By Tara Hoke
Situation
A section officer forwards newspaper clippings to ASCE's Committee on Professional Conduct (CPC) detailing the indictment of an engineering firm executive and ASCE member on charges relating to his involvement in an alleged kickback scheme. While the overarching premise of the scheme is by no means unusual-payment of a well-placed public official in exchange for his support in steering public contracts to the engineering firm--the details are noteworthy for the complex workings by which its participants endeavored to disguise the movement of funds.
As reported in the indictment, the initiator and primary beneficiary of the scheme is the former chair of the municipal improvement authority for a Mid-Atlantic state. Using the services of his agency's attorney (also an indicted coconspirator), the public official establishes a private corporation that in turn incorporates a second company, ostensibly to engage in the business of purchasing and managing rental properties. The official's spouse is installed as a salaried employee of this rental company, but the company's organizing paperwork does not identify the official as an owner, and he likewise does not disclose his interest in the company to his public agency.
The new company promptly purchases a small piece of commercial property, and the engineering firm's executive--also doing business through a separate corporate entity-leases the property for use as an environmental testing laboratory. This transaction enables the engineering executive to funnel tens of thousands of dollars to the public official, first through management fees for conversion of the commercial property (formerly an antique shop) to a suitable testing laboratory, and second through a generous rental agreement.
Later, according to the indictment, the engineering executive agrees to augment his payments to the public official through a second rental transaction. Once again using his separate company as a front, the engineer purchases a beachfront condominium in a neighboring state, and he contracts with the official's rental company to manage this luxury property. In reality, however, the property is not offered for rent but instead is used by the public official as a personal vacation destination.
Over the course of the next five years, this layering of false or inflated rental transactions allows the engineer to funnel more than $200,000 to the public official. In exchange, the official is instrumental in directing millions of dollars in public works contracts to the engineer's firm. On one occasion, the public works official persuades the municipal improvement authority to award a major project to the engineer's firm even over the objections of the authority's paid staff, while the staff executive who was most vocal in obstructing the transaction is abruptly discharged.
The public official's activities remain undetected for the duration of his term as chair of the municipal improvement authority, but soon afterward, a broader investigation of corruption within the county reveals improper payments that the public official himself had made to the county treasurer and various political party operatives. When questioned by prosecutors about these payments, the public official admits to supplying these individuals with a share of his scheme with the engineering firm executive. Ultimately, both the official and the engineer accept plea deals in exchange for their testimony against the county treasurer and other conspirators.
Question
What does ASCE's Code of Ethics say about the engineering firm executive's involvement in this scheme?
Discussion
In ASCE's 100-year history of reviewing and adjudicating cases of professional conduct, the payment of bribes, kickbacks, and other improper gratuities has consistently remained the most prolific type of ethical misconduct reported to the Society, and accordingly it has received ample treatment in the language of today's Code of Ethics. Fundamental Canon 5 directs that engineers "shall not compete unfairly with others," and guideline a under that canon elaborates: "Engineers shall not give, solicit, or receive, either directly or indirectly, any political contribution, gratuity, or unlawful consideration in order to secure work."
In addition, Fundamental Canon 6 of the Code requires that "Engineers shall act in such a manner as to uphold and enhance the honor, integrity, and dignity of the engineering profession and shall act with zero tolerance for bribery, fraud, and corruption," and each of this canon's supplemental guidelines expand upon this obligation. Most notably for this case, guideline a bans participation in "fraudulent, dishonest, or unethical" business practices, guideline b requires engineers to be "scrupulously honest" in financial matters, and guideline d directs engineers to be "especially vigilant" in cases of institutionalized corruption.
Upon review of the criminal indictment and related news coverage, the CPC felt that the member's actions represented a likely violation of Canons 5 and 6. The committee contacted the engineer, who admitted to the conduct described in the indictment and expressed remorse for taking actions that The Perils of Trading Long-Term Values for Short-Term Gain reflected poorly on his character and the integrity of the profession.
The member claimed that he had been drawn into the scheme after his firm was selected to perform design work on a countywide sewer project, a selection he insists was made without any hint of impropriety. A few months after receiving this contract, however, the member was approached by the public official, who informed the member that he was expected to make regular "contributions" to the official in exchange for ensuring that the contract went smoothly. While the member claimed that he was "repulsed" by the official's demand, he was also aware that the official's position would make it easy for him to obstruct or delay the project. The timing of the official's message gave his threat additional leverage; this was the largest piece of work the engineer's firm had ever obtained, and the firm had already invested significant amounts in preparation for the work. Fearing the financial repercussions of any other action, the member agreed to take part in the scheme.
The member claimed that he was a victim of extortion, and while he acknowledged this was no defense to his criminal or ethical culpability, he claimed that he "had never felt good" about his actions and was relieved when the official left office and the scheme ended. The engineer expressed a desire to remain an ASCE member and asked the CPC to grant him time to settle all his outstanding legal matters, following which he vowed to work with the Society in developing educational material based on his case, in hopes that his experiences might serve to benefit the profession.
The CPC was receptive to this suggestion and agreed to table the matter for a six-month period, but shortly thereafter, the committee learned that additional charges, related to the executive's alleged recruitment of other participants in the kickback scheme, were pending against the member. When six months passed with no further word from the member, the CPC contacted him to advise that they were forwarding the case to ASCE's Board of Direction with a recommendation that the member be expelled. The member responded by submitting his resignation from the Society, which the Board accepted, and notice of the action was published in a Society publication.
While this case illustrates the clear threat that pressure can pose to the ethical practice of engineering, it also demonstrates the perils of taking action to relieve a short-term pressure without regard to the long-term risks of that action. Engineers should be mindful to heed the warning of an inner voice telling them that a decision "doesn't feel good," recognizing that no amount of remorse felt later on can remove the legal or ethical stain of following a dishonest or corrupt path.
Tara Hoke is ASCE’s general counsel and a contributing editor to Civil Engineering.
© ASCE, ASCE News, April,2020
