Global Regulatory Enforcement Law Blog : Global Regulatory Enforcement Lawyers & Attorneys: Reed Smith Law Firm: Government Contracts & Compliance

This post was written by Leslie A. Monahan.

A final rule issued by the Department of Labor (“DOL”) August 29, 2011 provides final regulations to implement Executive Order (“E.O.”) 13495, Nondisplacement of Qualified Workers Under Service Contracts. E.O. 13495, which was signed by President Obama January 30, 2009, establishes a general policy for the federal government with regard to staffing successor service contracts where performance is for similar services at the same location as the prior contract. In particular, the policy provides qualified employees who worked under a preceding contract the opportunity to work under a successor contract if they so choose.

Under the new rule, it is now mandatory for service contracts to include a clause requiring successor contractors to offer qualified employees, who were employed under the prior contract and would otherwise be terminated at the award of the successor contract, a right of first refusal of employment under the successor contract. This requirement to include a right of first refusal extends to subcontractors as well.

Since E.O. 13495 does not establish wage or fringe benefit rates, the final rule does not mandate that a successor contractor offer jobs to employees at the same wage as the former contractor. However, the rates offered by successor contractors will have to meet the minimum wage and fringe benefit rates established under the Service Contract Act (“SCA”). Accordingly, successor contractors may base their bids on the minimum wage rates and fringe benefits required by the SCA.

The final rule clearly states that when a collective bargaining agreement governs the wage and fringe benefits on the predecessor contract, a provision of the SCA requires a successor contractor to pay no less than the predecessor’s collective bargaining agreement rates. However, many questions have been raised concerning whether the successor contractor would be required to accept all the terms and conditions of the predecessor’s collective bargaining agreement for National Labor Relations Act (“NLRA”) purposes.Unfortunately, the DOL has taken the position that the potential interplay between the nondisplacement provisions of the final rule and the NLRA exceeds its authority. Hopefully, additional guidance will be provided when regulations are issued that implement the final rule.

Although the final rule has been published, the effective date for this rule is still pending. Once the date has been determined, the DOL will publish a notice in the Federal Register announcing the date.
 

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This post was written by Lorraine M. Campos.

First there were PACs. Then there were Super PACs. Now there are…”Mega-PACs”?

One of the largest sources of controversy in the 2010 election cycle was the rise of Super PACs (also known by the Federal Election Commission’s (“FEC”) far blander name, “Independent Expenditure-Only Committees”). These Super PACs were approved in FEC Advisory Opinions 2010-09 and 2010-11 shortly after the Supreme Court’s decision in Citizens United v. FEC, and the D.C. Circuit’s decisions in EMILY’s List v. FEC and SpeechNow.org v. FEC.

Super PACs are not subject to the contribution and source limitations of regular PACs, but instead may raise unlimited contributions from individuals, political committees, corporations, and labor organizations. There was only one catch: Super PACs could only make independent expenditures. They were not permitted to make any monetary or in-kind contributions to other political committees, such as candidate committees and political parties.

A group called National Defense PAC (“NDPAC”) disagreed with that restriction. In August 2010, it submitted an advisory opinion request to the FEC to extend the limits of Super PACs. In particular, NDPAC sought permission to: (1) accept unlimited contributions from individuals, other PACs, corporations and unions “for the express purpose of making independent expenditures”; and (2) accept contributions subject to statutory amount and source limitations “to expend as campaign contributions to candidates.” NDPAC proposed that it would create two bank accounts to keep the two funds separate and apart.

The FEC created two draft advisory opinions, one approving NDPAC’s proposal and one denying it. However, it was unable to garner sufficient votes to pass either draft advisory order. Accordingly, in January 2011, NDPAC filed a complaint in the U.S. District Court for the District of Columbia seeking a declaratory judgment that the contribution limit provisions of the Federal Election Campaign Act (“FECA”) were unconstitutional as applied to NDPAC, and an injunction enjoining the FEC from enforcing those provisions against NDPAC. In June 2011, the court granted NDPAC’s motion for a preliminary injunction, finding that recent case law “lead[ ] to the inevitable conclusion that NDPAC has a strong possibility of success on the merits.”

