and the Law
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Playing Santa to Federal Officials Can Lead to Jail
By James C. Fontana
Treating a valued commercial customer to an expensive holiday dinner may earn you admiration from your corporate superiors. Do the same for a public official on a government contract and you, and the official, may end up in jail. While entertainment budgets are still common, though less extravagant, in the commercial world, they are considered taboo in the world of federal procurement.
To ensure impartiality in performing official government duties, an array of the federal ethics statutes impose severe civil and criminal penalties against those who violate their sometimes cryptic provisions. For example, federal bribery laws generally prohibit anyone from giving, offering or promising a public official, either directly or indirectly, anything of "value" with the "intent to influence" any official act or omission on the part of that official. Such acts include inducing public officials to do business with a private person. Likewise, the law prohibits the public official from taking that item of value.
But how does one define "value" or "intent to influence"? Does buying a government end user lunch constitute a bribe? Is trading holiday gifts with a contracting officer whom you've known for years a criminal offense? In the world of federal procurement, it just may be. The law states that an illegal "gift" to a federal public official includes "any gratuity, favor, discount, entertainment, hospitality, loan, forbearance or other item having monetary value." Expressly added to the list of prohibited gifts are training, transportation, local travel, lodgings and meals. And it doesn't make a difference that the contractor paid for these items in cash or "in-kind" such as return favors or exchange of items of like value - like the holiday gift.
But, like many laws, these laws provide exceptions. Yet some of these exceptions can be confusing. For example, gifts to government officials do not include such things as "modest items of food and refreshments, such as soft drinks, coffee and doughnuts, offered other than as part of a meal." Also excluded are items with "little intrinsic value," better known as nominal value items. The law presumes that anything given to the official having an aggregate market value of $20 or less per occasion is legal, provided that the aggregate market value of a series of gifts to the same official does not exceed $50 in a calendar year. But this exception does not apply to gifts of cash or investment interests such as stock, bonds or certificates of deposit. In addition, where the market value of a gift exceeds $20, the official may not pay the excess value over $20 in order to accept the gift. This means that if a Wizards basketball ticket has a face value of $60, offering it to your procuring contracting officer for $40 does not make the gift legal. Moreover, no matter the nominal value of the gift, be it $20 or $2, if the reason for giving it is influencing official duties, then the gift is illegal.
Another key exception is where the gift is based on a family relationship or personal friendship between the giver and the public official receiving the gift. Factors determining whether this exception applies include the history of the relationship and whether the family member or friend, rather than a company, personally pays for the gift. But again, no matter the relationship between the parties, the intent to influence is still the controlling factor.
Other exceptions include some nongovernment-funded commercial discounts on such things as reduced membership fees in organizations (e.g., reduced airfare offered to all government agencies), certain public service awards (e.g., honorary degrees), gifts based on outside business or employment relationships that are unrelated to the government employee's official duties, and gifts in connection with participation in certain political organizations and activities.
Federal contractors should also be mindful that, while there are governmentwide regulations that implement these laws, individual agencies have published their own guidelines on acceptance of gifts from private sources.
Legal jargon aside, the rule of thumb is good judgment and caution when faced with a situation involving possible illegal gifts to government officials. The most common scenario involves food and entertainment. In these situations, the smart contractor would adhere to the "coffee and doughnut" rule. If you're serving coffee and doughnuts to a government employee, it should be considered proper in most circumstances, so long as no one accuses you of trying to influence that employee's official actions. If the coffee is being served in fine china, then be vigilant of the appearance of your acts. If you make it a brunch at the Willard, you and the official are probably breaking the law.
James C. Fontana is vice president and corporate counsel of Wang Government Services Inc. in McLean, Va.
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