Opinion ID: 524252
Heading Depth: 2
Heading Rank: 2

Heading: FHC's Present Responsibility

Text: 39 Under the applicable regulations, the ultimate inquiry as to present responsibility relates directly to the contractor itself, not to the agent or former agent personally responsible for its past misdeeds. Thus, the contractor can meet the test of present responsibility by demonstrating that it has taken steps to ensure that the wrongful acts will not recur. In re Jerry A. Costacos, GSBCA No. 7547-D (Gen.Serv.Admin.Susp. & Debarment Bd., slip op. April 9, 1985), for example, the Board held that a contractor that continued to employ a debarred individual had, by adopting controls to prevent the employee from becoming involved with or exercising any influence over contracts with the Government, sufficiently negated the possibility that the company would be a future business risk to the Government, and that it could not be debarred for want of present responsibility to be a government contractor. Affording the contractor this opportunity to overcome a blemished past assures that the agency will impose debarment only in order to protect the Government's proprietary interest and not for the purpose of punishment. 40 In this case, Robinson argues that the DLA should have credited the trust arrangement as sufficient, notwithstanding Heydt's past conduct, to establish the company's present responsibility to do business with the Government. Robinson points both to the trust agreement, which gives him full management authority over the company, and to the affidavits of the management employees of FHC stating that Heydt has removed himself from FHC's premises and, to their knowledge, has had no business contact with the company since the effective date of the trust agreement. (Counsel for Robinson represents that the affiants comprise all of FHC's management staff, an extra-record point on which we indulge FHC for present purposes.) 41 The DLA, as noted previously, took the position that without some explanation of the circumstances surrounding the alleged improper conduct by Heydt, it was unable to evaluate the efficacy of the trust in ensuring that such conduct was not likely to recur. That determination was neither arbitrary, nor capricious, nor an abuse of discretion. 42 Fully crediting the company's assurances that the trust agreement left the ultimate decisionmaking authority to someone other than Heydt and that, as of the time the affidavits were sworn, Heydt had little or no contact with the company, the DLA would still have at least two legitimate concerns. First, although the trust agreement gives Robinson direct authority over all company operations, it contains no specific term barring Heydt from either acting on behalf of the company or participating in its management. Therefore this case is unlike Costacos, where the contractor had instituted specific corporate controls to wall off the debarred employee from participation in government contracts and the evidence indicated that those controls would indeed be enforced. FHC offered no assurances that Heydt would be excluded from the company's business decisions. 43 Second, and more important, nothing in either the trust agreement or in any other submission by the company gave the Government any assurance that Heydt would not conduct illicit dealings on behalf of FHC entirely outside company channels. FHC's employees, in their affidavits, stated only that they knew nothing of Heydt's improper contacts with Sherry; that the company's books did not reflect any payments to Sherry; and that prior to establishing the trust arrangement, Heydt spent little time at FHC's offices and left day-to-day management responsibilities largely up to them. The inference to be drawn, therefore, is that Heydt's contacts with Sherry took place entirely outside company channels. The DLA could not tell from the information submitted by FHC how the transactions with Sherry took place; it knew nothing of the source from which the money was drawn, the medium through which the illicit arrangements were made, or the means Heydt used to conceal his activities from his employees. The Government knew only that Heydt had managed to circumvent whatever company controls might have been in existence prior to the effective date of the trust; and that, by virtue of both his continued right to receive the company's income and his reversionary interest in the trust, he still had a direct and substantial interest in any contracts awarded to the company. Without further details as to how he effected his secret deal, it had no way of knowing whether entrusting the company to Robinson was likely to prevent a repeat performance by Heydt. Viewing the facts that were before the debarring official, we cannot characterize as arbitrary, capricious, or an abuse of discretion his conclusion that [w]ithout knowing either the scope or the extent of the conduct, I am unable to determine whether Mr. Heydt's having placed the assets of FHC into a temporary trust and having appointed a temporary trustee to operate for the company would sufficiently protect the Government's interests in doing business only with contractors who conduct business with honesty and integrity. 44 Because we hold that the DLA reasonably found the trust agreement inadequate to assure that Heydt would not continue to act improperly in FHC's interest as a government contractor, we need not address the reasonableness of the agency's alternative rationale--viz., that Heydt's continuing interest would have a chilling effect on the company's present employees, by which we presume the DLA to mean that the employees might either secure contracts by illicit means, or tolerate Heydt's doing so, in order to curry his favor or avoid his retribution upon his return to the company--nor whether the agency properly found that FHC was an affiliate of Heydt. 45