(April 2, 2019) – The Antitrust Division (Division) of the Department of Justice (DOJ) investigations of public procurement bids has uncovered multiple criminal violations. Last week, the Division announced that two companies have agreed to plead guilty to bid rigging and fraud in the procurement of Department of Defense (DoD) fuel supply contracts for U.S. military bases in South Korea. The Division simultaneously unsealed indictments charging seven individuals with violating criminal antitrust laws as well as committing fraud against the federal government. To date, five companies have pleaded guilty to charges stemming out of the Division's probe into these DoD fuel supply contracts.
At a press conference announcing the plea agreements and indictment, Makan Delrahim – the Assistant Attorney General of the Division - said that "We will not waver in our dedication to prosecuting corporations and individuals, wherever they are located, that seek to profit at the expense of American taxpayers." The top criminal antitrust official at the Division, Deputy Assistant Attorney General for Criminal Enforcement Richard Powers, echoed Delrahim's statements at the American Bar Association white collar conference, stating that public procurement are a priority for the Division's criminal program.
The Cost of Violating Criminal Antitrust Laws
Penalties for violating criminal antitrust laws in the United States are steep. Companies face maximum fines of US$100 million. In addition to criminal fines, the DOJ can seek treble civil damages under both Section 4a of the Clayton Act and the False Claims Act (FCA) when the government is the victim of criminal antitrust conduct. For example, one of the companies that pleaded guilty in the fuel supply investigation agreed to pay a total of US$104.17 million to the government in order to resolve the matter: US$46.67 million in criminal fines, US$14.88 million to settle the civil antitrust claims, and US$42.62 million to settle the FCA claims. Individuals also face severe criminal penalties, including criminal fines of up to US$1 million and imprisonment of up to 10 years.
Furthermore, foreign individuals are not protected from the consequences of indictment. The Division has previously extradited indicted non-U.S. citizens from countries such as Canada and Germany. Additionally, the DOJ works with enforcement officials in the more than 50 countries that also have antitrust regulators. The current administration also appears willing to consider extraditing individuals. In the recent fuel supply case, Delrahim said that the DOJ is exploring "every option for bringing these [indicted] individuals to the US" and is communicating with the Korean Ministry of Justice "about access" to the individuals. According to Delrahim, the DOJ anticipates "full cooperation" with the South Korean authorities.
Given the Division's recent focus on public procurement – whether its seeking contracts for cafeteria services or supplying sophisticated technology - domestic companies and foreign companies should understand the significant penalties at stake and should review their compliance programs. Where necessary, it is cost-efficient to strengthen those programs, including compliance training for their employees and executives.
Given this heightened scrutiny, companies should consider retaining outside counsel to evaluate the sufficiency of their compliance programs (or implement one). In addition to preventing violations, compliance programs often reveal violations. If a company suspects that it has violated criminal U.S. antitrust laws, it should consult with experienced outside antitrust counsel to assess its best course of action. The first guilty party in the door that meets the requirements of the DOJ leniency program will receive amnesty and employees that cooperate will not be prosecuted.
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