SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): NOVEMBER 8, 1995
STEWART & STEVENSON SERVICES, INC.
(Exact name of registrant as specified in its charter)
Texas 0-8493 74-1051605
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation or organization) Number) Identification No.)
2707 North Loop West
Houston, Texas 77008
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (713) 868-7700
Item 5. Other Events.
On November 8, 1995, Stewart & Stevenson Services, Inc. (the "Company") and
the United States Department of the Air Force entered into an interim agreement
ending the suspension of the Company from entering into new government contracts
or receiving the benefit of federal assistance payments. Under the terms of the
agreement, the suspension is terminated on an interim basis pending resolution
of criminal charges brought against the Company and four of its employees. The
agreement has no effect on the indictment returned in the United States District
Court, Southern District of Texas, on May 3, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STEWART & STEVENSON SERVICES, INC.
/s/ Robert L. Hargrave
Date: November 15, 1995 By:_______________________________
Name: Robert L. Hargrave
Title: Chief Executive Officer
EXHIBIT INDEX
99 Interim Administrative Agreement, dated November 8, 1995, between
Stewart & Stevenson Services, Inc. and the U.S. Department of the Air
Force.
INTERIM ADMINISTRATIVE AGREEMENT
This Interim Agreement dated the 8 day of November, 1995, is made between
Stewart & Stevenson Services, Inc. (SSSI) and the United States Department of
the Air Force. As used herein, SSSI means SSSI and all its operating sectors,
groups, divisions, units and wholly-owned subsidiaries, including those acquired
or established during the term of this Agreement. As used herein, Air Force
means the Department of the Air Force, represented herein by the Deputy General
Counsel of the Air Force for Contractor Responsibility.
PREAMBLE
1. SSSI is a corporation engaged in providing goods and services for both
military and civilian uses, and has its principal place of business at Houston,
Texas.
2. On May 3, 1995, SSSI was indicted in the United States District Court for
the Southern District of Texas. A copy of the indictment is attached to this
Interim Agreement as Exhibit 1. The Indictment contains six (6) counts. Count
One alleges a conspiracy to defraud the United States, in violation of 18 U.S.C.
Section 371. Count Two alleges a major fraud against the United States, in
violation of 18 U.S.C. Section 1031. Counts Three, Four, Five and Six allege
false statements to the United States in violation of 18 U.S.C. Section 1001.
3. Bob H. O'Neal, then first Vice President and now President of SSSI, was
also indicted in Counts One to Six. As of June 8, 1995, Mr. O'Neal was placed
on administrative leave from his position at SSSI.
4. William McFarland, then General Operations Manager of SSSI, was also
indicted in Counts One to Six. As of June 8, 1995, Mr. McFarland was placed on
administrative leave from his position at SSSI.
5. Paul Edson, then Program Manager for the Peace Shield Program at SSSI, was
also indicted in Counts One to Six. As of June 8, 1995, Mr. Edson was placed on
administrative leave from his position at SSSI.
6. Lyman Hardy, then an employee of SSSI, was also indicted in Counts One to
Six. As of June 8, 1995, Mr. Hardy was placed on administrative leave from his
position at SSSI.
7. John Runion was an employee of CRS Sirrine assigned to the CRS
Sirrine/Metcalf & Eddy Joint Venture (hereinafter "Joint Venture"). He later
left the Joint Venture and, for a short time, acted as consultant for SSSI. He
has not been a consultant to SSSI since April 1989. Mr. Runion was also
indicted under Count One (Conspiracy).
8. The indictment is pending as of the date of this agreement.
9. SSSI has pled "not guilty" and is currently defending the allegations in
the Indictment.
10. On May 12, 1995, the Air Force suspended SSSI and Messrs. O'Neal,
McFarland, Edson, Hardy, and Runion from Government contracting and Government-
approved subcontracting pursuant to the procedures contained in the Federal
Acquisition Regulation (FAR) Subpart 9.4 and the Department of Defense FAR
Supplement (DFARS) Subpart 209.4. The Air Force also suspended SSSI from
federally-assisted benefits and programs as participant or beneficiary pursuant
to 32 C.F.R. Part 25. The suspension actions were based upon the May 3, 1995
indictment.
11. SSSI and the Air Force are parties to this agreement. Messrs. O'Neal,
McFarland, Edson, Hardy, and Runion are not parties to this agreement and their
suspensions are not affected by this agreement.
12. SSSI has expressed an interest in demonstrating that, notwithstanding the
facts alleged in the indictment, SSSI has taken appropriate measures to assure
the Air Force that SSSI can be trusted to deal fairly and honestly with the
Government while the indictment is pending and that SSSI may be restored to
temporary eligibility for government contracts and federal assistance programs
pending resolution of the charges at issue here.
13. SSSI represents that since the indictment, SSSI has taken the following
measures:
a. SSSI has adopted a comprehensive document entitled "Standards of
Business Practice" (hereinafter "Standards"). The Standards contain the basic
principles that will guide all employees of SSSI. The Standards have been
distributed to every employee of SSSI.
b. SSSI also established a Business Practice Helpline which is available
on a confidential basis to all employees, suppliers and customers to allow for
reporting suspected misconduct or for asking questions related to business
ethics or business conduct.
c. SSSI appointed T. Michael Andrews as Vice President for Business
Practices. Mr. Andrews was an SSSI Vice President with 34 years of service with
the Company. He was chosen based on his seniority, broad management experience,
leadership ability and overall temperament. Mr. Andrews previously had
responsibility for two divisions of the Company. Those two divisions were
reassigned to other managers so that he could devote his full energies to the
Business Practices Program. He is assisted by Rita Sanderfer as Director of
Business Practices and Don Stevenson in a similar position.
d. On June 8, 1995, the Company adopted a written policy requiring that
any employee that is suspended, proposed for debarment, debarred, or indicted on
any charges relating to business integrity be placed on administrative leave.
Pursuant to that policy, Messrs. O'Neal, McFarland, Edson and Hardy were placed
on administrative leave. None of these individuals performs any role in the
business affairs of SSSI.
e. Also on June 8, 1995, Mr. Robert Hargrave was appointed Chief
Executive Officer of SSSI. Mr. Hargrave, a member of the Board of Directors, is
now fully responsible for all operations of SSSI. He still performs his duties
as Chief Financial Officer.
f. The Audit Committee of the Board of Directors also acts as the ethics
committee of the Board. Mr. Andrews, as well as Mr. Hargrave, makes periodic
reports to the Audit Committee of the Board (or any successor committee of the
Board of Directors performing ethics oversight function) concerning SSSI's
Business Practices Program and compliance with this Agreement.
14. The Air Force has determined that FAR 9.407 provides a cause to continue
the suspension of SSSI based upon the indictment. The Air Force has further
determined, however, that SSSI's corrective actions reflected in the terms and
conditions of this Interim Agreement provide adequate interim assurance that
SSSI's future dealings with the Government, if any, will be conducted
responsibly and that suspension is not necessary at this time to protect the
Government's interests. The parties, therefore, agree to the terms and
conditions set out below.
ARTICLES
1. PERIOD OF AGREEMENT. At the date of execution of this Interim
Administrative Agreement the period of the Agreement is indefinite. The period
may become fixed in the future, however, by operation of this Article 1.
a. If SSSI and Messrs. O'Neal, McFarland, Edson, and Hardy are acquitted
of the criminal charges at issue here, the terms and conditions of this
Agreement shall continue in force and effect and the period of the Agreement
shall be fixed as three years from the date of execution of this Interim
Agreement by the Air Force. At any time during this Interim Agreement or any
fixed-period Agreement that follows, if the Air Force determines that SSSI has
ceased to be in full compliance with the Agreement, and SSSI does not cure the
noncompliance within the period set forth in Article 26, the terms and
conditions of the Agreement shall be extended to expire on a date three years
following re-establishment of full compliance as determined by the Air Force.
If the period of this Agreement becomes fixed pursuant to the terms of this
Article, the subject matter covered by the resulting fixed-period Agreement
shall be limited to the facts charged in the indictment that forms the basis of
the suspension at issue here.
b. If SSSI or Messrs. O'Neal or McFarland or Edson or Hardy are convicted
of the criminal charges, this Interim Agreement will not become fixed, but the
Air Force will reconsider the present responsibility of SSSI in light of all
information then available. During the period of reconsideration, the terms and
conditions of this Agreement will remain in effect except that the Air Force may
unilaterally initiate proceedings to debar SSSI.
c. As used herein, the term Agreement shall mean this Interim Agreement
and any fixed-period agreement that may follow pursuant to this Article 1.
2. SELF-GOVERNANCE PROGRAMS. SSSI has implemented and agrees to maintain a
business practices program that includes compliance programs for certain
affected employees and an ethics program that covers all employees of all SSSI
entities. The Board of Directors shall be responsible for the Business
Practices Program. The Business Practices Program shall be maintained so as to
ensure that SSSI and each of its officers, directors, employees, and consultants
maintains the business honesty and integrity required of a Government contractor
and that SSSI's performance of each Government contract is in compliance with
all applicable laws, regulations, and the terms of the contract. The Business
Practices Program includes the following components:
a. CENTRAL HIGH-LEVEL PROGRAM MANAGEMENT. SSSI has designated T. Michael
Andrews to be the SSSI Vice President for Business Practices. The Vice
President for Business Practices is responsible for managing all aspects of the
SSSI Business Practices Program.
b. CODE OF BUSINESS ETHICS. On September 13, 1995, the SSSI Board of
Directors adopted a written Standards of Business Practice. A copy of the
Standards is Exhibit 2 to this Agreement. The Standards have been circulated to
each employee of SSSI. After receiving the Standards each current employee has
signed a certification that the employee has received and understands the import
of the document. These certifications are maintained by SSSI and are open to
inspection by the Government. At least once in each calendar year, each then-
current employee shall repeat the procedure of acknowledging possession of the
Standards and recognition of its import. Within two weeks of starting
employment with SSSI, new employees shall receive the Standards. Within two
weeks, a business practices advisor for the employee's location shall discuss
the requirements of the Standards with the new employee.
c. INFORMATION AND EDUCATION PROGRAM. SSSI has instituted and shall
maintain an information and education program designed to assure that all
employees are aware of all standards of business practice that employees are
expected to follow and the consequences both to the employee and to the company
that will ensue from any violation of such measures. Training consists of
compliance training for affected employees, plus at least one hour of live
initial training in the SSSI Business Practices Program for every SSSI employee,
plus, each year for each employee, not less than one hour of live ethics
training and, in addition, appropriate compliance training. A schedule for the
first year of ethics training will be submitted with the first report required
under Article 6 below.
d. LANGUAGE. All written materials and training related to the Business
Practices Program will be provided in English and in any other language
necessary to assure that each employee understands all elements of any written
or oral presentation.
e. REPORTING AND INFORMATION SOURCES. SSSI has installed a toll-free
telephone number called the "Business Practices Helpline" for confidential calls
reporting suspected misconduct or for asking questions related to business
ethics or business conduct. In addition, SSSI has posted in a prominent place
accessible to each of its employees, a notice giving the toll-free number,
inviting confidential calls, and stating the company's commitment to comply with
all applicable laws and regulations in the conduct of its business. A copy of
the notice is Exhibit 3 to this Agreement.
g. GIFTS PROHIBITED. SSSI prohibits its employees from giving to any
government employee any gifts, entertainment, meals or anything else of value,
other than minor refreshments in conjunction with business discussions or
promotional items with the SSSI logo of less than $10 in value.
3. PERFORMANCE STANDARDS. The evaluation of each employee's performance will
include the employee's commitment to, promotion of and adherence to the SSSI
Business Practices Program. The Company will notify each employee that
commitment to, promotion of and adherence to the Program is an important factor
in each employee's evaluation, compensation and promotion. A copy of the
notification will be provided in the first report provided under Article 6
below.
4. MANAGERS' AND SUPERVISORS' CERTIFICATES. SSSI has implemented and will
maintain an annual certification requirement that all departmental managers at
every level in the company attest that they personally have (a) discussed with
each employee under their supervision the content and application of the
company's Business Practices Program; (b) informed each such employee that
strict compliance with the Program is a condition of employment; and (c)
informed each such employee that SSSI will take disciplinary action, including
termination, for violation of the principles and practices set forth in the
Program, applicable laws or regulations, or basic tenets of business honesty and
integrity. A copy of the certificate used to fulfill this requirement is
attached as Exhibit 4. SSSI will submit, as a part of each report to the Air
Force pursuant to Article 6, a statement by the Chief Executive Officer that he
has verified that the certifications are being maintained and that each manager
has provided a certification as required by this provision. The certificates
shall be maintained and available for the Air Force's review and inspection
during the life of this agreement.
5. BOARD RESPONSIBLE. The Board of Directors of SSSI shall be responsible for
the company's Business Practices Program, for maintaining and updating the
Standards of Business Practice, and for auditing SSSI's compliance with this
Agreement. The Chief Executive Officer of SSSI and SSSI's Vice President for
Business Practices shall provide periodic reports to the Audit Committee of the
Board (or any successor committee of the Board of Directors performing ethics
oversight function) concerning SSSI's Business Practices Program and compliance
with this Agreement, and shall take whatever actions are appropriate and
necessary to ensure that SSSI conducts its activities in compliance with the
requirements of the law and sound business ethics. The Committee shall report
to the full Board on a quarterly basis regarding these matters. The reports
required by this Article shall be made to the Committee once in each calendar
month during the period of the Interim Agreement and not less than quarterly
during the period of any fixed-period Agreement that may follow pursuant to
Article 1. SSSI shall provide to the Air Force copies of the written reports
and any minutes of the Committee meetings reflecting the reports made to the
Committee and the Board's decisions or directions to management concerning any
matters in any way related to SSSI's Business Practices Program or this
Agreement. The names of the members of the Audit Committee and the Board of
Directors are listed at Exhibit 5. If any member of the Board leaves the Board,
or if the membership of the Audit Committee changes, SSSI shall notify the Air
Force within one week of the change and shall name each new member to the Air
Force upon election or appointment.
