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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. Nothing16
herein shall prohibit a labor organization representing employees of a prime17 SB NO. 601
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contractor or subcontractor in collective bargaining from entering into market1
recovery arrangements intended to subsidize the wage and benefit packages of2
affected employees.3
(3) "Person" means any individual, partnership, limited liability4
company or corporation, association, labor union, political committee,5
corporation, or other legal entity, including their subsidiaries.6
(4) "Prime contract" means a contract or contractual action entered into7
by the state for the purpose of obtaining supplies, materials, equipment, or8
services of any kind.9
(5) "Prime contractor" means a person who has entered into a prime10
contract with the state.11
(6) "Prime contractor employee" means any officer, partner, employee,12
or agent of a prime contractor.13
(7) "State" means the state of Louisiana or any department, agency, or14
political subdivision thereof.15
(8) "Subcontract" means a contract or contractual action entered into16
by a prime contractor or subcontractor for the purpose of obtaining supplies,17
materials, equipment, or services of any kind under a prime contract.18
(9) "Subcontractor"means:19
(a) Any person, other than the prime contractor, who offers to furnish20
or furnishes any supplies, materials, equipment, or services of any kind under21
a prime contract or a subcontract entered into in connection with such prime22
contract.23
(b) Any person who offers to furnish or furnishes general supplies to the24
prime contractor or a higher tier subcontractor.25
(10) "Subcontractor employee" means any officer, partner, employee,26
or agent of a subcontractor.27
B. It shall be unlawful for any person to knowingly and willfully:28
(1) Provide, attempt to provide, or offer to provide any kickback.29 SB NO. 601
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(2) Solicit, accept, or attempt to accept any kickback.1
(3) Include, directly or indirectly, the amount of any kickback prohibited2
by Paragraph (1) or (2) of this Subsection in the contract price charged by a3
subcontractor to a prime contractor or a higher tier subcontractor or in the4
contract price charged by a prime contractor to the state.5
C. Any person who engages in conduct prohibited by Subsection B shall6
be imprisoned for not more than ten years or be subject to a fine of ten7
thousand dollars, or both.8
D. Civil actions. (1) The state may, in a civil action, recover a civil9
penalty from any person who violates Subsection B of this Section. The amount10
of such civil penalty shall be twice the amount of each kickback involved in the11
violation, but not more than ten thousand dollars for each occurrence of12
prohibited conduct.13
(2) The state may, in a civil action, recover a civil penalty from any14
person whose employee, subcontractor or subcontractor employee violates15
Subsection B of this Section by providing, accepting, or charging a kickback.16
The amount of such civil penalty shall be the amount of the kickback.17
(3) A civil action under this Subsection shall be barred unless the action18
is commenced within six years after the later of:19
(a) The date on which the prohibited conduct establishing the cause of20
action occurred.21
(b) The date on which the state knew or should reasonably have known22
that the prohibited conduct had occurred.23
E. A contracting agency may offset the amount of a kickback provided,24
accepted, or charged in violation of Subsection B of this Section against any25
moneys owed by the state to the prime contractor under the prime contract to26
which such kickback relates.27
F. Duties of prime contractor. (1) Upon direction of a contracting agency28
with respect to a prime contract, the prime contractor shall withhold from any29 SB NO. 601
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sums owed to a subcontractor under a subcontract of the prime contract the1
amount of any kickback that was or may be offset against that prime contractor2
under Subsection E of this Section.3
(2) Such contracting agency may order that sums withheld under4
Paragraph (1) of this Subsection either be paid over to the contracting agency,5
or retained by the prime contractor, if the state has already offset the amount6
of such sums against the prime contractor.7
(3) The prime contractor shall notify the contracting agency when an8
amount is withheld and retained under Paragraph (2) of this Subsection.9
G. Contract requirements. (1) Each contracting agency shall include in10
each prime contract awarded by such agency a requirement that the prime11
contractor shall have in place and follow reasonable procedures designed to12
prevent and detect violations of Subsection B of this Section in its own13
operations and direct business relationships.14
(2) Each contracting agency shall include in each prime contract15
awarded by such agency a requirement that the prime contractor shall16
cooperate fully with any state agency investigating a violation of Subsection B17
of this Section.18
H. Reporting requirements. (1) Whenever a prime contractor or19
subcontractor has reasonable grounds to believe that a violation of Subsection20
B of this Section may have occurred, the prime contractor or subcontractor21
shall promptly report the possible violation in writing to the contracting agency22
head and the inspector general.23
(2) In the case of an administrative or contractual action to prohibit any24
person who otherwise is eligible from entering into contracts with the state25
because of violations of Subsection B, evidence that such person has supplied26
information pursuant to Paragraph (1) of this Subsection shall be favorable27
evidence of such person's conduct.28
(3) Paragraphs (1) and (2) of this Subsection shall not apply to a prime29 SB NO. 601
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contract that is not greater than one hundred thousand dollars or to a prime1
contract for the acquisition of commercial items. For purposes of this2
Subparagraph:3
(a) "Item" means any individual part, component, subassembly,4
assembly, or subsystem integral to a major system, and other property that may5
be replaced during the service life of the system, and includes spare parts and6
replenishment spare parts, but does not include packaging or labeling7
associated with shipment or identification of such item.8
(b) "Commercial item" means:9
(i) Any item, other than real property, that is of a type customarily used10
by the general public or by nongovernmental entities for purposes other than11
governmental purposes, and that has been sold, leased, or licensed to the general12
public, or has been offered for sale, lease, or license to the general public.13
(ii) Any item that evolved from an item described in Item (i) of this14
Subparagraph through advances in technology or performance and that is not15
yet available in the commercial marketplace, but will be available in the16
commercial marketplace in time to satisfy the delivery requirements under a17
state contract.18
(iii) Any item that, but for modifications of a type customarily available19
in the commercial marketplace, or minor modifications made to meet applicable20
technical requirements would satisfy the criteria in Items (i) or (ii) of this21
Subparagraph.22
I. Notwithstanding any provisions of Subsection H, a prime contractor23
shall cooperate fully with any state agency investigating a violation of24
Subsection B of this Section.25
Section 2. This Act shall become effective upon signature by the governor or, if not26
signed by the governor, upon expiration of the time for bills to become law without signature27
by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If28
vetoed by the governor and subsequently approved by the legislature, this Act shall become29 SB NO. 601
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effective on the day following such approval.1
The original instrument was prepared by Alden A. Clement, Jr. The following
digest, which does not constitute a part of the legislative instrument, was
prepared by Michael Bell.
DIGEST
Claitor (SB 601)
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. Nothing herein will prohibit a labor organization representing
employees of a prime contractor or subcontractor in collective bargaining from
entering into market recovery arrangements intended to subsidize the wage and
benefit packages of affected employees.
(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 SB NO. 601
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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.
(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 SB NO. 601
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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
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)
Summary of Amendments Adopted by Senate
Committee Amendments Proposed by Senate Committee on Judiciary C to the
original bill.
1. Exempts a labor organization representing employees of a prime contractor
or subcontractor in collective bargaining from the definition of "kickback".