ANNUAL ACQUISITION ETHICS TRAINING FOR DESIGNATED DEPARTMENT OF ARMY PERSONNEL 2007

1. ANNUAL ACQUISITION ETHICS TRAININGFORDESIGNATED DEPARTMENT OF ARMY PERSONNEL2007

2. DUTY……HONOR…..GOVERNMENT CONTRACTS

3. Got Ethics Questions? Contact your ethics counselor before you act. CPT Nancy Lewis: (703) 806-4484 Nancy.J.Lewis@us.army.mil

4. Why Ethics Rules? • Ensure that we perform our mission with public interest in mind. • Uphold public’s confidence in integrity of Government.

5. Ex-Air Force Official Gets Prison Time Boeing Received Special Treatment in Procurement By Renae Merle and Jerry Markon Washington Post Staff Writer Saturday, October 2,2004; Page A01

6. Dragonladygets her tail caught in the revolving door "The stain of this offense is very severe," said Judge T.S. Ellis of the U.S. District Court in Alexandria, Virginia, while sentencing Darlene Druyun this morning. Druyun, also known as the Dragonlady for being a tough negotiator, was the second-most senior Air Force procurement official and, while overseeing billions of dollars of Air Force contracts, was involved in discussions with Boeing for a $250,000-a-year job. She was sentenced to nine months in prison, a $5,000 fine, three years of supervised release and 150 hours of community service. Druyun (who referred to herself as the "Godmother of the C-17") pleaded guilty to\ conspiracy to violate federal conflict-of-interest regulations on a technical basis. That is, she initially admitted only knowingly violating regulations, but not to using her position in the Pentagon to give Boeing advantages. However, she failed a lie detector test and then admitted that she "did favor the Boeing Company in certain negotiations as a result of her employment negotiations and other favors provided by Boeing to the defendant," according to the supplemental statement of facts and supplemental plea agreement . Druyun helped Boeing obtain a grossly-inflated $23 billion deal where the Pentagon would lease Boeing tankers, rather than buy them (and save up to $5 billion). Essentially, she was negotiating for Boeing rather than the government at this point. Assistant U.S. Attorney Robert Wiechering said, "she did this as a parting gift to Boeing and to ingratiate herself into Boeing." For more information on the Boeing tanker deal check out our Contractor Bailout Archives and our new report The Politics of Contracting.

7. Contractor fraud probed on Kuwait base U.S. authorities are investigating a web of more than $10 million in favors, bribes and kickbacks among Army officers, contractors and subcontractors at Camp Arifjan, court and military records show. By Matt Kelley, USA TODAY October 14, 2007

8. Camp Arifjan. . . is the center of the Army's financial operation for Iraq. It has handled more than $4.2 billion in military contracts. It's also a center for corruption investigations. • So far, 13 people associated with the Army's contracting operation in Kuwait have been charged with corruption in federal courts — the majority of the 20 corruption cases brought to date involving Army contracts for Iraq. Eight of the 13 have pleaded guilty. Two enlisted soldiers at Camp Arifjan were court-martialed for taking bribes. • Six companies accused of corruption in Kuwait also have been punished administratively by Army contracting officials, records show. The biggest bribery case of the Iraq war so far involves Army Maj. John Cockerham, a former contracting officer at Arifjan, who is accused of taking $9.6 million in bribes from at least eight companies seeking contracts to provide bottled water and other supplies.

9. Those linked to Cockerham include some involved in other cases: • Maj. Gloria Davis, a fellow contracting officer at Arifjan who worked on several contracts with Cockerham. Davis killed herself in December, a day after admitting to Army investigators that she took $225,000 in bribes from contractor Lee Dynamics International, federal court records say. Lee Dynamics also hired Davis' son, Damien Thomas, the company's lawyer says. The Army suspended Lee Dynamics from contracting in July. • Diaa Salem, a businessman from Kuwait whom Cockerham named as a business partner when creating a Texas company in 2004. The Army barred Salem and his firm, Jasmine International Trading, from getting contracts for a year in 2006 in a separate case. • In that case, two Army soldiers working at Camp Arifjan's finance office were court-martialed for taking $7,000 from Salem to process Jasmine's payments more quickly, according to Army records released to USA TODAY under the Freedom of Information Act.

10. Other unassociated cases: • LTC Guiterrez: Assigned to ASG-KU as Director of Logistics. Offered to disclose procurement –sensitive information to an employee of a contractor providing logistics support to the Army in exchange for a cash payment of $3400. LTC Guiterrez committed suicide subsequent to the preferral of bribery charges against him. • CW2 Peleti: Charged in federal court with receiving $50,000 in bribes regarding a food services contract and smuggling $40,000 in cash to the US. Peleti was the Food Services Advisor for Iraq and Kuwait in 2005. • CW2 Wiesemann: Charged with graft and bribery. He has since resigned with an Under Other Than Honorable Conditions discharge as he faces federal prosecution. • LTC Bruce D. Hopfengardner, USAR: In connection with a bribery and fraud scheme, accused of fraudulently awarding contracts and authorizing cash payments despite defective or non performance; also accused of stealing $120,000 in cash from the Coalition Provisional Authority (CPA) in cooperation with other co-conspirators; faces wire fraud, wrongful conversion, interstate transportation of stolen property, conspiracy and money laundering charges.