6. REPORTS. Each month, pending resolution of the criminal charges at issue
here, the Chief Executive Officer of SSSI shall submit a written report to the
Air Force describing the measures taken by SSSI during that month to implement
the Business Practices Program and to ensure compliance with this Agreement.
The reports will be submitted in time to be received at the Air Force within
twenty days of the end of the month being reported. If this Agreement becomes
fixed following resolution of the criminal charges, the reporting obligation
will continue, but the reports will be submitted quarterly in time to be
received at the Air Force within twenty days of the end of the calendar quarter.
If the Agreement is fixed, the final report is to be received by the Air Force
not later than one month prior to the final day of the Agreement. The reporting
dates are deadlines for receipt of the reports at Air Force Headquarters.
SSSI's failure to meet these requirements on or before the dates agreed to shall
constitute a noncompliance with this Agreement. The reports shall include:
a. A description of standards of conduct/ethics/compliance training
conducted and the number of persons who attended.
b. Informal notifications or initiatives relating to the Business
Practices Program.
c. Information required by Articles 2, 3, 4, 5, 10, 11, 12, 13, 14 and
15.
d. The status of any (i) ongoing criminal investigation or criminal
proceedings involving SSSI; (ii) ongoing civil or administrative investigations
or proceedings involving the Foreign Corrupt Practices Act ("FCPA"), fraud,
false statements, false claims, corruption, conflict of interest, or antitrust
violations involving SSSI and any government entity; or (iii) other matters
involving SSSI that the Vice President for Business Practices of SSSI determines
may bear on the corporate integrity of SSSI.
e. A statement that the certifications referenced in Article 2.b have
been obtained.
f. A report identifying all calls made to the company confidential toll-
free line (regardless of subject matter), and any instances of suspected
violations of the Standards of Business Practice brought to the attention of the
principal members of SSSI management through any other channel during the
preceding quarter. Such reports shall state the nature of the reported conduct,
type and results of any internal investigation, corrective and/or disciplinary
action, if any, and status of feedback to the source of the information.
Matters pending resolution at the time of a reporting period shall be reported
each quarter until final resolution of the matter is reported. Negative reports
are required.
g. The status of the criminal case referenced in the preamble hereto and
any related civil litigation.
7. MANAGEMENT. The principal members of SSSI management on the date of
execution of this Agreement by SSSI are:
Robert L. Hargrave -- Group Vice President, Chief
Executive Officer and Chief Financial Officer
Garth C. Bates, Jr. -- Group Vice President,
Distribution
C. LaRoy Hammer -- Group Vice President, Tactical
Vehicle Systems Division
Richard R. Stewart -- Group Vice President, Engineering
Power Systems
T. Michael Andrews -- Vice President for Business
Practices
Bobby W. Brown -- Vice President, Human Relations
Donald E. Stevenson -- Vice President, Quality
Keith T. Stevenson -- Vice President, Texas
Distribution
C. Jim Stewart III -- Vice President, Marketing
Lawrence E. Wilson -- Vice President, General Counsel
and Secretary
SSSI agrees to notify the Air Force within one week if any of these principals
leave their current positions and to name their successors (if any) to the Air
Force upon appointment.
8. LEGAL PROCEEDINGS. SSSI represents to the Air Force that, with the
exception of the pending indictment and related civil litigation, to the best of
SSSI's knowledge, SSSI is not now under criminal or civil fraud investigation by
any Governmental entity. In addition to the periodic written reports required
under Article 6, SSSI shall notify the Air Force within ten working days of the
time SSSI learns of (a) the initiation of any criminal or civil investigation by
any federal, state or local governmental entity involving the FCPA, fraud, false
statements, false claims, corruption, conflict of interest or antitrust
violations; (b) service of a criminal subpoena or Civil Investigative Demand by
any such governmental entity; (c) service of a search warrant or the conduct of
a search by a police or investigative organization at any SSSI facility;
(d) initiation of a legal action by any entity alleging violations of the False
Claims Act; or (e) criminal charges brought by any governmental entity. SSSI
shall provide the Air Force with information sufficient to allow the Air Force
to determine the impact of the investigative or legal activity upon the
corporate integrity of SSSI.
9. MEETING. Between three and four months after the effective date of this
Agreement, the chief executive officer, the Chairman of the Audit Committee, and
the Vice President for Business Practices shall meet with the Air Force Deputy
General Counsel for Contractor Responsibility or a designee to discuss
implementation of this Agreement.
10. INTERNAL AUDIT. SSSI shall cause its internal audit organization to
periodically audit SSSI's operations for compliance with the Agreement and with
SSSI's self-governance programs, including the Business Practices Program. The
results of the audits shall be furnished to the Air Force with the reports
submitted pursuant to Article 6.
11. AUDIT REPORTS. In addition to the requirements of Article 10, SSSI agrees
to provide, with reports filed under the provisions of Article 6, a list of all
audit reports generated by or for SSSI within the preceding six months,
including reports generated as a result of customer or Government surveys of
SSSI. SSSI shall report pursuant to Article 13 any misconduct disclosed in such
reports that (a) constitutes a violation of criminal law; (b) constitutes a
violation of civil law relating to FCPA, fraud, false claims, false statements,
corruption or conflicts of interest or antitrust violations; or (c) involves
other matters that the Vice President Business Practices determines may bear on
the corporate integrity of SSSI.
12. BUSINESS ETHICS REVIEW. SSSI shall have its independent consultant on the
Business Practices Program previously identified to the Air Force perform a
review of SSSI's Business Ethics Program within 12-15 months of the date of this
Agreement. SSSI shall require the independent consultant to prepare a report
for SSSI evaluating SSSI's Program and recommending any improvements that seem
appropriate. SSSI shall require the independent consultant to provide a copy of
the report directly to the Air Force. SSSI shall provide SSSI's action plan for
implementing any recommended corrective action to the Air Force not later than
three months after the date of the independent consultant's Report. In the
event the independent consultant recommends changes, the Air Force shall have
the right to approve such changes before the changes are implemented. Before
the review is performed, the consultant shall provide to the Air Force the
methodology to be utilized for review and comment.
13. REPORTS OF MISCONDUCT. In addition to the routine reports of misconduct
required by Article 6.d., SSSI shall report to the Air Force, within 15 days of
discovery by management, any suspected misconduct that management has reasonable
grounds to believe may involve the FCPA, fraud, false statements, corruption or
conflict of interest, antitrust violations, or other matters that the Vice
President for Business Practices determines may bear on the corporate integrity
of SSSI. The misconduct to be reported pursuant to this Article includes
misconduct by any person, including, but not limited to, those associated with
SSSI or with the Government and shall include misconduct disclosed to SSSI from
any source. SSSI will investigate any report of such misconduct that comes to
its attention and will notify the Air Force of the outcome of the investigation
and any potential or actual impact on any aspect of SSSI's Government business.
SSSI will take corrective action, including prompt restitution of any harm to
the Government. SSSI will include summary reports of the status of each such
investigation to the Air Force in the reports submitted pursuant to Article 6
until each matter is finally resolved. It is the intention of the Air Force
that the requirements of this Agreement related to disclosures by SSSI to the
Air Force shall not render involuntary a disclosure made pursuant to any agency
Voluntary Disclosure Program.
14. REVIEW OF PROPOSALS AND CLAIMS. Until the resolution of the criminal
charges at issue here, every SSSI proposal or claim submitted to the Government
shall be audited by an independent Certified Public Accountant ("CPA"), assisted
by SSSI's internal audit staff, before it is submitted to the Government to
determine whether such proposal or claim is in accordance with applicable
statutory and regulatory requirements, except that such audit need not be
performed on any proposal or claim that:
a. originates from, is submitted by or relates to the Tactical
Vehicle Systems Division of SSSI and is subject to the partnering agreement to
be executed by DCAA, DLA, TACOM and Stewart & Stevenson no later than December
1, 1995, or
b. originates from, is submitted by or relates to an operating unit
of SSSI that has an estimating procedure that has been approved by the DLA or
c. does not contain a Certificate of Current Cost and Pricing Data.
In addition, every other month, at least one SSSI Government contract proposal
or claim that was excluded from pre-submission audit on the basis of clause (c)
above shall be selected at random for a post-award audit by an independent CPA
assisted by SSSI's internal audit department to determine if it was prepared in
accordance with SSSI's internal procedures. A written audit report explaining
the methodology and detailing the results of each audit required by this Article
shall be furnished to the DCAA within 15 days after the audit is complete. To
the extent that a post-award audit discloses improper pricing, SSSI shall
promptly offer a reduction in contract price. The working papers and other
records relating to each audit conducted pursuant to this Article shall be
retained by SSSI for the same period of time as is the cost or pricing data
related to the contracts concerned. When requested by the DCAA in connection
with an SSSI audit or review of an SSSI price proposal, SSSI shall immediately
furnish all documents that are available. SSSI shall furnish the DCAA other
documents that may be requested within five working days of the request. If the
documents required cannot be provided within five working days, SSSI shall
provide to the DCAA a written explanation, and shall furnish the documents as
soon as possible.
15. LETTER TO SUPPLIERS AND SUBCONTRACTORS. In November of each calendar year,
SSSI will distribute to every supplier and subcontractor to SSSI a letter from
the Vice President, Quality of SSSI in the form attached as Exhibit 6. A copy
of each year's letter shall be furnished to the Air Force pursuant to Article 6.
16. EMPLOYMENT OF SUSPENDED OR DEBARRED INDIVIDUALS. SSSI shall not knowingly
employ, with or without pay, an individual who is under indictment, convicted,
or listed by a Federal Agency as debarred, suspended, or otherwise ineligible
for Federal programs. SSSI shall make reasonable inquiry into the status of any
potential employee or consultant. Such reasonable inquiry shall include, at a
minimum, the inclusion on all employment applications a question regarding
whether the applicant is now, or has ever been, suspended, proposed for
debarment or debarred, a review of the General Services Administration's List of
Parties Excluded from Federal Procurement and Nonprocurement Programs within two
weeks after any person is hired, and the termination of any new employee that
has incorrectly represented his or her status on the application, unless such
termination is prohibited by applicable law. SSSI is not required to terminate
individuals who are indicted or become suspended or are proposed for debarment
during their employment with SSSI. SSSI, however, will remove such employees
from responsibility for or involvement with SSSI's business affairs until the
resolution of such suspension or proposed debarment. In addition, if any
employee of SSSI is charged with a criminal offense relating to business
practices, SSSI will remove that employee immediately from responsibility for or
involvement with SSSI's business affairs. If the employee is convicted or
debarred, SSSI will terminate their employment with SSSI unless prohibited by
applicable law. SSSI shall notify the Air Force of its decision on such
personnel action, and the reasons therefor, within 15 days of the action.
During the interim period of this Agreement, if SSSI or any of its
employees determines that there is a requirement that any indicted or suspended
individual be consulted or become involved in SSSI's business affairs in any
manner, SSSI shall notify the Air Force in writing of the proposed contact. If
the Air Force objects, SSSI will not contact the indicted or suspended
individual. Nothing in this Article precludes the execution of or compliance
with a joint defense agreement regarding ongoing or future litigation.
17. BUSINESS RELATIONSHIPS WITH SUSPENDED OR DEBARRED ENTITIES. SSSI shall not
knowingly form a contract with, purchase from, or enter into any business
relationship in a transaction in excess of $25,000 with any individual or
business entity that is listed by a Federal Agency as debarred, suspended, or
proposed for debarment, unless there is a compelling reason to do so.
Notwithstanding any other provision of this Article, SSSI may enter into a
business relationship with a suspended or debarred entity if the Chief Executive
Officer first determines in writing that a compelling reason justifies the
action and furnishes to the Air Force a copy of the determination not later than
10 days prior to SSSI entering such a relationship. In addition to the
provisions of this Article, SSSI shall comply with the requirements of
FAR 9.405-2(b). SSSI simultaneously will provide to the Air Force Deputy
General Counsel for Contractor Responsibility a copy of the documents
submitted to the contracting officer pursuant to FAR 9.405-2(b). Reasonable
inquiry shall be made into the status of any potential business partner.
Such reasonable inquiry shall include, at a minimum, review of the General
Services Administration's List of Parties Excluded from Federal Procurement
and Nonprocurement Programs.
18. PERSONNEL. As stated above, Messrs. O'Neal, McFarland, Edson and Hardy
have been placed on administrative leave and have no role in the business
affairs of SSSI. These individuals will remain on administrative leave pending
the outcome of the trial of this matter. Each individual's status will be
evaluated on the basis of the verdict or other resolution of the indictment.
19. PROPOSED CHANGES. SSSI shall notify the Air Force of any proposed changes
in the directives, instructions, or procedures implemented in furtherance of
SSSI's Business Practices Program and compliance with this Agreement. The Air
Force, or its authorized representative, retains the right to verify, approve,
or disapprove any such changes. No such changes shall be implemented without
the prior approval of the Air Force.
