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Duty To Investigate Hints of Impropriety in Project Financial Transactions

The DVD Ethicana, a training film developed by the Anti-Corruption Education and Training Initiative, a worldwide consortium of educators, engineering professionals, and communicators that includes ASCE, dramatizes the ethical dilemmas that professionals and employees of construction firms may face in performing services in countries in which corruption is endemic. The film tells the story of Cant Construction, a firm undertaking a large infrastructure project in Ethicana, a fictional country with a well-established history of government corruption. Although Cant Construction begins its work with the firm intention of eschewing improper conduct, its executives and staff soon find themselves in an ethical quagmire as they attempt to fulfill their contractual obligations in a country that regards “appreciation” payments and similar practices as part and parcel of doing business.    

 

Situation

As an executive of Cant Construction, Unoco knows that his company recently paid a heavy fine for its involvement in a “pay to play” contracting scheme and that it might sustain even greater damage to its reputation and financial stability if it engages in illegal conduct in Ethicana. Although concerned about the financial arrangements for this multimillion-dollar project and aware of the history of corruption in the country, Unoco relies on his understanding that such financial institutions as the one funding the Ethicana project typically place strict conditions on loans to ensure that the funds are managed properly.  

However, during his discussions with Cant Construction’s “agent,” a native of Ethicana with strong ties to the country’s interior minister, Unoco is told not to worry about whether the bank will approve Ethicana’s transparency procedures. The agent explains that he has an “inside track” at the institution. He also tells Unoco that Ethicana awarded the project to Cant Construction without first engaging in competitive bidding, despite the financial institution’s stated policy that competitive bids are a prerequisite for funding. When Unoco points out the contradiction to his agent, he is told that Ethicana has a method for arranging “exceptions” with the institution. 

Despite these indications that the financial institution may not be monitoring Ethicana’s financial stewardship as closely as he believed, Unoco makes no further inquiry into the matter. Instead, he tells the agent that he would prefer not to know any more details of the funding arrangements between Ethicana and the bank, and he proceeds to recommend the project to his superiors at Cant Construction.  

Question

Do Unoco’s actions in dismissing signs of improper conduct in the funding arrangements for the Ethicana project and requesting not to be given additional information about the arrangements violate ASCE’s Code of Ethics?  

Discussion

Canon 6 of the Code of Ethics reads as follows: “Engineers shall act in such a manner as to uphold and enhance the honor, integrity, and dignity of the engineering profession and shall act with zero tolerance for bribery, fraud, and corruption.” While category (a) in the guidelines to practice for this canon requires only that members not “knowingly” engage in fraudulent, dishonest, or unethical conduct, category (d) cautions that “engineers should be especially vigilant to maintain appropriate ethical behavior where payments of gratuities or bribes are institutionalized practices.” 

This stricture reflects the notion that “zero tolerance” with regard to bribery, fraud, and corruption must involve recognizing and investigating signs that such practices are taking place. Furthermore, vigilance in avoiding improper or illegal conduct is even more necessary when corrupt practices are an established feature of the business or government culture. Unoco’s failure to investigate strong hints of improper conduct in the Ethicana infrastructure project hardly signifies “zero tolerance” for bribery, fraud, or corruption and thus may be considered a violation of canon 6 of the Code of Ethics. 

A second ethical concern is Unoco’s failure to serve in the best interests of his employer. Canon 4 of the code says that “engineers shall act in professional matters for each employer or client as faithful agents or trustees.” Unoco’s suspicions regarding the funding arrangements should have prompted him to realize that Cant Construction would be taking a risk in carrying out the project because funding could be withdrawn or lost. Moreover, his misgivings should have alerted him to the possibility of further acts of impropriety as the project unfolded. By choosing not to investigate his concerns, Unoco failed to uphold his ethical obligation to serve as a “faithful agent” and thus violated canon 4. 

This dilemma is just one of the many ethical issues raised in the DVD and the accompanying training materials. Other subjects include financial arrangements with local agents, making “facilitation payments” to expedite project deliveries, and the role of the project’s financial, technical, and legal personnel in monitoring ethical and legal compliance. The issues presented require an understanding and analysis not only of applicable ethical standards but also of state licensure regulations as well as other state and federal laws, for example, the Foreign Corrupt Practices Act. And while the case study involves an international construction project, it is important to bear in mind that the ethical issues and situations could very well be encountered on domestic soil. 

In March of this year 3,000 copies of the DVD were distributed by the Anti-Corruption Education and Training Initiative to major engineering and construction firms, engineering colleges, government agencies, financial institutions, and lenders worldwide. For more information or to purchase a copy, visit www.ethicana.org 

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 and that the general summary information contained in these case studies is not to be construed as a precedent binding upon the Society.  

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