Are State Department Contractors Shortchanging Whistleblowers?

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A review of 30 top State Department contractors found that they have ethics codes for employees that investigators worry “may have a chilling effect” on willingness to blow the whistle on waste, fraud and abuse, a watchdog found.

All of the companies reported some variation of the employee “confidentiality” agreements of the type that have been controversial lately in the private sector, according to a report released last week by State’s inspector general, which did not independently verify the assertions. None, however, reported having enforced the agreements.

The survey was prompted by earlier news reports and material from the Special Inspector General for Afghanistan Reconstruction showing that Houston-based KBR Inc. and the Arlington, Va.,-based nonprofit called International Relief and Development, working for the U.S. Agency for International Development, had required departing employees to sign “nondisparagement” agreements. IRD recently underwent a major reorganization after its leaders were fired for billing the government for lavish entertainment.

Other companies the IG then interviewed required ongoing employees to sign agreements--under threat of termination--before being interviewed about a violation of the company’s business code, saying they would not discuss particulars without permission from company counsel.

The inspector general “identified at least 13 contractors with a provision in their employee handbook, code of ethics, and/or consultant agreements that required employees to notify company officials if they are contacted by a government auditor or investigator,” the report said. “While some of these provisions may have a legitimate justification, such as ensuring the company is able to raise any applicable privilege to a document request, they still may have a chilling effect on employees who wish to report fraud, waste, or abuse to a federal official.”

All 30 contractors said they maintain policies to encourage employee reporting of legal or ethical violations, as required by prohibitions against retaliation against whistleblowers under the Federal Acquisition Regulation and the 2013 National Defense Authorization Act. But the IG’s tally found inconsistent follow-through.

The IG recommended that State Department bureaus circulate best practices guidance among contractors, to which department officials agreed.

In the private sector, requiring confidentiality agreements has been targeted by the Securities and Exchange Commission, which on April first took an enforcement action against KBR for using “improperly restrictive language in confidentiality agreements with the potential to stifle the whistleblowing process.”

The Project on Government Oversight, a transparency and whistleblower advocacy nonprofit, blogged a summary of the IG report, commenting that “whistleblowers are the first and best line of defense against corporate and governmental wrongdoing, and they must be protected from intimidation and harassment. Contractor employees need to feel safe in reporting potential illegalities,” wrote investigator Neil Gordon. “While it is reassuring to see the government crackdown on abusive corporate confidentiality practices like the SEC recently did with KBR, we know from the State Department IG’s report that much more needs to be done.”

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