20. ACCESS TO RECORDS. In addition to any other right the Air Force may have
by statute, regulation, or contract, the Deputy General Counsel for Contractor
Responsibility of the Air Force or her duly authorized representative may
examine SSSI's books, records (including test data records), and other company
documents and supporting materials for the purpose of verifying and evaluating:
(a) SSSI's compliance with the terms of this Agreement; (b) SSSI's compliance
with its Business Practices Program; (c) SSSI's compliance with Federal
procurement policies and accepted business practices; and (d) SSSI's compliance
with the requirements of Government contracts or subcontracts. The materials
described above shall be made available by SSSI at all reasonable times for
inspection and audit. Further, for purposes of this provision, the Air Force or
its authorized representative may interview any SSSI employee who consents to be
interviewed at the employee's place of business during normal business hours or
at such other place and time as may be mutually agreed between the employee and
the Air Force. Employees may elect to be interviewed with or without a
representative of SSSI present. This provision shall not be used as a discovery
tool in the discovery phase or trial of the indictment.
21. COSTS OF REVIEW. SSSI has paid to the Air Force $30,000 to cover the Air
Force's costs of independently reviewing this matter and administering this
Agreement.
22. UNALLOWABLE COSTS. SSSI agrees that all costs, as defined in FAR 31.205-
47, incurred by, for, or on behalf of SSSI or any SSSI current or former
officer, director, agent, employee, consultant, or affiliate shall be expressly
unallowable costs for Government contract accounting purposes. Such costs
include, but are not limited to, costs arising from, related to, or in
connection with (a) the matters at issue here, (b) the Government's criminal and
civil investigations regarding the matters at issue here, and (c) the Air
Force's independent review of SSSI's present responsibility, including the costs
of the company's submissions, presentations, and appearances before the office
of the Air Force Deputy General Counsel for Contractor Responsibility. SSSI's
costs of performing and administering the terms of this Agreement and any fines
or penalties levied or to be levied in or arising out of the matter at issue
here are agreed to be expressly unallowable costs. Also unallowable are SSSI's
costs of bringing SSSI's self-governance, compliance, and/or ethics programs to
a level acceptable to the Air Force. SSSI agrees to account separately for such
costs. In the event that SSSI and/or Messrs. O'Neal or McFarland or Edson or
Hardy are acquitted, this clause will not apply to the acquitted person or
entity. SSSI's present and future costs of maintaining, operating, and
improving SSSI's corporate self-governance/compliance/ethics programs are
allowable costs for purposes of this Agreement.
23. ADVERSE ACTIONS. SSSI avers that adverse actions taken, or to be taken, by
SSSI against any employee or other individual associated with SSSI arising out
of or related to the wrongdoing at issue here were solely the result of SSSI's
initiatives and decisions and were not the result of any action by, or on behalf
of, agents or employees of the United States.
24. STATUS OF SUSPENSION. The Air Force enters this Agreement and will
terminate SSSI's suspension temporarily in reliance upon SSSI's faithfully
fulfilling the terms and conditions of this Agreement. The Air Force's decision
to terminate the suspension of SSSI temporarily upon the information now
available to the Air Force shall not restrict the Air Force or any other agency
of the Government from instituting administrative action, including, without
limitation, suspension or debarment, should information indicating the propriety
of such action come to the attention of the Air Force or such other agency. If
SSSI and Messrs. O'Neal, McFarland, Edson and Hardy are acquitted of the charges
at issue here, the Air Force will not reinstate suspension or initiate debarment
proceedings upon the basis of such charges. If, however, SSSI or Mr. O'Neal, or
Mr. McFarland, or Mr. Edson, or Mr. Hardy is convicted, the Air Force will
reassess the need for the protection of suspension or debarment.
25. PRESENT RESPONSIBILITY. In entering this Agreement, the Air Force makes no
decision on the merits of the indictment or the criminal charges at issue here.
This Agreement is temporary because the Air Force recognizes that facts relevant
to the present responsibility of SSSI are not now available to the suspending
official. The parties agree that in entering this Agreement, the Air Force is
not determining that SSSI is presently responsible for Government contracting.
SSSI's failure to meet any of its obligations pursuant to the terms and
conditions of this Agreement may constitute a separate cause for suspension
and/or debarment unless cured in a timely fashion as set forth below.
26. INADMISSIBILITY OF AGREEMENT. The parties agree that the negotiation or
existence of this agreement shall not be admissible or used in any court or
court proceeding except to enforce the agreement itself.
27. NOTICE OF NONCOMPLIANCE AND RIGHT TO CURE. In the event the Air Force
determines that SSSI is in noncompliance with any of the terms of this
Agreement, the Air Force shall notify SSSI at the address set forth below of the
basis for the determination of noncompliance. SSSI shall have ten (10) days
after receipt of the notice to cure the noncompliance and provide notice of such
cure. In the event the noncompliance is cured within the ten-day period, the
effective date of this Agreement as described in Article 1 above shall not be
extended.
28. NOTIFY EMPLOYEES. SSSI will notify all SSSI employees of the fact and
substance of this agreement, the reason for the Agreement, and the importance of
each employee's abiding by the terms of the Agreement and all requirements of
law, regulations, and SSSI policies and procedures.
29. SALE OF BUSINESSES. In the event that SSSI sells or in any way transfers
ownership of any part of the business entities that are bound by this Agreement,
SSSI shall notify the Air Force in advance. Moreover, in the event the segment
of the business to be sold does more than $5 million in Federal government
contracting or subcontracting, SSSI will obtain an agreement from the buyer to
maintain a compliance program substantially similar to the program now in place
at SSSI.
30. PURCHASE OF BUSINESSES. In the event that SSSI purchases or establishes
new business units after the effective date of this Agreement, SSSI shall
implement all provisions of this Agreement, including any training or education
requirements, within 60 days following such purchase or establishment.
31. WAIVER. SSSI hereby waives all claims, demands, or requests for monies of
any kind or of whatever nature that SSSI may have or may develop in the future
arising from, related to, or in connection with, any investigation, or as a
result of administrative or judicial proceedings, or request for any other
relief in law or in equity, or in any other forum be it judicial or
administrative in nature arising out of or relating to the facts that gave rise
to the suspension, but shall not waive any contract claims.
32. RELEASE. SSSI hereby releases the United States, its instrumentalities,
agents, and employees in their official and personal capacities, of any and all
liability or claims arising out of or related to the investigation, criminal
prosecution, or civil settlement at issue here, or the suspension of SSSI or the
discussions leading to this Agreement.
33. AIR FORCE RELIANCE. SSSI represents that all written materials and other
information supplied to the Air Force by its authorized representative during
the course of discussions with the Air Force preceding this Agreement are true
and accurate, to the best information and belief of the SSSI signatories to this
Agreement. SSSI understands that this Agreement is executed on behalf of the
Air Force in reliance upon the truth and accuracy of all such representations.
34. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all prior agreements and understandings, whether oral
or written, relating to the subject matter hereof. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns.
35. AUTHORIZED REPRESENTATIVE. Robert L. Hargrave, of SSSI, is fully
authorized to execute this Agreement and represents that he has authority to
bind SSSI.
36. SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect other provisions of this Agreement.
37. NOTICES. Any notices, reports, or information required hereunder shall be
in writing and delivered or mailed by registered or certified mail, postage
prepaid as follows:
If to SSSI, to: Robert L. Hargrave
Group Vice President, Chief Executive
Officer and Chief Financial Officer
Stewart & Stevenson Services, Inc.
P.O. Box 1637
Houston, TX 77251-1637
If to the
Air Force, to: Deputy General Counsel
(Contractor Responsibility)
Department of the Air Force
1740 Air Force, Pentagon
Washington, D.C. 20330-1740
with a copy to: Joseph Satagaj
DCMDS-GDG
1200 Main Street
Dallas, TX 75202-4399
Paul Davison
SA-ALC/JAN
204 Lombard Drive
Kelly Air Force Base, Texas 78241-5609
or such other address as either party shall have designated by notice in writing
to the other party. In addition to the copies sent to DCMDS and SA-ALC, SSSI
shall submit two copies of reports made pursuant to Article 6 to SAF/GCR.
38. PUBLIC DOCUMENT. This Agreement, including all attachments, is a public
document and may be distributed by the Air Force throughout the Government as
appropriate and to other interested persons upon request.
39. MODIFICATION. This Agreement may be amended or modified only by a written
document signed by the parties.
DEPARTMENT OF THE AIR FORCE
/s/ Janet C. Cook
By: _________________________ Date: November 8, 1995
STEWART & STEVENSON SERVICES, INC.
/s/ Robert L. Hargrave
By: _________________________ Date: November 8, 1995
LIST OF EXHIBITS
Exhibit 1 Indictment
Exhibit 2 Standards of Business Practice
Exhibit 3 Helpline Posters
Exhibit 4 Manager's Certificate
Exhibit 5 List of Board and Audit Committee membership
Exhibit 6 Letter to Suppliers
EXHIBIT 1
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
UNITED STATES OF AMERICA Criminal No. H-95-93
v.
STEWART & STEVENSON SERVICES, INC.
BOB H. O'NEAL
WILLIAM "BILL" MCFARLAND
PAUL EDSON
LYMAN HARDY
JOHN RUNION
INDICTMENT
THE GRAND JURY CHARGES:
COUNT ONE
I. Conspiracy - 18 U.S.C. Section 371
A. Introduction
AT ALL TIMES MATERIAL TO THIS INDICTMENT:
1. Defendant STEWART & STEVENSON SERVICES, INC. (SSSI) was a corporation
headquartered in Houston, Texas.
2. Defendant BOB H. O'NEAL was first Vice-President and then President of
SSSI.
3. Defendant WILLIAM "BILL" MCFARLAND was the General Operations Manager
of SSSI.
4. Defendant PAUL EDSON was the Program Manager for the Peace Shield
Program at SSSI.
5. Defendant LYMAN HARDY was an employee of SSSI assigned to the Peace
Shield Program.
6. Defendant JOHN RUNION was an employee of Metcalf & Eddy assigned to
the Joint Venture with CRS Sirrine from August, 1987, to August, 1988. RUNION
was the Quality Control Manager for the Peace Shield Program.
7. JOHN RUNION left the CRS Sirrine + Metcalf & Eddy Joint Venture and
went to work for SSSI as a consultant in August, 1988.
8. Childress Business Enterprises was owned by Donald Childress. Donald
Childress was an antique car dealer in Galveston, Texas, and the father-in-law
of WILLIAM "BILL" MCFARLAND'S daughter.
9. Toyomenka was an international trading company with an office in
Houston, Texas. Toyomenka later changed its name to Tomen America, Inc.
10. The Peace Shield Program was a United States Government contract to
build long range radar installations to protect the citizens of Saudi Arabia
from hostile attack by another country. The government contract was pursuant to
the Foreign Military Sales (FMS) provisions of the United States Code. All FMS
programs are based on the authority of the Arms Export Control Act (22 U.S.C.
Sections 2751, et seq.). The United States entered an agreement known as a
Letter of Offer and Acceptance (LOA) with the government of Saudi Arabia to
develop an air defense system. This agreement pledged the United States to use
its best efforts to provide the Saudis with the best available system.
11. The prime contract to design and build the radar sites was negotiated
pursuant to 10 U.S.C. Section 2304(a)(10), and was awarded by the United States
Air Force to a joint venture comprised of two companies - CRS Sirrine and
Metcalf + Eddy (the JV). A joint venture is similar to a partnership where each
member of the joint venture contributes something of value, such as employees,
funds, and equipment, and is entitled to a return of its pro rata share of
profits or losses derived from the business of the joint venture. A prime
contract is a contract between the United States government and some non-
government entity such as a corporation, partnership or joint venture.
12. The JV, as the prime contractor, then divided the prime contract into
sub-contracts. A sub-contract is a contract between the prime contractor and
some other non-government entity. The JV then accepted bids on the various sub-
contracts from other companies which wished to participate in a particular area
of the Peace Shield Program. Every aspect of the contracting process is
governed by United States Government regulations known previously as Defense
Acquisition Regulations (DAR's) and now known as Federal Acquisition Regulations
(FAR's).
13. One such sub-contract called for the manufacture and installation of a
Power Generation System (PGS) at each of the seventeen long range radar (LRR)
sites and on Ground Entry Site (GES). The PGS generates electrical power at the
radar sites.
14. SSSI was one of eleven companies which received permission from the JV
to bid on the PGS sub-contract to the Peace Shield contract.
15. SSSI was one of only four out of the eleven companies which actually
submitted a bid to the JV on the PGS sub-contract by the deadline of August 5,
1987. The DAR's required that the PGS sub-contract be awarded through a
competitive bidding process.
16. SSSI's bid of $106,217,362 for the PGS contract was the low bid by
approximately $7.4 million and resulted, in part, in SSSI being awarded the PGS
sub-contract.
17. Many of the government contract clauses contained in the prime
contract between the United States Government and the JV were inserted in the
PGS sub-contract and were made specifically applicable to the administration of
the PGS sub-contract.
