Earlier quoted context omitted.
Don't screw around. You've described yourself as the sole witness the commission of a serious crime. Passivity and/or trying to resolve this "politely" in back channels can bite you by making you an accomplice. If it really was as bad as you describe - your next call should be to the FBI and you should prepare for that by writing down every detail you remember, as carefully and accurately as you can.
Isn't he better off just walking away from this (and yes OP: forget the sale)? Per his own account here, he (a) discussed potential issues with "hiding" the kickback, and (b) tentatively agreed to discuss the possibility with his "by the book" partner. I am not questioning your righteous outrage here, but this is a can of worms if there ever was one. And I'm just guessing that the sleaze ball in DC acted that way bec…
First, you can't be too paranoid: perhaps his firm was being investigated and the bribe proposal was false.
Second, if the bribe offer was serious and that guy has any power, now his firm has a nervous enemy in the wrong place.
Third, if the bribe offer is taken up by someone else, he makes it less likely that he can get future contracts anywhere near that arm of government without making bribes.
Fourth, the corruption is independently reported by some third party, then it may come back to haunt his firm (as in questions about what they knew about it, when).
-t