Campaign finance laws, bid rigging, price fixing, and bribery. We hear about this with contractors, but how about design professionals?
Several times each year, there is an article about some contractor being debarred or convicted of bid rigging, bribery, or kick-back schemes. We turn the page, shake our heads, and wonder why those contractors are so unethical. But is it just contractors who break the law on ethics? How about design professionals? It is rare for criminal charges to be filed against them, but it does happen, and more often than you would expect. Here are a few laws and related cases that will send chills down your spine, as they should, and would make an excellent training session at your next lunch-and-learn about what “not to do.”
- Campaign finance laws. AIA’s ethical Rule 2.102 prohibits bribery by members “with the intent of influencing the official’s judgment in connection with an existing or prospective project,” followed by Rule 2.103, which bars members serving in a public capacity from accepting payments or gifts “which are intended to influence their judgment.” The official commentary notes that these rules do not prohibit campaign contributions made in conformity with applicable campaign financing laws. However, those rules are sometimes broken. Take for example a 2008 case in which three top executives of a large engineering firm were charged with violating campaign finance laws. The firm’s chairman and chief operating officer pled guilty to paying a gratuity to influence and reward a public official. The third executive, a vice president, pled guilty to concealing material facts. Under the alleged scheme, company employees were invited to make personal donations of $1,000 each to a public official, which the company promised to pay back, in order to avoid state caps on corporate campaign donations.
- Bid rigging/price fixing. Federal and state laws prohibit price-fixing and bid rigging schemes which violate the spirit of competitive bidding. These include anti-trust criminal laws like the Sherman Act, and its companion, the Clayton Act, which allows the federal government or private individuals or groups to sue for violation of anti-trust laws. Plaintiffs in these cases may recover “treble” (triple) damages, plus costs, attorney’s fees, and interest. The only case dealing with design professionals involved three minority-owned architectural firms in the same city that formed a coalition in which the group agreed to target projects it desired to pursue and, once chosen, its members could not pursue work on such projects in their individual capacities or associate themselves in any way with the project except in their role as members of the group. The court found that this agreement violated the Sherman Act. The court clarified that although the “arrangement is not bid rigging nor price fixing as such, there is little difference in terms of the anticompetitive impact … An agreement between competitors that creates a joint venture having the power to direct individual competitors to refrain from bidding on contracts interferes with the free market price structure.”
- Bribery. There are numerous federal statutes that prohibit bribery of public officials in order to influence any official act. These include the Anti-Kickback Act, the Hobbs Act, and the Copeland Act. In one Alabama case, the owner of an engineering firm was convicted of paying bribes in exchange for contracts, including giving one official stacks of $100 bills in envelopes containing from $1,000 to $4,000. In return the firm received 48 new contracts and more than $1 million in professional fees. In addition, the official was given free architectural plans and hunting trips from an architect whose firm had entered into contracts with the county. The official was found guilty and sentenced to 120 months in prison. The engineer was also convicted and sentenced. In a 2010 case, multiple officials, government contractors, and engineers were convicted of conspiracy to commit bribery, bribery, and public corruption relating to a $3 billion repair and rehabilitation of a sewer and wastewater treatment system. The evidence showed that two county officials received hundreds of thousands of dollars in bribes, in addition to free work on their homes, gift certificates, trips, and even a college scholarship from the defendants, who obtained hundreds of millions of dollars-worth of construction and engineering contracts with the county. One engineering firm was awarded more than $50 million in contracts during the sewer rehabilitation project. When one defendant argued that the gifts were merely to foster good will with the county, the court held: “A finding that a gift was made or accepted with corrupt intent necessarily excludes friendship and goodwill gifts,” adding that the extent to which the parties went to conceal their bribes was powerful evidence of their corrupt intent. In addition to prison terms, one defendant was ordered to pay a $19.4 million fine.
Be careful out there! Most of these criminal convictions involve conduct that you would recognize as unethical and illegal even before reading this article. But sometimes the pressure to bring in a project, or avoid competition, is just too tempting for those with a lower moral compass. If an owner, contractor, or another design professional makes you a proposal that does not feel right, go with your “gut instinct” and talk to your lawyer before proceeding.
William Quatman is an architect and general counsel at Burns & McDonnell Engineering Co. Contact him at firstname.lastname@example.org.