By Tara Hoke
One of the trickiest dilemmas considered by ASCE’s Committee on Professional Conduct is the extent to which the ASCE Code of Ethics applies to a member’s actions outside the workplace. While this hypothetical is based on a case involving a non-engineering professional, it presents an opportunity to explore the ethical implications of personal versus professional conduct.
Situation
An ASCE member employed by a large multinational firm is offered a long-term assignment abroad. One of the firm’s smaller offices is in a part of the world that is experiencing explosive growth in infrastructure investment, and the firm’s leadership believe that this member’s management and technical expertise make him the best candidate to expand their business in the region. In exchange for the member’s acceptance of this new role, the firm prepares an employment contract outlining his compensation and benefits, including the option to participate in the firm’s income tax compliance program.
Under U.S. law, citizens of the United States are taxed on their worldwide income, regardless of where they are living or where the income is generated. Unfortunately, Americans working abroad typically must also file and pay income taxes in the country where their income is made, resulting in double taxation of foreign earned income. To reduce this problem, the Internal Revenue Service offers a smattering of tax exclusions and credits for U.S. taxpayers. One such exclusion is the foreign earned income exclusion, which allows taxpayers living abroad to exclude a certain amount of foreign income from taxation.
Accordingly, even though the engineer would live and work abroad full time and receive his salary solely from the international office, he would still be obliged to file U.S. tax returns. At the time of his assignment, this tax law allowed for the exclusion of roughly $90,000 of foreign income, meaning that the engineer would be required to pay U.S. taxes on any earnings in excess of that amount. The compliance program offered by his employer would take and remit the appropriate withholdings from his check to satisfy the engineer’s tax obligations in the U.S. and his country of residence.
The member signs the employment contract to accept his transfer, but he declines the firm’s offer to assist with his U.S. tax compliance. Each year of his assignment, the member submits an annual U.S. income tax return, and each year he reports an annual income at, or just slightly above, the $90,000 exclusion threshold. Yet these U.S. filings substantially underreport the engineer’s actual earnings, which in fact ranged from two to three times the amount indicated on his returns.
With the bulk of his earnings held in a foreign bank account, the engineer’s false reporting goes undetected for more than five years, until — perhaps caught up in a flurry of preparations to move home — the engineer fails to file U.S. returns for the final year of his assignment. The omission triggers the attention of IRS auditors, who contact the engineer to request documentation of his earnings and information about assets held in U.S. or international bank accounts.
Recognizing that the IRS scrutiny would undoubtedly reveal the shortfall in his reporting, the member makes one last effort to escape accountability. He submits to the IRS investigators a doctored copy of his employment contract and other payroll documents that he has altered to make it appear as if he had requested enrollment in the firm’s tax compliance program and that his company had failed to submit the necessary payments.
The investigators are not deceived, and the member is promptly brought up on charges of federal tax evasion. Ultimately, he pleads guilty and is sentenced to serve 36 months in prison and pay more than $350,000 in restitution and fines.
Question
If this were an actual case involving an ASCE member, would the member’s actions violate the ASCE Code of Ethics?
Discussion
Section 1d of the ASCE Code of Ethics states that engineers “have zero tolerance for bribery, fraud, and corruption in all forms.” While this language seems clearly applicable to a case of tax fraud, in most cases reviewed by the CPC, the fraudulent conduct occurs within the scope of the accused’s professional practice, e.g., fraudulent billing practices or professional reports. Here, the egregious behavior involves the filing of a personal tax return — an action taken not in the capacity of an engineering professional providing services to others, but as a private individual.
To be sure, the code is commonly viewed as a guideline for professional conduct, and much of its language bears out this interpretation. The code’s preamble introduces its fundamental principles as a set of rules by which engineers “govern their professional careers,” while variations of the word “professional” occur in nearly a dozen other instances throughout the code. In this light, it could be argued that the code’s language is unfit for measuring a member’s private conduct, and its reach begins and ends with a member’s professional practice.
On the other hand, it could also be argued that many of the code’s provisions extend beyond purely professional conduct. Section 3a instructs members to “uphold the honor, integrity, and dignity of the profession,” and even acts committed in a nonprofessional setting can cast doubts about a member’s ability to uphold professional standards.
Such is certainly the rationale behind the practice in many states to revoke licensure for crimes of moral turpitude — a catch-all phrase for conduct that so exceeds social norms and morality as to make an individual unfit for professional practice.
Likewise, using the current example, it is difficult to see how a member could be deemed to “have zero tolerance for bribery, fraud, and corruption in all forms” if his or her off-the-clock behavior includes active participation in such schemes.
In prior cases, the CPC has generally sought to strike a middle ground between these opposing viewpoints, taking action on personal conduct only when the conduct has a sufficient link to professional matters. For instance, in the present example, the CPC might note that although the fraudulent filing itself was a personal matter, the income that was wrongfully withheld from the U.S. government was derived from providing professional services.
And even if that observation fails to make for a compelling connection to professional duties, the engineer’s subsequent attempt to cover up his crime has no such ambiguity.
Facing the likelihood of government sanction, the engineer willfully falsified documents so as to place blame on his employer, a deception which, if successful, might have caused significant civil sanctions or liability for his employer. Thus, the CPC would likely consider his actions to run afoul of Section 4a’s mandate for engineers to “act as faithful agents of their clients and employers.”
Even if punitive applications of ASCE’s Code of Ethics are restricted to professional circumstances, its aspirational applications have no such limitations. At its essence, the code is merely a call for members to act with honesty, integrity, dependability, and equity — values that serve well as a framework for ethical behavior in any situation.
Tara Hoke is ASCE’s general counsel and a contributing editor to Civil Engineering.
This article first appeared in the September/October 2024 print issue of Civil Engineering as “Doing the Right Thing (On Your Own Time).”