Perhaps seeing the writing on the wall, the FEC settled the case at the end of August. In a Stipulated Order and Consent Judgment, it agreed that it would not enforce provisions of FECA against NDPAC, “as long as NDPAC maintains separate bank accounts (1) to receive such contributions for the purpose of making independent expenditures, and (2) to receive source- and amount-limited contributions for the purpose of making candidate contributions….”

The FEC’s settlement with NDPAC has the potential to shape the 2012 election cycle and beyond. It seems unlikely that it would deny to other PACs what it has consented to with NDPAC. Thus, we could quickly see the rise of “Mega-PACs” capable of both making contributions to political candidates and accepting unlimited funds for independent expenditures, provided they do each action through separate bank accounts. At least one group has already applied for “Mega-PAC” status, and more are sure to follow.
 

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This post was written by Melissa E. Beras.

On October 14, 2011, just one week after the release of the "WikiLeaks Order," the Department of Defense (DoD), the General Services Administration (GSA), and the National Aeronautics and Space Administration (NASA) proposed a rule that would require certain contractors to complete training that addresses the protection of privacy and the handling and safeguarding of personally identifiable information (PII). Specifically, the rule requires contractors who access government records, handle PII, or design, develop, maintain, or operate a system of government records on behalf of the government, to undergo training upon award of a contract and at least annually thereafter. Further, according to the rule, contractors would have recordkeeping requirements for documents indicating that employees have completed the mandatory training and would be required to produce those records upon government request.

In addition, the proposed Federal Acquisition Regulation (FAR) text provides that the required privacy training must, at a minimum, address seven mandatory elements. Those elements include training on privacy protection in accordance with the Privacy Act of 1974, restrictions on the use of personally owned equipment that implicates PII, breach notification procedures, and other “agency-specific” training requirements. The proposed FAR text also provides alternative language for instances where an agency would prefer that the contractor create the privacy training package, as opposed to attending an agency-developed privacy training. Additional alternative language is proposed for instances where the government determines it is in its best interest for the agency itself to conduct the training. Moreover, the clause requires that it be flowed down to any subcontractors who: (1) have access to government records; (2) handle PII; or (3) design, develop, maintain, or operate a system of records on behalf of the government.

The proposed rule is a part of a broader effort to enhance cyber security. It follows the “WikiLeaks Order,” an executive order issued October 7, 2011, and formally titled “Structural Reforms to Improve the Security of Classified Networks and the Responsible Sharing and Safeguarding of Classified Information,” which directs governmental change to ensure that classified information is shared responsibly and safeguarded on computer networks in a manner consistent with appropriate protections for privacy and civil liberties. The order expressly states that agencies bear “the primary responsibility for meeting these twin goals.” The proposed rule also comes shortly after the DoD requested the extension of a pilot program through November 2011, which helps protect the networks of its prime defense contractors by sharing intelligence about threats to their data with these contractors.

Contractors interested in sharing their views on the proposed rule have the opportunity to comment. Written comments are due by December 13, 2011.

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This post was written by Michael A. Grant.

• The Wolfsberg Group recently published its Anti-Corruption Guidance, which leads me to assume that someone, somewhere, is drafting Corruption Guidance. Perhaps those old cartoons were on to something?
• More evidence that when it comes to cloud computing, no one knows what to do.
• People do bad things on the internet? Say it 'aint so.
• For those of you who have watched one too many Pirates movie (is there really another one?), and for those of us who have day dreamed about high stakes treasure theft  (did I just share too much?), this is your warning.
• Its OK to Laugh.

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This post was written by Rosanne Kay and Emma Osborne.

