Over the past few weeks, the Procurement Collusion Strike Force (PCSF or Strike Force) has been busy taking action across the country in a number of cases involving charges of bid rigging. In California, a former contractor at a food supply company admitted to violating the Sherman Act by conspiring with another company to submit artificially low bids to the US Bureau of Prisons (BOP). Just one week later in the same state, a former contract manager for the California Department of Transportation (Caltrans) pleaded guilty to bid-rigging and bribery charges for conspiring to obstruct the competitive bidding process for the state agency and for accepting bribes as part of that scheme. Then, on the east coast in Florida, three men were indicted for pre-arranging a winner in a competitive contracting process for customized promotional products to the US Army.
Cumulatively, these actions demonstrate that the Strike Force is continuing its zealous efforts to crack down on bid rigging at the local, state, federal, and international levels. Since its inception in 2019, the PCSF has sought to detect, investigate, prosecute, and deter antitrust crimes such as bid rigging and related fraudulent schemes in the grant, government procurement, and program funding areas. Arnold &Porter has kept track of the Strike Force's developments over the past few years.
BOP Bid-Rigging Scheme
On April 5, 2022, the Department of Justice (DOJ) announced a former contractor of a food supply company, Edgar Porras, agreed to plead guilty to a felony bid-rigging charge. Conspiracy to rig bids, which is a violation of the Sherman Antitrust Act, carries a maximum sentence of ten years of imprisonment and a maximum fine of $1 million. According to the plea agreement, from 2013 to 2018, Porras conspired with an individual from a competing food company to rig bids for contracts from the BOP. Porras and another individual identified as "Co-Conspirator-1" agreed on which company would submit the lowest bid to supply food to BOP facilities. Porras's participation in the bid-rigging conspiracy involved 111 BOP contracts, worth approximately $1.9 million. Porras will appear for sentencing at a later date.
State-Level Bid Rigging and Bribery Scheme
On April 12, DOJ announced that Choon Foo "Keith" Yong agreed to plead guilty to bid-rigging and bribery charges. Yong, a former Caltrans employee, admitted to conspiring to rig the bidding process for improvement and repair contracts from Caltrans. Caltrans is a California state agency that awards contracts to acquire, improve, and repair transportation facilities. According to Yong's plea agreement, Caltrans received over $3 billion from the Federal Highway Administration for each fiscal year from 2015-2020.
The plea agreement further details Yong's participation in the conspiracy, which spanned from early 2015 through late 2019. As a contract manager at Caltrans, Yong provided his co-conspirators' advance notice when a Caltrans contract was coming up for bid. Yong then coordinated with his co-conspirators to determine which of the contractor's companies would be invited to submit bids and which contractor would submit a non-competitive bid. The winning contractor paid money or other financial benefits to Yong and the contractor that submitted the sham bid. Yong admitted to receiving bribes in the form of cash, wine, furniture, and remodeling services for his home as a reward for his participation in the bid-rigging agreement. The total value of the payment and benefits received by Yong exceeded $800,000. Yong will appear for sentencing on August 22. He has agreed to pay restitution, to forfeit nearly $15,000 and to cooperate in the ongoing investigation.
Assistant Attorney General Jonathan Kanter of the Justice Department's Antitrust Division lauded Yong's guilty plea as "the first in the Antitrust Division's ongoing investigation into bribery and bid rigging at Caltrans."
US Army Bid-Rigging and Fraud Scheme
On April 5, 2022, a federal grand jury in the Middle District of Florida indicted three Florida men—Lawrence O'Brien, Bruce LaRoche and Thomas Dailey—for conspiracy to rig bids for customized promotional products sold to the US Army and conspiring to defraud the United States (as to LaRoche and O'Brien).
According to the indictment, from mid-2014 through late 2019 defendants conspired to rig bids submitted to the US Army for customized promotional products, which the Army purchases as part of its operational and recruitment efforts. In furtherance of their scheme, the defendants allegedly arranged in advance which company would win the bid. The defendants also allegedly exchanged each company's bid templates and submitted bids on each other's behalf.
The indictment further alleges that LaRoche and O'Brien conspired to defraud the United States after receiving requests for bids from the Army. LaRoche or co-conspirators acting at his direction allegedly drafted each bid for shell companies that were owned or controlled by LaRoche as though those companies were submitting competing bids. Similarly, the indictment alleges that O'Brien prepared and submitted sham bids from shell companies owned by him "to give the impression that the companies competed with each other."
The PCSF appears to be picking up the pace in their investigation and prosecution of procurement collusion. In addition, these recent cases demonstrate that the Strike Force is not limiting its enforcement purely to antitrust violations. Because these violations may involve additional illegal conduct such as fraud and bribery, the Strike Force appears to be broadening its approach to pursue all potentially illegal conduct that affects the procurement process.
As the Biden Administration continues to utilize the funding from the $1.2 trillion Infrastructure Investment and Jobs Act, the Strike Force likely will be on the lookout for bid rigging, bribery, and fraud in the federal contracting process. As a result, companies should implement or review existing compliance programs to ensure their employees do not violate antitrust and other federal laws involving government procurement.
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