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LABOR & EMPLOYMENT LAW — 01/27/10

Defund the Crooks Act introduced in the House

A bill (H.R. 4444) that would prohibit the federal government from awarding contracts or grants to organizations that have been convicted of violating federal or state laws or that have filed, submitted or transmitted a fraudulent claim to a regulatory agency was introduced in the House on January 14, 2010, by Rep. Alan Grayson (D-Fla). Called the Defund the Crooks Act, the bill would terminate a contract or grant awarded to an organization that knowingly employed an individual convicted of violating federal or state law or that have had their corporate charters revoked because of the failure to comply with such laws. Parent companies, subsidiaries and owners of more than 50 percent of the organization would also be subject to similar penalties.

The bill would also amend the Federal Acquisition Regulation so that the following prohibitions apply:

• no federal contract, grant, cooperative agreement or any other form of agreement, including the execution of a contract option, the award of a task order, or a memorandum of understanding, may be awarded to or entered into with the covered organization;

• no federal funds in any form may be provided to the organization (except funds provided as payment for goods or services provided to the government before the date of the enactment of this Act); and

• no federal employee acting in the course and scope of employment and no federal contractor during the performance of the contract, may promote the organization in any way, including recommending the organization to any person or referring any person to the organization for any purpose.

Under the legislation, termination of contracts or grants would occur within a year of the bill’s enactment for contracts and grants awarded before the bill took effect. For contracts or grants awarded after the date of enactment, they would be terminated immediately.

The bill has been referred to the House Committee on Oversight and Government Reform. Rep. Betty McCollum (D-Minn) introduced a similar bill (H.R. 3679) in October 2009, which would prohibit corporations with a felony conviction from receiving any federal funding for the five years after the conviction, prohibit corporate felons from making federal campaign contributions for five years, and limit the lobbying the corporation can do during that period.

White House targeting contractors that are tax cheats. Meanwhile, on January 20, President Obama issued a memorandum directing the Commissioner of Internal Revenue to conduct a review of certifications of non-delinquency in taxes that companies bidding for federal contracts are required to submit pursuant to a 2008 amendment to the Federal Acquisition Regulation, further directing that the commissioner report within 90 days on the overall accuracy of contractors' certifications. A fact sheet was also issued by the Administration.

Said the President: “I'm directing my budget office, together with the Treasury Department and other federal agencies, to take steps to block contractors who are seriously delinquent in their taxes from receiving new government contracts. I'm also directing the IRS to conduct a review of the overall accuracy of companies' claims about tax delinquencies. We need to be sure that when a company says it's paying taxes, that company is, in fact, paying taxes.”

The memo also directs the Director of the Office of Management and Budget, working with the Secretary of the Treasury and other agency heads, to evaluate the practices of contracting officers and debarring officials in response to contractors’ certifications of serious tax delinquencies. Accordingly, such agencies must provide to the President, within 90 days, recommendations on process improvements to ensure such contractors are not awarded new contracts, including a plan to make contractor certifications available in a government-wide database, as is already being done with other information on contractors.

For more information on this and other topics, consult CCH Employment Practices Guide or CCH Labor Relations.

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