By: Lindsay Simmons
It’s one thing for a contractor to agree with the importance of compliance in theory, or even to establish a compliance program. But making sure that it actually works is something else entirely. A recently announced civil settlement serves as a reminder that the implementation of your compliance program is at least as important as creating it in the first place. And a key to that implementation is communicating with your employees.
On March 10, 2016, the United States Attorney’s Office for the Southern District of Illinois announced that Farrell Lines, Incorporated (Farrell) and DAMCO USA, Inc. (Damco) have paid to the United States of America three million six hundred fifty nine thousand five hundred dollars ($3,659,500.00) in civil penalties regarding failures by Farrell and Damco to comply with certain terms of Farrell’s contract with the United States Transportation Command (USTRANSCOM). Under the contract in question, Farrell was required to perform international door-to-door and/or port-to-port transportation services to move Department of Defense (DoD) and other Government approved cargo into and out of Afghanistan via multiple modes of transportation (air, sea, and land). Farrell subcontracted its work on the contract to its affiliate, Damco.
The contract price was based almost exclusively on the weight of the shipments, with the documented cargo weights – evidenced by “weight tickets” issued by a certified commercial scale for each cargo container – submitted with billing invoices to the Government. As a result of an investigation the United States Army Criminal Investigation Command, Defense Criminal Investigative Service, Defense Contract Audit Agency, Naval Criminal Investigative Service, Air Force Office of Special Investigations, and the Office of the Special Inspector General for Afghanistan Reconstruction, USTRANSCOM discovered that 563 weight tickets submitted by Farrell to support their billing invoices were “recreated” by Damco employees and not authentic weight tickets.
According to the press release, Farrell and Damco were cooperative in the investigation. There’s no mention of penalties for the employees involved. What’s not clear from the DOJ announcement is whether and to what extent Damco (and Farrell) had compliance programs in place that emphasized the importance of not making false statements and false claims to the government. Nor is it clear how, if such programs did exist, the companies had communicated their compliance message to their employees.
Since it’s unclear whether or how the Damco employees themselves benefitted from the scheme, it almost seems as if they “recreated” the weight tickets in order to avoid having to actually weigh the shipping containers. Whatever the employees’ motivation, their decision to recreate false weight tickets was clearly unwise – and the exact opposite of what compliance requires. An effective compliance program — properly implemented with regular communications to the employees on compliance issues — would have made the employees’ bad actions less likely and easier for the companies to timely detect and fix.
© 2016 Jackson Kelly PLLC