18. One such clause, the "Changes" clause required any changes made in
materials specified in the contract, after the award of the sub-contract,
required approval by the JV in a Change Order Proposal (COP). The PGS sub-
contract also contained a government contract provision that required an
"equitable adjustment" to the contract price for any authorized change of
material on a COP if a cost impact resulted from the change. An "equitable
adjustment" is a change to the total dollar amount of the contract in either
direction. COP-1 was approved by the JV to permit substitution of stainless
steel pipe (SS pipe) for high silicone iron pipe (HSI pipe).
B. The Conspiracy
19. From in or about July, 1987, to on or about April 1, 1992, in the
Houston Division of the Southern District of Texas, the defendants,
STEWART & STEVENSON SERVICES, INC.,
BOB H. O'NEAL,
WILLIAM "BILL" MCFARLAND,
PAUL EDSON,
LYMAN HARDY,
AND
JOHN RUNION,
did knowingly combine, conspire, confederate and agree together and with each
other, and with other persons known and unknown to the grand jury:
a. To execute a scheme and artifice with the intent to defraud the United
States, in violation of Title 18, United States Code, Section 1031;
b. To make false material statements in a matter within the jurisdiction of
the United States, in violation of Title 18, United States Code, Section 1001;
c. To defraud the United States in its ability to fairly administer the
Foreign Military Sales agreement between the United States and the Kingdom of
Saudi Arabia.
C. The Manner and Means of the Conspiracy
20. It was a part of said conspiracy that defendant JOHN RUNION would and
did review the technical specifications for the Power Generation Systems sub-
contract prior to being hired as the quality control manager by the joint
venture of CRS Sirrine + Metcalf & Eddy (the JV).
21. It was a further part of said conspiracy that the defendant JOHN
RUNION would and did communicate with C. Jim Stewart III and BOB O'NEAL,
employees of the defendant STEWART & STEVENSON SERVICES, INC. (SSSI), within the
first week of his employment with the JV and would and did discuss what SSSI had
to do to obtain the Peace Shield sub-contract for the Power Generation Systems
(PGS).
22. It was a further part of said conspiracy that the defendant JOHN
RUNION, while working for the JV, would and did assist defendant SSSI with the
technical requirements necessary for SSSI to successfully bid on the PGS sub-
contract.
23. It was a further part of said conspiracy that the defendant JOHN
RUNION, while working for the JV, would and did meet with defendants BOB O'NEAL,
and WILLIAM "BILL" MCFARLAND prior to the award of the PGS sub-contract to
advise them where their bid was deficient and to advise them how to correct the
deficiencies.
24. It was a further part of said conspiracy that the defendant JOHN
RUNION, while working for the JV, would and did meet with defendants BOB O'NEAL,
and WILLIAM "BILL" MCFARLAND and other SSSI employees prior to the award of the
PGS sub-contract to discuss the substitution of stainless steel pipe for the
high silicon iron pipe (HSI pipe) specified in the contract.
25. It was a further part of said conspiracy that the defendant JOHN
RUNION, while working for the JV, would and did meet with defendants BOB O'NEAL,
WILLIAM "BILL" MCFARLAND, and PAUL EDSON and other SSSI employees prior to the
award of the PGS sub-contract to discuss the substantial cost savings to SSSI
based on the substitution of stainless steel pipe for HSI pipe.
26. It was a further part of said conspiracy that defendants BOB O'NEAL,
WILLIAM "BILL" MCFARLAND, and PAUL EDSON would and did falsely assert to
employees of the JV that the PGS sub-contract was not a government contract in
order to deceive the JV in an attempt to retain for defendant SSSI the
substantial cost savings resulting from COP-1.
27. It was a further part of said conspiracy that the defendant JOHN
RUNION, while working for the JV, would and did recommend to the JV that SSSI be
awarded the PGS sub-contract.
28. It was a further part of said conspiracy that the defendant JOHN
RUNION, while working for the JV, would and did recommend to the JV that the
specification for bleed air pipe be changed from high silicon iron to stainless
steel.
29. It was a further part of said conspiracy that the defendant JOHN
RUNION and defendant SSSI, in the persons of defendants BOB O'NEAL and WILLIAM
"BILL" MCFARLAND would and did structure a transaction which made it appear that
RUNION sold his restored 1940 Ford automobile to an antique auto dealer named
Donald Childress for $25,000.
30. It was a further part of said conspiracy that the defendant SSSI, in
the persons of defendants BOB O'NEAL and WILLIAM "BILL" MCFARLAND would and did
cause Donald Childress to pay to defendant JOHN RUNION the sum of $25,000.
31. It was a further part of said conspiracy that the defendant SSSI, in
the persons of defendants BOB O'NEAL and WILLIAM "BILL" MCFARLAND would and did
cause two SSSI checks to be issued to Childress Business Enterprises in the
total amount of $25,000.
32. It was a further part of said conspiracy that the defendant SSSI, in
the persons of defendants BOB O'NEAL and WILLIAM "BILL" MCFARLAND and defendant
JOHN RUNION would and did agree that title in the 1940 Ford would not pass from
RUNION, to SSSI, Donald Childress, or anyone else.
33. It was a further part of said conspiracy that defendants BOB O'NEAL
and WILLIAM "BILL" MCFARLAND would and did cause the SSSI check requests for the
two checks to Childress Business Enterprises to falsely reflect that the
payments were for "supplies-equipment."
34. It was a further part of said conspiracy that defendants BOB O'NEAL
and WILLIAM "BILL" MCFARLAND would and did cause SSSI to fraudulently charge the
two checks payable to Childress Business Enterprises to the Peace Shield PGS
subcontract as "insurance".
35. It was a further part of said conspiracy that defendant JOHN RUNION,
while working for the JV, would and did provide confidential, internal JV
documents to defendant SSSI.
36. It was a further part of said conspiracy that defendant BOB O'NEAL
would and did offer defendant JOHN RUNION a job with SSSI in return for his
assistance to SSSI during the PGS sub-contract award process.
37. It was a further part of said conspiracy that the defendant SSSI, in
the persons of defendants BOB O'NEAL, WILLIAM "BILL" MCFARLAND, PAUL EDSON and
LYMAN HARDY as well as other SSSI employees would and did discuss the fact that
the substitution of stainless steel pipe for the HSI pipe would result in a cost
savings to SSSI in the approximate amount of $5 million.
38. It was a further part of said conspiracy that the defendant SSSI, in
the persons of defendants BOB O'NEAL, WILLIAM "BILL" MCFARLAND, PAUL EDSON and
LYMAN HARDY as well as other SSSI employees would and did decide that SSSI would
keep the approximate $5 million cost savings instead of returning it as an
equitable adjustment to the United States Government through the JV as required
by law.
39. It was a further part of said conspiracy that the defendant SSSI, in
the persons of defendants BOB O'NEAL, WILLIAM "BILL" MCFARLAND, PAUL EDSON and
LYMAN HARDY as well as other SSSI employees would and did make false statements
to the JV that no cost savings resulted from the change of material in the pipe
specification.
40. It was a further part of said conspiracy that the defendant SSSI, in
the persons of defendants BOB O'NEAL, WILLIAM "BILL" MCFARLAND, PAUL EDSON and
LYMAN HARDY as well as other SSSI employees would and did conduct and caused to
be conducted a world wide search for a lower priced quote for HSI pipe.
41. It was a further part of said conspiracy that the defendant SSSI, in
the persons of defendants BOB O'NEAL, WILLIAM "BILL" MCFARLAND, PAUL EDSON and
LYMAN HARDY as well as other SSSI employees would and did mislead various
manufacturers of pipe regarding the specifications of the HSI pipe, and the
prospect of SSSI's purchase thereof, in an effort to obtain lower quotes on HSI
pipe and make it appear that there was no cost impact from the change in pipe
material.
42. It was a further part of said conspiracy that the defendant SSSI, in
the persons of defendants BOB O'NEAL, WILLIAM "BILL" MCFARLAND, PAUL EDSON and
LYMAN HARDY as well as other SSSI employees would and did offer to pay and did
pay various manufacturers of pipe to provide SSSI with a price quote for HSI
pipe which it then could use to mislead the JV as to any cost impact and allow
SSSI to keep the significant cost savings.
43. It was further part of said conspiracy that the defendant SSSI, in the
persons of defendants BOB O'NEAL, WILLIAM "BILL" MCFARLAND, PAUL EDSON and LYMAN
HARDY would and did provide a fraudulent quote for HSI pipe to the JV in an
attempt to mislead the JV regarding the true cost savings of approximately $5
million.
44. It was a further part of said conspiracy that the defendant SSSI, in
the persons of defendants BOB O'NEAL, WILLIAM "BILL" MCFARLAND, PAUL EDSON and
LYMAN HARDY would and did use Toyomenka, a Japanese company, as a conduit for
the fraudulent quote to provide a level of deniability regarding the fraudulent
quote.
45. It was a further part of said conspiracy that the defendant SSSI, in
the persons of defendants BOB O'NEAL, WILLIAM "BILL" MCFARLAND, PAUL EDSON and
LYMAN HARDY would and did submit and cause to be submitted fraudulent claims to
the JV.
46. It was a further part of said conspiracy that the defendant SSSI, in
the persons of defendants BOB O'NEAL, WILLIAM "BILL" MCFARLAND, PAUL EDSON and
LYMAN HARDY would and did submit and cause to be submitted false and fraudulent
certificates of current cost and pricing data to the JV regarding the cost
impact of COP-1.
D. OVERT ACTS
47. For the purpose of effecting the objects of the conspiracy, the
following overt acts, among others, were committed in the Southern District of
Texas and elsewhere:
(1) In or about August 1987, JOHN RUNION met with SSSI employees including
BOB O'NEAL and WILLIAM "BILL" MCFARLAND to discuss where SSSI's bid was
deficient and what SSSI had to do to make its bid acceptable to the JV.
(2) In or about September, 1987, JOHN RUNION met with SSSI employees
including BOB O'NEAL and WILLIAM "BILL" MCFARLAND to discuss the pipe
specification change from HSI pipe to stainless steel pipe.
(3) On or about November 10, 1987, WILLIAM "BILL" MCFARLAND originated an
SSSI check request for a check payable to Childress Business Enterprises in the
amount of $21,000.
(4) On or about November 10, 1987, BOB O'NEAL approved an SSSI check
request for a check payable to Childress Business Enterprises in the amount of
$21,000.
(5) On or about November 11, 1987, JOHN RUNION received a check in the
amount of $25,000 from Donald Childress.
(6) On or about November 11, 1987, WILLIAM "BILL" MCFARLAND delivered a
SSSI check in the amount of $21,000 to Donald Childress.
(7) On or about November 12, 1987, WILLIAM "BILL" MCFARLAND originated an
SSSI check request for a check payable to Childress Business Enterprises in the
amount of $4,000.
(8) On or about November 12, 1987, BOB O'NEAL approved an SSSI check
request for a check payable to Childress Business Enterprises in the amount of
$4,000.
(9) On or about November 12, 1987, WILLIAM "BILL" MCFARLAND caused a SSSI
check in the amount of $4,000 to be delivered to Donald Childress.
(10) On or about December 1, 1987, PAUL EDSON instructed Bill Trim, an SSSI
employee, to withdraw his cost analysis, showing an approximate $5 million cost
savings, from the SSSI Peace Shield files.
(11) On or about December 1, 1987, Bill Trim, an SSSI employee, was
instructed by BOB O'NEAL, WILLIAM "BILL" MCFARLAND and PAUL EDSON to find a
quote for HSI pipe that would reduce the cost difference between HSI and
stainless steel pipe and allow SSSI to keep the savings which actually resulted
from COP-1.
(12) On or about December 31, 1987, SSSI paid Productive Resources
Management $10,000 to provide SSSI with a quote for HSI pipe that would reduce
the cost difference between HSI and stainless steel pipe and allow SSSI to keep
the savings which actually resulted from COP-1.
(13) On or about March 2, 1988, PAUL EDSON sent a letter to the JV stating
that there was no significant cost change as a result of the change from HSI
pipe to stainless steel pipe (COP-1).
(14) On or about March 10, 1988, PAUL EDSON, sent a letter to the JV again
stating that there was no significant cost change as a result of COP-1.
(15) On or about July 14, 1988, JOHN RUNION, sent a letter to BOB O'NEAL
and C. Jim Stewart II stating the terms for RUNION's employment by SSSI.
(16) On or about October 2, 1989, PAUL EDSON, sent a letter to the JV, with
carbon copies to several SSSI employees including BOB O'NEAL, WILLIAM "BILL"
MCFARLAND, and LYMAN HARDY, falsely and fraudulently stating that their analysis
now indicated that using stainless steel pipe would cost more than using HSI
pipe. Because of that analysis, SSSI stated it was rescinding their "no cost
change" position.
(17) On or about November 21, 1989, LYMAN HARDY stated to Roger Varner at
Wisconsin Centrifugal that SSSI was willing to pay the costs of Wisconsin
Centrifugal if it was willing to provide a quote to SSSI for HSI pipe.
(18) On or about November 21, 1989, LYMAN HARDY sent a SSSI internal memo
to PAUL EDSON summarizing a telephone conversation he had with Roger Varner at
Wisconsin Centrifugal regarding the withdrawal of their quote for HSI pipe.
(19) On or about January 11, 1990, LYMAN HARDY sent a SSSI internal memo to
PAUL EDSON stating that the current documented cost of the HSI pipe was $368 per
linear foot.
(20) On or about May 11, 1990, WILLIAM "BILL" MCFARLAND submitted a claim
to the JV, which was carbon copied to PAUL EDSON and LYMAN HARDY, which stated
that COP-1 resulted in an increase in cost to SSSI in the amount of $869,767.
