Three Views on Responding to a Government Contractor’s Corporate Crisis
The objective, once you find yourself in this situation, is not to get away with it. It is to drive to an optimal result that’s transparent, and the optimal result is not necessarily going to be without some pain, but that’s how you build a company, and a company’s reputation. When things go wrong, how do you deal with them?
Hello, and welcome to Integrity Through Compliance: AMI’s Business Success Series. This podcast was created by seasoned compliance experts at Affiliated Monitors to speak practically to your business needs. During this series you will hear from AMI’s experts who will provide their observations on industry trends, geared to raise your awareness and to protect your brand. So grab a cup of coffee and join us as we guide you and your business to integrity through compliance.
Greetings! I’m Rod Grandon, Managing Director, Monitoring Services with Affiliated Monitors. I welcome you to today’s podcast. Our discussion today will focus on compliance challenges companies face or may face when contracting with the federal government. Government contracting is a complex, ever-changing undertaking that offers financial opportunities, a certain degree of economic stability, and a virtual minefield of risks for contractors who participate unwittingly in the federal marketplace. This is particularly true for those organizations entering the government market for the first time, or for those organizations whose business lines have changed, or there’s been perhaps developments in terms of acquisitions or mergers. And as a result, revenues now have significantly shifted over a relatively short period of time to include government sales. In addition to the many rules and requirements associated with government contracting, there also may be competing interests within the company as to specific objectives and concerns. This is true among government stakeholders as well with various agencies, and even individuals and offices within a given agency, having their own issues, concerns, and requirements.
This situation can be very challenging for any business. Now throw in potential compliance failures, intentional misconduct, or even evidence of illegal activity. That environment quickly becomes not only challenging; it can become outright hostile. Today’s expert panel will consider some of these challenges and potential responses within the context of a scenario that is based on our experiences in government contracting, particularly in government, industry, and as outside legal counsel. We recognize that there is no textbook solution for many of these challenges. However, we will discuss potential approaches and various considerations that may be useful for organizations as they develop facts, manage communications and information flow, when determining whether or not to disclose facts to government stakeholders or to engage in other communications with government stakeholders. And when it comes time to consider possible corrective measures, including disciplinary action against employees. We offer all of this discussion — all of these thoughts — within the context of mitigating risks to the company, and maintaining the company’s ability to continue conducting business with the federal government.
Now, before diving into today’s scenario, I want to introduce you to our panel of experts. First, Tom Miiller. Tom is a distinguished attorney and executive leader with nearly 40 years of hands-on, broad-based professional experience in high technology businesses ranging from computers, communications, to aerospace. Tom Miller served as the Senior Vice President, General Counsel, and Corporate Secretary of Engility Holdings, Inc. He held that position since the company was spun off from L-3 Communications in July, 2012, until it merged with SAIC in 2019. Tom currently serves as an outside director under a special security agreement board for a foreigner foreign-owned entity that is doing business in the United States. Our other expert this morning is my friend and longtime colleague David Robbins. David is a Partner and Co-chair of Jenner & Block’s government contracts practice. David is an experienced litigator investigations, lawyer and strategic counselor with a broad skill set focus on ethics, compliance, mergers and acquisition diligence, investigations, crisis management, and enforcement defense for government contractors, grant recipients, and regulated industries. Before David returned to private practice, he had been very much involved as a senior government official within the Air Force General Counsel’s office. In that office, he and I both have had the opportunity to serve as the Air Force’s Director of Procurement Fraud Remedies, and to serve as the Air Force’s Suspension and Debarment Official — these things all providing some degree of background and context for our comments this morning. With that, I turn it over to David for today’s facts scenario.
Well, thank you very much, Rod. And let me just say a little bit about you and Tom, your organization Affiliated Monitors, and how grateful I am to be a part of this podcast. Right. When I think of people who have been there, done it all, seen everything, and can deal with issues calmly with a really strong background in this arena, both of you are at the top of the list, Tom, from an extensive in-house perspective and someone who I’ve looked to as — as obviously a client, and a friend, and a mentor; all of the above over the years. And Rod the same with you, having worked for you at the Air Force and work with you since I’ve left — since we both left — and turning to you and Affiliated Monitors for proactive monitoring engagements, and for monitoring and administrative agreement-related engagements across government contracts, matters. You are, in my view, a true gold standard in the industry. And just being on this with you both is a tremendous honor for me personally.
