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Regular Session, 2010
SENATE BILL NO. 601
BY SENATOR CLAITOR
PUBLIC CONTRACTS. Provides relative to criminal sanctions for certain violations of the
design-build process in awarding public contracts. (gov sig)
AN ACT1
To enact R.S. 14:140.1, relative to kickbacks in state contracts; to provide prohibitions,2
definitions, penalties, and reporting requirements; and to provide for related matters.3
Be it enacted by the Legislature of Louisiana:4
Section 1. R.S. 14:140.1 is hereby enacted to read as follows: 5
ยง 140.1. Kickbacks relative to state contracts6
A. As used in this Section:7
(1) "Contracting agency," when used with respect to a prime contractor,8
means the state or any department, agency, or political subdivision of the state9
that enters into a prime contract with a prime contractor.10
(2) "Kickback" means any money, fee, commission, credit, gift, gratuity,11
thing of economic value, or compensation of any kind that is provided, directly12
or indirectly, to any prime contractor, prime contractor employee,13
subcontractor, or subcontractor employee for the purpose of improperly14
obtaining or rewarding favorable treatment in connection with a prime contract15
or in connection with a subcontract relating to a prime contract.16
(3) "Person" means any individual, partnership, limited liability17 SB NO. 601
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company or corporation, association, labor union, political committee,1
corporation, or other legal entity, including their subsidiaries.2
(4) "Prime contract" means a contract or contractual action entered into3
by the state for the purpose of obtaining supplies, materials, equipment, or4
services of any kind.5
(5) "Prime contractor" means a person who has entered into a prime6
contract with the state.7
(6) "Prime contractor employee" means any officer, partner, employee,8
or agent of a prime contractor.9
(7) "State" means the state of Louisiana or any department, agency, or10
political subdivision thereof.11
(8) "Subcontract" means a contract or contractual action entered into12
by a prime contractor or subcontractor for the purpose of obtaining supplies,13
materials, equipment, or services of any kind under a prime contract.14
(9) "Subcontractor"means:15
(a) Any person, other than the prime contractor, who offers to furnish16
or furnishes any supplies, materials, equipment, or services of any kind under17
a prime contract or a subcontract entered into in connection with such prime18
contract.19
(b) Any person who offers to furnish or furnishes general supplies to the20
prime contractor or a higher tier subcontractor.21
(10) "Subcontractor employee" means any officer, partner, employee,22
or agent of a subcontractor.23
B. It shall be unlawful for any person to knowingly and willfully:24
(1) Provide, attempt to provide, or offer to provide any kickback.25
(2) Solicit, accept, or attempt to accept any kickback.26
(3) Include, directly or indirectly, the amount of any kickback prohibited27
by Paragraph (1) or (2) of this Subsection in the contract price charged by a28
subcontractor to a prime contractor or a higher tier subcontractor or in the29 SB NO. 601
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contract price charged by a prime contractor to the state.1
C. Any person who engages in conduct prohibited by Subsection B shall2
be imprisoned for not more than ten years or shall be subject to a fine of ten3
thousand dollars, or both.4
D. Civil actions. (1) The state may, in a civil action, recover a civil5
penalty from any person who violates Subsection B of this Section. The amount6
of such civil penalty shall be twice the amount of each kickback involved in the7
violation, but not more than ten thousand dollars for each occurrence of8
prohibited conduct.9
(2) The state may, in a civil action, recover a civil penalty from any10
person whose employee, subcontractor or subcontractor employee violates11
Subsection B of this Section by providing, accepting, or charging a kickback.12
The amount of such civil penalty shall be the amount of the kickback.13
(3) A civil action under this Subsection shall be barred unless the action14
is commenced within six years after the later of:15
(a) The date on which the prohibited conduct establishing the cause of16
action occurred.17
(b) The date on which the state knew or should reasonably have known18
that the prohibited conduct had occurred.19
E. A contracting agency may offset the amount of a kickback provided,20
accepted, or charged in violation of Subsection B of this Section against any21
moneys owed by the state to the prime contractor under the prime contract to22
which such kickback relates.23
F. Duties of prime contractor. (1) Upon direction of a contracting agency24
with respect to a prime contract, the prime contractor shall withhold from any25
sums owed to a subcontractor under a subcontract of the prime contract the26
amount of any kickback that was or may be offset against that prime contractor27
under Subsection E of this Section.28
(2) Such contracting agency may order that sums withheld under29 SB NO. 601
