In November 2019, the Antitrust Division of the Department of Justice (DOJ) announced the formation of a multi-agency Procurement Collusion Strike Force (PCSF or Strike Force) tasked with detecting, investigating, prosecuting, and deterring antitrust crimes such as bid-rigging and related fraudulent schemes in the grant, government-procurement, and program-funding areas. Arnold & Porter previously wrote about the Task Force and provided an outlook as to what to expect from the Task Force in 2021.
Without explicitly referring to the Strike Force, the DOJ continues to focus on anticompetitive behavior in government contracting. This is clear from a recently announced guilty plea related to bid rigging. Alan Gaines, from Missouri, pleaded guilty to one count of conspiring to rig online bids submitted to the General Services Administration (GSA) in violation of Section 1 of the Sherman Act. He is the third individual charged and the third individual to plead guilty as part of the Antitrust Division's investigation into the bid rigging conspiracy. Gaines entered into the guilty plea after the court denied his motion to dismiss the indictment, in which he challenged the government's ability to bring antitrust charges against him. The reported proceeds from this scheme—$67,324—are modest, but that just underscores the DOJ's focus on pursuing cases involving anticompetitive behavior and government procurements.
Plea Background
The GSA operates a public, online platform, GSA Auctions, which auctions surplus equipment no longer needed by federal agencies. The system allows the general public to submit bids electronically on the website. The proceeds from the online auction are distributed to the government agencies or the US Treasury general fund.
Gaines admitted that he conspired with two others between 2012 to 2018 in rigging bids on the GSA Auctions platform. The conspiracy took place in several states, including Florida, Texas and Pennsylvania. Gaines's co-conspirators, Igor Yurkovetsky and Marshall Holland, both previously pleaded guilty in connection with this investigation.
According to their pleas, Gaines, Yurkovetsky, and Holland purchased computer equipment from the auction forum. The three individuals would communicate with each other via text, phone, and email during the bidding process to discuss and coordinate who would submit the winning bid, when to refrain from bidding, and the price the co-conspirator would be willing to bid. When one of the individuals placed a bid, the other two members would help monitor the website to ensure a predetermined winner. The individuals agreed not to compete against each other when bidding on particular lots offered for sale. As part of their scheme, Gaines and his co-conspirators would share their bidder identification numbers with each other even though the purpose of the numbers were to keep bidders anonymous. If a particular conspirator were to win a lot, Gaines, Yurkovetsky, or Holland would disassemble the computers for components and share them among each other. Gaines admitted to monitoring and enforcing the conspiracy by maintaining logs of bids won, which would include how the co-conspirators would split the proceeds.
Anticompetitive Focus Going Forward
This plea agreement reflects the Antitrust Division's continued effort to combat anticompetitive activity in public procurements. In a statement, Acting Assistant Attorney General Richard A. Powers stated that the GSA Office of the Inspector General (OIG) and the Antitrust Division are dedicated to "safeguarding online auctions from collusion" from people like Gaines who "stole from the government and robbed American taxpayers." GSA Inspector General Carol F. Ochoa, whose agency investigated the matter, further stated that "[c]ompetition is a fundamental component of any fair auction," and that the "GSA OIG will continue to investigate allegations of collusive activities that undermine the integrity of GSA Auctions and short-change the taxpayer." As the Procurement Collusion Task Force continues to ramp up, more prosecutorial activity in this area are expected to follow, either through the Strike Force or through coordination between the Antitrust Division and procurement officials. Having robust and executable compliance policies in place is an important tool for avoiding or mitigating a possible problem.
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