Okay. With that out of the way, let’s talk about the facts here, right? We have come up with this stylized, somewhat invented, factual scenario just to really tease out key issues that we want to talk about. As Rod notes, there’s no right answers here. There’s no wrong answers here. There’s really important brainstorming that goes on, to see the various stakeholder responses and thought processes on all of this, because we think this is helpful. This specific set of facts it’s, well it’s taken in part from a number of different matters that the three of us have worked on together and separately — and obviously embellished still further to tease out key points. We’ve also discussed these facts with a number of people in our networks, and we found they resonate. There are common issues that everyone sees in their business. All of these are pieced together and de-identified all across the board, just to show how these various stakeholders interact and address the issues. This isn’t a rip from the headlines. This isn’t a “okay, here’s one set of fact pattern, we’re using it.” This is stylized, but we do think it’s universally applicable. Let’s talk about it. So a contractor — Company A — enters into a strategic market by buying a company, keeping the executives on board to run the new entity with a lockup agreement. The buying entity, Company A, is a public, large company, but it lacks robust government contracts in-house expertise. I mean, this is after all a market entry point for them. They do their diligence as they’re required to do, and as they should, they’re led by deal lawyers, but they don’t have government contracts legal presence for that diligence. The seller is a graduated small business, and they rode the line pretty closely by managing their financials to remain small, not blowing the revenue base size standard before finally becoming large, and having to change their business, and ultimately selling. Revenues have been flat since the company became large, but the buyer, Company A, believes with the company’s national footprint, they can help the selling entity increase revenues. And existing federal sales infrastructure can also help Company A, the buyer, expand further, deeper, and really penetrate once and for all the federal market. Upon acquisition, however, the key executives brought over from the seller, they start to bristle at the new corporate oversight and integration efforts. And if you could see me — I know this is audio only — I’m doing air quotes around “oversight and integration efforts”. There’s pushback on providing key information that the buyer, that Company A expects to receive. So, Company A seeks to mentor these executives, as this is their first time in a large corporate structure, but they’re getting some pushback. The revenues of the acquired company begin to fall. More business is going to companies that used to sub to the seller, and now our small business primes on ongoing and new work. The buyer, Company A, they look a bit harder and a bit closer at the financials, and they start seeing expenses for social events with government customers: gifts, lunches. In-house counsel directs review of emails of key executives, and that review reveals efforts to move the existing business actually purchased from the seller of the existing business, and move that to other small companies with an intense focus on these other small businesses that seem misplaced, given the ongoing work and duties to Company A, to the buyer. All right.
That is a lot. It’s like a law school fact pattern going wrong. There’s a lot there, but it’s a lot there on purpose. Rod, are you going to ask the initial question, or do you want me to ask the million dollar question of Tom for his general initial reactions?
Well, I’ll kick this off in picking this apart, and again, excellent fact pattern. So Tom, I’m going to turn to you first. Again, you have been a corporate executive, a general counsel. This lands on your desk. What are your initial reactions, and what are your priorities? What are the first things that you’re likely to do?
Well, first I’m going to check and make sure my resume is updated. And then — uh, no, that was a joke. I’ve got to tell you, this is a disaster scenario. You used the metaphor of a minefield to talk about government contracts. This is a minefield scenario. I look at this seriously, and my largest concern by far is that the people involved don’t know how bad they have it yet. They got lost in the woods, so to speak, when they did the acquisition without using the proper expertise to do the due diligence, and discover what was going to be happening. And now you’ve got a general counsel who is probably an ace at governance and securities law, and the marketplaces that they were in, who really doesn’t know anything about government contracts. And as you know from years of it, government contracts is not just multi-layered, it’s almost three-dimensional in all directions, where you need to navigate the regulations, the statutes, the case law, the marketplace, and the people.