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Paragraph (1) of this Subsection either be paid over to the contracting agency,1
or retained by the prime contractor, if the state has already offset the amount2
of such sums against the prime contractor.3
(3) The prime contractor shall notify the contracting agency when an4
amount is withheld and retained under Paragraph (2) of this Subsection.5
G. Contract requirements. (1) Each contracting agency shall include in6
each prime contract awarded by such agency a requirement that the prime7
contractor shall have in place and follow reasonable procedures designed to8
prevent and detect violations of Subsection B of this Section in its own9
operations and direct business relationships.10
(2) Each contracting agency shall include in each prime contract11
awarded by such agency a requirement that the prime contractor shall12
cooperate fully with any state agency investigating a violation of Subsection B13
of this Section.14
H. Reporting requirements. (1) Whenever a prime contractor or15
subcontractor has reasonable grounds to believe that a violation of Subsection16
B of this Section may have occurred, the prime contractor or subcontractor17
shall promptly report the possible violation in writing to the contracting agency18
head and the inspector general.19
(2) In the case of an administrative or contractual action to prohibit any20
person who otherwise is eligible from entering into contracts with the state21
because of violations of Subsection B, evidence that such person has supplied22
information pursuant to Paragraph (1) of this Subsection shall be favorable23
evidence of such person's conduct.24
(3) Paragraphs (1) and (2) of this Subsection shall not apply to a prime25
contract that is not greater than one hundred thousand dollars or to a prime26
contract for the acquisition of commercial items. For purposes of this27
subparagraph:28
(a) "Item" means any individual part, component, subassembly,29 SB NO. 601
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assembly, or subsystem integral to a major system, and other property that may1
be replaced during the service life of the system, and includes spare parts and2
replenishment spare parts, but does not include packaging or labeling3
associated with shipment or identification of such item.4
(b) "Commercial item" means:5
(i) Any item, other than real property, that is of a type customarily used6
by the general public or by nongovernmental entities for purposes other than7
governmental purposes, and that has been sold, leased, or licensed to the general8
public, or has been offered for sale, lease, or license to the general public.9
(ii) Any item that evolved from an item described in Item (i) of this10
Subparagraph through advances in technology or performance and that is not11
yet available in the commercial marketplace, but will be available in the12
commercial marketplace in time to satisfy the delivery requirements under a13
state contract.14
(iii) Any item that, but for modifications of a type customarily available15
in the commercial marketplace, or minor modifications made to meet applicable16
technical requirements would satisfy the criteria in Items (i) or (ii) of this17
Subparagraph.18
I. Notwithstanding any provisions of Subsection H, a prime contractor19
shall cooperate fully with any state agency investigating a violation of20
Subsection B of this Section.21
Section 2. This Act shall become effective upon signature by the governor or, if not22
signed by the governor, upon expiration of the time for bills to become law without signature23
by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If24
vetoed by the governor and subsequently approved by the legislature, this Act shall become25
effective on the day following such approval.26 SB NO. 601
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The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Alden A. Clement, Jr.
DIGEST
Proposed law creates the crime of kickbacks relative to state contracts.
Proposed law provides that for the purposes of proposed law:
(1) "Contracting agency," when used with respect to a prime contractor, means the state
or any department, agency, or political subdivision of the state that enters into a
prime contract with a prime contractor.
(2) "Kickback" means any money, fee, commission, credit, gift, gratuity, thing of
economic value, or compensation of any kind that is provided, directly or indirectly,
to any prime contractor, prime contractor employee, subcontractor, or subcontractor
employee for the purpose of improperly obtaining or rewarding favorable treatment
in connection with a prime contract or in connection with a subcontract relating to
a prime contract.
(3) "Person" means any individual, partnership, limited liability company or corporation,
association, labor union, political committee, corporation, or other legal entity,
including their subsidiaries.
(4) "Prime contract" means a contract or contractual action entered into by the state for
the purpose of obtaining supplies, materials, equipment, or services of any kind.
