Suspension and Exclusion of Contractors and Termination of Contracts

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: [email protected]). 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

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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

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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