[Federal Register Volume 61, Number 130 (Friday, July 5, 1996)]
[Rules and Regulations]
[Pages 35115-35122]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16510]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 367

RIN 3064-AB76


Suspension and Exclusion of Contractors and Termination of 
Contracts

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Interim final rule; request for comments.

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SUMMARY: The Board of Directors of the Federal Deposit Insurance 
Corporation (FDIC or Corporation) is adopting an interim final rule 
concerning suspension and exclusion of FDIC contractors and termination 
of contracts. The interim final rule is adopted pursuant to section 
12(f) (4) and (5) of the Federal Deposit Insurance Act (FDI Act), and 
the rule-making authority of the FDIC found at section 9 of the Act. 
Additional provisions implementing these statutory directives appear in 
the FDIC's regulation, as published in the Federal Register on June 6, 
1996, governing contractor conflicts of interest and the requirements 
that FDIC contractors meet minimum standards of competence, experience, 
fitness and integrity. This interim final rule is a companion to the 
conflict of interest regulation in that it sets forth procedures for 
the suspension and/or exclusion of contractors that have violated the 
conflicts of interest regulations (and hence, fail to meet minimum 
standards of fitness and integrity), or have otherwise acted in a 
manner warranting such action. In addition to FDIC contractors, this 
interim final rule also applies to subcontractors, key employees, 
management officials and affiliated business entities of FDIC 
contractors (all such terms are defined herein), and is designed to 
inform such contractors regarding their rights to notice and an 
opportunity to be heard on FDIC suspension and exclusion actions.

DATES: Effective date. This interim final rule is effective July 5, 
1996.

    Comment period date. Comments must be received on or before 
September 3, 1996.

ADDRESSES: Send written comments to Jerry L. Langley, Executive 
Secretary, FDIC, 550 17th Street, NW., Washington, DC 20429. Comments 
may be hand-delivered to room 400, 1776 F Street, NW., Washington, DC 
20429 on business days between 8:30 a.m. and 5:00 p.m. (FAX number: 
(202) 898-3604; Internet: <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="690a0604040c071d1a292f2d202a470e061f">[email protected]</a>). Comments will be 
available for inspection and photocopying in the FDIC Public 
Information Center, room 100, 801 17th Street, NW., Washington, DC 
20429, between 9:00 a.m. and 5:00 p.m. on business days.

FOR FURTHER INFORMATION CONTACT: Peter A. Ziebert, Counsel, Legal 
Division, (202) 736-0742; or Richard M. Handy, Assistant Executive 
Secretary (Ethics), Office of the Executive Secretary, (202) 898-7271.

SUPPLEMENTARY INFORMATION:

I. Background

    This interim final rule sets forth standards and procedures 
governing suspension and exclusion of FDIC contractors, which includes 
subcontractors, management officials, key employees and affiliated 
business entities of such contractors, for violations of 12 CFR part 
366, the FDIC's contractor conflict of interest regulation (61 FR 
28725, June 6, 1996). This interim final rule also provides for the 
termination of awarded contracts of FDIC contractors. For the most 
part, this rule is modeled after the suspension and exclusion 
regulation used by the Resolution Trust Corporation (RTC) until RTC 
sunset on December 31, 1995, which had been codified at 12 CFR part 
1618. This rule also bears similarity to the suspension and debarment 
procedures utilized by other federal entities, which have been 
developed after extensive public comment and

[[Page 35116]]

have withstood considerable judicial scrutiny. However, as discussed 
below, the rule departs in certain respects from the procedures used by 
other federal entities because the FDIC is not subject to the Federal 
Acquisition Regulation (FAR). The rule also revises the former RTC 
regulation in several ways as the FDIC now promulgates its own 
suspension and exclusion regulation.
    Generally, this rule provides for more expedited and less formal 
procedures than are used by other federal agencies, while at the same 
time satisfying due process requirements regarding notice and an 
opportunity to be heard. These expedited procedures are necessary due 
to the urgent need to protect the FDIC and the public interest against 
further dissipation of assets now under FDIC control and previously 
under RTC control.
    As noted above, FDIC has a statutory mandate to be vigilant in 
enforcing the highest ethical standards for its contractors. 
Accordingly, it is imperative that contractor suspension and exclusion 
proceedings be processed as expeditiously as possible consistent with 
due process requirements that affected contractors be afforded notice 
and an opportunity to be heard on such enforcement actions.

