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Government Contracting

U.S. companies often overlook the State Department’s International Traffic In Arms Regulations (ITAR), potentially at their peril.  ITAR govern products, technologies and services originally developed for military, but frequently extend far beyond defense contractors to companies in other fields including: engineering, communications, manufacturing, transportation, software, chemicals and technical services.  In light of the broad reach and severe sanctions for ITAR violations (including civil and criminal penalties for companies and their employees), every company should determine if it is subject to ITAR. 


As Professor J. Reece Roth learned, there are severe consequences for conducting research activities that do not comply with ITAR. In January, the U.S. Court of Appeals for the Sixth Circuit upheld Roth’s conviction by a lower court for violations of ITAR.  Roth, a professor at the University of Tennessee, was conducting research in the U.S. at Tennessee University on plasma actuators related to unmanned aircraft. 


The U.S. government is beginning to focus on individual employees in its prosecution of International Traffic in Arms Regulations (ITAR) violations.  As an example, a former employee of Rocky Mountain Instrument Co. (RMI) was charged personally for criminal ITAR violations in connection with the transfer of technical drawings to offshore components manufacturers. RMI, a government contracts firm in Denver, Colorado, had previously been prosecuted in 2007 for export violations for transferring to foreign manufacturers technical drawings for optical components without obtaining an export license.


In a recent Viewpoint entry, I discussed the influence of the U.S. Federal Sentencing Guidelines for Organizations (FSGs) and some recent amendments to the FSGs that will have major implications for compliance and ethics programs. For those organizations doing business (or seeking to do business) with the United States government, another essential resource is the Federal Acquisition Regulation (FAR). Besides its many specific provisions governing the acquisition process, FAR also outlines some critical rules for a company’s compliance and ethics program.


With the amount of criticism being directed at contractors from agencies, watchdog organizations, and Congress, and with agency inspector general offices and the Department of Justice receiving ever-greater resources and missions,


Among other significant changes published recently by the Federal Acquisition Regulation (FAR) Councils, effective December 12, 2008, most Federal contractors will be under a new obligation to tell the Government when their company is involved with procurement-related criminal violations and violations of civil False Claims Act, as well as in cases in which the company has received a significant contract overpayment. If a contractor fails to report such matters, the new rules provide that the contractor could be suspended or debarred from receiving further Federal contracts.


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