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B-152840, FEB. 20, 1946

B-152840 Feb 20, 1946
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ESQUIRE: REFERENCE IS MADE TO YOUR LETTER DATED NOVEMBER 26. THE OFFER WAS REJECTED PURSUANT TO A DETERMINATION BY THE CONTRACTING OFFICER THAT HE WAS UNABLE TO MAKE THE FINDING REQUIRED BY ARMED SERVICES PROCUREMENT REGULATION 1-904.1 THAT PIERREL IS A RESPONSIBLE SOURCE OF SUPPLY. BECAUSE HE WAS UNABLE TO DETERMINE THAT PIERREL HAD A SATISFACTORY RECORD OF INTEGRITY. IN THAT VISCONTI TRANSPORTED IN FOREIGN COMMERCE ANTIBIOTIC CULTURES AND KNOW-HOW FOR THE PRODUCTION OF CERTAIN ANTIBIOTICS WITH KNOWLEDGE THAT THE CULTURES AND KNOW-HOW WERE STOLEN. ALSO CONSIDERED WERE REPORTS FROM THE FEDERAL BUREAU OF INVESTIGATION. IN AN EFFORT TO DETERMINE WHETHER FOREIGN FIRMS CONTRACTED BY THE DEFENDANTS WHO STOLE THE ARTICLES KNEW OR SHOULD HAVE KNOWN THAT THE MATERIAL OFFERED HAD BEEN IMPROPERLY ACQUIRED.

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B-152840, FEB. 20, 1946

TO FRANK DELANEY, ESQUIRE:

REFERENCE IS MADE TO YOUR LETTER DATED NOVEMBER 26, 1963, AND SUBSEQUENT CORRESPONDENCE PROTESTING THE REJECTION BY THE DEFENSE SUPPLY AGENCY OF AN OFFER SUBMITTED BY PIERREL, S.P.A., MILAN, ITALY, TO SUPPLY A DRUG UNDER REQUEST FOR PROPOSALS (RFP) DSA 2-3854, ISSUED SEPTEMBER 18, 1963.

THE OFFER WAS REJECTED PURSUANT TO A DETERMINATION BY THE CONTRACTING OFFICER THAT HE WAS UNABLE TO MAKE THE FINDING REQUIRED BY ARMED SERVICES PROCUREMENT REGULATION 1-904.1 THAT PIERREL IS A RESPONSIBLE SOURCE OF SUPPLY, BECAUSE HE WAS UNABLE TO DETERMINE THAT PIERREL HAD A SATISFACTORY RECORD OF INTEGRITY. THE EVIDENCE CONSIDERED BY THE CONTRACTING OFFICER INCLUDED AN INDICTMENT BY A FEDERAL GRAND JURY WHICH CHARGED NICOLO VISCONTI, PRESIDENT OF PIERREL, WITH VIOLATION OF 18 U.S.C. 2314, IN THAT VISCONTI TRANSPORTED IN FOREIGN COMMERCE ANTIBIOTIC CULTURES AND KNOW-HOW FOR THE PRODUCTION OF CERTAIN ANTIBIOTICS WITH KNOWLEDGE THAT THE CULTURES AND KNOW-HOW WERE STOLEN, CONVERTED AND TAKEN BY FRAUD FROM THE LEDERLE LABORATORIES DIVISION OF AMERICAN CYANAMID COMPANY. ALSO CONSIDERED WERE REPORTS FROM THE FEDERAL BUREAU OF INVESTIGATION, ADVICE FROM THE DEPARTMENT OF JUSTICE THAT VISCONTI HAD ADMITTED PURCHASING LABORATORY DATA, AFFIDAVITS OF TWO OF THE OTHER DEFENDANTS INDICTED WITH VISCONTI ATTESTING TO THE VALIDITY OF VARIOUS CHARGES IN THE INDICTMENT, AND PORTIONS OF THE TRANSCRIPTS OF PROCEEDINGS IN A RELATED CIVIL SUIT BY THE AMERICAN CYANAMID COMPANY AGAINST TWO OTHER DEFENDANTS. ALSO, IN AN EFFORT TO DETERMINE WHETHER FOREIGN FIRMS CONTRACTED BY THE DEFENDANTS WHO STOLE THE ARTICLES KNEW OR SHOULD HAVE KNOWN THAT THE MATERIAL OFFERED HAD BEEN IMPROPERLY ACQUIRED, THE DEFENSE SUPPLY AGENCY DISCUSSED THE MATTER WITH GOVERNMENT DRUG EXPERTS. IT WAS THE CONSENSUS OF SUCH EXPERTS THAT A REASONABLE INDIVIDUAL, KNOWLEDGEABLE OF THE DRUG INDUSTRY, IF OFFERED HIGH YIELD CULTURES OF A PATENTED ANTIBIOTIC BY OTHER THAN A PATENT OWNER, SHOULD HAVE AT LEAST SUSPECTED THEY WERE NOT ACQUIRED LEGITIMATELY, SINCE SUCH CULTURES ARE CLOSELY GUARDED BY THE AMERICAN DRUG INDUSTRY.