11. Other cases: • COL Whiteford:. Once the second most senior person at CPA. Charged with conspiracy, bribery, wire fraud. • LTC Debra Harrison: Assigned to CPA at one point as the Acting Comptroller. Charged in federal court with conspiracy, bribery, wire fraud, interstate transport of stolen property, bulk cash smuggling, money laundering and falsifying tax report. • LTC Michael Wheeler: Assigned as an advisor for CPA projects for the reconstruction of Iraq. Charged in federal court with conspiracy, bribery, wire fraud, interstate transport of stolen property, bulk cash smuggling. These three worked in conjunction with LTC Bruce D. Hopfengardner. Phillip Bloom is a US citizen who received more than $8.6 million in rigged contracts. The indictment alleges that Bloom, in return, provided Whiteford, Harrison, Wheeler, Stein, Hopfengardner and others with over $1 million in cash, SUVs, sports cars, a motorcycle, jewelry, computers, business class airline tickets, liquor, promise of future employment with Bloom, and other items of value.

12. Topics • Gifts • Bribery • Contractor Personal • Organizational Conflict of Interest • Procurement Integrity Act • Seeking Employment/Post-Government Service Employment

13. S G I F T s The servants of the nation are to render their services without any taking of presents . . The disobedient shall, if convicted, die without ceremony. --Plato

14. The rules on the acceptance of gifts are with a few exceptions, the same for all agencies in the Executive Branch. Everyone in DoD must be aware of the restrictions in order to avoid inadvertent mistakes that could ruin a career. As decision-makers, we all perform official duties that outsiders may want to unfairly influence. As public servants, we must not allow even the appearance of impropriety.

15. Prosecution ! “. . . Michael Dubberly, GM-15 program director of the Air Vehicle Division for the Naval Air Systems command, pleaded guilty to accepting gratuities from Engineering Matrix Services of Cardiff, N.J. . . . Dubberly was treated to four expensive dinners from executives of the company, which he helped award millions of dollars in Navy contracts. He also requested that a portion of the company’s profits be deposited in an offshore mutual fund, according to the inspector general. Dubberly faces a maximum sentence of two years in prison and a $250,000 fine.”

16. Two years in prison and a $250,000 fine in exchange for four expensive meals?!?!? If Mr. Dubberly were prosecuted under the bribery statute (18 USC 201), he could face penalties of up to 15 years in prison and 3 times the amount of the bribe. The prosecution appears to have decided to ask for lesser penalties in this case. And don’t forget: even if the courts don’t prosecute, the media surely will.

17. Gift Acceptance Analysis 1) Is it (a) from a prohibited source, or (b) offered because of your official position? 2) Is it defined as a “gift”? 3) Is there an exception? 4) Is there a limitation on using the exception?

18. General Gift Rule An employee shall not solicit or accept any gift or other item of monetary value 1. From a prohibited source; or 2. Given because of the employee’s official position

19. D E F I N I T I O N Prohibited Sources Any person 1) seeking official action from, doing business with, or conducting activities regulated by, the individual’s employing agency; or 2) whose interests may be substantially affected by the performance or nonperformance of the individual’s official duties

20. Not “Gifts” • Modest items of food and refreshment • Greeting cards and items with little intrinsic value, such as plaques, certificates, and trophies • Loans from financial institutions • Opportunities and benefits available to the public or a class of employees • Rewards and prizes to competitors • Pensions and other benefits from a former employer • Anything paid for by the Government or by the employee • Gifts accepted under specific statute

21. Gift Exceptions Exceptions to the gift acceptance prohibition

22. Gift Exceptions • Gifts of up to $20, up to $50 per year from the same source • Discounts and similar benefits

23. You may accept gifts (other than cash or investment interests) up to $20 per occasion, if the aggregate market value received from one source under this exception does not exceed $50 in a year. You may accept reduced membership or other fees offered to all Government employees or all military personnel by professional organizations if the only restriction on membership is professional qualifications. You may accept opportunities, benefits, favorable rates, and commercial discounts offered (1) to a group in which membership is unrelated to Government employment (e.g., The Association of Retired Persons) (2) to members of an organization in which membership is related to Government employment if the same is broadly available to large segments of the public through organizations of similar size, (e.g., The Senior Executive Service Association) or (3) by an entity that is not a prohibited source

24. Gift Exceptions, cont. • Gifts based on personal relationships • Gifts based on outside employment • Awards and honorary degrees

25. Gift Exceptions, cont. • Social invitations from other than prohibited sources • Speaking engagements and widely attended gatherings Mr. and Mrs. Invitee Defense Pentagon Washington, D.C.