The first person to be charged under the new UK Bribery Act, a magistrates court clerk, was convicted by Southwark Crown Court on Friday, 14 October 2011.

The court clerk, 22 year old Mr Munir Yakub Patel, was convicted under Section 2 of the Bribery Act for requesting and receiving a bribe intending to improperly perform his functions. The court heard that Mr Patel agreed to use his position at Redbridge magistrates court to prevent a traffic penalty from being entered onto a court database in exchange for £500.

Mr Patel was bailed until 11 November 2011, when he will be sentenced.

The case was brought by the Crown Prosecution Service (‘CPS’) which, like the Serious Fraud Office (‘SFO’), can bring prosecutions under the Bribery Act. It is anticipated that the CPS will focus on more domestic prosecutions whilst the SFO will focus on the more complex overseas corruption cases.

Although this is a minor conviction, it marks the start of the jurisprudence under the new Act. However, it will have little bearing on how complex overseas bribery cases will be dealt with or on how contentious parts of the Act relating to jurisdiction and “associated person” will be interpreted. The Act is not retrospective and will only apply to offences committed since it came into force on 1 July 2011. It may therefore take some time before we see the first SFO prosecution under the Act.
 

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This post was written by Cynthia O'Donoghue.

Richard Thomas, the former UK Information Commissioner predicted that the European Commission will issue a regulation rather than a directive as part of the overhaul of the EU data protection directive. Under EU law a regulation has immediate legal effect whereas a directive requires the EU member states to enact implementing legislation. The issuance of a regulation would finally harmonise data protection law across the EU member states. In addition Richard Thomas predicted that the issuance of a regulation would result in a standardised registration process for data controllers across the EU. Richard Thomas made his predictions at the 10th Annual Data Protection Compliance Conference which took place last week in London.

At the same conference the current Information Commissioner, Christopher Graham, complained about not having statutory powers to carry out audits in sectors that receive the most complaints and which cause him the most concern. Commissioner Graham’s complaint stems from the fact that under the UK Data Protection Act 1998 he must seek permission from organisations before being able to carry out an audit of their data protection practices. Commissioner Graham is seeking to extend his powers under the Coroners and Justice Act 2009 so that he can target those sectors most complained about which include car insurance companies and banking and building societies.
 

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This post was written by Amy J. Greer.

After his conviction on 14 counts of securities fraud and conspiracy in what has been described as the biggest insider trading case ever - and, by his defense counsel, John Dowd as a “victory,” since he didn’t get convicted on all counts - today Galleon founder Raj Rajaratnam was sentenced to 132 months, or 11 years in prison, for his massive insider trading scheme.

This sentence represents the longest of the string of sentences handed down this year in connection with this trading ring. Former hedge fund trader Zvi Goffer, another link in the conspiracy’s chain, was sentenced on September 21, 2011 to 10 years, so it was widely expected that Raj would get a longer term.

Prior to sentencing, in an effort to reduce the sentencing guideline range, a complex calculation that takes many factors into consideration - but probably most important here, the amount at issue as a result of the unlawful trading - Raj’s lawyers made pitches to the court in an effort to reduce the ill gotten gains or losses avoided. The prosecution’s numbers were in excess of $70 million; the defense was at under $8 million. There was also much discussion about Rajaratnam’s health issues, also a potential consideration for a sentencing court.

Given that Raj was looking at a sentence in excess of 20 years, perhaps this is where his defense team can finally claim some actual victory. While the crimes for which they were convicted differ, the treatment of white collar criminal defendants in the financial fraud/securities area are often compared and, after all, Dennis Kozlowski is doing 8 to 25 in New York State prison, Jeffrey Skilling, who won at the United States Supreme Court, is doing more than 24 years in a federal penitentiary; more recently, Lee Farkas got 30 years for a mortgage fraud scheme, and then, of course, there’s Madoff’s 150 year sentence.

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