(21) On or about May 11, 1990, WILLIAM "BILL" MCFARLAND attached an altered
bid from a foundry in England to the claim as support that COP-1 resulted in an
increase in cost to SSSI in the amount of $869,767.
(22) On or about October 31, 1990, LYMAN HARDY delivered a claim signed by
WILLIAM "BILL" MCFARLAND to the JV which falsely and fraudulently stated that
COP-1 now resulted in an increase in cost to SSSI in the amount of $410,604.
(23) On or about February 18, 1992, PAUL EDSON transmitted a letter from
WILLIAM "BILL" MCFARLAND to the JV which attached a Certificate of Current Cost
or Pricing Data, dated December 19, 1991, signed by SSSI Controller Rudy Kusak.
(24) On or about March 30, 1992, PAUL EDSON transmitted a letter from
WILLIAM "BILL" MCFARLAND to the JV which attached a Certificate of Current Cost
or Pricing Data, dated March 31, 1992, signed by SSSI Controller Rudy Kusak.
In violation of Title 18, United States Code, Section 371.
COUNT TWO
MAJOR FRAUD AGAINST THE UNITED STATES - 18 U.S.C. Section 1031
A. Introduction
1. The allegations of Section A of Count One are repeated and realleged
as if fully set forth herein.
B. THE CONTRACT AWARD
2. On or about May 16, 1984, the United States, in a procurement of
property and services, awarded prime contract number F41608-84-C-A100, to the
Joint Venture of CRS Sirrine + Metcalf & Eddy, the value of said prime contract
being in excess of $1,000,000.
3. On or about October 1, 1987, the United States, through the Joint
Venture of CRS Sirrine + Metcalf & Eddy, awarded sub-contract number 87-HOPSH
179 to SSSI, the value of said sub-contract being in excess of $1,000,000.
C. The Scheme to Defraud The United States
4. From in or about July, 1987, to on or about April 1, 1992, in
connection with the foregoing procurement, the defendants,
STEWART & STEVENSON SERVICES, INC.,
BOB H. O'NEAL,
WILLIAM "BILL" MCFARLAND,
PAUL EDSON,
and
LYMAN HARDY
each aiding and abetting one another, did knowingly devise and attempt to devise
a scheme and artifice to defraud the United States.
D. The Manner and Means of the Scheme
5. The manner and means of the scheme and artifice to defraud are set
forth in Section C of Count One, the allegations of which are repeated and
realleged as if fully set forth herein.
E. The Execution of the Scheme
6. On or about the dates set forth below, in the Houston Division of the
Southern District of Texas, and elsewhere,
STEWART & STEVENSON SERVICES, INC.,
BOB H. O'NEAL,
WILLIAM "BILL" MCFARLAND,
PAUL EDSON,
and
LYMAN HARDY,
defendants herein, with the intent to defraud the United States and for the
purpose of executing and attempting to execute the aforementioned scheme and
artifice to defraud the United States, knowingly caused the following acts of
execution to be committed, and in doing so caused a gross loss to the United
States of more than $500,000 and a gross gain to the defendant, SSSI, of more
than $500,000:
ACTS OF EXECUTION
(1) On or about October 2, 1989, PAUL EDSON, sent a letter to the JV, with
carbon copies to several SSSI employees including BOB O'NEAL, WILLIAM "BILL"
MCFARLAND, and LYMAN HARDY, stating that SSSI was rescinding their "no cost
change" position because their analysis now indicated that using stainless steel
pipe would cost more than using HSI pipe.
(2) On or about November 21, 1989, LYMAN HARDY stated to Roger Varner at
Wisconsin Centrifugal that SSSI was willing to pay the costs of Wisconsin
Centrifugal if it was willing to provide a quote to SSSI for HSI pipe.
(3) On or about November 21, 1989, LYMAN HARDY sent a SSSI internal memo
to PAUL EDSON summarizing a telephone conversation he had with Roger Varner at
Wisconsin Centrifugal regarding the withdrawal of their quote for HSI pipe.
(4) On or about January 11, 1990, LYMAN HARDY sent a SSSI internal memo to
PAUL EDSON stating that the current documented cost of the HSI pipe was $368 per
linear foot.
(5) On or about May 11, 1990, WILLIAM "BILL" MCFARLAND submitted a claim
to the JV, which was carbon copied to PAUL EDSON and LYMAN HARDY, which falsely
and fraudulently stated that COP-1 resulted in an increase in cost to SSSI in
the amount of $869,767.
(6) On or about May 11, 1990, WILLIAM "BILL" MCFARLAND attached an altered
bid from a foundry in England to the claim as support that COP-1 resulted in an
increase in cost to SSSI in the amount of $869,767.
(7) On or about October 31, 1990, LYMAN HARDY delivered a claim signed by
WILLIAM "BILL" MCFARLAND to the JV which falsely and fraudulently stated that
COP-1 now resulted in an increase in cost to SSSI in the amount of $410,604.
(8) On or about February 18, 1992, PAUL EDSON transmitted a letter from
WILLIAM "BILL" MCFARLAND to the JV which attached a Certificate of Current Cost
or Pricing Data, dated December 19, 1991, signed by SSSI Controller Rudy Kusak.
(9) On or about March 30, 1992, PAUL EDSON transmitted a letter from
WILLIAM "BILL" MCFARLAND to the JV which attached a Certificate of Current Cost
or Pricing Data, dated March 31, 1992, signed by SSSI Controller Rudy Kusak.
In violation of Title 18, United States Code, Section 1031.
COUNT THREE
FALSE STATEMENT - 18 U.S.C. Section 1001
On or about May 11, 1990, in the Houston Division of the Southern District of
Texas, in a matter within the jurisdiction of the United States Air Force, a
department and agency of the United States, defendants,
SSSI,
and
WILLIAM "BILL" MCFARLAND,
aided and abetted by defendants,
BOB H. O'NEAL,
PAUL EDSON,
and
LYMAN HARDY,
did knowingly and willfully make and use a material false writing and document
by presenting to the United States Air Force, through the JV, a contract pricing
proposal (Standard Form 1411), with attachments, reflecting an increase to the
PGS sub-contract price in the amount of $980,612 ($869,767 cost plus $110,845
profit) attributable to the change in pipe from HSI pipe to stainless steel
pipe, knowing the same to be false and fraudulent in that the change in pipe
actually resulted in a substantial cost savings to SSSI.
In violation of Title 18, United States Code, Section 1001 and 2.
COUNT FOUR
FALSE STATEMENT - 18 U.S.C. Section 1001
On or about October 31, 1990, in the Houston Division of the Southern
District of Texas, in a matter within the jurisdiction of the United States Air
Force, a department and agency of the United States, defendants,
SSSI,
and
WILLIAM "BILL" MCFARLAND,
aided and abetted by defendants,
BOB H. O'NEAL,
PAUL EDSON,
and
LYMAN HARDY,
did knowingly and willfully make and use a material false writing and document
by presenting to the United States Air Force, through the JV, a contract pricing
proposal (Standard Form 1411), with attachments, reflecting an increase to the
PGS sub-contract price in the amount of $462,932 ($410,604 cost plus $52,328
profit) attributable to the change in pipe from HSI pipe to stainless steel
pipe, knowing the same to be false and fraudulent in that the change in pipe
actually resulted in a substantial cost savings to SSSI.
In violation of Title 18, United States Code, Section 1001 and 2.
COUNT FIVE
FALSE STATEMENT - 18 U.S.C. Section 1001
On or about February 18, 1992, in the Houston Division of the Southern
District of Texas, in a matter within the jurisdiction of the United States Air
Force, a department and agency of the United States, defendants,
SSSI,
and
WILLIAM "BILL" MCFARLAND,
aided and abetted by defendants,
BOB H. O'NEAL,
PAUL EDSON,
and
LYMAN HARDY,
did knowingly and willfully make and use a material false writing and document
by presenting to the United States Air Force, through the JV, a certificate of
current cost and pricing data for the Global Settlement, knowing the same to be
false and fraudulent; that is that SSSI had not provided accurate, complete and
current pricing data to the Joint Venture regarding the cost impact of COP-1.
In violation of Title 18, United States Code, Sections 1001 and 2.
COUNT SIX
FALSE STATEMENT - 18 U.S.C. Section 1001
On or about March 30, 1992, in the Houston Division of the Southern
District of Texas, in a matter within the jurisdiction of the United States Air
Force, a department and agency of the United States, defendants,
SSSI,
and
WILLIAM "BILL" MCFARLAND,
aided and abetted by defendants,
BOB H. O'NEAL,
PAUL EDSON,
and
LYMAN HARDY,
did knowingly and willfully make and use a material false writing and document
by presenting to the United States Air Force, through the JV, a certificate of
current cost and pricing data for the Global Settlement, knowing the same to be
false and fraudulent; that is that SSSI had not provided accurate, complete and
current pricing data to the Joint Venture regarding the cost impact of COP-1.
In violation of Title 18, Untied States Code, Section 1001 and 2.
A TRUE BILL
/s/ Frank B. Heath
____________________________
FOREPERSON OF THE GRAND JURY
GAYNELLE GRIFFIN JONES
United States Attorney
/s/ Albert A. Balboni
By: ________________________________
ALBERT A. BALBONI
Assistant United States Attorney
EXHIBIT 2
Contents
Business Practices Program 1
A Simple Test for Proper Conduct 2
Our Commitments 3
Commitment to Employees 3
Commitment to Customers 3
Commitment to Quality 4
Commitment to Suppliers 4
Commitment to the Environment, Health & Safety 5
Everyone's Responsibility 6
The Company 6
Every Employee 6
Supervisors 6
Compliance With Laws and Company Policies 7
Antitrust 7
Books and Records 7
Communications 8
Company Assets 8
Company Confidential Information 9
Competitors' Information 9
Conflicts of Interest 9
Discrimination and Harassment 10
Former Government Employees 10
Gifts and Entertainment 10
Government Contracts 11
Inside Information 12
International Business 12
Political Contributions and Activities 13
Abiding by the Standards 14
Discipline 14
How to Get Help 14
Confidentiality 14
Use of the Business Practices Program 14
Questions & Answers 15
Our Basic Principles
WE BELIEVE IN AND ARE PLEDGED TO:
Our Company Is Great Because of Its Employees
1. Do Unto Others As You Would Have Them Do Unto You
There is no greater principle as a keystone to all other principles and
implementations than our old Golden Rule. This philosophy must apply in all
human relationships, whether it be with our own people, customers, suppliers, or
the general public.
2. Select The Right People For The Right Job
Growth of an organization is dependent on care in selection of people who are
physically, mentally and temperamentally suited for the position regardless of
how big or how small the job. People should be selected who can develop and
grow.
3. Provide Training And Education For Our Employees
Every possible means for training and education should be provided so that each
employee may prepare and qualify for greater responsibilities as the
opportunities occur.
4. Promote Cooperation Between Departments
Keen understanding between the various divisions and departments should be
developed. Each individual can and will assist the other for the mutual benefit
of all.
5. Encourage Ideas, Suggestions and Criticism
Provide the means for everyone to freely offer ideas, suggestions, or criticisms
for improvement of every aspect of our business.
6. Provide Means Of Assisting Everyone In Our Organization To Develop
Security For Themselves And Their Family
The Company should provide means for the individual to grow and develop and thus
create personal and family security through their own efforts. The Company
should provide:
a. Opportunities for promotion and growth of each individual.
b. Participation in profits due to individual efforts, wherever
practicable.
c. A method for participation in stock ownership.
d. Attractive insurance and saving plans to assist in completing their
security programs.
Letter to All Employees
Our Standards of Business Practice should provide assistance to all employees
of Stewart & Stevenson. It should give you guidance in making sound business
decisions.
If you are ever uncertain about the meaning of something in this set of
standards or if you have questions or concerns about the application of these
guidelines, this handbook can tell you how to acquire assistance.
Stewart & Stevenson is a business. As a business we must remain profitable to
remain viable. But profitable operations are not our only concern. We must
always observe all relevant laws and regulations no matter where we are in the
world. We must also treat employees, customers, suppliers, regulators and our
communities with fairness, honesty, and respect.
In nearly 100 years, our company has grown from a small family business to an
international, publicly traded corporation with thousands of employees all over
the world. This company aims to be successful in the long run. That means that
in order to preserve our reputation as an honest company we must sometimes make
decisions in the near term which only pay off in the long run. If there is one
principle which should guide all of your actions at Stewart & Stevenson it is:
Do unto others as you would have them do unto you.
This Golden Rule should be what guides you first and foremost. Our ethical
behavior, in and out of the work place, should reflect the following:
Be honest. Don't mislead or withhold information.
Demonstrate integrity. Resist pressure to do wrong; be your best self.
Stand up for what you believe is right.
Keep promises. Keep your word and honor commitments.
Be loyal. Stand by family, friends, company, community, and country.
Pursue excellence.
Be responsible. Think before you act; be accountable.
Be kind and caring. Show you care through generosity and compassion.
Treat all people with respect. Be courteous and polite; be tolerant and
accepting of individual differences.
Be fair. Treat all people fairly; listen to others and try to
understand what they are saying and feeling.
Be a good citizen. Obey the law and respect authority. Protect the
environment.
Sometimes taking the high road in a situation can be difficult and painful.