II. Summary of the Interim Final Rule

    The regulation is comprised of 20 sections. Section 367.1 covers 
the authority, purpose, scope and application of the regulation. It 
makes clear that the regulation applies to contractors other than 
attorneys or law firms that provide services or enter into contracts to 
provide services to the FDIC acting in any capacity. The regulation is 
effective as of the date of publication in the Federal Register for 
reasons set out in section III, below. Moreover, the regulation applies 
to actions initiated by the FDIC on or after the effective date 
regardless of the date of the cause giving rise to such actions. 
Finally, Sec. 367.1 provides that this regulation supersedes and 
replaces the RTC suspension and exclusion regulation (12 CFR part 1618) 
and that RTC actions taken under that part will be honored as if taken 
by the FDIC.
    Section 367.2 contains the definitions to be used in this part. The 
definitions are generally based on the commonly accepted definitions 
used in the FDIC's conflict of interest regulation (12 CFR part 366) or 
by other federal entities. Key terms that are defined here include 
affiliated business entity, conflict of interest, contract, contractor, 
control, key employee, management official, pattern or practice of 
defalcation, subcontractor, and substantial loss to federal deposit 
insurance funds.
    Section 367.3 identifies the appropriate officials in the FDIC 
suspension and debarment program. The FDIC ``Ethics Counselor'' (FDIC 
Executive Secretary) is the official responsible for rendering 
suspension and exclusion decisions. The ``Corporation Ethics 
Committee'' provides a review forum of any suspension or exclusion 
decision appealed by a contractor.
    Section 367.4 is reserved.
    Section 367.5 covers exclusions. Contractors excluded from FDIC 
contracting are prohibited from entering into any new contracts with 
FDIC for the duration of the exclusion period. The FDIC shall not 
solicit offers from, award contracts to, extend or modify existing 
contracts, award task orders under existing contracts, or consent to 
subcontracts with excluded contractors.
    Section 367.5 (b)(1) sets forth a significant change in the 
regulation from the FAR-based debarment and suspension regulation, and 
from the former RTC regulation. FDIC exclusion actions will only become 
effective upon the Ethics Counselor's decision to exclude a contractor 
after the contractor has received written notice of a possible cause to 
exclude from FDIC and has had an opportunity to respond. In other 
words, a contractor's receipt of a notice of possible cause to exclude 
does not act as an exclusion from the FDIC contracting program. This 
provision provides contractors with ample due process as the exclusion 
matter is considered.
    Section 367.6 sets forth 13 causes for exclusion, which generally 
parallel the former RTC regulations. There are four mandatory causes 
for exclusion set forth at Sec. 367.6 (a) (1) through (4); the 
remainder are discretionary bases for which exclusion may be warranted 
if a violation is established by a preponderance of the evidence.
    Section 367.7 covers suspensions. The same contracting prohibitions 
apply to suspended contractors as is the case with excluded 
contractors. An important distinction in the regulation, however, is 
that a suspension action shall become effective immediately upon 
issuance of a notice of suspension, which as noted above differs from 
the notice of possible cause to exclude. Suspensions will be used when 
immediate action is necessary to protect the integrity of the FDIC 
contracting program and/or the security of FDIC assets during the 
pendency of legal or investigative proceedings against a contractor.
    Section 367.8 lists causes for suspension. Suspensions will be 
imposed upon a showing of adequate evidence of any of the causes listed 
in Sec. 367.7.
    Section 367.9 provides that causes to suspend and/or exclude a 
contractor can be imputed between a contractor and its affiliated 
business entities, key employees, management officials, joint venture 
partners, and subcontractors.
    Sections 367.10-.11 are reserved.
    Section 367.12 states that FDIC suspension and exclusion actions 
shall be processed as informally as practicable, consistent with due 
process considerations.
    Section 367.13 covers the issuance of the notice of possible cause 
to exclude, and notice of suspension, and the information that will be 
set forth therein.
    Section 367.14 covers contractor responses to such notices and 
clearly states that the contractor shall have 15 days from the date of 
the notice within which to respond.
    Section 367.15 addresses those situations where additional 
proceedings may be held, as determined by the Ethics Counselor, in 
situations where the contractor's response raises a genuine dispute 
over material facts. In such cases, the contractor shall be afforded 
the opportunity to appear (with counsel if desired) before the FDIC.
    Section 367.16 covers the Ethics Counselor's decisions in 
suspension and exclusion matters. It sets forth the information that 
will be included in a suspension or exclusion decision and makes clear 
that any exclusion decision rendered pursuant to this provision shall 
include a period of exclusion.
    Section 367.17 provides further information as to the period of 
suspension or exclusion.
    Section 367.18 covers abrogation of contracts (i.e., termination or 
recision) as an additional remedy for the FDIC.
    Section 367.19 sets forth procedures regarding exceptions to 
suspensions and exclusions and makes clear that such exceptions are 
only available in unique circumstances when there is a compelling 
reason to utilize a particular contractor for a specific task.
    Section 367.20 sets forth the procedures for the review and 
reconsideration of Ethics Counselor decisions to the Corporation Ethics 
Committee.

III. Administrative Procedure Act

    The FDIC is adopting this regulation as an interim final rule 
effective upon publication in the Federal Register without the usual 
notice-and-comment period or delayed effective date as

[[Page 35117]]

provided for under the Administrative Procedure Act. 5 U.S.C. 551, et 
seq. (APA). The APA requirements may be waived for ``good cause.''
    Promulgation of the regulation on an expedited basis is necessary 
due to the urgent need to protect the FDIC and the public interest 
against further dissipation of the assets now under FDIC control, and 
formerly under RTC control, as a consequence of the resolution of 
hundreds of failed savings associations. Furthermore, many FDIC 
contractors have in their possession extremely valuable documents and 
legal instruments which can be readily converted to private gain.
    The Financial Institutions Reform, Recovery, and Enforcement Act of 
1989 (FIRREA) has imposed a duty on the FDIC to be vigilant and 
aggressive in enforcing the highest ethical standards for its 
independent contractors. Accordingly, it is imperative that a 
regulation be immediately adopted setting forth policies and procedures 
pertaining to the suspension or exclusion of FDIC contractors that have 
been found to have violated those standards. The cost of any delay in 
promulgating the regulation would ultimately be borne by the taxpaying 
public in terms of additional erosion in the value of the assets under 
FDIC control.