So if there’s anything that’s going to scare me the most here, the general counsel’s ego is the problem that I would be worried about. They can’t feel like they can go learn this and do it on their own right away. It’s not going to work. And they’ve got to recognize that they need to seek outside expertise immediately, but they’ve got to go to their boss first. They’ve got to go to the CEO, and understand that the CEO doesn’t know much more about this world than the general counsel does. Now I’m going to say that in a good working environment, the GC and CEO are going to line up together and work on this and maintain a full level of communication — that’s assuming that neither of them are involved in any of these problems. But the CEO also has to know the personality of his general counsel, or her general counsel, and make sure they don’t fall into the trap of trying to do this because they’re just smart people and they can handle it themselves.
So your general counsel goes to your CEO; briefs them in on it. I’m going to keep it contained inside the operating company, between those two people, at the start. But what I’m going to do, if I’m that general counsel, is I’m going to start making phone calls searching for David Robbins, candidly. I mean, when I was in this chair, while I had been in government contracts all the way from when I was taught by Cibinic & Nash in the last millennium, I still picked up the phone and called David Robins. Now there are other people besides David, but in my career David is by far the best in handling these situations. He has a proper way to bound the issue. He doesn’t in a word — a phrase that we used all the time, he doesn’t chase down every rat hole that he sees. That doesn’t mean he doesn’t scope it in and review it carefully, but if you have certain lawyers loose inside of the company, they’ll probably never leave because they’re always going to be finding something more that they need to look at, whether it’s really a problem or not. David, and people of his ilk, are outstanding at sizing the problem, identifying it, and going after it. And as the general counsel of this company, I’m going to rely on that person to walk me through the issues, get me smart so I keep my CEO apprised on almost a daily basis. Now, after I’ve got through that, but before I make the phone call to outside counsel, I want to call the chair of the audit committee. This is a governance issue, relative to publicly held companies, and I need to bring them in right away to do it correctly — but just the audit committee chair at this point — tell them what we’ve discovered to this point, tell him that we need this outside counsel, and that we are going to call the outside counsel, so the chair is aware of it. We’ll get the whole audit committee involved a little bit later. And then, I pick up the phone and I call the outside counsel. The other person that I might involve in the knowledge, provided that, you know, there’s no connection of that role to what’s happening, is this Chief Financial Officer, because you’re going to be looking at books here. You’re going to want somebody to interface with the outside counsel’s forensic accountants, if you will, to help chase things down. And they can’t just walk in and know their way around the system. They’re going to need to work with the CFO. But I do believe, because you don’t know how wide this problem is within the company (that is now a subsidiary of your company), you want to keep this tightly held. Because the bad actors here, if they get a whiff of it, they’re going to go to ground fast. So that would be my first group of steps in dealing with this, recognizing that you have a severe problem that you don’t know enough about, and that you need to get that expertise, and you need to put a boundary around the problem so it really can be properly investigated in hand.
So Tom, on that point though, I have a question for you. You have a fairly unsophisticated buyer that now has this asset, that you’ve identified one (maybe two) potential fouls in the government contracts arena. What about the rest of the universe of potential issues where they have been not paying attention, not compliant — perhaps even engaging in intentional misconduct? How do you test the scope — this scope area, and David, maybe you have thoughts on that as well?
Yeah. When I was talking about not running down rat holes, I was thinking about the larger corporation. I think this is a subsidiary issue, and given the history in this case — which is very different than my own experiences, because we were always buying companies we knew — you’re going to need to do the equivalent of a due diligence almost, around the problems to make sure there’s nothing else that relates to what you’ve already discovered. David?
Yes, absolutely. So I get a call from Tom — or someone like me gets a call from someone like Tom. We hear all of this. And we all know, I mean we’ve been doing government contracts for a while, we all know where our radars go up. We all know what the early challenges are, but the early challenges aren’t the entirety of that investigation. We’ve clearly got some gifts, gratuities, bribery/kickback related fact investigation to do. And that’s a potentially significant area, because you know, it’s not only just administrative or civil, there could be some potential criminal concerns. So the scope, the team, making sure we lock down documents, get backends/deletion prevention put in place, bullet holes, all of that — that’s first and foremost. We’ve got more than that though, because it seems like we have some broad compliance potential concerns, because there’s enough — I don’t know of a better phrase than weirdness — there’s enough weirdness going on that we’re going to have a conversation. I would want to have a conversation with the general counsel: how broad do you want to go? Right? We clearly have the gifts, gratuities, the why — the factual investigation as to why — the potential for personal conflicts of interest. But the challenge of course, is inbounding that scope. Any and all of that can give rise to contractual remedies; could give rise, potentially, to civil False Claims Act concerns. Some limited facts sort of start pricking my radar up about potential criminal concerns. So trying to run down those facts really fast is important. And I also want to make sure we’re having a discussion early with the client about remediation, because of exactly the points that you both raised earlier. You have a fairly unsophisticated buyer with a fairly small and perhaps entity that’s permitted to fly under the radar, in terms of what’s traditional expectations of a larger company, in terms of government contracts, ethics, and compliance.