But remember that we expect only the best from all Stewart & Stevenson
employees. Take pride in this company and know that its success depends on its
good reputation and that good reputation depends on each of you. Thank you for
helping to maintain the integrity and reputation of Stewart & Stevenson.
C. Jim Stewart II Robert Hargrave
Chairman of the Board Vice President and Treasurer
Chief Executive Officer
Business Practices Program
The Stewart & Stevenson Standards of Business Practice is the focal point of the
Company s Business Practices Program. The purpose of the program is to provide
employees with the necessary information about the Company s standards so that
they will be able to base their actions on these sound principles.
These words alone are not enough to help you in this task. The Business
Practices Office was established to ensure that:
You know and understand the policies and standards of the Company
You know and understand the laws and regulations which affect your job
If you have a question about a law or policy or about what the Company
would consider proper business practice, you can get a prompt
answer
If you witness something that appears suspicious, there is a safe way
to inform the Company without fear of retaliation
This handbook on Standards of Business Practice does not contain an answer to
every question and does not explain every law, regulation or policy which you
will need to know in doing your job. In some cases there may be more detailed
policies or guidelines. If you are ever uncertain about a law, regulation or
policy, you should seek clarification and may do so from:
your supervisor - phone ________________________________________
the Business Practices Advisor at your facility
name __________________________________________________________
phone _________________________________________________________
the Business Practices Officer of the corporation, T. Michael Andrews,
via voice or fax, at:
869-3338 (Houston area) or
1-800-272-4597 (all other areas)
IF IN DOUBT, ASK!
All employees as well as agents and representatives of the Company must observe
these Standards of Business Practice. The Business Practices Office can provide
you with advice about the right thing to do. You should contact your local
Business Practices Advisor and/or the Business Practices Officer to report any
incidents that appear to violate our Standards of Business Practice. The
Business Practices Office will make every effort to protect your confidentiality
and will ensure that your questions are answered and your concerns are
investigated. You may even call the Business Practices Office anonymously, if
you prefer.
A Simple Test for Proper Conduct
If you are not certain that your actions are proper, a simple way to check is to
ask yourself the following questions:
How would I feel if my family or friends knew of my actions?
Would I behave differently if I knew my actions would be reported on
the evening news?
Are my actions legal?
Does this meet the Golden Rule test?
Remember: If in doubt, do the right thing. If you don't know what's right, DON T
DO IT. First check with one of the sources of advice listed in this handbook.
If in Doubt, ASK!
Our Commitments
Commitment to Employees
Before Stewart & Stevenson can create quality products and services in order to
win customers, we must have dedicated and dependable employees to make it all
possible. Each employee should be provided the opportunity to make a positive
contribution to the Company and be rewarded for it. The Company has a
responsibility to each and every employee to:
Create an environment where people are fulfilled, challenged and well
treated.
Promote from within the Company whenever possible
Provide training and resources so that employees may excel in current
and future positions
Instill in employees a sense of personal responsibility and ownership
in everything they do
Recognize individual differences
Reward and promote employees based on individual merit and hard work
Provide honest and timely feedback on employee performance
Create an environment where employees can relate concerns without fear
of retaliation
Maintain a clean, safe, drug-free work environment
Provide competitive salaries and benefits to all employees
Offer stock ownership to all employees
Commitment to Customers
The cornerstone of Stewart & Stevenson s long-term success has been our real
commitment to our customers. As a company we must always remember that our
customers come first. We must be honest and open with our customers. We should:
Seek innovative solutions to customer needs
Respond to customer needs promptly and courteously
Instill confidence and trust in our customers
Anticipate customer needs and aggressively fulfill them
View customer relationships as long-term partnerships
Deliver products in a timely manner without sacrificing quality
Promise only what we can deliver
Be honest with customers
Always sell products and services which meet the customers needs not
our needs
Strive to increase customer s knowledge of our company and our
industry
Accurately answer customer questions
Commitment to Quality
The Company is committed to providing the highest quality products at the most
competitive price.
Every employee is responsible for ensuring that we deliver high quality products
and services. We will not ship a product or complete a service unless we can
guarantee that it meets the performance and quality expectations of our customer
and the quality requirements of law. Each employee at every level has a
responsibility to constantly monitor for quality. Only through high quality
goods and services which meet specifications can we meet or exceed our customers
expectations. Remember:
Pay attention to details no matter how small or obscure
Correct any problems which are your responsibility, notify the
responsible person of any problem you notice
Always alert your supervisor or quality assurance supervisor to any
problems
Always use approved materials, components or procedures
Always do specified testing requirements
Always seek approval from the Quality Assurance department and your
supervisor before deviating from any quality requirements
Do not ship products with quality problems just to meet a deadline
Only ship products which meet or exceed the customers requirements
Commitment to Suppliers
Our suppliers are a valuable resource to the Company. We should always treat
them fairly and courteously. In deciding among suppliers, always be objective
and impartial. Base buying decisions on factors such as price, quality,
technical reliability and delivery. To maintain the integrity of the Company you
should:
Maintain the confidentiality of suppliers proprietary and
confidential information
Provide competitive information about Stewart & Stevenson only on a
need to know basis
Never try to influence a purchasing decision because of personal
relationships with potential suppliers
Promote competition among suppliers to ensure value and continued
supply
Use a sole-source supplier only if absolutely necessary and approved
by management
Always follow Stewart & Stevenson s rules on accepting gifts and
entertainment
Not expect suppliers to purchase our products as a condition to
purchasing their products
Develop mutual trust with suppliers
Not disparage or relate weaknesses of a supplier to other suppliers or
anyone outside of Stewart & Stevenson
Commitment to the Environment, Health & Safety
We are committed to producing quality products and services in a safe, efficient
and environmentally sound manner while maintaining a workplace that protects the
health and safety of our employees and the communities surrounding our
facilities. To carry out this commitment, we will:
Conduct all our operations in compliance with all applicable
environmental, health and safety laws and regulations
Integrate environmental, health and safety awareness into our
business decisions
Make environmental and safety improvements beyond those legally
required, when prudent to effectively manage risks
Set company and employee performance standards that promote positive
safety and environmental behavior, and provide resources, training
and incentives to ensure meeting these standards
Encourage innovation in our processes and products to minimize or
prevent the creation of waste and the discharge of contaminants to
the air, land or water
Establish procedures and programs to implement our company s
environmental, health and safety policy
Maintain our commitment by verifying continuous improvement through
periodic independent audits
Communicate our environmental, health and safety commitment to our
employees, neighbors, customers and shareholders
Cooperate with regulatory agencies as needed to address environmental,
health and safety issues
Everyone s Responsibility
Creating and maintaining an honest and open workplace is
the responsibility of each and every employee at Stewart
& Stevenson no matter who they are.
The Company
The Company has a responsibility to:
Implement the Business Practices Program
Regularly update and distribute the Standards of Business Practice to
all employees
Through training and communications, make sure that every employee is
aware of and understands the Standards of Business Practice
Provide ongoing training on other relevant laws, regulations and
policies
Create a work environment that is supportive of the Standards of
Business Practice and which promotes honesty and integrity
Make sure that employees are following the Standards of Business
Practice
Provide resources for employees to voice concerns or relate problems
in a safe and confidential way
Every Employee
Each and every employee of this Company has a responsibility to:
Regularly read and understand the Standards of Business Practice
Uphold the Standards of Business Practice in their words, deeds and
actions
Ask a supervisor, Business Practices Advisor or Business Practices
Officer if unsure about the proper thing to do
Help create an environment that supports the Standards of Business
Practice
Advise other employees if they may be violating the Standards of
Business Practice
Be alert to any situations which have the potential to violate the
Standards of Business Practice or which may be illegal or improper
Report any violations of the Standards of Business Practice to a
supervisor, Business Practices Advisor or Business Practices Officer
Supervisors
Every employee who manages or supervises other employees has a responsibility to
ensure that all elements of the Business Practices Program and Standards of
Business Practice are implemented. Supervisors will be evaluated on their
efforts to:
Ensure that all new and existing employees receive and understand the
Standards of Business Practice and understand its meaning and
application
Provide regular re-training and review of the Standards of Business
Practice for each employee
Demonstrate a commitment to the Standards of Business Practice through
words, behavior and actions
Emphasize the importance of following all aspects of the Standards of
Business Practice
Ensure that each employee knows where to report violations and
understands that there will be no repercussion for doing so.
Compliance With Laws and
Company Policies
Every person employed by or representing Stewart & Stevenson must ensure that
the Company complies with the letter and spirit of all laws and regulations
governing its activities.
Antitrust
It is our goal to compete on the basis of free competition and to provide our
customers with the best products at a fair price. The antitrust laws of the
United States and the trade laws of most countries and states in which we do
business state that in order to make competition free, open and fair to
consumers we must not:
Fix or control prices with competitors
Divide up territories or markets
Limit the production or sale of products
Boycott certain suppliers or customers
Unfairly control or restrict trade in any way
Restrict a competitor s marketing practices
Disparage a competitor or mislead a customer
Employees involved in sales, marketing and pricing should never discuss such
matters, even informally, with competitors. Employees should be careful to
protect the Company by not discussing products, pricing and markets with
competitors. Any attempt by a competitor to initiate such a discussion should be
promptly reported to Corporate General Counsel.
Books and Records
Accurate and complete information is important for the efficient and proper
management of our business. Many people rely on reports and records in order to
do their jobs including fellow employees, management, suppliers, government
regulators, stockholders, investors, and creditors.
We expect all employees and agents of this company to be truthful, honest and
complete as possible in all records and reports. No one should ever
intentionally mislead or misinform those who receive information. We must be
careful not to make false or misleading statements.
Information should be honest and accurate within the Company as well so that
problems can be identified and solved. Employees should respond completely and
truthfully to requests by internal audit, legal staff, independent accountants
and special counsel. It is equally important that such responses include all
relevant information, even if not specifically requested. Remember also:
Follow proper procedures to ensure that all transactions are properly
authorized, documented and recorded
Payments for services rendered by outside sales representatives, cash
disbursements from petty cash funds, and checks payable to cash are
subject to close scrutiny if excessive in amount or frequency
Anonymous or numbered bank accounts, off-book assets, and false
invoices are strictly prohibited
Disbursements of funds from any company account must reflect the
actual recipient as the payee and must be supported by documentation
showing the business purpose
Communications
Stewart & Stevenson s reputation has been built on integrity. Continued success
of our company depends upon open, accurate and honest communication at all
levels in the Company and with all parties outside of the Company while
protecting company sensitive information and documentation. We must always be
truthful and accurate in all communications with customers, suppliers and
competitors. No communication should intentionally mislead or make false or
exaggerated claims. Our promotional literature and advertising must protect and
enhance our reputation by providing clear and complete information about our own
products and not making misleading statements about our competitors products.
Our concern for truth in all communications includes communication between
employees. Delivering bad news or making an honest assessment can sometimes be
difficult, especially when dealing with your superiors. Sound information is the
basis of sound business decisions. We must all work to create an environment
where information flows freely and openly.
Company Assets
Protect the Company s assets and property as you would your own. Employees are
occasionally permitted to perform routine personal tasks while at work such as
calling home briefly to check on a child or making a copy of one s tax returns.
However, excessive, non-routine and expensive use of company time, assets or
equipment is not permitted. Examples of unacceptable personal uses of company
resources which require a supervisor s permission could include:
Personal long-distance calls
Photocopy tasks of more than 10 pages
Use of computers, word processors or printers for more than a few
minutes
Use of tools, equipment and machines
Use of company paper, pens, folders and notebooks at home for family
members use
Personal use of a company vehicle
Use of company resources for personal, community or charitable purposes must
receive prior approval.
Company Confidential Information
Among our company s biggest assets are our trade secrets and confidential
information. We must all take care to protect this information just as we would
with any corporate asset. Be careful to never discuss with anyone outside the
Company any information which is not publicly available. This information would
include:
unannounced products
prices
earnings that are not publicly disclosed
procurement plans
business volumes
capital requirements
confidential product performance data
personnel information
any classified information
marketing and service strategies
business plans
business or supplier negotiations
Employees should be careful not to inadvertently discuss confidential
information with authorized Stewart & Stevenson personnel if they are in the
presence of someone who is not authorized or who might overhear. This also
applies to discussions with family members or friends who might unintentionally
and innocently pass the information along. Employees have an ongoing obligation
to safeguard this information even after they leave Stewart & Stevenson.
As a company which uses the technology of many of our suppliers and customers,
we must also be careful to protect their proprietary technology and information.
This includes government classified information and any other information
entrusted to us for other uses.
Competitors' Information
Employees may learn about competitors products and services through publicly
available information such as trade journals or published specifications. Under
no circumstances should an employee undertake improper means to obtain or be the
recipient of improperly obtained competitive information.
Further, Stewart & Stevenson will not hire competitors employees in order to
get confidential information. If an employee has somebody s trade secrets or
proprietary information when they join Stewart & Stevenson, they must not
disclose them or cause the Company to make use of them. Legal and ethical
requirements are involved and take precedence over gaining a competitive
advantage.
Conflicts of Interests
Employees have an obligation to avoid having their personal interests conflict
with the Company s interests. In order to preserve the strong reputation of
Stewart & Stevenson, it is important to avoid any conflicts or even the
appearance of a conflict. A conflict of interest occurs when an employee has a
relationship with or interest in a supplier, customer, or competitor of the
Company which could be seen as having the potential to influence their
objectivity toward Stewart & Stevenson. If you think that you or a member of
your family may have a conflict or appearance of a conflict of interest, you
must consult with Corporate General Counsel for guidance.