YOUR CONTENTIONS REGARDING THE IMPROPRIETY OF THE REJECTION OF PIERREL'S OFFER MAY BE SUMMARIZED AS FOLLOWS:

1. 18 U.S.C. 2314, THE STATUTE UNDER WHICH VISCONTI WAS INDICTED, DOES NOT EMBRACE KNOW-HOW.

2. THERE IS NO CHARGE IN THE INDICTMENT THAT VISCONTI RECEIVED AND TRANSPORTED IN FOREIGN COMMERCE THE PARTICULAR DRUG TO BE PROCURED UNDERRFP DSA 2-3854.

3. PIERREL DENIES ANY ADMISSION BY VISCONTI AS TO ANY OF THE CHARGES IN THE INDICTMENT.

4. PIERREL PREVIOUSLY WAS FOUND BY ANOTHER CONTRACTING OFFICER TO BE RESPONSIBLE, AND ASPR 1-904.1 IMPLIES THAT, WITHOUT NEW FACTS OR EVIDENCE OF THE INVALIDITY OF SUCH DETERMINATION, IT IS ILLEGAL FOR ONE CONTRACTING OFFICER TO OVERRULE A PRIOR DETERMINATION BY ANOTHER CONTRACTING OFFICER. ALSO, THERE IS NO INDICATION THAT THE SECOND CONTRACTING OFFICER HAD IN HIS POSSESSION THE INFORMATION AVAILABLE TO HIS PREDECESSOR WHO MADE THE FAVORABLE DETERMINATION.

5. THE CONTRACTING OFFICER DID NOT ADVISE PIERREL OF THE INFORMATION OF RECORD BEFORE MAKING HIS FINDING.

6. THERE IS NO SMALL BUSINESS ADMINISTRATION DETERMINATION OF RECORD, WHICH ALLEGEDLY WOULD BE FAVORABLE TO PIERREL.

7. THE CONTRACTING OFFICER'S FINDING IS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE.

AS TO YOUR CONTENTION THAT 18 U.S.C. 2314 DOES NOT EMBRACE KNOW-HOW, THE STATUTE IS A CRIMINAL ONE AND THE AUTHORITY TO MAKE A BINDING DETERMINATION CONCERNING ITS PROPER INTERPRETATION THEREFORE RESTS IN THE COURTS. ACCORDINGLY, WE MUST DECLINE TO EXPRESS AN OPINION ON THE QUESTION AT THIS TIME.

CONCERNING THE FACT THAT THE INDICTMENT COVERS DRUGS OTHER THAN THE DRUG TO BE PROCURED UNDER RFP DSA 2-3854, THE DETERMINATION OF THE CONTRACTING OFFICER RELATES TO PIERREL'S INTEGRITY AND NOT TO THE MATTER OF WHETHER THE DRUG TO BE PROCURED WAS TAINTED BY THE ALLEGED THEFTS. ACCORDINGLY, SUCH FACT IS IMMATERIAL HERE.

AS TO PIERREL'S DENIAL OF ANY ADMISSION BY VISCONTI REGARDING THE CHARGES IN THE INDICTMENT, SUCH ALLEGATION GOES TO THE MERITS OF THE INDICTMENT, AND, THEREFORE, IS A MATTER FOR DETERMINATION BY THE COURT IN THE CRIMINAL PROCEEDINGS.