And we’re going to need to give assurance, I mean, we all know this, right? We’re going to need to give assurance to customers and, to the extent the Department of Justice eventually comes involved, them; that we have improved the overall oversight, internal controls, and ethics and compliance. So, some aspect of this has to be an assessment of the current state of ethics and compliance, and some remediation. And in the back of my mind, Rod, relevant to what you do as part of your daily life here: is a proactive assessment, is an independent assessment necessary here? It’s too premature to have that discussion. I’d probably hold that back to see, how bad is it, at first pressure test? But that’s one of those things we might need to be talking about sooner than later. If, for example, it had been awhile since the buyer, since Company A found this problem, what were they doing? Did they integrate properly? And that all goes to potential corporate responsibility here. Could they be tagged with, you know, a head in the sand behavior? Does that raise their risk? Does that not? How you react after disclosure really matters. So those are the broad areas I’m interested in having a conversation about, and affects the scoping discussion and all of that, of course drives budget, level of effort, man power, etc. Rod, Tom, did that answer the question? Are there other areas that are missing that we should be talking about during the scoping conversation?
Yes, sir — would be my thoughts [laughter]. No, working with David on investigations that we’ve had in the past has always been a very open dialogue. And as a company, when I was at Engility, we weren’t interested in trying to hide problems, and we thought full transparency and our ethics program were absolutely essential parts of our corporate culture and our business success, if you will. That was a choice that our first CEO made before we even spun off and became a publicly traded company. You know, the outside attorney is going to help us size this up, and lay out what I would think of as the dance steps. When do we contact the government? Who do we contact in the government? What laws are driving us? And I’m going to rely heavily on their expertise. Even when I had 40 years in the business, I still relied heavily on David’s expertise in these areas, because you know, government contracts and corporate law are very big, broad areas and nobody is an expert in everything.
So if I can pick up on that. So David, you know, again, listening to what Tom said, listening to what you said: we all recognize in the world of government contracts, there is a federal acquisition regulation that imposes a burden that a contractor that — above a certain dollar threshold, admittedly — the contractor that has credible evidence of certain improper acts must, is required to make a disclosure to the government of those facts, those circumstances. You’re going to be a — you know, I’m sure Tom’s looking to you to guide him as to when that disclosure should be made. Any — can you give any thoughts on that?
Sure, absolutely. And look, we’ve been working with the mandatory disclosure rule now, for about a dozen years. We know that it rests on four key, undefined terms, right? Do we have credible evidence of — a violation of certain things, including Title 18 crimes related to integrity, certain limited numbers of them, and the civil False Claims Act and/or significant overpayments. We know, as lawyers we can drive a bus through any of those holes. You can probably come up with an analysis that supports disclosure or not. But ultimately, in an arena where you have the mandatory disclosure rule, well it’s called that for a reason; where you’re not supposed to keep secrets, where you’re supposed to have an ethics and compliance program. Our discussion is always about, why try and keep these things secret? Bring your customer in. Let them know what you’re looking at. Let them know you understand there’s a problem, and you’re taking care of it and you will keep them informed.
