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Why Whistleblowers Should be Honorary Members of the new Antitrust Strike Force

Posted  December 20, 2019

When our firm represented a whistleblower who brought down the largest oil companies in Korea for bid-rigging, resulting in fines and penalties of over $360 million, we did not imagine the case would play a role in launching a new initiative, the Justice Department’s Procurement Collusion Strike Force. The Strike Force is an interagency partnership tasked with rooting out collusive schemes like bid-rigging. The new group includes the Antitrust Division, 13 U.S. Attorneys’ Offices, and investigators from the FBI, the Department of Defense Office of Inspector General, and others. One key partner, however, was omitted from DOJ’s press release: whistleblowers.

Explaining the rationale for the Strike Force, the Department noted that the “Antitrust Division and its law enforcement partners have a history of prosecuting criminal antitrust conspiracies that take advantage of government contracts.” The press release then spent a full paragraph discussing the details of our bid-rigging case, mentioning only one other case in passing at the end. Yet the release never disclosed that the bid-rigging prosecution that launched the Strike Force was initiated and supported almost exclusively by a whistleblower who brought a claim under the False Claims Act.

Whistleblowers are a critical part of enforcement in government contracting fraud. They are uniquely positioned to reveal secret bid-rigging and other collusive arrangements. Cartels are notoriously difficult to uncover, because the conspirators are typically a small and tightly controlled group. Moreover, persons with direct knowledge of collusion may fear exposing themselves  to potential criminal liability.

Offshore cartels, such as the Korean bid-rigging conspiracy, are likely more commonplace than domestic bid-rigging, but they are also more difficult to crack. In many countries, collusive bidding is an acceptable business practice, and therefore law enforcement is often less rigorous than in the United States. Insiders are typically the only way to shine a light on such international collusion, and the benefits can be enormous, as illustrated by the $360 million recovery in the Korean case.

Clearly, cartel investigations would benefit enormously from well-placed whistleblowers. Although anyone who cooperates will inevitably worry about triggering a circular firing-squad that might land the cooperator in jail, that’s a misperception. In fact, cooperation is often the best way to inoculate those with knowledge of an illegal cartel from criminal prosecution.

In most cases, the first person to come forward is spared the Justice Department’s wrath, and in many cases could be entitled to a reward under the False Claims Act. Our client, the bid-rigging whistleblower, is likely to receive tens of millions of dollars based on the size of the government’s recovery.

But as it currently stands the law only provides rewards to antitrust whistleblowers in situations where the victim of collusion is the government. To properly incentivize whistleblowers, Congress should enact a statute that specifically rewards persons who report antitrust violations, no matter the victim.

Such a statute might be limited to the most serious antitrust violations, such as Section 1 of the Sherman Act and certain provisions of the Clayton Act. It could be modeled after the SEC and CFTC whistleblower statutes that were passed in 2010 and have been enormously successful. The private enforcement assistance that would be unleashed against those engaged in anticompetitive collusion would be just as effective as it has been for the CFTC, which currently has whistleblowers involved in 40% of its enforcement efforts.

Finally, despite the incentives and protections for whistleblowers, not every potential cooperator will receive the red carpet treatment and a check. That depends on the specific facts and circumstances of each situation. Qualified attorneys with years of relevant experience can assess a prospective cooperator’s likelihood of receiving a favorable reception and offering assistance, not a target, to the new Strike Force.

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Tagged in: Bribery and Bid-Rigging, FCA Federal, Government Procurement Fraud, Importance of Whistleblowers, International Whistleblowers,