bid rigging
Subscribe to bid rigging's Posts

Government Contractor Pleads Guilty to Bid-Rigging and Procurement Fraud

On June 7, 2021, as part of the US Department of Justice’s (DOJ) continuing commitment to prosecuting cases where the government is a victim, a government contractor pleaded guilty to one count of bid-rigging and one count of conspiracy to commit mail and wire fraud in connection with the DOJ’s ongoing investigation into public works contracts for the North Carolina Department of Transportation (NCDOT).

Ohio-based Contech Engineered Solutions LLC (Contech) entered its plea of guilty before a federal judge in the US District Court for the Eastern District of North Carolina and was sentenced to pay a $7 million criminal fine. Contech was also ordered to pay an additional $1,533,988 in restitution to the NCDOT. Notably, the DOJ did not impose a term of probation on Contech because Contech agreed to improve its compliance program to prevent recurrence of anticompetitive conduct. Contech, however, is required to cooperate with the DOJ, including producing documents and making witnesses available for interviews or testimony.

Contech and its former executive were indicted in October 2020 on six counts of alleged bid-rigging, conspiracy to commit fraud and mail and wire fraud in connection with a decade-long conspiracy involving public works projects in North Carolina.

This prosecution highlights the DOJ’s ongoing commitment to the Procurement Collusion Strike Force (PCSF) and its efforts to scrutinize public procurements and combat collusion and related fraud in government contracting.

The PCSF has conducted extensive training of law enforcement officers and procurement officers, among others, to help identify scenarios and situations where collusion is more likely to occur. The PCSF is also utilizing data analytics to advance its investigations, building on technological advancements and more useable data sets to target and prosecute anticompetitive conduct.

Importantly, the PCSF has recently doubled in size and has gone global just as the United States has approved unprecedented stimulus spending in response to the global COVID-19 pandemic and as the Biden administration is poised to approve a new infrastructure plan. The PCSF has provided tools that allow any individual to report suspected collusion via email or an online tip center. Enforcers’ renewed commitment to procurement collusion—coupled with increased government spending—will likely lead to more investigations and additional prosecutions in 2021.

Contech, a manufacturer of aluminum and other products, conspired with its supplier in bidding on numerous NCDOT public works projects. According to the indictment, the former Contech executive would obtain (or direct his subordinate to obtain) the supplier’s total bid price in advance. Using that information, Contech then submitted bids to be intentionally higher than its supplier. The indictment also alleged that Contech submitted false certifications that its bids were competitive and free of collusion throughout the conspiracy.

The indictment alleged bid-rigging between a manufacturer and its supplier, which is typically a vertical relationship and generally subject to the Rule of Reason rather than per se criminal analysis. Under the Rule of Reason, antitrust enforcers balance the anticompetitive effects of the conduct in question against the procompetitive benefits. Certain anticompetitive conduct, however, [...]

Continue Reading




If Past is Prologue, Ramped up Antitrust Compliance is Critical

The COVID-19 pandemic has brought not only a healthcare crisis, but also one of the worst economic downturns in history. As businesses emerge from this crisis, there may be increased risk that employees may cross the line and engage in anticompetitive conduct. Therefore, it is critical that companies and individuals prepare now to ensure that antitrust compliance and, if necessary, reporting of conduct through internal hotlines are strongly encouraged. In this article, published on Bloomberg Law, our authors explore the risks associated with antitrust cartel conduct, review enforcement by government authorities following past economic crises, and outline compliance steps companies and individuals should take to minimize enforcement risks.

Access the Full Article.




2019 in Review: Overview of Cartel Investigations

The Department of Justice Antitrust Division (DOJ) was active in 2019. At the beginning of 2019, the DOJ was preparing for trial in six matters and had 91 pending grand jury investigations. Throughout 2019, the DOJ made public several new investigations, including in the commercial flooring industry, online auctions for surplus government equipment, the insulation installation industry and suspension assemblies used in hard disk drives. The DOJ also announced developments in other ongoing investigations.

Meanwhile, the European Commission (Commission) entered into settlements with parties in three cartel cases: Occupant Safety Equipment, FOREX and Canned Vegetables. The Commission imposed total fines of €1,469 million in 2019. In March 2019, the Commission launched an online tool to submit documents and information in the context of leniency and settlement proceedings.

