We have had concerns with the FAR contract clause 52.222-50 since its initial promulgation. The clause prohibits trafficking in persons—i.e., it prohibits contractors from using, benefitting from, or participating in the use of slave labor. Period. Which is fine, if that’s all the clause did.

But the clause also prohibits “the procurement of commercial sex acts”.  Further, it defines “commercial sex acts” as “any sex act on account of which anything of value is given or received by any person”. Let’s note that such activities are legal and regulated by the Government in many places, including parts of Nevada as well as parts of Europe.  But you can’t engage in such lawful activities when you are performing on a contract that contains the clause. Moreover, the definition is so loose that simply taking your date out for a dinner might well be construed to be giving or receiving a thing of value.  If one “gets lucky” one might be violating the contract prohibition.

The clause carries with it its own remedies for noncompliance. Those remedies include:

• Requiring the contractor to remove a contractor employee or employees from the performance of a contract.

• Requiring the contractor to terminate a subcontract.

• Suspension of contract payments.

• Loss of award fee.

• Termination of the contract for default or cause.

• Suspension or debarment of the contractor.

Recently, a contractor performing work in Afghanistan ran afoul of this issue. Armor Group North America (AGNA) found itself the defendant in a False Claim Action filed by a qui tam relator (whistleblower) named James Gordon, who was a former employee of AGNA who claimed that he had been retaliated against for bringing concerns about wrongdoing and ethical breaches to the attention of his management. According to this internet report, Mr. Gordon alleged the following—

• AGNA did not properly staff the Kabul embassy in order to provide the level of security outlined in the company’s contract with the Department of State.

• AGNA employees were allowed to visit local brothels that were well-known for using trafficked women as employees, in violation of the Trafficking Victims Protection Act.

• AGNA cut costs by substituting refurbished Iraqi vehicles in place of armored vehicles for transporting goods to and from the Kabul Embassy.

AGNA settled the FCA suit for $7.5 million. According to this Department of Justice press release—

The settlement resolves U.S. claims that in 2007 and 2008, AGNA guards violated the Trafficking Victims Protection Act (TVPA) by visiting brothels in Kabul, and that AGNA’s management knew about the guards’ activities. The settlement also resolves allegations that AGNA misrepresented the prior work experience of 38 third country national guards it had hired to guard the Embassy, and that AGNA failed to comply with certain Foreign Ownership, Control and Influence mitigation requirements on the embassy contract, and on a separate contract to provide guard services at a Naval Support Facility in Bahrain.

Previously, we have gone on record warning contractors performing international work—especially work in Southwest Asia—regarding the FAR “morals clause” that has been included in many of their contracts. The remedies available to the Government are both severe and wide-ranging. In our view, AGNA “dodged a bullet” by agreeing to a quick settlement with the DOJ. Not only did the company avoid much more severe consequences, but it also removed this salacious story from the insatiable modern news cycle.

Contractors performing international work need to guard against their employees violating the prohibitions of 52.222-50. Contractors need to listen to allegations of wrongdoing and be prepared to show Government investigators that they took those allegations seriously. Although $7.5 million may not seem like a lot of money, we’re sure of at least two things: (1) the company paid more than that amount when attorney fees are included, and (2) that amount could have paid for quite a bit of self-governance processes.

If your company performs international work, you may want to ask yourself how prepared you are to survive similar charges of wrongdoing.

According to the DOJ, Mr. Gordon will receive $1.35 million as his share of the settlement. There was no report as to how much of that amount his attorneys will receive.