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June 2013

Keeping the Playing Field Level

Situation:

An ASCE member forwards newspaper reports to the Committee on Professional Conduct (CPC)detailing the indictment of several state officials and business leaders on charges of bid rigging, criminal conspiracy, and bribery. The indictment is the culmination of a sweeping investigation into the state highway agency’s procurement process, and its findings describe a long-standing, pervasive culture of corruption that has seen millions of dollars in engineering and construction contracts awarded to contractors in exchange for campaign contributions and other favors.

Among the individuals named in the complaint and in subsequent trial testimony are no fewer than 15 ASCE members. These members are from different firms and enterprises, yet the conduct of each paints a similar picture of the state’s procurement practices. While contracts were nominally awarded on the recommendation of a review committee on the basis of a competitive, qualifications-based process, certain high-ranking officials had significant influence on the decision. These officials could ensure that the selection committee’s choice came from a “short list” of favored contractors made up of companies whose principals had made substantial donations to the officials’ political party.

As a consequence of this system, executives of companies seeking to do business with the state were routinely called upon to support the campaigns of the incumbent officials and their political allies. All of the ASCE members admit to making personal contributions, participating in expensive fund-raising galas and dinners, or personally hosting fund-raising efforts or events and say that they did so with the understanding that such contributions would ensure access to the most lucrative state contracts. Occasionally the financial assistance they rendered was augmented with direct contributions to state officials, including gifts of travel and small luxury items.

Question:

Did the members’ activities in providing campaign contributions and other services to elected officials to obtain an advantageous position in contract awards violate ASCE’s Code of Ethics?

Decision:

Strictures against unfair competition have been a feature of the Code of Ethics since its inception, in 1914. Today, this principle is embodied in canon 5: “Engineers shall build their professional reputation on the merit of their services and shall not compete unfairly with others,” and category (a) in the guidelines to practice for this canon adds the following: “Engineers shall not give, solicit, or receive, either directly or indirectly, any political contribution, gratuity, or unlawful consideration in order to secure work, exclusive of securing salaried positions through employment agencies.” Yet despite the long history of this prohibition, complaints relating to unfair competition remain by a wide margin the most common type reported to the CPC.

At the same time, one of the most recent amendments to ASCE’s code, the injunction in canon 6 to “act with zero tolerance for bribery, fraud, and corruption,” is equally applicable to this case. Supplementing this canon, category (a) in the guidelines to practice says that engineers must “not knowingly engage in business or professional practices of a fraudulent, dishonest, or unethical nature,” category (b) requires engineers to be “scrupulously honest” in financial transactions, and category (e) calls for transparency in the procurement of projects.

Although the facts of this case were fairly simple, the sheer number of members named in the illegal scheme created a daunting task for the CPC. Its members reviewed voluminous documentation related to the trial and conducted a number of telephone and personal interviews with the state prosecutors and with the accused members and their counsel.

While the accused members did not deny their involvement in the pay-to-play scheme, they all claimed that they felt they had no choice but to participate in what they deemed to be a shakedown by corrupt officials. They also stressed that state-funded highway projects were virtually “the only game in town,” meaning that the viability of their firms and their personal livelihoods depended on their ability to secure state work. Several of them noted that the system of exchanging contributions for access had been in place well before they became involved, and they expressed the cynical view that this was merely business as usual for their locality.

Although not denying the extent to which financial pressures and the prevailing culture had influenced the members’ actions, the members of the CPC felt that these factors did not justify complicity in the scheme. They found that all of the members had violated canons 5 and 6 of the Code of Ethics, and they recommended disciplinary actions based on the member’s level of participation in the scheme. The actions would thus range from a letter of admonition in the case of a management employee who had made a few small contributions to expulsion in the case of owners and principals who had provided thousands of dollars in cash or made other types of contributions.

In recent years, often in the wake of scandals similar to the case described here, many U.S. states and municipalities have attempted to address corruption in the government contracting process by strictly regulating the interplay between state procurement and political fund-raising. At present, some 15 states and numerous localities, including New York City and Los Angeles, have adopted laws to combat so-called pay-to-play arrangements, and legislative efforts in the District of Columbia and other areas suggest that other jurisdictions may soon follow suit.

As a general rule, these laws impose limitations or even outright bans on political contributions from government contractors. The limitations may begin when the contract is first negotiated and may extend through termination of the contract, and in some cases they may remain in place for years afterward. Several jurisdictions also require the filing of registration and disclosure statements regarding political activities on the part of any contractor covered by the law. Although similar in intent, the laws differ greatly in the nature and scope of regulation. One significant area of difference concerns the types of government contracts that trigger the pay-to-play restrictions. In Virginia, for example, the law’s restrictions on political contributions arise only for companies seeking no-bid contracts exceeding $5 million, whereas in Hawaii the restrictions apply to both no-bid and competitive contracts and there is no minimum dollar value.

A second difference has to do with the entities covered by the law. Several states, including Ohio and South Carolina, place restrictions on political contributions only from the contracting business itself, whereas the restrictions imposed in other states also apply to persons and entities affiliated with the business. The law in Illinois to combat pay-to-play arrangements covers corporate officers and political action committees associated with the corporation, while in Connecticut the law applies not only to officers, board members, managers, and persons having more than 5 percent ownership but also to the spouses and adult children of those individuals. Businesses or individuals found to have violated a state or municipal pay-to-play law may be subject to a number of penalties, including termination of state contracts, debarment from future government work, fines, or even criminal penalties.

The freedom to engage in political activities has long been viewed in the United States as a civic right. Moreover, to the extent that the political process can be guided by informed voices on engineering matters, political activity on the part of those in the engineering profession benefits not only the profession but also society as a whole. At the same time, it is essential for engineers to recognize the ethical and legal limitations on their political activities, particularly when those activities can create the perception of seeking an improper financial benefit. An effective educational and compliance program is crucial for firms seeking government contracts, particularly firms operating in multiple jurisdictions under multiple pay-to-play laws. Principals and employees alike must understand when their personal activities may be covered, what types of activities may fall afoul of existing law, and where they can go with questions or to report misconduct.

Additional information on laws against pay-to-play arrangements may be found at www.citizen.org/documents/wagner-case-record.pdf. Furthermore, the ethics training videos Ethicana and Ethics on Trial: The Case of Marvin L. Camper deal with pay-to-play situations and are available through ASCE. Also relevant is the video Henry’s Daughters, which is available through the National Institute for Engineering Ethics, part of Texas Tech University’s Murdough Center for Engineering Professionalism.

Members who have an ethics question or would like to file a complaint with the Committee on Professional Conduct may call ASCE’s hotline at (703) 295-6061 or (800) 548-ASCE (2723), extension 6061. The attorneys staffing this line can provide advice on how to handle an ethics issue or file a complaint. Please note that individual facts and circumstances vary from case to case, that some details may have been altered for purposes of illustration or confidentiality, and that the general summary information contained in these case studies is not to be construed as a precedent binding upon the Society.

Tara Hoke is ASCE’s assistant general counsel and a contributing editor to Civil Engineering.

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