In Defense of Ethics: New Considerations After the Packard Commission

The Catholic Lawyer Volume 34, 1991, Number 2 Article 4 In Defense of Ethics: New Considerations After the Packard Commission Paul E. Fiorelli Follow this and additional works at: https://scholarship.law.stjohns.edu/tcl Part of the Catholic Studies Commons Recommended Citation Paul E. Fiorelli (2017) "In Defense of Ethics: New Considerations After the Packard Commission," The Catholic Lawyer: Vol. 34 : No. 2 , Article 4. Available at: https://scholarship.law.stjohns.edu/tcl/vol34/iss2/4 This Article is brought to you for free and open access by the Journals at St. John's Law Scholarship Repository. It has been accepted for inclusion in The Catholic Lawyer by an authorized editor of St. John's Law Scholarship Repository. For more information, please contact . IN DEFENSE OF ETHICS: NEW CONSIDERATIONS AFTER THE PACKARD COMMISSION PAUL E. FIORELLI* INTRODUCTION The war in the Persian Gulf has reemphasized the importance of United States military preparedness, even in times of peace. During wartime, it may be easier for military contractors to justify the costs of researching and developing newer, more exotic, "smarter" weapons systems. Now that the current crisis has passed in its technical sense, many in Congress may "shift gears" and attempt to reallocate expenditures from a war-driven economy to one associated with a time of peace. Even the euphoria of victory in the Iraqi-Kuwaiti theatre and feelings of "patriotism" identified therewith will probably not protect the defense industry from increased public scrutiny. Budget cuts required by Gramm-Rudman will place an even greater pressure on defense contractors to compete for increasingly scarce government funds. The pressure to survive may increase the temptation to engage in fraudulent procurement practices, not unknown in this area. Whether contractors succumb to this temptation depends upon a number of factors, including individual corporate resolve, commitment to ethics, and government review.' The purpose of this Article is to present an overview of the ethics Copyright 1991, Paul E. Fiorelli, J.D., M.B.A., Associate Professor of Accounting and Law, Xavier University. Apart from the current situation in the Middle East, one by-product of the decrease in political tension between East and West should be a corresponding decrease in military expenditures. The circumstances seemed clearer prior to Iraq's invasion of neighboring Kuwait and the current unrest in the Soviet Union. Regardless of problems in the rest of the world, it will become increasingly difficult to justify military growth in light of the current emphasis on reducing the deficit. * 34 CATHOLIC LAWYER, No. 2 process in the defense industry, and suggest appropriate self-policing policies to maximize the probability of compliance. Although current remedies are in need of improvement, the government and private citizens will not hesitate to use the available sanctions, including but not necessarily limited to: (1) fines; (2) imprisonment; (3) suspension; (4) debarment; and (5) qui tam actions.2 I. PACKARD COMMISSION In 1985, President Reagan formed the Blue Ribbon Commission on Defense Management ("Packard Commission") to address a fundamental breakdown of the entire military procurement process. 3 This was partially in response to sensationalized spare parts aberrations. Even prior to the current thaw in the "Cold War," it was difficult for Congress to support military spending increases with the press reporting airborne toilet seat covers costing the taxpayer $1,900 apiece." Summarizing, the Packard Commission found legitimate cause for dissatisfaction with the process by which the Department of Defense ("DoD") and Congress purchase military equipment and material. The Commission strongly disagreed, however, with the commonly held views of what is wrong in the procurement process and the approach to be used in fixing it. The nation's defense programs, so said the Commission, lose far more to inefficient procedures than to fraud and dishonesty. The truly deleterious impediments were found to be overcomplicated organization and rigid procedure, not avarice or connivance among the members of the defense industry.5 The Packard Commission's Interim Report of February 1986 called There is a wealth of material addressing problems associated with government contracting, and fraud in particular. See generally Barletta & Pollack, Civil Litigation of Allegations of Fraud in Connection with Government Contract Claims, 18 PUB. CONT. L.J. 235 (1988); Blum & Lobaco, Following the Money, 7 CAL. LAW. 36 (1987); Coburn & Sinchak, Federal Procurement in the Federal Courts 1987-88: A Selective Review, 19 Pua. CONT. L.J. 14 (1989); Fennell, Government Contract Fraud, 25 AM. CRIM. L. REV. 427 (1988); Overly, Government Contractors,Beware: Civil and Criminal Penalties Abound for Defective Pricing, 20 Loy. L.A. L. REV. 597 (1987); Pitt, Minimizing Corporate Civil and Criminal Liability: A Second Look at Corporate Codes of Coduct, 697 PRAC. L. INST. 319 (1990). For a fine analysis of the impact of recent federal legislation in this area, see Donaldson, Section Six of the Office of Federal Procurement Policy Act Amendments of 1988: A New Ethical Standard in Government Contracting?,20 CUMB. L. REV. 421 (1990). ' See Mayer, Military Procurement: Basic Principles and Recent Developments, 21 GEO. WASH. J. INT'L L. & ECON. 165 (1987) (events leading to formation of Packard Commission). ' See Cincinnati Enquirer, July 26, 1990, at A8, col. 1. Even though the public and the press focused on spare parts abuses, the Packard Commission felt that this was not a fundamental cause of the problem. 5 AN INTERIM REPORT TO THE PRESIDENT, BLUE RIBBON COMMISSION ON DEFENSE MANAGEMENT (PACKARD COMMISSION) 15 (1966). ETHICS IN DEFENSE INDUSTRY for defense contractors to perform more self-policing, and increase their efforts in the area of business ethics. The Commission stated bluntly: "To assure that their houses are in order defense contractors must promulgate and vigilantly enforce codes of ethics that address the unique problems and procedures incident to defense procurement. They must also develop and implement internal controls to monitor these codes of ethics and sensitive aspects of contract compliance." 6 Prior to the Commission's 1986 Final Report, thirty-three defense contractors became signatories of what is now known as the "Defense Industry Initiative" ("DII"). The DII was divided into two parts. The first called for contractors to adopt codes of ethics, train employees in the area of business ethics, and provide "whistleblower" reporting mechanisms (i.e., hotlines and/or ombudsmen). The second part called for increased public accountability. Signatories were to complete a questionnaire intended to measure their implementation of the ethical principles. These questionnaires would then be audited by an outside, independent agency and the results made public. They also agre (...truncated)