It strengthens your bond. You know, you may have to pay back some money. You may have to have some difficult conversations. It may be hard. It may be unpleasant, but that’s how you get through. And that’s the general expectation. So my discussion about mandatory disclosure is sort of a whe, but not if, and if there needs to be further discussion, it becomes: okay, I understand what the rules are. I understand these undefined terms are undefined, and there’s no real hard and fast guidance out there. But then we talk about what you get for doing it, you get the impression that you as the company, as the contractor on top of it, you get the ability to shape the facts — accurately, of course — but for a government audience, that if they’re developing these facts on their own, or in response to a potential whistleblower, that may be sussed out during the investigation of a terminated employee at the end of it. We get our story out there first. So there’s relationship enhancements, there’s compliance reasons to disclose, and there’s overall ‘protect-the-company’ reasons to disclose. So we’re having that discussion very, very early.
I think David makes a really important point here. The objective, once you find yourself in this situation, is not to get away with it. It is to drive to an optimal result that’s transparent, and the optimal result is not necessarily going to be without some pain, but that’s how you build a company, and a company’s reputation. When things go wrong, how do you deal with them? And if you put your head in the sand, or if you choose to try to cover it up, your company’s not going to last a long time.
Hey Rod, if I can ask you a question? If you could put on your former government lawyer hat, and whether that’s Head Acquisition Lawyer for the Coast Guard, Senior Acquisition Lawyer for the Air Force, or in the fraud arena: the Suspension and Debarment Official and Deputy GC of the Air Force, what do you think the government needs to know, and how do they react when they see mandatory disclosures on issues like these? Just focusing — I guess there’s a split and you can tell me if you agree or not, it’s just been my sense — there’s a split between the acquisition lawyer serving the buying customer and the fraud silo within the government. So are their reactions even different? What do you need to see, and how do people react on the government side?
And you actually inserted a word in your question that is fascinating: silo. And this has been my experience within the government, is that: you have an acquisition community that is very, very overwhelmed, overworked, and it is focused, in its acquisition responsibilities, on schedule. Getting — particularly within the Department of Defense — getting products and services to the war fighter as quickly as possible. And in my experience, sometimes that schedule, that desire to get product out, comes at the expense of quality, price — a whole host of considerations — to include a willingness by the acquisition community to really pick up, and be concerned about possible yellow flags, or maybe even a red flag; that there may be fraud or misconduct associated with their contracts. But putting that aside, the acquisition community still has a responsibility, and they know they have a responsibility, and there is going to be some concern about which contracts may have been affected, and that information is going to want to be known fairly quickly. They will — there will be some interrelationship between the fraud community and the acquisition community, and most likely initiated by the fraud community reaching out as a result of perhaps, the disclosure. Maybe some sort of an investigation is underway. And by the way, I would just point out that there’s always, in these types of situations, the possibility that the government may already be ahead of the company, in terms of knowing about and investigating potential acts of misconduct through the steps of a whistleblower. You know, and that kind of plays into Tom’s point. You don’t know, in many cases, what the government knows until suddenly you have, perhaps, somebody knocking on your door by one of the IG’s, or maybe even the FBI. So again, there is this concern: the acquisition communities want to know, potentially, what contracts are affected, and what can they do to avoid disruption on their contracts?
The fraud community has a broader range of responsibilities, and they’re going to want to know what occurred, when did the company find out, what was the context in which this misconduct occurred? Is it something in the past? Was there any effort by the company to have in place an effective ethics and compliance program? Did the company take any steps to assess its risk profile, to understand its risks, to develop policies, procedures, and controls that were aligned with those risks? Was there training? Were there good communications? All of these things the fraud community is going to be very interested in. They’re going to have a far more holistic view of what is relevant or not relevant, and not just the facts of potential misconduct. But you can — certainly when that mandatory disclosure rolls in, there’s going to be a disclosure that goes to the IG — the agency IG, and to the contracting officer, or a relevant contracting officer or officers. That disclosure, ultimately, will make its way to the agency’s fraud counsel.
And that, I think, has been, over the years made a pretty good — and, you know, going back decades, not such a good relationship now that information flows. But once the fraud community gets it, there’s going to be a very holistic view of: what should the agency do contractually/administratively. Does the Department of Justice need to be brought in? All of these things are going to start being brought into play. And let’s not forget, both within the acquisition community and the fraud community, is this possibility that government officials were engaging in improper, potentially illegal conduct. That is going to be a critical, critical point of focus.
