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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, [...]

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Sixth Circuit Decision Affirms Summary Judgment Against Antitrust Challenge to Hospital Joint Operating Company’s Contracting Conduct

A recent decision by the US Court of Appeals for the Sixth Circuit is important for competitors involved in joint ventures because it states what mode of antitrust analysis—the per se rule or the rule of reason—applies to the conduct of joint ventures when it is challenged as anticompetitive. The decision is also significant because the court describes some steps joint venturers can take to improve the odds that their conduct will be analyzed under the more lenient rule of reason.

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