Discrimination
and
Harassment
The Company believes that the diversity and abilities of its employees are among
its greatest assets and that all individuals deserve an equal opportunity on the
basis of skill, dedication, knowledge and experience.
It is the policy of the Company that the recruiting, hiring, transferring,
promoting, compensating, disciplining and terminating of employees will be
without discrimination regardless of race, sex, religion, age, national origin,
handicap, disability or Vietnam Era Veterans status. All persons will be treated
equally.
No officer or employee shall engage in, or permit any person that reports to him
or her to engage in slurs, jokes, intimidation or other conduct that is
degrading, demeaning or offensive.
The Company has adopted various written policies regarding its employment
practices, the full text of which can be obtained from the Company's Human
Resources Department. It is each officer's and employee's responsibility to
become familiar with the scope and content of such policies and to implement
such policies within his or her respective areas of responsibility.
Former
Government
Employees
Federal law prohibits the hiring of former government employees who were
recently involved in the award of or administration of Stewart & Stevenson
government contracts. These laws also limit the assignment of former government
employees. Before any discussions are initiated with a present or former
government employee regarding employment with Stewart & Stevenson, the Stewart &
Stevenson Corporate Human Resources Department must be contacted for
instructions.
Gifts and
Entertainment
Stewart & Stevenson believes that customers should purchase our products because
they provide the best quality, service and price; and because we stand behind
our products. We do not want to affect our customers' judgment or have suppliers
try to affect our judgment based on gifts or entertainment. While we understand
that some exchange of business courtesies is normal and appropriate, we must
always be careful.
Pertaining to Non-Government Customers, Suppliers, and Others
Employees are allowed to infrequently accept or offer gifts valued at $25 or
less in connection with business relationships consistent with normal business
practices in the industry and geographic area involved.
Employees are allowed to infrequently accept or offer meals and entertainment of
reasonable value in connection with business relationships consistent with
normal business practices in the industry and geographic area involved.
An employee must obtain permission from his or her Group Vice President prior to
the receipt or offer of a gift of a recreational activity involving travel or
overnight lodging with a business associate. Where such an activity is offered,
the anticipated recipient should confirm that the planned entertainment does not
violate the business standard practices of his or her company.
Pertaining to Government Customers
Employees may not provide any gifts, entertainment, meals, or anything else of
value to any government official, other than minor refreshments in conjunction
with business discussions or promotional items with the Company logo of less
than $10 in value.
Government Contracts
Stewart & Stevenson will strictly observe the laws, rules, and regulations which
govern the acquisition of goods and services by any governmental agency of any
country. Stewart & Stevenson employees who deal with any governmental agency are
responsible for learning and complying with all rules that apply to acquisitions
by federal, state and local governments, and by foreign governments.
No Stewart & Stevenson employee shall attempt to obtain, from any source,
government information that is procurement-sensitive, or any information of a
competitor in circumstances where there is reason to believe the release of such
information by the government is unauthorized. Stewart & Stevenson employees
will strictly observe all laws and regulations regarding classified information.
Employees are prohibited from engaging in any conduct in violation of the Anti-
Kickback Act of 1986. This law prohibits government contractors and
subcontractors from providing or receiving anything of value for the purpose of
giving or getting favorable treatment, including influencing a procurement
action. Employees having
influence on procurement decisions must be careful to avoid actual or potential
conflicts of interest and may be required to certify from time to time that they
have not violated, and do not know of any other employee who has violated, any
provisions of the act. In addition, federal appropriated funds shall not be used
to pay anybody to influence, or attempt to influence, anyone employed by the
Executive or Legislative Branches, including Members of Congress and their
staffs, in connection with the award of government contracts or contract
modifications. When other than appropriated funds are used for this purpose to
pay non-employees of Stewart & Stevenson, a special government report must be
made.
Stewart & Stevenson will observe fully other obligations of government
contractors including:
Proper charging of all labor and material costs
Exclusion of any unallowable costs from charges to the government
Full compliance with all rules related to the submission of cost and
pricing data as that term is used in the Truth in Negotiations Act
Full compliance with contract specifications and requirements,
including testing and quality assurance requirements
Full compliance with government rules governing accounting for
independent research and development as well as bid and proposal
expenses
Proper treatment of all indirect costs, including any rules of cost
allocability or allowability that may apply in our work
Inside
Information
Employees of Stewart & Stevenson have access to information which investors
outside the Company do not have. An employee must not use inside information to
influence personal or anyone else s investment decisions regarding the Company s
stock or the stock of any company with which we do business. The law defines
inside trading as decisions about the purchase or sale of stock based on
material information about the Company or a company with which we do business
and which is not publicly available. Material information is information which
would be important to a reasonable investor in deciding whether to buy, sell or
hold stock. Everyone should be careful not to disclose, even innocently, any
non-public inside information to family members or friends who might innocently
or unintentionally pass it along to others.
International
Business
Stewart & Stevenson has grown from a small local company to one doing business
in countries throughout the world. Our employees and agents are expected to
comply with all U.S. and foreign laws while conducting business outside the
United States, including the U.S. Foreign Corrupt Practices Act.
The Foreign Corrupt Practices Act and other U.S. laws prohibit the payment or
offering of anything of value to foreign government officials or members of
their families or political parties. The acts of foreign agents used to
facilitate business are considered the Company s acts. We must never use an
agent or representative to do indirectly what would be illegal or unfair for us
to do directly. It is the responsibility of each employee and agent to
investigate and determine to the extent possible whether an improper payment is
being made. Ignoring the possibility of improper payments is not acceptable.
Facilitating payments, which are small payments demanded from low-level
government personnel to perform routine clerical functions such as inspecting
goods, securing required permits or passing goods through customs are strongly
discouraged. While facilitating payments may sometimes be allowed under U.S.
law, such payments are likely not to be permissible under foreign law. Before
any such payment is made, obtain the approval of Corporate General Counsel. Also
note that for facilitating payments to be legal under U.S. law they must be
documented and reported.
Sometimes U.S. and international customs and laws are not the same. If U.S. law
or company policy is more restrictive than local law or custom, observe U.S. law
and company policy. If local law or custom is more restrictive than U.S. law or
company policy, observe local law or custom.
Stewart & Stevenson will not participate in foreign boycotts not sanctioned by
the U.S. government, nor provide any information that could be construed to
further unsanctioned boycotts.
Political Contributions and Activities
Stewart & Stevenson believes in the value of democracy and the political
process. We encourage employees to become involved in the political process at a
local, state or federal level.
Stewart & Stevenson will not make, directly or indirectly, any contributions to
a political party, candidate or public official except as permitted by law. This
applies to both local and federal governments. Contributions made by individual
employees or agents will not be reimbursed directly or indirectly by the Company
even if made in the Company s name.
Although the Company does not normally make political contributions, it has
created a political action committee (PAC) which can legally receive
contributions from employees and make contributions to candidates and political
organizations in connection with campaigns. Contributions to the PAC are
confidential and voluntary. Employees should not use company time or resources,
including telephones and photocopiers, to solicit contributions or any other
form of support for political purposes. Under no circumstances should an
employee pressure another employee or supplier to make political contributions
to, or work for a candidate or political organization.
Abiding by the Standards
Discipline
Stewart & Stevenson stands behind the Standards of Business Practice and will
try to fairly enforce its contents. Violations of the Standards will result in
one or more of the following depending on the nature, frequency and severity of
the violation:
warning
reprimand (marked in personnel file)
probation
temporary suspension
discharge
reimbursement of losses or damages
criminal or civil prosecution
How to
Get Help
You should feel free to ask any question or raise any concern about the
Standards of Business Practice with your supervisor, or the Business Practices
Advisor at your facility, or the Business Practices Officer of the corporation.
Confidentiality
Communications with your Business Practices Advisor or the Business Practices
Officer will be treated confidentially in accordance with legal obligations. If
your identity is needed to address your question or concern, you will be advised
in advance.
Anonymous communications are accepted on the Helpline. Not knowing who you are
can make it very difficult to solve and understand certain problems. It also
makes it difficult to report back to you. If you feel that you must remain
anonymous when calling the Helpline, the Business Practices Officer can assign
you a case number and you may call in later with your number to receive
information on their efforts. Any confidential information such as discipline of
other employees cannot be discussed with you by the Business Practices Officer.
Use of the
Business
Practices
Program
Any Company employee, supplier, contractor, customer, agent or representative
may make use of the Business Practices Office to voice concerns or to receive
clarification. However, any attempts by an employee to use the Business
Practices Office to intentionally harm a person through false accusations or
other wrongful actions are prohibited. Employees who report a problem in good
faith and believe it to be true will never be reprimanded.
No employee should ever retaliate or threaten retaliation to another employee
for raising a concern about the enforcement of the Standards of Business
Practice or any other Company policy. This violates company policy and the law.
Questions & Answers
We understand that the Standard of Business Practice cannot provide concrete
answers to every workplace question. These questions and answers are meant to
increase your understanding of the Standards of Business Practice and provide
answers to commonly asked questions that arise at work. If the Standards of
Business Practice or these questions and answers do not clearly answer a
question or concern fully, please ask your supervisor, your Business Practices
Advisor or the Business Practices Officer.
Business Practices Program
Q: If I have a question about proper business conduct or have witnessed
something that may be improper, whom should I contact?
A: While we encourage you to go to your supervisor with your concerns, there may
be times when it would be impractical to do so. If this is the case or if your
supervisor does not give you a satisfactory response, you can turn to a
representative from the Business Practices Office. Many company locations have a
designated Business Practices Advisor. The Advisor will usually be an employee
who has other job responsibilities and who has been specially trained on how to
help other employees who have raised concerns. There is also the Corporate
Business Practices Officer who is responsible for the overall management of the
Business Practices Program throughout the corporation. He or she is the person
who will answer the Corporate Helpline, ensure that you receive a prompt
response and oversee any necessary investigation.
Q: Sometimes being ethical means losing business or profit. Does the Company
really expect me to be ethical if it means losing business?
A: Yes. Stewart & Stevenson is committed to preserving its reputation for
honesty and integrity in the long run. Our long-term profitability depends on
your ethical conduct today and every day.
Q: I recently saw something at work which I believe breaks the law but I wasn't
completely sure. I am afraid to report it in case I am wrong.
A: Anything that you witness that you honestly believe could be illegal, wrong
or in violation of Company policy should be reported to your supervisor, the
Business Practices Office through the Helpline or your local Business Practices
Advisor. As an employee of Stewart & Stevenson it is your duty and
responsibility to report such problems. Employees who report a problem in good
faith and believe it to be true will never be reprimanded. The only time
employees will be disciplined for contacting the Business Practices Office is
when they deliberately report something which they know is false or misleading
in order to harm someone else.
Q: What should I do if my supervisor asks me to do something which I think is
unethical or illegal?
A: If you are ever asked to do something which you believe is wrong, you should
not do it no matter who asks you. If you are comfortable talking to your
supervisor, this should be your first step. If you are not comfortable talking
to your supervisor or if you do not receive a satisfactory response, contact
your Business Practices Advisor or the Business Practices Officer on the
Helpline.
Q: I have a question about the Standards of Business Practice. Whom should I
contact?
A: We always encourage you to speak to your supervisor first since he or she
will probably be in the best position to help you. However, if you are
uncomfortable asking your supervisor for any reason, you should feel free to
contact your local Business Practices Advisor who is trained on the Standards of
Business Practice and on how to help you. You can also contact the Corporate
Business Practices Officer directly on the Helpline.
Q: Do our Standards of Business Practice apply to consultants, agents or other
representatives of the Company?
A: Yes. When the Company hires any representative, agent or consultant, that
person should be given a copy of the Standards of Business Practice and is
expected to abide by it just like employees of Stewart & Stevenson.
Confidential
Information
& Trade
Secrets
Q: What should I do if I receive information about a competitor that is
confidential or proprietary?
A: All such material should be forwarded immediately to the corporate general
counsel's office. You should not read or make any copies of the material. If you
are given such information orally in person or on the telephone you should
immediately inform the person that it is against Company policy and that such
discussions should terminate immediately. This is true even if a customer gives
you the information.
Inside
Trading
Q: If I hear information that Stewart & Stevenson is about to acquire another
large company, may I buy or sell by Stewart & Stevenson stock?
A: Absolutely not. Since you are a Stewart & Stevenson employee you are probably
considered an insider under U.S. law. Only after the information has become
publicly available may you trade stock unless it is part of a routine stock
purchase plan.
Q: May I buy stock in the other company which is about to be acquired by Stewart
& Stevenson?
A: No. The prohibition against inside trading applies to information obtained
about other companies as well as Stewart & Stevenson.
Q: I purchase Stewart & Stevenson stock every pay period as part of the employee
stock ownership plan. Sometimes I receive information about quarterly earnings
before the public does. Are my routine stock purchases illegal?
A: No. Regular purchases of stock which are part of your benefits as an employee
are allowed, even if you have inside information at the time. However, you may
not sell stock while you have such inside information.
Q: Am I allowed to tell a friend or relative about important company information
so that they can buy or sell stock?
A: No. You will be violating inside trading laws in this situation too. Both you
and your friend or relative would be liable under the law.
Treatment of
Employees
Q: What should I do if I feel that I have been discriminated against at work?