So, you know, with that — you know, Tom, there’s a lot of stakeholders out there. One of the challenges (in addition to just the complexity of working in the government contracts world) is that within a company, you’re going to have different views, different sets of stakeholders, different interests. You’ve got to manage those internal concerns. You also have similar concerns on the part of the government community. The acquisition community has its concerns. The fraud community has its concerns. DOJ may have its concerns, and here you are, working with your outside counsel to manage these things. What do you do? Where do you turn first, besides just having your head spin for a while?
Uh, well I stand on my head too! The thing that strikes me first, in the way I’ve always looked at these — and candidly, listening to your comments, I’m having flashbacks. Not pleasant ones, either. We’re in a situation where the investigation is paramount, because not only does it affect people inside my company, but it will involve people in the government. So whether it’s mandatory disclosure or voluntary disclosure, it doesn’t matter. Disclosure is the key here, and building a working relationship with the Inspector General, most likely. Once again, I’ll defer to David as to whom we’ll go to, but a working relationship to preserve the integrity of the investigation is the first priority in my mind. So I’m not really interested in telling my business leads what’s going on. I don’t know the scope of the wrongdoing, or the bad conduct in my company while — until the investigation is over. And I can’t think of many — if any — situations in my career where, dealing with a fraud matter we had our business leads calling their customers at any point, until after the investigation in the matter was disclosed. So there is no way I would have a vice-president of an organization calling the lead contracting activity before I had made a disclosure and started working it. Because candidly, once you start working with the fraud element of the government, they’re leading the dance at that point, and you’re working with them in as transparent a way as possible, to ensure that they know that you are as serious about cleaning this up as they are about finding out what went on, and taking the proper actions. I mean, you were in that community. Does that sound like what you would expect from a business that’s trying to do the right thing?
It definitely sounds — I mean, you’ve got to manage the relationship, and once this information of central misconduct gets out, you’ve got problems, not only with just performance, but with these notions of contractor responsibility, with trust with your customer, and again various stakeholders [unclear] customers. So David, turning to you again. What do you do? How do you — I’m sure Tom’s going to look to you to figure out how to manage and sequence communications. What are your thoughts?
Yeah. Normally my standard playbook, if the facts permit, is to have the conversation with the business leaders (if they’re read in on the investigation), to say, “are you more comfortable giving a heads up that later today, we will be sending the following disclosure.” Not giving them a chance to get out ahead of it, just giving them a heads up call that it’s happening, and that they will get a copy of it, because, you know — or the contracting officer will get a copy of it, and offer them a copy. These facts are different. We can’t do that. I agree with Tom that we’re going to have to have a more narrow set of communications because unfortunately, government officials on the take is — well look, it’s extraordinarily rare, just because the vast majority of contractors and the vast majority of government officials operate above board with the highest ethics.
But I got to tell you just yesterday — just yesterday, I found a new plea agreement for a contracting officer taking money from a contractor. So this has to be a more narrow disclosure. This probably has to go to an OIG, and to the extent I’ve got a relationship based on prior work with these folks, I might call in in advance and say, look, this is somewhat sensitive. We’d normally lob it in through the just general hotline, but is there somewhere else you think it should go? So it can be treated carefully. We have other obligations to notify the affected contracting officer. We’d like your direction on when and how to do that. If I don’t have a personal relationship with these folks, we’ll do that through the hotline number and we’ll give them a certain amount of time. “In the next 30 days we’d like to make the following decisions,” for example. And if we don’t hear back — we generally hear back — but if we don’t, we start making phone calls, we will get that answer. We will get that guidance because, as Tom notes, you don’t want to impede a potential federal investigation. You don’t want to get out ahead of any OIG. And I agree that’s likely who you’ve got to deal with, but that’s the dynamic you have to keep in mind.
So Rod, if we’ve exhausted this topic (and I don’t know that we’ve exhausted it, but if it’s time to pivot), I really just am fascinated by what you do every day. It’s a career path I didn’t know too much about. Obviously I’ve seen some of your partners and colleagues appear before us with the Air Force, but you know, how you weigh these things externally is fascinating to me. So given that we’ve all talked about this, we have some challenges here in terms of a company buying into the government contracting space, and potentially missing rather routine ethical lapses, or maybe not integrating as well as it could, or as quickly as it could, and not having this long history of responsible government contractor operations to draw on, in potentially difficult conversations with the government. You know, I mentioned earlier, I would always think about a proactive monitor in a situation like this. How do you assess a situation like that?
