In November 2019, the Department of Justice (DOJ) announced the creation of the Procurement Collusion Strike Force (PCSF), an interagency partnership composed of prosecutors from the Antitrust Division and the United States Attorney’s Offices as well as the Federal Bureau of Investigation (FBI), the Department of Defense, and various Officers of the Inspector General. The PCSF’s stated goal is to deter, detect, investigate, and prosecute antitrust crimes that relate to government procurement, grant, or other public funding programs. The DOJ has devoted significant resources to the PCSF, which is a clear indication that investigating procurement crimes is a top enforcement priority for the Biden Administration.
PCSF Activity
The PCSF has twin functions. First, the PCSF investigates and prosecutes individuals and organizations that engage in procurement-related crimes. Second, the PCSF facilitates training for procurement officials and government contractors on antitrust risks in the procurement process.
The PCSF has quickly become an active enforcement tool. Since its inception in late 2019, the PCSF has opened more than 60 criminal investigations and prosecuted over 30 companies and individuals. Just this month, the DOJ reported that the PCSF has prosecuted anticompetitive crimes in construction, defense contracting, transportation, poultry, aerospace, and health care. In addition, the PCSF has prosecuted anticompetitive conduct involving federal, state, and local procurement, including local government school district contracts. At times, the charges even extend beyond antitrust crimes. The PCSF has announced 12 indictments, nine convictions, and one sentencing so far in 2022 alone.
Three examples highlight the breadth of PCSF’s enforcement activities:
- United States v. Dornsbach (D. Minn.): On March 10, 2022, the PCSF secured an indictment against both Kamida Inc., a concrete repair and construction company, and its CEO for participating in bid-rigging activities in Minnesota. The parties were charged with conspiracy to violate the Sherman Act, 15 U.S.C. § 1, after they allegedly made an agreement with a third party, whereby the third-party submitted inflated bids designed to lose to Kamida’s bid. Notably, the underlying bids were submitted to municipal bodies, including local governments and school districts.
- United States v. Stephens (E.D. Tex.): On July 14, 2022, a military contractor pleaded guilty to conspiracy to violate the Sherman Act for rigging bids for public military contracts in Texas and Michigan. In his plea, the contractor admitted to (a) submitting coordinated and inflated bids pursuant to agreements with other contractors, (b) requesting and facilitating the submission of inflated bids by co-conspirators in order to receive the winning bid, (c) falsely representing himself as an employee of a disabled-veteran-owned small business in order to make false and inflated bids on “set-aside” government contracts, reserved for small businesses operated by disenfranchised individuals, and (d) bribing government employees with donations, items, or services of financial value. This case demonstrates the PCSF’s emphasis on prosecuting individuals, even when their employer is not prosecuted, and the wide-array of conduct that may lead to violations under the Sherman Act.
- United States v. O’Brien (M.D. Fla.): In another case against individuals, on April 12, 2022, the PCSF helped secure an indictment against three men for a bid-rigging scheme involving U.S. military contracts. While all three defendants are charged with violating the Sherman Act, two of the defendants face initial charges of conspiring to defraud the federal government. The fraud charges arose from defendants’ alleged creation of shell companies that submitted sham bids. If convicted, the consequences could be quite steep given the multiple charges involved and demonstrates that the PCSF does not limit its prosecutions or investigations to antitrust crimes.
Belangrijkste opmerkingen
- The stakes for government contractors are high. Criminal penalties for Sherman Act violations include fines of up to $1,000,000 for individuals or $100,000,000 for corporations and up to 10 years imprisonment. In addition, those convicted of procurement-related crimes are likely to be debarred from federal procurement awards for a period of time. Violators of the Sherman Act are also subject to civil liability. Private plaintiffs can sue for treble (or three times) damages and attorneys’ fees.
- To avoid these consequences, companies should invest in robust compliance programs that incorporate the following elements:
- Compliance – A comprehensive antitrust compliance policy, which includes a confidential reporting mechanism that encourages employees to anonymously report potential anticompetitive conduct, which then allows for prompt investigation of any such report.
- Training – Regular antitrust training for employees, tailored to the business activities of the organization, which helps employees learn how to spot anticompetitive conduct like bid rigging, price fixing, fraud, and bribery.
- Monitoring – Monitoring programs that track and scrutinize the company’s procurement activity with respect to all levels of government contracts and any other higher-risk business activities.
- Individual liability remains a top priority of DOJ. Individuals may be subject to investigation and prosecution by the PCSF, even where their company is not subject to prosecution.
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