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.”
Takeaways
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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