IV. Regulatory Flexibility Analysis

    The Board of Directors has concluded that the interim final rule 
will not impose a significant economic hardship on small institutions. 
Therefore, the Board of Directors hereby certifies pursuant to section 
605 of the Regulatory Flexibility Act (5 U.S.C. 605) that the interim 
final rule will not have a significant economic impact on a substantial 
number of small business entities within the meaning of the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.). Therefore, the provisions of 
that Act relating to an initial and final regulatory flexibility 
analysis do not apply.

V. Paperwork Reduction Act

    No collections of information pursuant to the Paperwork Reduction 
Act are contained in this interim final rule. Therefore, no information 
has been submitted to the Office of Management and Budget (OMB) for 
review.
    For the above reasons, the FDIC finds that the benefits to the 
public in adopting the interim rule outweigh any harm from the delay in 
seeking public comment. The FDIC actively solicits comments from the 
public and will carefully evaluate and act upon any such comments 
before adopting the rule as final within 60 days after the close of the 
public comment period.

List of Subjects in 12 CFR Part 367

    Administrative practice and procedure, Conflict of interest, 
Government contracts.

    For the reasons set out in the preamble, FDIC adds part 367 to 
title 12, chapter III of the Code of Federal Regulations to read as 
follows:

PART 367--SUSPENSION AND EXCLUSION OF CONTRACTORS AND TERMINATION 
OF CONTRACTS

Sec.
367.1 Authority, purpose, scope and application.
367.2 Definitions.
367.3 Appropriate officials.
367.4 [Reserved]
367.5 Exclusions.
367.6 Causes for exclusion.
367.7 Suspensions.
367.8 Causes for suspension.
367.9 Imputation of causes.
367.10-367.11 [Reserved]
367.12 Procedures.
367.13 Notices.
367.14 Responses.
367.15 Additional proceedings as to disputed material facts.
367.16 Ethics Counselor decisions.
367.17 Duration of suspensions and exclusions.
367.18 Abrogation of contracts.
367.19 Exceptions to suspensions and exclusions.
367.20 Review and reconsideration of Ethics Counselor decisions.

    Authority: 12 U.S.C. 1822(f) (4) and (5).


Sec. 367.1  Authority, purpose, scope and application.

    (a) Authority. This part is adopted pursuant to section 12(f) (4) 
and (5) of the Federal Deposit Insurance Act, 12 U.S.C. 1822(f) (4) and 
(5), and the rule-making authority of the Federal Deposit Insurance 
Corporation (FDIC) found at 12 U.S.C. 1819. Other regulations 
implementing these statutory directives appear at 12 CFR part 366.
    (b) Purpose. This part is designed to inform contractors and 
subcontractors (including their affiliated business entities, key 
employees and management officials) regarding their rights to notice 
and an opportunity to be heard on FDIC actions involving suspension and 
exclusion from contracting and rescission of existing contracts. This 
part is in addition to, and not in lieu of, any other statute or 
regulation that may apply to such contractual activities.
    (c) Scope. (1) This part applies to:
    (i) Contractors, other than attorneys or law firms providing legal 
services, submitting offers to provide services or entering into 
contracts to provide services to the FDIC acting in any capacity; and
    (ii) Subcontractors entering into contracts to perform services 
under a proposed or existing contract with the FDIC.
    (d) Application. (1) This part will apply to entities that become 
contractors, as defined in Sec. 367.2(f), on or after July 5, 1996. In 
addition, this part will apply to contractors as defined in 
Sec. 367.2(f) that are performing contracts on July 5, 1996.
    (2) This part will also apply to actions initiated on or after July 
5, 1996 regardless of the date of the cause giving rise to the actions.
    (3) Contracts entered into by the former Resolution Trust 
Corporation (RTC) that were transferred to the FDIC will be treated in 
the same manner as FDIC contracts under this part.
    (4) This part supersedes and replaces the former RTC regulation 
relating to suspension and exclusion of registered contractors and 
rescission of contracts in effect through December 31, 1995. RTC 
actions taken under the RTC regulation will be honored as if taken by 
the FDIC. A contractor subject to an RTC exclusion or suspension will 
be precluded thereby from participation in the FDIC's contracting 
program unless that exclusion or suspension is modified or terminated 
under the provision of this part.


Sec. 367.2  Definitions.

    (a) Adequate evidence means information sufficient to support the 
reasonable belief that a particular act or omission has occurred.
    (b) Affiliated business entity means a company that is under the 
control of the contractor, is in control of the contractor, or is under 
common control with the contractor.
    (c) Civil judgment means a judgment of a civil offense or liability 
by any court of competent jurisdiction in the United States.
    (d) Company means any corporation, firm, partnership, society, 
joint venture, business trust, association, consortium or similar 
organization.
    (e) Conflict of interest means a situation in which:
    (1) A contractor; any management officials or affiliated business 
entities of a contractor; or any employees, agents, or subcontractors 
of a contractor who will perform services under a proposed or existing 
contract with the FDIC:
    (i) Has one or more personal, business, or financial interests or 
relationships which would cause a reasonable individual with knowledge 
of the relevant facts to question the integrity or impartiality of 
those who are