A: If you believe that you or any other employee has been discriminated against
at Stewart & Stevenson, you should report it immediately to your supervisor, the
Corporate Human Resources Department, your Business Practices Advisor or the
Business Practices Officer.
Q: Some people that I work with have calendars with pictures which are sexually
suggestive. These pictures make me uncomfortable. Are they appropriate?
A: Pictures such as these are inappropriate at Stewart & Stevenson. If this or
any other sexually suggestive behavior or words make you uncomfortable, they
should be brought to the attention of your supervisor.
Q: My manager has instituted policies on such things as maternity leave, sick
leave and comp time which are more restrictive than elsewhere in the Company.
What should I do?
A: You should first speak to your manager about these differences. However, if
you are uncomfortable talking to your manager, you should contact the Corporate
Human Resources Department, your Business Practices Advisor or the Business
Practices Officer.
International
Business Practices
Q: We use foreign agents in many countries around the world to help us make
sales. One agent asked me to increase his commission and I worry that the extra
money may be used to pay or bribe local officials. What should I do?
A: If you suspect that the Company's money could be used improperly, you have a
responsibility to investigate. No payments should be made to any agent unless
you are certain that illegal payments are not being made. With every agent you
have a duty to ask how the Company's money is being spent. If you suspect that
illegal payments may be made and do nothing to investigate or halt the practice,
you and the Company could be liable under the law.
All contracts that the Company has with foreign agents contain provisions which
obligate the agent to agree not to violate any laws, including U.S. anti-bribery
laws. However, these contracts alone are not enough to always protect you or the
Company. You have an obligation to go beyond the contract and make sure that our
foreign agents are abiding by the law. Although this may seem culturally
insensitive to the agent, you must explain that this is necessary to do business
with a U.S. company.
Q: I sometimes do business outside the United States. Sometimes when a shipment
arrives in a foreign country, the shipping clerk expects a small payment to
facilitate paperwork. If I don't make the payment it could take months to get
the equipment to the customer. What should I do?
A: Under U.S. law, these facilitating payments may be legal. Contact the
Corporate General Counsel for approval before making such payments.
Gifts and
Entertainment
Q: Are regulations on meals and entertainment the same with all government
agencies?
A: No. Regulations vary between federal, state, local and foreign government
agencies. You should be familiar with the regulations before offering any
business courtesies.
Q: A supplier sent me a pen and pencil set as a gift of thanks. May I accept it?
A: As long as the item is reasonably valued at $25 or less, you may accept it
for personal use.
Q: A supplier offered me a discount on one of their products. May I take
advantage of this offer?
A: Unless the discount is offered company-wide, you may not accept it. Discounts
are regarded as personal gifts and should be declined.
Accuracy of
Books and
Records
Q: Will I be reimbursed for business expenses even if I have lost the receipt?
A: All business-related expenses should be properly recorded. You should always
make every effort to keep receipts. In the rare instance where you have lost a
cash receipt and have attempted to secure a replacement copy, you must indicate
that the receipt was lost and receive the approval of your supervisor.
Political
Activities
Q: On my free time I volunteer for a political candidate. Is it okay for me to
use my office to do some of this work?
A: No. You may not use Company time or resources to support any candidate or
other political cause.
Q: Can my boss encourage me to contribute to a political campaign?
A: No. Any type of encouragement, no matter how innocent, by a supervisor could
be perceived as coercion.
Q: Can the Company require me to contribute to its Political Action Committee
(PAC)?
A: No. If you chose to participate in the Company's PAC that is fine. But any
contributions are completely voluntary and confidential.
Gathering and
Using
Information
about
Competitors
Q: We recently hired a person from one of our biggest competitors. She has
extremely useful information about her old employer but it is confidential. Is
it okay if we ask her to share it with us to help Stewart & Stevenson?
A: No. Even if she volunteers it, you cannot use the information. You should
treat her confidential information just as you would want a former Stewart &
Stevenson employee to treat our confidential information after leaving. She
should be aware that our Company policy prohibits her from disclosing or relying
on confidential information about her former company.
Q: At a recent trade show, one of competitors mentioned that they are
considering increasing their prices because of certain market pressures.
Everyone in the industry is under the same pressures. Is it okay to discuss
price plans?
A: No. You should never discuss our future pricing plans even indirectly with
anyone outside the Company. Similarly, you should never learn of competitor's
pricing plans from them or from anyone else unless it is publicly available. If
a competitor begins to discuss pricing plans with you, you must immediately and
clearly break off the discussion even if that means being rude and walking out
of a meeting. Any such occurrences should be reported immediately to the
corporate general counsel's office.
Antitrust
Q: One of our government contracts has testing requirements which seem to
overlap and duplicate other testing requirements. It seems like a waste of time
and money to do both sets of tests. Do we have to keep doing both sets of test?
A: Yes. The government contract requires that both tests be performed. The
Company may not change testing requirements without first telling the government
and getting their approval. To not perform both required tests would be illegal.
Q: I received an anonymous package containing a competitor's pricing data and
proposal. What should I do?
A: You must immediately give the document to the Corporate General Counsel. You
should not make any copies of the information.
Q: One of our government customer's regulations does not allow us to purchase a
meal for their employees. Can I have them to my home for dinner instead?
A: The rules which prohibit the Company from buying a customer's meal also
prohibit us from inviting them for a meal in our homes.
Doing
Business
with the
Government
Q: I have some tools and equipment which I use at work. May I take them home to
work on my house when no else will need them?
A: Company tools and equipment are valuable assets and should be used for
business purposes only. In certain circumstances, personal use may be permitted
by your supervisor.
Q: I would like to use my computer at work to type my son's school paper. Is
this okay?
A: This may be okay if done outside of your normal working hours. You should
first check with your supervisor. He or she will consider whether anyone else
will need access to your computer at that time.
Q: I would like to make a copy of a software program on my work computer to put
on my home computer so that I can do Company work at home. Is this okay?
A: It may be proper but only if you obtain written permission from the software
company. Stewart & Stevenson has licensing agreements on software. You will also
need to get the approval of your supervisor.
Proper Use
of Company
Assets
Q: I am responsible for planning a lot of off-site meetings for the Company.
Some of the hotels offer to give me free rooms for my personal use. May I accept
these offers?
A: You may not accept such offers. This could cause people to wonder if you are
favoring the hotels which offer you free rooms. You should decline all such
offers.
Q: I volunteer for a local charity. May I use the office photocopiers to make
copies of a fund-raising leaflet?
A: While the Company encourages its employees to be involved in community
activities, you should not use the copying machine or any other office equipment
for charitable or other non-business purposes without prior approval.
Conflicts of
Interest
Q: Does the conflict of interest policy apply to more distant relatives such as
cousins and in-laws? What about to friends?
A: The conflict of interest policy typically applies to members of your
immediate family. However, if a personal relationship, whether it is a more
distant relative or a close friend, has the potential to compromise your
objectivity or could create the appearance of compromising your objectivity in
conducting the Company's business you should obtain prior approval.
Q: My daughter owns a local restaurant. I am responsible for planning a Company
dinner. May I select my daughter's restaurant if the price is comparable to
other restaurants being considered?
A: No. Although it may seem fair to you, it could seem to others as favoritism.
Even the appearance of a conflict of interest should be avoided.
Q: My daughter was offered a job with one of the Company's suppliers. Is this a
conflict?
A: This may be a conflict if you are involved in making any decisions which
could affect that supplier. You should contact the Business Practices Office or
the corporate general counsel's office about this problem. They may okay the
situation or find an acceptable way to remedy the potential conflict.
Q: I have been approached by a friend to invest in a company which will produce
a product which might eventually be sold to Stewart & Stevenson. If my only
involvement in the new company is financial, is it still a conflict of interest?
A: This has the potential to be a conflict depending on your position in the
Company, the position you have to influence Company purchasing decisions, the
amount of your investment and the importance of Stewart & Stevenson as a future
customer. Before investing, you should obtain prior approval.
Q: A Stewart & Stevenson customer has asked me to work as a consultant to it
after business hours to help it develop a product which would not be of interest
to Stewart & Stevenson. I deal with this customer fairly often at work. Could
this be a conflict?
A: This situation has the potential to create a conflict or the appearance of a
conflict of interest. Other employees, suppliers, or customers may wonder,
wrongly or rightly, whether you favor the other company because of your special
relationship with it. This has the potential to compromise your objectivity in
dealing with this customer.
EXHIBIT 3
Do unto others as you would have them do unto you
Treat all People with Respect
Be Responsible
Be Honest
Be Kind and Caring
Pursue Excellence
Be Fair
Be a Good Citizen
Keep Promises
Be Loyal
Demonstrate Integrity
[LOGO]
The Business Practices Office
1-800-272-4597
869-3338(Houston Area)
[LOGO]
If in Doubt, Ask!
?
The Business Practices Office
1-800-272-4597
869-3338(Houston Area)
Do unto others as you would have them do unto you
If In Doubt, ASK!
Are my actions legal?
Does this meet the "Golden Rule" test?
How would I feel if my family or friends knew my action?
Would I behave differently if I knew my actions would be reported on the evening
news?
[LOGO]
The Business Practices Office
1-800-272-4597
869-3338(Houston Area)
Do unto others as you would have them do unto you
Be Fair
Be Loyal
Be Honest
Keep Promises
Be Responsible
Be a Good Citizen
Pursue Excellence
Be Kind and Caring
Demonstrate Integrity
Treat all People with Respect
[LOGO]
The Business Practices Office
1-800-272-4597
869-3338(Houston Area)
EXHIBIT 4
MANAGER AND SUPERVISOR CERTIFICATE
Dated: .
As _________________ of _______________________ I attest I have personally:
(Title) (Division, Department)
A. discussed with each employee under my supervision the content an
application of the company's Business Practice Program;
B. Ensured that each employee knows that strict compliance with the Program is
a condition of employment;
C. ensured that each employee knows SSSI will take disciplinary action,
including termination, for violation of the principles and practices set forth
in the Program, applicable laws or regulations, or basic tenets of business
honesty and integrity;
D. ensured each employee knows where to report violations and understands
there will be no repercussion for doing so;
E. committed to uphold all aspects of the Standards of Business Practice.
Printed Name: _______________________________
Signature: __________________________________
EXHIBIT 5
BOARD OF DIRECTORS
C. Jim Stewart, II
J. Carsey Manning
Robert L. Hargrave
Donald E. Stevenson
Jack T. Currie
Jack W. Lander, Jr.
Robert H. Parsley
Robert S. Sullivan
Orson C. Clay
Brian H. Rowe
Richard R. Stewart
Bob H. O'Neal
Audit Committee
Jack T. Currie, Chairman
Robert H. Parsley
Jack W. Lander, Jr.
EXHIBIT 6
To Our Suppliers:
Stewart & Stevenson has always conducted its business according to the highest
ethical standards. We highly value our relationship with you and want you to
understand the standards to which the Company holds itself.
Since the Company has grown so rapidly in recent years, we have found it
important to present our values and standards in a more formal manner. We now
annually distribute a copy of our "Standards of Business Practices" handbook to
every employee. This document underscores the Board of Directors' and the
management's' commitment to ethical business conduct.
It is important that you know exactly what we expect of our employees involved
in purchasing activities. Also, in order to remain a supplier to Stewart &
Stevenson, it is vital that you understand our expectations of you and adhere to
them. Specifically, our "Standards of Business Practices" provide:
Employees may not directly or indirectly accept any personal payments, gifts,
services, discounts, favors, or gratuities, regardless of the size or amount,
outside the normal and accepted course of business with the Company. Employees
may infrequently accept non-monetary gifts, which are valued at $25 or less,
which are promotional in nature and which are part of normal business dealings.
Our employees, however, should never solicit even these modest business
courtesies, and your employees should never feel any obligation to offer them.
Employees may accept reasonable and infrequent meals which are offered by
suppliers as part of legitimate business discussions.
If a supplier wishes to provide an employee with travel or overnight lodging,
the employee must receive approval of the employee's Group Vice President. The
activity should have a valid business purpose.
One of the aspects of our Business Practices Office which may be of interest to
you is the "Confidential Helpline." Mike Andrews, Vice President, Business
Practices, answers the Helpline. The Helpline is a resource for any employee or
supplier to utilize; to get advice regarding proper business conduct at the
Company or to express concerns about anything that might be perceived as
improper conduct. Mike can be reached at 1-800-272-4597. While we always
encourage you to resolve problems directly with your Company contact, Mike is an
additional resource for you to contact in the event that you should have
concerns about the Company's practices.
If you have any questions, would like to obtain a copy of our "Standard of
Business Practices" handbook, or would prefer to express your concerns to me,
please contact me at 713-868-7629. I have enclosed a certificate that states
that you have read and agree to abide by these policies when dealing with
Stewart & Stevenson personnel. I ask you to sign and return it in the enclosed
self addressed envelope. Your cooperation is sincerely appreciated.
Very truly yours,
STEWART & STEVENSON SERVICES, INC.
Don E. Stevenson
Vice President, Quality
Business Practices
To: Don Stevenson
STEWART & STEVENSON SERVICES, INC.
P.O. Box 1637
Houston, TX 77251-1637
I have read the attached letter and agree to abide by all the policies it
discusses in my and (name of company) dealings with Stewart & Stevenson and its
subsidiaries.
Signed ___________________________________________ Date _______________
Print your name ________________________________________________________
Your title ______________________________________________________________
Address of Company ____________________________________________________
____________________________________________________
Your business phone number _____________________________________________
Thank you.