First of all, let’s just put some definitional construct here. Most of our monitoring occurs in the context of post-enforcement monitoring. That is, a justice or an agency suspending and debarring official has said, bad things will happen — or may happen — unless you get a monitor. And usually there’s an agreement ,or perhaps a court order that will structure the monitoring relationship and say, well this is the focus of what you need to do. And this is the reporting sequence, and all of that. That’s the post-enforcement. Where David is referring to is proactive engagement, that is, before any government officials saying thou must, the company itself is saying we should. And in many cases — in fact, almost every case I’ve been involved — that guidance has come from outside legal counsel. And let’s just take a moment to look at the roles and responsibilities. The general counsel is focused on the overall health and wellbeing of the company. Outside legal counsel is coming in to do an internal investigation subject to the guidance, and consulting with the general counsel.
That’s focusing on facts and circumstances. Separately, there’s this whole area of, is there an effective ethics and compliance program in place? And it’s important to think about that — and David, you mentioned this earlier — it’s important to think about this early in the process, because if you do everything you can to deal with the facts, but you still are showing that there’s a lack of integrity within the company, or potential for a lack of integrity within the company, some of those government stakeholders are not going to be satisfied with the outcome, and they may be looking to potentially exclude the company from the federal marketplace. So I do, I do think there’s like a very important role for this proactive engagement to come in, and truly work with. And frankly, under legal counsel, we do these engagements typically under an attorney client privilege so that that information is controlled very carefully.
But we can get in and begin to develop information to establish, does the company have an effective ethics and compliance program? And in doing that, we’re going to be looking at risk management considerations, as I stated earlier, the alignment of policies, procedures, and controls with those risk management considerations. What is the tone? What is company leadership doing? What is the — what are middle managers doing? What are supervisors at all levels doing? What impact is this effort having — this messaging, this training, these communications. What, if any, impact is it having on the workforce? What is the employee response? Are they willing to report concerns, suspected misconduct, which is frankly, I think a critical element for any company to have in place to have an environment in which employees are willing to identify potential issues and problems. These are things that I think are very important to factor into and alongside — maybe not concurrently, but perhaps just a little bit behind the internal investigation, so that when it is time to engage with the government, you have a full picture.
And if there are issues that need some remedial attention, the company can go ahead and be proactive in putting those in place, so that when it’s time to engage with the government stakeholders, you’re not coming hat in hand. You’re coming in and saying, look, we identified these problems. We have done this, you know, A, B, C, D E. We’ve identified these, and this is what we are doing. These are the affirmative steps we’re doing, what we’ve done, and what we plan to do. And frankly, that is a far more impressive presentation to the government, (particularly that suspending and debarring official) than just coming in and saying, whoops, we have bad facts. Anyway, Tom,, we have a few minutes left here, but one of the things that’s extraordinary and the way that I came to know you is, your company — you, particularly — were wonderful in establishing a working relationship with David and with me as part of the Air Force suspending and debarment community. You came in, you — at one point there had been some reasons for you to come in, but even after those had come and gone, you maintained this relationship. It wasn’t that you were there every day, every week, but every so often you would come in and talk about the ethics and compliance posture, what was going on. And when issues arose, you were able to call us, or asked to come in and socialize these things, so that those problems were — as you said, you were leading the dance. So I just like to — sort of, last thoughts: what is the value of that? What was the value of that type of a relationship to you and to Engility?
The value is incalculable. I’ve talked about it with a number of people many times. And first of all, I really have to give the credit to our very first CEO. And it was a cultural approach that was carried on by our second CEO (so that made it very effective) which was that, we weren’t going to run away from problems. We were going to step forward and embrace them. And when we established that as our rule, in other words — we were under this administrative agreement that we inherited from a different business unit, from the company that we spun off from. We decided — the CEO specifically — decided, instead of coming into your office and saying, “hey, we really don’t belong in this,” or, “okay, we’re going to be out of it in a year or so.” You know, he came in and said, “when we’re out of it, we’re going to keep complying with it and we’re going to enhance it and strengthen it.”