[[Page 35118]]

or will be acting under a proposed or existing FDIC contract;
    (ii) Is an adverse party to the FDIC, RTC, Federal Savings and Loan 
Insurance Corporation (FSLIC), or their successors in a lawsuit; or
    (iii) Has ever been suspended, excluded, or debarred from 
contracting with a federal entity or has ever had a contract with the 
FDIC, RTC, FSLIC or their successors rescinded or terminated prior to 
the contract's completion and which rescission or termination involved 
issues of conflicts of interest or ethical responsibilities; or
    (2) Any other facts exist which the FDIC, in its sole discretion, 
determines may, through performance of a proposed or existing FDIC 
contract, provide a contractor with an unfair competitive advantage 
which favors the interests of the contractor or any person with whom 
the contractor has or is likely to have a personal or business 
relationship.
    (f) Contractor means a person or company which has submitted an 
offer to perform services for the FDIC or has a contractual arrangement 
with the FDIC to perform services. For purposes of this part, 
contractor also includes:
    (1) A contractor's affiliated business entities, key employees, and 
management officials of the contractor;
    (2) Any subcontractor performing services for the FDIC and the 
management officials and key employees of such subcontractors; and
    (3) Any entity or organization seeking to perform services for the 
FDIC as a minority or woman-owned business (MWOB).
    (g) Contract(s) means agreement(s) between FDIC and a contractor, 
including, but not limited to, agreements identified as ``task 
orders'', for a contractor to provide services to FDIC. Contracts also 
mean contracts between a contractor and its subcontractor.
    (h) Control means the power to vote, directly or indirectly, 25 
percent or more of any class of the voting stock of a company; the 
ability to direct in any manner the election of a majority of a 
company's directors or trustees; or the ability to exercise a 
controlling influence over the company's management and policies. For 
purposes of this definition, a general partner of a limited partnership 
is presumed to be in control of that partnership.
    (i) Conviction means a judgment or conviction of a criminal offense 
by any court of competent jurisdiction, whether entered upon a verdict 
or plea, and includes pleas of nolo contendere.
    (j) FDIC means the Federal Deposit Insurance Corporation acting in 
its receivership and corporate capacities, and FDIC officials or 
committees acting under delegated authority.
    (k) Indictment shall include an information or other filing by a 
competent authority charging a criminal offense.
    (l) Key employee means an individual who participates personally 
and substantially in the negotiation of, performance of, and/or 
monitoring for compliance under a contract with the FDIC. Such 
participation is made through, but is not limited to, decision, 
approval, disapproval, recommendation, or the rendering of advice under 
the contract.
    (m) Management official means any shareholder, employee or partner 
who controls a company and any individual who directs the day-to-day 
operations of a company. With respect to a partnership, all partners 
are deemed to be management officials unless the partnership is 
governed by a management or executive committee with responsibility for 
the day-to-day operations. In partnerships with such committees, 
management official means only those partners who are a member of such 
a committee.
    (n) Material fact means one that is necessary to determine the 
outcome of an issue or case and without which the case could not be 
supported.
    (o) Offer means a proposal or other written or oral offer to 
provide services to FDIC.
    (p) Pattern or practice of defalcation regarding obligations means 
two or more instances in which a loan or advance from an insured 
depository institution:
    (1) Is in default for ninety (90) or more days as to payment of 
principal, interest, or a combination thereof, and there remains a 
legal obligation to pay an amount in excess of $50,000; or
    (2) Where there has been a failure to comply with the terms of a 
loan or advance to such an extent that the collateral securing the loan 
or advance was foreclosed upon, resulting in a loss in excess of 
$50,000 to the insured depository institution.
    (q) Preponderance of the evidence means proof by information that, 
compared with that opposing it, leads to the conclusion that the fact 
at issue is more probably true than not.
    (r) Subcontractor means an entity or organization that enters into 
a contract with an FDIC contractor or another subcontractor to perform 
services under a proposed or existing contract with the FDIC.
    (s) Substantial loss to federal deposit insurance funds means:
    (1) A loan or advance from an insured depository institution, which 
is currently owed to the FDIC, RTC, FSLIC or their successors, or the 
Bank Insurance Fund (BIF), the Savings Association Insurance Fund 
(SAIF), the FSLIC Reserve Fund (FRF), or funds that were maintained by 
the RTC for the benefit of insured depositors, that is or has ever been 
delinquent for ninety (90) or more days as to payment of principal, 
interest, or a combination thereof and on which there remains a legal 
obligation to pay an amount in excess of $50,000;
    (2) An obligation to pay an outstanding, unsatisfied, final 
judgment in excess of $50,000 in favor of the FDIC, RTC, FSLIC, or 
their successors, or the BIF, the SAIF, the FRF or the funds that were 
maintained by the RTC for the benefit of insured depositors; or
    (3) A loan or advance from an insured depository institution which 
is currently owed to the FDIC, RTC, FSLIC or their successors, or the 
BIF, the SAIF, the FRF or the funds that were maintained by the RTC for 
the benefit of insured depositors, where there has been a failure to 
comply with the terms to such an extent that the collateral securing 
the loan or advance was foreclosed upon, resulting in a loss in excess 
of $50,000.


Sec. 367.3  Appropriate officials.

