Government Subpoenas Result in Suspension for IBM

On March 27, 2008, the Environmental Protection Agency (EPA) suspended the International Business Machines Corporation (IBM) from receiving future federal money. In contracting speak, this means that IBM was "[suspended] by any Federal agency pursuant to Executive Order 12549 and the agency implementing regulations based on an indictment or other adequate evidence (a) to suspect the commission of an offense that is a cause for debarment or (b) that other causes for debarment under the agency regulations may exist."

Simply stated, IBM was included on the government's Excluded Parties List and is temporarily prevented from receiving future federal contracts. That action resulted from several federal grand jury subpoenas being served on the company and several employees requesting testimony and documents regarding interactions between employees of the EPA and certain IBM employees.

According to IBM's press release, the misconduct "relates to an investigation by the EPA of possible violations of the Procurement Integrity provisions of the Office of Federal Procurement Policy Act regarding a bid for business with the EPA originally submitted in March 2006. The temporary suspension applies to all Federal agencies and IBM business units." Suspending the entire company is a big step for the government, which in the past has only suspended a few divisions of Boeing rather than the entire company.

POGO's Federal Contractor Misconduct Database (FCMD) shows that IBM has had eight instances of misconduct (including alleged kickbacks and export and securities violations) since 1995 totaling more than $800 million in fines, penalties, and settlements. IBM ranked as the 45th largest contractor with nearly $1 billion in federal contract award dollars in 2005.

POGO applauds the EPA's decision to hold IBM accountable and hopes that the government doesn't waive or lift the suspension when the next federal business opportunity presents itself. That's the wrong message to send to contractors and the public. For years, we have promoted the concept of a government FCMD and a stronger suspension/debarment system as ways to prevent risky contractors from receiving taxpayer dollars. Fines, penalties, and settlements aren't working--going after a company's bottom line and potential future business might be the wake-up call that all contractors need to realize that the government and the public will hold them responsible for their actions.