Kickbacks, Gratuities and Conflicts of Interest

INTRODUCTION

Honesty and fairness are two components of the Northrop Grumman Values of Customer Satisfaction, Integrity, and People. Employees are bound by company Values, Standards of Business Conduct, and company policies to make a committed effort to do the right thing at all times and to be honest and fair in all their business dealings. Compromising those values and standards by offering or soliciting kickbacks, gratuities, or bribes to receive favorable treatment is prohibited by company policy and federal law.

KICKBACKS

A kickback is ANY money, fee, commission, credit, gift, gratuity, any item of value, or compensation of any kind which is provided:

Directly or indirectly, to any prime contractor, subcontractor, or employee of either
For the purpose of improperly obtaining or rewarding favorable treatment in connection with either a prime or subcontract.

A bribe is defined as a promise of an exchange of benefit for favorable treatment. A person who offers a bribe has a dishonest or corrupt and therefore criminal purpose. A kickback is actually a type of bribe in which the benefit is favorable treatment in connection with a prime or subcontract.

The Anti-Kickback Act of 1986 is the federal law which prohibits providing, attempting to provide, or offering to provide a kickback or favorable treatment; and soliciting, accepting, or attempting to accept any kickback, gratuity, or bribe. This law also imposes severe civil and criminal penalties for both the company and the individuals involved in such activities.

The law identifies an annual declaration by employees of gifts or gratuities received from subcontractors as an example of a reasonable procedure to prevent and detect violations.

Northrop Grumman asks salaried employees to make those declarations annually on the Certificate on Conflict of Interest, Relationships With Suppliers and Standards of Business Conduct (Form C-196). When you sign this certificate, you certify compliance with the law and with Northrop Grumman?s Standards of Business Conduct which require employees to go beyond the letter of the law and avoid even the appearance of improper conduct in all of our business dealings.

GRATUITIES

A gratuity or a gift which is given voluntarily in anticipation of something in return may be innocent or only appear to be innocent. Company policy permits the exchange of gifts of nominal value ($10.00 or less) as long as the exchange does not violate the regulations or policies of the other organization, be it government or commercial.

Solicitation or acceptance of any gift or gratuity, including but not limited to, any fee, commission, favor, hospitality, entertainment, transportation, meal, or other tangible or intangible benefit that is not available to the general public, by a Northrop Grumman employee or the employee?s family from any actual or prospective supplier or supplier representative is expressly prohibited. Exceptions are:

An exchange of gifts that is clearly based only upon a personal relationship between an employee and the supplier representative and is not related to company business or the expenditure of company funds
A supplier?s or consultant?s promotional material or samples with a maximum value of $10 (an operating element may be more restrictive)
Meals or refreshments offered at a supplier?s cafeteria or facility where business is being conducted
Northrop Grumman-obtained group rate passes or tickets to recreational events
Business courtesies in connection with commercial transactions that are unrelated to federal government contracts and subcontracts and are in accordance with applicable laws and generally accepted business and ethical practices in the industry where acceptance of the specific courtesy is documented in a written company policy or procedure
Where refusal of the gift or gratuity would be awkward or embarrassing provided that the employee promptly notify management and consult with the operating element?s lead Business Conduct Officer (BCO) within two business days of the event or if occurring during a business trip, within two business days of return
Where acceptance is approved, in writing, by the appropriate company vice president prior to receipt (a company vice president should seek approval from his or her immediate supervisor).

CONFLICTS OF INTEREST

Conflict of interest is a conflict between the private interests and the official responsibilities of a person in a position of trust. Every Northrop Grumman employee occupies a position of trust. We must be particularly sensitive to any situation, on or off the job, that might erode that trust or cause others to doubt our fairness or to question the good faith of our acts or decisions. Situations in which personal or financial interests involving you or your immediate family conflict with your Northrop Grumman responsibilities must be carefully avoided.

If you or any member of your family has a substantial financial interest in any firm which is supplying goods or services to Northrop Grumman or which is bidding on or proposes to do work for Northrop Grumman, you must promptly advise your management and disclose in writing the nature of your interest on the Conflict of Interest (C-196) form.

RESPONSIBILITY

Employees who find themselves in a position where they believe they have been offered a kickback or where an employee from another company may be indicating a desire to receive one should refuse and report the incident to their management, the Law Department, their Business Conduct Officer (BCO), or call the Sector OpenLine or the Corporate OpenLine.

EMPLOYEE GUIDELINES

Employees are responsible for their personal reputation and that of the company. Each of us is accountable for performing every aspect of our work according to the highest standards and for behaving in an honest and fair manner. In order to carry out these responsibilities and obligations, you must:

Report any offer of, or request for, a kickback, gratuity, or bribe to department management, your BCO, the Law Department, or the OpenLine
Follow company policies and procedures with regard to any contract solicitation or procurement involving an outside supplier or subcontractor
Inform suppliers beforehand that Northrop Grumman employees cannot accept gifts or gratuities and thus avoid embarrassment
Not accept gifts, entertainment, meals, favors, or other gratuities from a supplier except as expressly permitted by written company policies and procedures
Promptly inform the company through management of a gift accepted or a courtesy received because a gracious refusal was culturally unacceptable
Report conflicts or potential conflicts of interest to department management, your BCO, the Law Department or the OpenLine
Be especially attentive to the potential for actual or perceived conflicts of interest and avoid even the appearance of a conflict of interest
Complete annually a Certificate on Conflict of Interest, Relationships With Suppliers and Standards of Business Conduct (Form C-196) in accordance with company policy.

MANAGER/SUPERVISOR GUIDELINES

Managers or supervisors are responsible for ensuring that their departments abide by company policies and the law. Managers and supervisors must:

Report to the Law Department an offer of a kickback, gratuity, or bribe which has come to their attention
Review employees? C-196 forms to evaluate any potential conflicts of interest
If the employee responded ?yes? to any question, discuss the potential conflict with the employee
Report any potential conflicts of interest which have come to their attention to the Law Department, the BCO, or the OpenLine
Ensure their department follows company policies and procedures with regard to any contract solicitation or procurement involving an outside supplier or subcontractor.

If you have any questions or concerns about company policy as it relates to these or any other ethics or compliance topics, contact your management, your BCO, the Law Department, the Sector OpenLine or the Corporate OpenLine.