    (a) The Ethics Counselor is the Executive Secretary of the FDIC. 
The Ethics Counselor shall act as the official responsible for 
rendering suspension and exclusion decisions under this part. In 
addition to taking suspension and/or exclusion action under this part, 
the Ethics Counselor has authority to terminate exclusion and 
suspension proceedings. As used in this part, ``Ethics Counselor'' 
includes any official designated by the Ethics Counselor to act on the 
Ethics Counselor's behalf.
    (b) The Corporation Ethics Committee is the committee appointed by 
the Chairman of the FDIC, or Chairman's designee, which provides review 
of any suspension or exclusion decision rendered by the Ethics 
Counselor that is appealed by a contractor who has been suspended and/
or excluded from FDIC contracting.
    (c) Information concerning the possible existence of any cause for 
suspension or exclusion shall be reported to the Office of the 
Executive Secretary (Ethics Section). This part does not modify the 
responsibility to report allegations of fraud, waste and abuse, 
including but not limited to criminal violations, to the Office of 
Inspector General.

[[Page 35119]]

Sec. 367.4  [Reserved]


Sec. 367.5  Exclusions.

    (a) The Ethics Counselor may exclude a contractor from the FDIC 
contracting program for any of the causes set forth in Sec. 367.6, 
using procedures established in this part.
    (b) Exclusion is a serious action to be imposed when a contractor 
has violated one or more of the causes set forth in Sec. 367.6. 
Contractors excluded from FDIC contracting programs are prohibited from 
entering into any new contracts with FDIC for the duration of the 
period of exclusion as determined pursuant to this part. The FDIC shall 
not solicit offers from, award contracts to, extend or modify existing 
contracts, award task orders under existing contracts, or consent to 
subcontracts with such contractors. Excluded contractors are also 
prohibited from conducting business with FDIC as agents or 
representatives of other contractors.
    (c) Exclusion actions do not become effective upon the notification 
of the contractor that there is a possible cause to exclude under 
Sec. 367.13. Rather, they become effective only upon the Ethics 
Counselor's decision to exclude the contractor pursuant to Sec. 367.16.
    (d) The causes for exclusion set forth in Sec. 367.6(a)(1) through 
(4) reflect statutorily established mandatory bars to contracting with 
the FDIC.
    (e) Except when one or more of the statutorily established 
mandatory bars to contracting are shown to exist, the existence of a 
cause for exclusion does not necessarily require that the contractor be 
excluded; the seriousness of the contractor's acts or omissions and any 
mitigating or aggravating circumstances shall be considered in making 
any exclusion decision.


Sec. 367.6  Causes for exclusion.

    The FDIC may exclude a contractor, in accordance with the 
procedures set forth in this part, upon a finding that:
    (a) The contractor has been convicted of any felony;
    (b) The contractor has been removed from, or prohibited from 
participating in the affairs of, any insured depository institution 
pursuant to any final enforcement action by the Office of the 
Comptroller of the Currency, the Office of Thrift Supervision, the 
Board of Governors of the Federal Reserve System, or the Federal 
Deposit Insurance Corporation or their successors;
    (c) The contractor has demonstrated a pattern or practice of 
defalcation;
    (d) The contractor has caused a substantial loss to Federal deposit 
insurance funds;
    (e) The contractor has failed to disclose, pursuant to 12 CFR 
366.6, a material fact to the FDIC;
    (f) The contractor has failed to disclosed any material adverse 
change in the representations and certifications provided to FDIC under 
12 CFR 366.6;
    (g) The contractor has miscertified its status as a minority and/or 
woman owned business (MWOB);
    (h) The contractor has a conflict of interest that was not waived 
by the Ethics Counselor or designee;
    (i) The contractor has been subject to a final enforcement action 
by any federal financial institution regulatory agency, or has 
stipulated to such action;
    (j) The contractor is debarred from participating in other federal 
programs;
    (k) The contractor has been convicted of, or subject to a civil 
judgment for:
    (1) Commission of fraud or a criminal offense in connection with 
obtaining, attempting to obtain, or performing a public or private 
agreement or transaction, or conspiracy to do the same;
    (2) Violation of federal or state antitrust statutes, including 
those proscribing price fixing between competitors, allocation of 
customers between competitors, and bid rigging, or conspiracy to do the 
same;
    (3) Commission of embezzlement, theft, forgery, bribery, 
falsification or destruction of records, making false statements, 
receiving stolen property, making false claims, obstructing of justice, 
or conspiracy to do the same;
    (4) Commission of any other offense indicating a breach of trust, 
dishonesty or lack of integrity, or conspiracy to do the same;
    (l) The contractor's performance under previous contract(s) with 
FDIC or RTC has resulted in:
    (1) The FDIC or RTC declaring such contract(s) to be in default;
    (2) The termination of such contract(s) for poor performance; or
    (3) A violation of the terms of a contract that would have resulted 
in a default or termination of the contract for poor performance if 
that violation had been discovered during the course of the contract; 
or
    (m) The contractor has engaged in any conduct:
    (1) Indicating a breach of trust, dishonesty, or lack of integrity 
that seriously and directly affects its ability to meet standards of 
present responsibility required of an FDIC contractor; or
    (2) So serious or compelling in nature that it adversely affects 
the ability of a contractor to meet the minimum ethical standards 
required by 12 CFR part 366.


Sec. 367.7  Suspensions.