One of the things I learned dealing with you, Rod, though, is it went well beyond government contracts and compliance issues. Of course, we talked about that, but there were times that I came into your office and I wanted, you know — I wanted you to know things that were going to happen that may not have involved government contracts at all; may have been commercial-type litigation, but a very high level. Because I didn’t want you guys being blindsided by somebody up on Capitol Hill saying, “what the heck is going on?” And having a sensitivity to the needs of an organization such as the suspension and debarment office is something that I think every company kind of needs to pay attention to, and be sensitive to. I felt like it enabled us to build a really strong relationship to where there were other things that would be happening that I could come in and sit down and talk with you about so, once again, you wouldn’t be caught by surprise, even if there was no role in it for your office. The tangible benefit of course, is that you retained responsibility for any issues that came up.
So for example, we had another issue that we had carried over from the Iraq war, where we negotiated a settlement with the justice department — It largely involved army contracts — and when the army wanted to come in and say, you know, “we’re going to tell you whether or not you’re responsible or not responsible, and whether you need to be suspended,” your office had the authority, and knowing us and how we operated, the authority to step forward and say, “no, I’ve got jurisdiction over this.” Now, I can also go back to another situation which didn’t involve the suspension and debarment office, but I stepped into a job where there were headlines — and in fact, I got read in before I even stepped into the job — that the, the DCAA had decided the company had defrauded the government by $20 million on a border patrol contract. You know, it’s good to know that we don’t worry about the border anymore these days. That’s an old issue. [laughter] So anyway — and that was not a political comment in the least — but when I got inside, it was a very technical matter. And I started working with the GSA IG investigator on it, and we went for a few years, actually working through every single thing. And every time something came up, he would call me and I would run it to ground. And we developed a trust relationship to such — to the point that when it was, when we reached a certain point in time, he called me up and said, “Tom, I just want you to know the investigations were closed with no action,” which is the only time that’s ever happened to me. And, you know, it was all based on building that relationship and being authentic and genuine.
You can’t do it just because you might get something out of it. You have to do it culturally, because it is the right way to behave. You know, you made comments about ethics and compliance programs, and I just wanted to make an observation there, which is: I’ve seen a lot of companies that think ethics and compliance are the same thing, and they’re not. And that’s one of the divisions that we made very early in Engility. We chose that our ethics program would teach ethics, so that people would understand that what we’re about is a bigger, broader thing. It’s about doing the right thing. It’s about treating people right. And you know, it’s about — following the rules, certainly because that’s also correct — but our whole focus was to teach ethics, and teach it about the gray areas. So we had a live training that we did every year throughout the entire company, which was a part of that old administrative agreement that we carried forward. And I know there are a lot of business people out there who would not like to put that kind of cost into an ethics program, and yet, it was instrumental in building the culture that we ultimately had at Engility, which was, to me, the thing I was most proud of about the company before we sold it.
Our time is pretty much up, but David, any final thoughts? Comments?
No, other than my gratitude for the chance to be on here with you both, I really liked the discussion very much, and it’s good to be connected with you both again, for something like this.
I have not worked with two finer gentlemen in the course of my career, and you two were definite highlights in a long career that had a lot of highlights. But, this has been fun. Thank you.
Tom, thank you so much. And with that, we wish everyone well.
Thank you for joining Affiliated Monitors’ podcast, Integrity Through Compliance: AMI’s Business Success Series. Today’s segment is just a sample of the subject matter expertise captured by AMI’s compliance professionals. Go to our website at www.affiliatedmonitors.com to view the comprehensive list of industry and in-house talent AMI has available to enhance professional and business integrity programs and controls. Also, connect with us on LinkedIn to receive updates and trends in the areas of enforcement and compliance. If you have any questions about today’s podcast or would like to learn more, please contact us at firstname.lastname@example.org. Our Affiliated Monitors podcast production team of Deloris Saad, our compliance associate, and Dan Barton, our editor and podcast music composer, look forward to you joining us again for our next installment of Integrity Through Compliance: AMI’s Business Success Series.