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Military Contractors Get Prison Sentence for Bid Rigging Scheme

Posted  August 30, 2023

Two military contractors were recently sentenced to prison time for bid-rigging violations, which the government said involved more than $17 million in government dollars, according to a DOJ press release.  This is the latest in the broader crackdown by the DOJ’s “Procurement Collusion Strike Force,” a joint effort to combat antitrust violations and government fraud.

Bid rigging is when two or more individuals or entities agree on who will be the winning bidder.  It corrupts the bid or auction process and results in higher overall costs and pricing due to the lack of competition.  It is a per se antitrust violation under Section 1 of the Sherman Act, and it can also form the predicate for a False Claims Act case.

In this case, according to the DOJ’s press release citing plea agreements, the coconspirators “submitted coordinated, higher-priced and non-competitive bids to ensure a designated company won” certain government contracts related to servicing military equipment.  The DOJ announced that for these bid-rigging violations, Aaron Stephens of Texas was sentenced to 10 months in prison, and John “Mark” Leveritt of Texas was sentenced to 6 months in prison.  Both were also ordered to pay fines.

Bid rigging for government contracts harms the government and, ultimately, all taxpayers.  In the words of DOJ Assistant Attorney General Jonathan Kanter, “We will hold accountable those who enrich themselves at the expense of our armed forces and ultimately the public.”  U.S. Attorney Damien Diggs for the Eastern District of Texas reiterated that bid rigging in military contracting “harm[s] the military, taxpayers, and legitimate businesses alike . . . .”

This is not the first time that the government has gone after allegations of bid rigging in government contracts.  For example, Constantine Cannon represented a whistleblower who brought a False Claims Act lawsuit against several South Korean oil companies for allegedly bid-rigging fuel contracts for U.S. military bases in South Korea.  The False Claims Act permits private individuals to bring lawsuits on behalf of the government for fraud committed against the government.  It was enacted during the Civil War to go after war profiteers trying to defraud the Union Army.  Under the statute, successful whistleblowers are entitled to receive up to 30 percent of any government recovery.

In the South Korea case, five different entities ended up paying a total of $363 million to settle the matter.  It was the largest False Claims Act antitrust recovery as well as the largest False Claims Act settlement involving bid rigging to date.  In November 2018, SK Energy Co. Ltd., GS Caltex Corporation, and Hanjin Transportation Co. Ltd. collectively agreed to pay $154 million, to resolve civil claims, and an additional $82 million in criminal fines for their involvement in the conspiracy the whistleblower exposed.  And in March 2019, the Department of Justice announced that two additional companies, Hyundai Oilbank Co. Ltd and S-Oil Corporation, would pay $75 million in criminal fines and $52 million to resolve these same False Claims Act and antitrust violations.  The whistleblower received an award of nearly $37 million, representing 23% of the False Claims Act payments.  Read more about that case here and here.

Big rigging, like other antitrust arrangements, are often secretive agreements.  Whistleblowers can play a key role in uncovering the misconduct.  If you have any information of potential antitrust violations that directly impact government purchases, military contracting, or Medicare/Medicaid and would like to speak to an experienced member of the Constantine Cannon whistleblower lawyer team, please do not hesitate to reach out and contact us for a free and confidential consultation.

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Tagged in: Antitrust Enforcement, Bribery and Bid-Rigging, Criminal Proceedings, FCA Federal, Government Procurement Fraud,