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FCPA Security Case Ends In A Fiasco

Two years ago at the SHOT Show where civil, security and military small arms manufacturers display their wares the FBI ran a major sting leading to the arrest of 22 individuals for attempted bribery of a foreign official in order to gain a contract. It was one of the biggest cases in terms of numbers of persons and companies involving the Foreign Corrupt Practices Act (FCPA).

The FCPA is designed to prevent U.S. and foreign companies, too, from being involved in bribes or other illegal means to gain work from overseas customers. If a company does business in the U.S. or with the U.S. government it may be targeted under this act. Recently large companies have been charged under this law including the Dutch giant Siemens, BAE Systems as well as oil support company KBR.

This case involved a fake representative of an African country negotiating for equipment for a police force that would require some payments to people to make the deal go through. Different companies were involved and various people charged.

Now after two years of failing to convict anybody in the first two trails the FBI and Justice Department have given up. Rather then attempt to retry the cases they have decided to drop charges against the remaining defendants. Whether they will attempt to retry the first two trials remain to be seen.

The first ended in an acquittal and the second in a mistrial as the jury could not make a decision. This was primarily due to the fact that the prime witness for the prosecution was considered unreliable as well as details of communications between him and the FBI agents involved in the case portrayed them negatively. The jury also felt that at no time was it made clear to the defendants that the payments demanded were bribes.

The FCPA is an important tool and the U.S. has worked hard to end the practice of defense contractors paying officials in other countries for contracts. That does not mean it does not still happen and there remain cases in the U.S. of government officials taking bribes. Other nations have had a harder time but overall the defense industry is a lot less corrupt then it was thirty years ago.

These cases illustrate that the government has to be very careful how it approaches these situations and the way they prepare their case.

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Minority Set Aside Contracts Still Banned in DoD

In November a Federal Appeals Court ruled against the Pentagon’s program of minority set asides in contracting. This case is under review about whether it will be appealed to the Supreme Court. Government Executive writes that the Defense Department announced while this process is ongoing it will continue not using these contracting rules. The company that won the law suit sued because they submitted a lower bid then the winner who was a minority owned corporation. The appeals court based their ruling on the fact that the rules benefited minorities not proven to be discriminated in the past by Defense contracting. The Department has maintained a program where five percent of contracts had to go to these designated disadvantaged businesses. More to come in the future on this as one would presume that the Obama administration would support this program in the Federal Courts.

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Arrests in Afghanistan contracting scandal

Two Air Force personnel and three Afghan nationals were arrested over charges that bribes were paid to win contracts for military construction in Afghanistan. Two of the Afghans also resided in the United States. Supposedly a bribe of $30,000 was paid to the US Air Force officials to win a $1 M construction contract in 2004. Another bribe was paid later to win a road contract. Several US military and civilian personnel have been arrested and charged with contract related corruption in Kuwait, Iraq and the United States. With the amount of money going to the efforts in Afghanistan and Iraq there is always a chance for such crime.

There is more at The Wall Street Journal’s MarketWatch.com site.

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Defense companies busted for trying to steal secrets related to fuel contracts

January 7, 2008 by · Comment
Filed under: Justice Department, logistics 

Two Americans living in Prague, Czech Republic were arrested and charged with an attempt to steal “information related to contract to supply fuel” according to this press release on Rueters. The Justice Department announced the arrests today. The two men had recruited an American living in Maryland to steal confidential information related to bids and pricing from a US company that provided fuel and services to DoD. There have been many cases of one contractor through judicious hiring acquiring knowledge of another companies secrets. Sometimes the employee just brings documents with him, as happened with Boeing and Lockheed when the were competing on a US Air Force space launch vehicle contract.

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