ERC Tells Congress That Strong Ethics Programs Would Bolster False Claims Act

July 31, 2014

WASHINGTON, DC – Ethics Resource Center (ERC) President Patricia J. Harned told Congress that certification of private sector ethics and compliance programs could help protect taxpayers from fraudulent activity by government contractors. In testimony on possible changes to the False Claims Act, Harned told a House subcommittee that well-implemented ethics and compliance programs significantly reduce the incidence of fraud.
“When a strong program and culture are in place, misconduct decreases by more than half,” Harned said in testimony to the House Judiciary Subcommittee on the Constitution and Civil Justice. She said ERC research also shows that employees feel much less pressure to compromise standards in companies with strong compliance and ethics programs.

The subcommittee is exploring possible amendments to the False Claims Act, which was enacted during the Civil War and remains the government’s main tool in response to contractor fraud. Among options up for review is a voluntary accreditation system for compliance programs. Proponents say such programs would reduce the reliance on after-the-fact enforcement by deterring fraudulent conduct.

Data from the ERC’s 2013 National Business Ethics Survey shows that more than one-in-five (22 percent) workers at U.S. business said they had witnessed possible violations of the False Claims Act in the previous 12 months. But the number of workers who witnessed possible violations dropped by 71 percent in companies with a strong ethics culture.

Harned emphasized that effective programs must focus on equally on ethics as well as compliance. “Companies that merely comply with the law aim for the minimum standard; they check the box when they’ve met expectations and move on to other priorities,” she warned. “While compliance standards and controls are essential, it is the commitment to ethics and culture that perpetuates right conduct in a company, and diminishes the need for enforcement due to violations of the False Claims Act.”