Read the full report.




Procurement Collusion Strike Force’s Focus on Detection Yielding New Investigations

On March 3, 2020, the American Bar Association (ABA) hosted a Q&A with two members of the Procurement Collusion Strike Force (PCSF)—Mark Grundvig, the Assistant Chief of the DOJ Antitrust Division’s Criminal II section, and Marcus Mills, Special Agent, Major Fraud Investigations Division, USPS Office of Inspector General.

During the course of the Q&A, Mr. Grundvig and Mr. Mills provided their perspective on the goals and progress of the PCSF.

(more…)




Cartel Snapshot: Mid-Year Update

2019 MID-YEAR UPDATE

The Department of Justice (DOJ) Antitrust Division announced three new investigations and several developments in its other investigations, including new investigations in the commercial flooring industry, online auctions for surplus government equipment and insulation installation contracts. The Antitrust Division also released its Spring 2019 Division Update, which notes that the Division “is preparing for trial in six matters and had 91 pending grand jury investigations at the close of FY 2018.”

In April 2019, the Division held a public roundtable discussion on the Antitrust Criminal Penalty Enhancement & Reform Act (ACPERA), which is due to sunset next year. ACPERA reduces the criminal liability and civil damages exposure of companies and individuals who are granted leniency under the Division’s Leniency Program for cooperating in investigations into cartel and other anticompetitive conduct. The roundtable consisted of a series of panel discussions allowing judges, attorneys, economists, academics, the business community and other interested stakeholders to weigh in on how the law can be improved. The Division was particularly interested in the public’s views on whether ACPERA has properly incentivized the self-reporting of criminal conduct and whether there are issues that have impeded the law’s intended effect.

The European Commission (Commission) announced developments in ongoing investigations in the auto parts industry, and in its government bonds and car emissions cases. The Commission also launched a new online tool to make it easier for companies to submit statements and documents as part of leniency and settlement proceedings in cartel cases.

US DEVELOPMENTS

  • The first new investigation disclosed by the DOJ is in the commercial flooring industry. The DOJ charged a former vice president of a commercial flooring contractor in Chicago of exchanging price information with its rivals to fix prices of contracts for removal and installation of commercial flooring. Assistant Attorney General Delrahim of the Antitrust Division said that the indictment “is the first of what we expect to be many in this ongoing investigation into bid rigging” in the commercial flooring industry.
  • The DOJ disclosed a second new investigation into bid rigging of Government Services Administration (GSA) contracts. The owner of a Texas company pleaded guilty to rigging bids for surplus government equipment—computers for resale and for recycling—in online GSA auctions.
  • The DOJ announced a third new investigation into bid rigging by insulation installation contractors. A manager for a Connecticut-based insulation contractor pleaded guilty for his role in rigging $45 million worth of bids for insulation installation contracts in New England from 2011 to 2018.
  • The DOJ’s investigation into fuel-supply contracts for the armed services remains active. Two more Korean companies pleaded guilty for their involvement in a bid-rigging conspiracy that targeted contracts to supply fuel to US Armed Forces in South Korea.
  • The DOJ’s investigation into price fixing in the promotional products space appears quite active.
  • In May 2019, state attorneys general for 43 states and Puerto Rico brought federal and state antitrust, consumer protection and common law claims against 18 generic [...]

    Continue Reading



Recent Indictments Demonstrate Increased Focus on Bid-Rigging in Government Procurements

Companies involved in the government contracting industry should take note that the government is honing in on anticompetitive conduct affecting government procurements. The federal government has demonstrated an increased interest in this area, and companies should refresh and audit their compliance programs to avoid hefty civil and criminal penalties and potential prison terms for implicated employees.

Access the full article.




Joint FTC / DOJ Guidance: Hurricanes Harvey and Irma

Businesses and individuals in Texas, Florida, the Southeast, Puerto Rico and the Virgin Islands are preparing for a massive recovery and reconstruction effort in the wake of Hurricanes Harvey and Irma. The Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC) have issued antitrust guidance that reiterates key principles of permissible and impermissible competitor collaboration and provides useful examples related to disaster recovery. (more…)




THE LATEST: Acting AAG Clarifies Scope of Amnesty for Executives

The US Department of Justice (DOJ) Antitrust Division (the Division) offers leniency to the first company to contact the Division and acknowledge participation in an antitrust conspiracy such as price-fixing, bid-rigging or market allocation. The Division’s leniency program requires the applicant to fully cooperate with the government’s investigation and to candidly acknowledge its wrongdoing, among other requirements. In return, the successful applicant receives a pass from corporate criminal exposure and also receives immunity for its officers, directors and executives.