(5) "Prime contractor" means a person who has entered into a prime contract with the
state.
(6)"Prime contractor employee" means any officer, partner, employee, or agent of a
prime contractor.
(7) "State" means the state of Louisiana or any department, agency, or political
subdivision thereof.
(8) "Subcontract" means a contract or contractual action entered into by a prime
contractor or subcontractor for the purpose of obtaining supplies, materials,
equipment, or services of any kind under a prime contract.
(9) "Subcontractor"means:
(a) Any person, other than the prime contractor, who offers to furnish or
furnishes any supplies, materials, equipment, or services of any kind under
a prime contract or a subcontract entered into in connection with such prime
contract.
(b) Any person who offers to furnish or furnishes general supplies to the prime
contractor or a higher tier subcontractor.
(10)"Subcontractor employee" means any officer, partner, employee, or agent of a
subcontractor.
Proposed law provides that it is unlawful for any person to knowingly and willfully:
(1) Provide, attempt to provide, or offer to provide any kickback. SB NO. 601
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(2) Solicit, accept, or attempt to accept any kickback.
(3) Include, directly or indirectly, the amount of any kickback prohibited by proposed
law in the contract price charged by a subcontractor to a prime contractor or a higher
tier subcontractor or in the contract price charged by a prime contractor to the state.
Proposed law provides that any person who engages in conduct prohibited by proposed law
can be imprisoned for not more than 10 years or subjected to a fine of $10,000, or both.
Proposed law provides that the state may recover a civil penalty from any person who
violates proposed law. Proposed law further provides that the amount of such civil penalty
is to be twice the amount of each kickback involved in the violation, but not more than
$10,000 for each occurrence of prohibited conduct.
Proposed law provides that the state may recover a civil penalty from any person whose
employee, subcontractor or subcontractor employee violates proposed law by providing,
accepting, or charging a kickback. Proposed law further provides that the amount of such
civil penalty is to be the amount of the kickback.
Proposed law provides that a civil action under proposed law is barred unless the action is
commenced within six years after the later of the date on which the prohibited conduct
establishing the cause of action occurred, or the date on which the state knew or should
reasonably have known that the prohibited conduct had occurred.
Proposed law provides that a contracting agency may offset the amount of a kickback
provided, accepted, or charged in violation of proposed law against any moneys owed by the
state to the prime contractor under the prime contract to which such kickback relates.
Proposed law provides that upon the direction of a contracting agency with respect to a
prime contract, the prime contractor is to withhold from any sums owed to a subcontractor
under a subcontract of the prime contract the amount of any kickback that was or may be
offset against that prime contractor under proposed law. Proposed law provides that such
contracting agency may order that sums withheld under proposed law either be paid over to
the contracting agency, or retained by the prime contractor if the state has already offset the
amount of such sums against the prime contractor. Proposed law further provides that the
prime contractor is to notify the contracting agency when an amount is withheld and retained
under proposed law.
Proposed law provides that each contracting agency is to include in each prime contract
awarded by such agency a requirement that the prime contractor must have in place and
follow reasonable procedures designed to prevent and detect violations of proposed law in
its own operations and direct business relationships. Proposed law further provides that each
contracting agency must include in each prime contract awarded by such agency a
requirement that the prime contractor will cooperate fully with any state agency
investigating a violation of proposed law.
Proposed law provides that whenever a prime contractor or subcontractor has reasonable
grounds to believe that a violation of proposed law may have occurred, the prime contractor
or subcontractor is to promptly report the possible violation in writing to the contracting
agency head and the inspector general.
Proposed law provides that in the case of an administrative or contractual action to prohibit
any person who otherwise is eligible from entering into contracts with the state because of
violations of proposed law, evidence that such person has supplied information to the state SB NO. 601
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pursuant to proposed law is favorable evidence of such person's conduct. Proposed law
further provides that these provisions of proposed law do not apply to a prime contract that
is not greater than $100,000 or to a prime contract for the acquisition of commercial items.
Proposed law provides a definition of "item."
Proposed law provides that a prime contractor must cooperate fully with any state agency
investigating a violation of proposed law.
Effective upon signature of the governor or lapse of time for gubernatorial action.
(Adds R.S. 14:140.1)