WITH RESPECT TO THE ASSERTION THAT PIERREL PREVIOUSLY WAS DETERMINED BY ANOTHER CONTRACTING OFFICER TO BE A RESPONSIBLE SOURCE OF SUPPLY, THE RECORD SHOWS THAT SUCH DETERMINATION WAS MADE IN 1962 IN CONNECTION WITH ANOTHER PROCUREMENT. THE DATE OF SUCH DETERMINATION WAS PRIOR TO THE RETURN OF THE INDICTMENT AGAINST PIERREL AND PRIOR TO RECEIPT OF FEDERAL BUREAU OF INVESTIGATION REPORTS AND ADVICE FROM THE DEPARTMENT OF JUSTICE OF AN ADMISSION BY VISCONTI REGARDING PURCHASE OF LABORATORY DATA. IT IS THEREFORE APPARENT THAT NEW AND ADDITIONAL FACTORS WERE CONSIDERED BY THE CONTRACTING OFFICER WHO MADE THE UNFAVORABLE DETERMINATION IN 1963. THIS CONNECTION, IT SHOULD BE NOTED THAT ASPR 1-905.1 REQUIRES CONTRACTING OFFICERS TO POSSESS OR OBTAIN INFORMATION SUFFICIENT TO PASS UPON THE CURRENT RESPONSIBILITY OF BIDDERS. ACCORDINGLY, IT IS OUR OPINION THAT THE CONTRACTING OFFICER HANDLING THE 1963 PROCUREMENT WAS REQUIRED TO MAKE HIS OWN DETERMINATION OF PIERREL'S RESPONSIBILITY ON THE BASIS OF THE INFORMATION AVAILABLE TO HIM, AND WITHOUT REGARD TO THE 1962 DETERMINATION.

REGARDING YOUR CONTENTION THAT THE CONTRACTING OFFICER DID NOT ADVISE PIERREL OF THE INFORMATION ON WHICH THE NONRESPONSIBILITY DETERMINATION WAS BASED PRIOR TO THE ISSUANCE OF THE DETERMINATION, THERE IS NO REQUIREMENT THAT BIDDERS BE GIVEN SUCH NOTICE. HOWEVER, THE DEFENSE SUPPLY AGENCY REPORTS THAT, EXCEPT FOR RESTRICTED FBI REPORTS AND THE MINUTES OF THE FEDERAL GRAND JURY, YOU HAVE BEEN APPRISED OF THE CHARGES AGAINST PIERREL AND POSSESS COPIES OF THE INDICTMENT, THE AFFIDAVITS OF THE OTHER TWO DEFENDANTS, AND OTHER PERTINENT INFORMATION. ALSO, THE ALLEGATIONS HAVE BEEN DISCUSSED WITH YOU AT LENGTH ON NUMEROUS OCCASIONS BY AGENCY REPRESENTATIVES. FURTHERMORE, AS YOU HAVE BEEN PREVIOUSLY ADVISED, NO DEBARMENT PROCEEDINGS HAVE BEEN INSTITUTED AGAINST PIERREL, AND THE PROVISIONS OF ASPR 1-604.2 AND 1-604.3 RELATIVE TO NOTIFICATION TO BIDDERS OF CAUSES OF DEBARMENT ARE THEREFORE INAPPLICABLE.

AS TO YOUR STATEMENT THAT THERE IS LACKING A SMALL BUSINESS ADMINISTRATION DETERMINATION RELATIVE TO CAPACITY AND CREDIT, WHICH PRESUMABLY WOULD FAVOR PIERREL, THE RECORD INDICATES THAT PIERREL DOES NOT QUALIFY AS A "SMALL BUSINESS CONCERN" UNDER ASPR 1-701.1 (A) (1) BECAUSE IT HAS NO PLACE OF BUSINESS IN THE UNITED STATES, ITS POSSESSIONS OR PUERTO RICO. MOREOVER, EVEN IF PIERREL DID QUALIFY AS A SMALL BUSINESS CONCERN, THE PROVISIONS OF ASPR 1-705.6 (B) (IV) WOULD NOT REQUIRE THE CONTRACTING AGENCY TO SUBMIT THE QUESTION OF CAPACITY AND CREDIT TO THE SMALL BUSINESS ADMINISTRATION, SINCE THE CONTRACTING AGENCY'S DETERMINATION OF NONRESPONSIBILITY WAS BASED ON LACK OF BUSINESS INTEGRITY.