    (a) The Ethics Counselor may suspend a contractor for any of the 
causes in Sec. 367.8 using the procedures established in this section.
    (b) Suspension is an action to be imposed when there exists 
adequate evidence of one or more of the causes set out in Sec. 367.8. 
This includes, but is not limited to, situations where immediate action 
is necessary to protect the integrity of the FDIC contracting program 
and/or the security of FDIC assets during the pendency of legal or 
investigative proceedings initiated by FDIC, any federal agency or any 
law enforcement authority.
    (c) The duration of any suspension action shall be for a temporary 
period pending the completion of an investigation and such other legal 
proceedings as may ensue.
    (d) A suspension shall become effective immediately upon issuance 
of the notice specified in Sec. 367.13(b).
    (e) Contractors suspended from FDIC contracting programs are 
prohibited from entering into any new contracts with the FDIC for the 
duration of the period of suspension. The FDIC shall not solicit offers 
from, award contracts to, extend or modify existing contracts, award 
task orders under existing contracts, or consent to subcontracts with 
such contractors. Suspended contractors are also prohibited from 
conducting business with FDIC as agents or representatives of other 
contractors.


Sec. 367.8  Causes for suspension.

    (a) Suspension may be imposed under the procedures set forth in 
this section upon adequate evidence:
    (1) Of suspension by another federal agency;
    (2) That a cause for exclusion under Sec. 367.6 may exist;
    (3) Of the commission of any other offense indicating a breach of 
trust, dishonesty, or lack of integrity that seriously and directly 
affects the minimum ethical standards required of an FDIC contractor; 
or
    (4) Of any other cause so serious or compelling in nature that it 
adversely affects the ability of a contractor to meet the minimal 
ethical standards required by 12 CFR part 366.
    (b) Indictment for any offense described in Sec. 367.6 is adequate 
evidence to suspend a contractor.
    (c) In assessing the adequacy of the evidence, FDIC will consider 
how much information is available, how credible it is given the 
circumstances, whether or not important allegations are corroborated 
and what inferences can reasonably be drawn as a result.

[[Page 35120]]

Sec. 367.9  Imputation of causes.

    (a) Where there is cause to suspend and/or exclude any affiliated 
business entity of the contractor, that conduct may be imputed to the 
contractor if the conduct occurred in connection with the affiliated 
business entity's performance of duties for or on behalf of the 
contractor, or with the contractor's knowledge, approval, or 
acquiescence. The contractor's acceptance of the benefits derived from 
the conduct shall be evidence of such knowledge, approval, or 
acquiescence.
    (b) Where there is cause to suspend and/or exclude any contractor, 
that conduct may be imputed to any affiliated business entity, key 
employee, or management official of a contractor who participated in, 
knew of or had reason to know of the contractor's conduct.
    (c) Where there is cause to suspend and/or exclude a key employee 
or management official of a contractor, that cause may be imputed to 
the contractor if the conduct occurred in connection with the key 
employee or management official's performance of duties for or on 
behalf of the contractor, or with the contractor's knowledge, approval, 
or acquiescence. The contractor's acceptance of the benefits derived 
from the conduct shall be evidence of such knowledge, approval, or 
acquiescence.
    (d) Where there is cause to suspend and/or exclude one contractor 
participating in a joint venture or similar arrangement, that cause may 
be imputed to other participating contractors if the conduct occurred 
for or on behalf of the joint venture or similar arrangement, or with 
the knowledge, approval, or acquiescence of these contractors. 
Acceptance of the benefits derived from the conduct shall be evidence 
of such knowledge, approval, or acquiescence.
    (e) Where there is cause to suspend and/or exclude a subcontractor, 
that cause may be imputed to the contractor for which the subcontractor 
performed services, if the conduct occurred for or on behalf of the 
contractor and with the contractor's knowledge, approval, or 
acquiescence. Acceptance of the benefits derived from the conduct shall 
be evidence of such knowledge, approval, or acquiescence.


Secs. 367.10-367.11  [Reserved]


Sec. 367.12  Procedures.

    (a) FDIC shall process suspension and exclusion actions as 
informally as practicable, consistent with its policy of providing 
contractors with adequate information on the grounds that give rise to 
the proposed action and affording contractors with a reasonable 
opportunity to respond.
    (b) For purposes of determining filing dates for the pleadings 
required by this part, including responses, notices of appeal, appeals 
and requests for reconsideration, the provisions relating to the 
construction of time limits in 12 CFR 308.12 will control.


Sec. 367.13  Notices.