26. Gift Hypothetical You are a quality assurance officer for the X-Files Project. UFO Corp. is the contractor. You attend a week of related meetings. On Monday, the VP for at UFO Corp. takes you to lunch and insists on paying the $18 for your meal On Tuesday, the CEO of UFO Corp. invites you to join him for dinner for which you never see a bill. On Wednesday, you run into an old college chum and have drinks in the hotel lounge, where you discover your friend is now the Director of Marketing for UFO Corp. He charges the tab to his own room before you can get out your wallet. You leave the tip. On Thursday, you sit down for a quiet breakfast alone when a UFO Corp. project officer sits down with you. You ask the waiter for separate checks, but the UFO employee insists on covering the entire amount through his corporate expense account. Are you in trouble?

27. Analysis: 1) Is it from a prohibited source? YES, YES, YES, and YES 2) Is it defined as a “gift”? YES 3) Is there an exception? YES and NO. The first meal probably qualifies for the $20 exception. The second meal probably does not, unless you only had a Caesars salad for dinner. You would need to send a check to UFO Corp. to cover the cost of your dinner if it was over $20. The drinks in the lounge would have put you over the $50 limit from the same source, since your chum works for UFO Corp. Gifts from different representatives of the same company are deemed to be from the company. BUT, you might accept the gift of the drinks under another exception: gifts based on a personal relationship. The breakfast with the project officer clearly would put you over the limit of $50 from the same source in a year unless you reimbursed the company for your dinner with the UFO executive AND you were able to accept the drinks under the personal relationship exception.

28. Bribery Accepting a gift, even if nominal in value, in return for being influenced in the performance of an official act is a bribe. 18 USC Section 201

29. Contractors in Government Workplace!

30. Changing Workplace Contractors Support DoD Mission- No longer considered “outsiders” with whom we deal with at arms length!! Contractors are Perceived as “Partners” Unchanging Laws Fundamental Differences Legal and Ethical Limitations

31. Oath of Office Officers and Army Civilians “I do solemnly swear/affirm that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office upon which I am about to enter. So help me God.”

32. The Contractor’s Oath BOTTOM LINE

33. Goals • Re-establish the Lines • Recognize when contractors and Federal employees must be distinguished

34. ALLOWING “TIME OFF”

35. ALLOWING “TIME OFF” • Remember: • Federal Personnel System rules/regulations are inapplicable to contractor personnel • Contractor personnel time is “billed” to the government • Exercise caution: • Organization Day • Holiday Party • Off-Site Conference • Training • Coordinate with contracting officer • Ensure that contractor personnel are informed

36. YOU MAKE THE CALL! • The holiday weekend is fast approaching and the officer-in-charge of the organization invokes the “59-minute rule” for all members of the office – including the contract support team who work with the Soldiers and government employees. • Is it permissible to allow the contractor personnel to leave 59-minutes before their scheduled departure time?

37. ANSWER • Decisions concerning “time off” are to be made by the contractor NOT the government • Contractor personnel are paid pursuant to the terms of the contract with the Army – not according to federal personnel system rules/regulations • The contractor employee has no authority to modify the terms of the contract • Only certain government personnel have the authority to modify the terms of the contract

38. Misuse of Contractor Personnel

39. Misuse of Contractor Personnel Prohibited from directing contractor personnel to: Perform any tasks other than those in the contract.

40. Sharing a Taxi A DoD employee and a contractor employee are on official travel and would like to split the cost of a taxi ride to the airport. This is permissible. True/False??

41. TRUE • Sharing the cost of the taxi ride with the contractor is permissible because each traveler would pay his or her pro-rata share to the neutral provider of the transportation. • The DoD employee should, however, consider whether sharing the taxi might constitute an appearance of a conflict of interest.

42. You Make the Call A contractor employee offers to drive an Army employee to lunch at a restaurant ten miles off-post in his personal vehicle. May the employee accept the ride?

43. Answer The Army employee may accept the ride if it fits within one of the exceptions to the gift rule. Caution: There may be an appearance problem that requires discussion with an ethics counselor if, for example, this arrangement occurs frequently or the Army employee is making official decisions affecting the contractor.

44. Organizational Conflicts of Interest

45. What is an Organizational Conflict of Interest (OCI)? An "organizational conflict of interest" exists when a contractor is or may be unable or unwilling to provide the government with impartial or objective assistance or advice. Creates an actual or potential conflict of interest on a current contract or a potential future procurement.

46. The two underlying principles are – 1) Preventing the existence of conflicting roles that might bias a contractor’s judgment AND 2) Preventing unfair competitive advantage

47. How Does OCI Arise? • Biased ground rules cases . . . government contractor has opportunity to skew a competition in its favor • Unequal access to information . . . access to non public information that would give it an unfair competitive advantage • Impaired objectivity . . . government contractor would be in a position to evaluate itself or a related entity

48. Areas • Providing systems engineering and technical direction • Preparing specification of work statements • Access to proprietary information • Solicitation provisions, waivers and mitigation plans

49. Providing Evaluation Services A contractor cannotevaluate its own offers for products or services, or those of its competitors, without proper safeguards to ensure objectivity to protect the Government’s interests.

50. Procurement Integrity Act