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Catch of the Week — DOJ Nets 3 South Korean Companies in Bid Rigging Scheme

Posted  November 16, 2018

Our Catch of the Week celebrates DOJ’s massive $236 million settlement with three South Korean-based companies accused of rigging bids to inflate the cost of fuel supplied to U.S. Army, Navy, Marine Corps, and Air Force bases in South Korea, the investigation of which was initiated by a whistleblower represented by Constantine Cannon. The three companies, SK Energy Co. Ltd., GS Caltex Corporation, and Hanjin Transportation Co. Ltd., will plead guilty and pay $82 million in fines to resolve the criminal cases against them and pay approximately $154 million as part of a civil settlement pending court approval.

According to criminal charges filed this week, the companies, along with unnamed co-conspirators, engaged in conspiracy to suppress competition and artificially raise prices under fuel supply contracts with the U.S. military.  The investigation is ongoing, and the companies have agreed to cooperate with DOJ. Their plea agreements await court approval.

In a DOJ press release, Director Dermot F. O’Reilly of the Pentagon’s Defense Criminal Investigative Service (“DCIS”) emphasized that the settlement should send a message to those who seek to cheat the government: “These guilty pleas and significant fines demonstrate the heavy consequences that come to those who enrich themselves through collusion in order to defraud the American taxpayer. This exhaustive investigation was a multi-year endeavor by DCIS, its investigative partners, and the Department of Justice. DCIS will continue to identify, disrupt, and bring to justice those who threaten U.S. military readiness through fraud and corruption.”

Separately, DOJ’s Antitrust Division filed a civil antitrust complaint and proposed settlements addressing the same conduct. The antitrust case was brought under Section 4A of the Clayton Act, which empowers the United States to seek treble damages when it has been injured by an antitrust violation, and the civil settlement will require the companies to pay more than the amount they overcharged the government.

Notably, Assistant Attorney General Makan Delrahim of the Antitrust Division signaled that the Division’s aggressive approach will continue: “The Antitrust Division has a long history of vigilantly protecting the interests of American consumers through civil and criminal antitrust enforcement. Going forward, it is my goal to apply that same vigilance to protect the interests of American taxpayers. When a firm cheats the United States by rigging bids, the Division will insist on robust civil settlements like those announced today.”

The civil settlement will also resolve a whistleblower lawsuit under the False Claims Act (“FCA”) alleging that SK Energy, GS Caltex, and Hanjin made false statements to the government relating to their agreement not to compete. Whistleblowers can bring claims under the FCA to report fraud and misconduct in government contracts and programs. The FCA allows private persons, known as relators, to bring a lawsuit on the government’s behalf, with the promise of a potential reward based on the government’s recovery.

Constantine Cannon represents the whistleblower in this matter. If you would like more information or would like to speak to a member of Constantine Cannon’s whistleblower lawyer team, please click here.

Tagged in: Bribery and Bid-Rigging, Catch of the Week, Defense Contract Fraud, FCA Federal, Government Procurement Fraud, International Whistleblowers,