    (a) Exclusions. Before excluding a contractor, the FDIC shall send 
it a written notice of possible cause to exclude. Such notice shall 
include:
    (1) Notification that exclusion for a specified period of time is 
being considered based on the specified cause(s) in Sec. 367.6 to be 
relied upon;
    (2) Identification of the event(s), circumstance(s), or 
condition(s) that indicates that there is cause to believe a cause for 
exclusion exists, described in sufficient detail to put the contractor 
on notice of the conduct or transaction(s) upon which an exclusion 
proceeding is based;
    (3) Notification that the contractor is not prohibited from 
contracting with the FDIC unless and until it is either suspended from 
FDIC contracting or the FDIC Ethics Counselor issues a decision 
excluding the contractor, provided however, in any case where the 
possible cause for exclusion would also be an impediment to the 
contractor's eligibility pursuant to 12 CFR part 366, the contractor's 
eligibility for any contract will be determined under that part; and
    (4) Notification of the regulatory provisions governing the 
exclusion proceeding and the potential effect of a final exclusion 
decision.
    (b) Suspensions. Before suspending a contractor, the FDIC shall 
send it notice, including:
    (1) Notice that a suspension is being imposed based on specified 
causes in Sec. 367.8;
    (2) Identification of the event(s), circumstance(s), or 
condition(s) that indicate that there is adequate evidence to believe a 
cause for suspension exists, described in sufficient detail to put the 
contractor on notice of the basis for the suspension, recognizing that 
the conduct of ongoing investigations and legal proceedings, including 
criminal proceedings, place limitations on the evidence that can be 
released;
    (3) Notification that the suspension prohibits the contractor from 
contracting with the FDIC for a temporary period, pending the 
completion of an investigation or other legal proceedings; and
    (4) Notification of the regulatory provisions governing the 
suspension proceeding.
    (c) Service of notices. Notices will be sent to the contractor by 
first class mail, postage prepaid. For purposes of compliance with this 
section, notice shall be considered to have been received by the 
contractor if the notice is properly mailed to the last known address 
of such contractor. Whenever practical, a copy of the notice will also 
be transmitted to the contractor by facsimile. In the event the notice 
is not sent by facsimile, a copy will be sent by an overnight delivery 
service such as Express Mail or a commercial equivalent.


Sec. 367.14  Responses.

    (a) The contractor will have 15 days from the date of the notice 
within which to respond.
    (b) The response shall be in writing and may include: information 
and argument in opposition to the proposed exclusion and/or suspension, 
including any additional specific information pertaining to the 
possible causes for exclusion; and information and argument in 
mitigation of the proposed period of exclusion.
    (c) The response may request a meeting with an FDIC official 
identified in the notice to permit the contractor to discuss issues of 
fact or law relating to the suspension and/or proposed exclusion or to 
otherwise resolve the pending matters.
    (1) Any such meetings between a contractor and FDIC shall take such 
form as the FDIC deems appropriate.
    (2) In cases of suspensions, no meeting will be held where a 
representative of the Department of Justice has advised in writing that 
the substantial interests of the Government would be prejudiced by such 
a meeting and the Ethics Counselor determines that a suspension is 
based on the same facts as pending or contemplated legal proceedings 
referenced by the representative of the Department of Justice.
    (d) Failure to respond to the notice shall be deemed an admission 
of the existence of the cause(s) for suspension and/or exclusion set 
forth in the notice and an acceptance of the period of exclusion 
proposed therein. In such circumstances, the FDIC may proceed to a 
final decision without further proceedings.
    (e) Where a contractor has received more than one notice, the FDIC 
may consolidate the pending proceedings, including the scheduling of 
any meetings, in accordance with this section.

[[Page 35121]]

Sec. 367.15  Additional proceedings as to disputed material facts.

    (a) In actions not based upon a conviction or civil judgment, if 
the Ethics Counselor finds that the contractor's submission raises a 
genuine dispute over facts material to the proposed suspension and/or 
exclusion, the contractor shall be afforded an opportunity to appear 
(with counsel, if desired), submit documentary evidence, present 
witnesses, and confront any witnesses the FDIC presents.
    (b) The Ethics Counselor may refer disputed material facts to 
another official for analysis and recommendation.
    (c) If requested, a transcribed record of any additional 
proceedings shall be made available at cost to the contractor.


Sec. 367.16  Ethics Counselor decisions.

    (a) Standard of proof:
    (1) An exclusion must be based on a finding that the cause(s) for 
exclusion is established by a preponderance of the evidence in the 
administrative record of the case; and
    (2) A suspension must be based on a finding that the cause(s) for 
suspension is established by adequate evidence in the administrative 
record of the case.
    (b) The administrative record consists of the portion of any 
information, reports, documents or other evidence identified and relied 
upon in the Notice of Possible Cause to Exclude, the Notice of 
Suspension and/or supplemental Notices, if any, together with any 
material portions of the contractor's response. When additional 
proceedings are necessary to determine disputed material facts, the 
Ethics Counselor shall base the decision on the facts as found, 
together with any information and argument submitted by the contractor 
and any other information in the administrative record.
    (c) In actions based upon a conviction, judgment, a final 
enforcement action by a federal financial institution regulatory 
agency, or in which all facts and circumstances material to the 
exclusion action have been finally adjudicated in another forum, the 
Ethics Counselor may exclude a contractor without regard to the 
procedures set out in Secs. 367.13 through 367.14. Any such decisions 
will be subject to the review and reconsideration provisions of 
Sec. 367.20.
    (d) Notice of decisions. Contractors shall be given prompt notice 
of the Ethics Counselor's decision in the manner described in 
Sec. 367.13(c). If the Ethics Counselor suspends a contractor or 
imposes a period of exclusion, the decision shall:
    (1) Set forth the cause(s) for suspension and/or exclusion included 
in the Notice that were found by a preponderance of the evidence with 
reference to the administrative record support for that finding;
    (2) Set forth the effect of the exclusion action and the effective 
dates of that action;
    (3) Refer the contractor to its procedural rights of review and 
reconsideration under Sec. 367.20; and
    (4) Inform the contractor that a copy of the exclusion decision 
shall be placed in the FDIC Public Reading Room.
    (e) If the FDIC Ethics Counselor decides that a period of exclusion 
is not warranted, the Notice of Possible Cause to Exclude may be 
withdrawn or the proceeding may be otherwise terminated. A decision to 
terminate an exclusion proceeding may include the imposition of 
appropriate conditions on the contractor in their future dealings with 
the FDIC.


