19 billion
3. Boeing (IL); 36; $357,973,000; $14 billion
4. Raytheon (MA); 24; $128,652,919; $7.8 billion
5. Northrop Grumman (CA); 21; $ 87,876,581; $3.5 billion
6. Fluor (CA); 19; $ 70,016,614; $1.1 billion
7. United Technologies (CT); 18; $214,836,860; $2.7 billion
8. TRW (OH); 16; $389,484,000; $2.5 billion
9. AT&T (NY); 14; $ 16,090,000; $673 million
10. Unisys (PA); 12; $182,245,692; $635 million

NOTE: Complete chart can be viewed on page 5 of the report at POGO's web page

Among POGO's recommendations to fix problems with the current suspension and debarment system are that:

• A federal agency such as the General Services Administration maintain a database of violations that government officials could consult before awarding contracts;

• Contractors be required to disclose violations as well as prior suspensions and debarments from doing business with the government;

• Small and large contractors be treated alike and fairly; and

• Suspension or debarment be mandatory for a contractor who is criminally convicted or had a civil judgement against them more than once in a three-year period. Cases of repeat offenders should also be reviewed and decided upon by the leadership of the federal Interagency Committee on Debarment and Suspension.

Copies of POGO's report, "Federal Contractor Misconduct: Failures of the Suspension and Debarment System," as well as the searchable Federal Contractor Misconduct Database can be viewed at http://www.pogo.org

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POGO investigates, exposes, and seeks to remedy systemic abuses of power, mismanagement, and subservience by the federal government to powerful special interests. Founded in 1981, POGO is a politically-independent, nonprofit watchdog that strives to promote a government that is accountable to the citizenry.

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