The leniency program is the crown jewel of the Division’s enforcement regime because of its demonstrated success generating new cases. The program’s ability to attract applicants is based on its transparency and predictability. The level of trust required for companies to air their criminal wrongdoing to prosecuting authorities is not automatic. It has been earned over the years by a program that keeps its promises and works as designed. Therefore, changes to the program are closely watched by the defense bar for any perceived lessening of immunity coverage. (more…)




DOJ and SDNY US Attorney’s Office Indict Three Dealers in Foreign Currency Exchange Spot Market Conspiracy Case

A grand jury has indicted three foreign currency exchange spot market dealers for alleged violations of the Sherman Act, 15 U.S.C. § 1, in a case brought jointly by the DOJ’s Antitrust Division and the US Attorney’s Office for the Southern District of New York (SDNY). The allegations in the case, United States v. Usher, et al., are that the three named defendants conspired to suppress and eliminate competition for the purchase and sale of Euro/US dollar (EUR/USD) currency pairs via price fixing and bid rigging.

The foreign currency exchange spot market (the “FX Spot Market”) enables participants to buy and sell currencies at set exchange rates. The FX Spot Market is an “over-the-counter” market conducted via direct customer-to-dealer trades, i.e., without an exchange.  In the market, currencies are traded and priced in pairs, whereby one currency is exchanged for the other.  When filling customer orders, dealers in the FX Spot Market do not serve in a broker capacity, but rather fulfill the orders via their own trading and speculation in the requested currency markets.  Dealers employ traders to quote prices and engage in trades to fill customer orders.  The dealers and their traders are able to access a separate virtual market, known as the interdealer virtual market, which enables currency trades amongst dealers.  According to the Indictment, currency pair prices are set by a continuous auction in the interdealer virtual market, where “individual actions taken by competing traders—to bid or not bid, to offer or not offer, to trade or not to trade, at certain times, and using certain tactics—can cause or contribute to a change in the exchange rate shown in the [virtual trading] interface, and thus may benefit, harm, or be neutral to a competing trader.” The Indictment asserts that this is because the benchmarks used by the virtual market were calculated at particular times each day and were based on “real-time bidding, offering, and trading activity” on the virtual trading market.

The Indictment asserts that the defendants violated the Sherman Act by:

  • engaging in chat room communications whereby they discussed customer orders, trades, names and risk positions;
  • refraining from trading against each other’s interests;
  • coordinating bids for the purpose of fixing the price of the EUR/USD pair.

Defendants are alleged to have engaged in profitable EUR/USD transactions while acting to fix prices and rig bids for the EUR/USD product in the FX Spot Market.  The Indictment further alleges that others were co-conspirators, suggesting that there may be cooperating witnesses and possibly further indictments to follow. Of note, however, recent Trump Administration changes to US Attorneys and DOJ Division Deputies and Chiefs may conceivably alter the course of this and any follow-on litigation. Regardless, over-the-counter markets have been a focus of antitrust lawsuits in recent years, most notably in the widely-covered Libor suits, and that trend is expected to continue.




THE LATEST: DOJ Trial Machine is Staffed Up, Fired Up

WHAT HAPPENED:
  • The DOJ Antitrust Division scored another trial win — this time in a real estate foreclosure bid rigging case.
  • Yesterday’s win follows on the heels of Division wins in a Puerto Rico bus transportation bid rigging/fraud case (DC Office, Criminal I), enjoining of a significant merger (DC Office, Lit I), corruption prosecution of an environmental remediator (New York Office), and another real estate auction case (San Francisco Office).
WHAT THIS MEANS:
  • The Division is growing a crop of trial-ready and eager attorneys in multiple offices. They can be expected not to shy away from a courtroom challenge.



STAY CONNECTED

TOPICS

ARCHIVES