Sec. 367.17  Duration of suspensions and exclusions.

    (a) Suspensions. (1) Suspensions shall be for a temporary period 
pending the completion of an investigation or other legal or exclusion 
proceedings.
    (2) If legal or administrative proceedings are not initiated within 
12 months after the date of the suspension notice, the suspension shall 
be terminated unless a representative of the Department of Justice 
requests its extension in writing. In such cases, the suspension may be 
extended for an additional six months. In no event may a suspension be 
imposed for more than 18 months, unless such proceedings have been 
initiated within that period.
    (3) FDIC shall notify the Department of Justice of an impending 
termination of a suspension at least 30 days before the 12-month period 
expires to give the Department of Justice an opportunity to request an 
extension.
    (4) The time limitations for suspension in this section may be 
waived by the affected contractor.
    (b) Exclusions. (1) Exclusions shall be for a period commensurate 
with the seriousness of the cause(s) after due consideration of 
mitigating evidence presented by the contractor.
    (2) If a suspension precedes an exclusion, the suspension period 
shall be considered in determining the exclusion period.
    (3) Exclusion for causes other than the mandatory bars in 12 CFR 
366.4(a) generally should not exceed three years, but where 
circumstances warrant, a longer period of exclusion may be imposed.
    (4) The Ethics Counselor may extend an existing exclusion for an 
additional period if the Ethics Counselor determines that an extension 
is necessary to protect the integrity of the FDIC contracting program 
and the public interest. However, an exclusion may not be extended 
solely on the basis of the facts and circumstances upon which the 
initial exclusion action was based. The standards and procedures in 
this part shall be applied in any proceeding to extend an exclusion.


Sec. 367.18  Abrogation of contracts.

    (a) The FDIC may, in its discretion, rescind or terminate any 
contract in existence at the time a contractor is suspended or 
excluded.
    (b) Any contract not rescinded or terminated shall continue in 
force in accordance with the terms thereof.
    (c) The right to rescind or terminate a contract in existence is 
cumulative and in addition to any other remedies or rights the FDIC may 
have under the terms of the contract, at law, or otherwise.


Sec. 367.19  Exceptions to suspensions and exclusions.

    (a) Exceptions to the effects of suspensions and exclusions may be 
available in unique circumstances, where there are compelling reasons 
to utilize a particular contractor for a specific task. Requests for 
such exceptions may be submitted only by the FDIC program office 
requesting the contract services.
    (b) In the case of the modification or extension of an existing 
contract, the Ethics Counselor may except such a contracting action 
from the effects of suspension and/or exclusion upon a determination, 
in writing, that a compelling reason exists for utilization of the 
contractor in the particular instance. The Ethics Counselor's authority 
under this section shall not be delegated to any lower official.
    (c) In the case of new contracts, the Corporation Ethics Committee 
may except a particular new contract from the effects of suspension 
and/or exclusion upon a determination in writing that a compelling 
reason exists for utilization of the contractor in the particular 
instance.


Sec. 367.20  Review and reconsideration of Ethics Counselor decisions.

    (a) Review. (1) A suspended and/or excluded contractor may appeal 
the exclusion decision to the Corporation Ethics Committee.
    (2) In order to avail itself of the right to appeal, a suspended 
and/or excluded contractor must file a written notice of intent to 
appeal within 5 days of the Ethics Counselor's decision.

[[Page 35122]]

    (3) The appeal shall be filed in writing within 30 days of the 
decision.
    (4) The Corporation Ethics Committee, at its discretion and after 
determining that it is in the best interests of the FDIC, may stay the 
effect of the suspension and/or exclusion pending conclusion of its 
review of the matter.
    (b) Reconsideration. (1) A suspended and/or excluded contractor may 
submit a request to the Ethics Counselor to reconsider the suspension 
and/or exclusion decision, reduce the period of exclusion or terminate 
the suspension and/or exclusion.
    (2) Such requests shall be in writing and supported by 
documentation that the requested action is justified by:
    (i) Reversal of the conviction or civil judgment upon which the 
suspension and/or exclusion was based;
    (ii) Newly discovered material evidence;
    (iii) Bona fide change in ownership or management;
    (iv) Elimination of other causes for which the suspension and/or 
exclusion was imposed; or
    (v) Other reasons the FDIC Ethics Counselor deems appropriate.
    (3) A request for reconsideration based on the reversal of the 
conviction or civil judgment may be filed at any time.
    (4) Requests for reconsideration based on other grounds may only be 
filed during the period commencing 60 days after the Ethics Counselor's 
decision imposing the suspension and/or exclusion. Only one such 
request may be filed in any twelve month period.
    (5) The Ethics Counselor's decision on a request for 
reconsideration is subject to the review procedure set forth in 
paragraph (a) of this section.

    By order of the Board of Directors.

    Dated at Washington, D.C., this 17th day of June 1996.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Deputy Executive Secretary.
[FR Doc. 96-16510 Filed 7-3-96; 8:45 am]
BILLING CODE 6714-01-P


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