CONCERNING THE ALLEGED ABSENCE OF SUBSTANTIAL EVIDENCE TO SUPPORT THE CONTRACTING OFFICER'S DETERMINATION, AS STATED PREVIOUSLY THE DETERMINATION WAS NOT BASED ON THE INDICTMENT ALONE, BUT ALSO UPON VARIOUS OTHER DOCUMENTS AND DATA, MOST OF WHICH HAVE BEEN MADE AVAILABLE TO YOU. IN ADDITION, THE CONTRACTING OFFICER CONSIDERED THE OPINIONS OBTAINED FROM GOVERNMENT DRUG EXPERTS REGARDING THE POSSIBILITY OF CONSTRUCTIVE NOTICE BY PURCHASERS OF THE IMPROPER ACQUISITION OF THE MATERIAL.

A SATISFACTORY RECORD OF INTEGRITY IS A REQUIREMENT WHICH PROSPECTIVE CONTRACTORS MUST MEET UNDER ASPR 1-903.1 (IV) IN ORDER TO QUALIFY AS RESPONSIBLE BIDDERS. WE HAVE HELD THAT A BIDDER'S INTEGRITY MAY PROPERLY BE DETERMINED ADMINISTRATIVELY BY APPLYING THE CAUSES AND CONDITIONS FOR THE SUSPENSION OF BIDDERS ENUMERATED IN ASPR 1-605.1. 39 COMP. GEN. 868, 872. SINCE ONE OF THE OFFENSES FOR WHICH VISCONTI HAS BEEN INDICTED--- THE RECEIPT OF STOLEN PROPERTY--- IS ENUMERATED IN ASPR 1-605.1 AS A CAUSE FOR THE SUSPENSION OF BIDDERS, IT NECESSARILY FOLLOWS THAT SUCH INDICTMENT CONSTITUTES AN ADEQUATE BASIS FOR HOLDING THAT VISCONTI IS NONRESPONSIBLE. IT IS OUR FURTHER OPINION THAT IT IS NOT INCUMBENT UPON EITHER THE CONTRACTING AGENCY OR THIS OFFICE TO WEIGH THE EVIDENCE UPON WHICH SUCH INDICTMENT WAS RETURNED, BOTH THE APPLICABILITY OF THE STATUTE TO THE FACTS ALLEGED AND THE GUILT OR INNOCENCE OF THE DEFENDANT BEING FOR CONSIDERATION BY THE COURTS IN THE CRIMINAL PROCEEDINGS.

THERE REMAINS FOR DETERMINATION WHETHER VISCONTI'S LACK OF INTEGRITY MAY BE IMPUTED TO PIERREL, S.P.A. WE HAVE HELD, REGARDING AMERICAN CORPORATIONS, THAT THE INTEGRITY OF A CORPORATION CAN BE NO GREATER THAN THE INTEGRITY OF THE INDIVIDUALS WHO CONTROL ITS OPERATION. 39 COMP. GEN. 468, 471. WE HOLD THAT SUCH PRINCIPLE IS LIKEWISE APPLICABLE TO PIERREL. THE RECORD INDICATES THAT VISCONTI, AS PRESIDENT OF PIERREL, TAKES AN ACTIVE PART IN THE CONDUCT OF THE AFFAIRS OF PIERREL, AND LACK OF INTEGRITY ON THE PART OF VISCONTI MUST THEREFORE BE IMPUTED TO PIERREL. UNDER THE CIRCUMSTANCES, THE DETERMINATION OF NONRESPONSIBILITY AS TO PIERREL MUST BE REGARDED AS PROPER AND YOUR PROTEST MUST BE DENIED.

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