Clients that do business with the federal government should take note: despite the pandemic and the upcoming election, the U.S. Department of Justice (“DOJ”) continues to prioritize its focus on punishing fraudulent and anticompetitive conduct by government contractors, carrying out dozens of active investigations and making use of dedicated resources across multiple divisions. Last month, Assistant Attorney General Makan Delrahim confirmed the DOJ Antitrust Division’s Procurement Collusion Strike Force (“Strike Force”) has opened almost two dozen active grand jury investigations into potential criminal antitrust law violations. The Strike Force was formed in the fall of last year in an effort to detect big rigging and other antitrust crimes in the public procurement space.
Both DOJ’s Antitrust and Criminal Divisions continued to be active in the public procurement space over the summer. In June, the Criminal Division announced that one of the largest engineering firms in the Republic of Korea, SK Engineering & Construction Co. Ltd, pleaded guilty to defrauding the U.S. Army and will pay more than $60 million in criminal fines, restitution, and civil penalties. That announcement follows on the heels of the Criminal Division’s 2019 reorganization of its Market Integrity and Major Frauds Unit to specialize in government procurement fraud, among other select missions.
In July, following an investigation by the Antitrust Division, Louisiana company Cajan Welding & Rentals, Ltd. pleaded guilty to defrauding the United States and violating the Procurement Integrity Act by obtaining non-public information to win subcontracting awards from the Department of Energy.
DOJ has shown no indication of slowing down its efforts in the fall. In September, DOJ announced the indictment of a Georgia company, Evans Concrete, LLC, and four individuals for conspiring to fix prices, rig bids, and allocate markets for the sale of ready-mix concrete used in residential, commercial, and public projects. Several agencies, including the United States Postal Service Office of Inspector General and the Department of Transportation Office of the Inspector General, assisted the Antitrust Division with the investigation that led to the charges.
All of this comes as the Antitrust Division continues to tout the success of its Strike Force to both domestic and international competition law officials.
We can expect additional procurement indictments or guilty pleas in the near term. DOJ has stated in the past that over a third of the Antitrust Division’s open investigations relate to public procurement in some way. Assistant Attorney General Makan Delrahim recently promoted the Strike Force as “[a] model for other countries looking for innovative ways to more effectively fight bid rigging and other anticompetitive schemes that impact public procurement, and cheat taxpayers, all over the world.” The Strike Force aims to work across jurisdictions, and, according to DOJ, at least 5,500 government employees in nearly 500 state and local agencies have now received training from the project.
We anticipate that the Market Integrity and Major Frauds Unit will amplify the work of the Antitrust Division’s Strike Force. Both the Criminal Division and Antitrust Division are members of the Task Force on Market Integrity and Consumer Fraud—a DOJ-wide task force that has a Fraud on the Government Working Group. In addition, the Strike Force shares a similar mission with the Market Integrity and Major Frauds Unit’s government procurement fraud team—both seek to combat criminal violations in the public procurement space.
The DOJ is particularly focused on COVID-19-related procurement fraud. The Antitrust Division has stated repeatedly that the Strike Force “remains on high-alert” to the possibility of big rigging and other forms of collusion by government contractors related to the COVID-19 pandemic. Earlier this year, the DOJ Office of Inspector General warned its own employees responsible for the agency’s procurement efforts to be aware of the increased risk of COVID-19-related fraud, including substandard or mislabeled protective equipment and price gouging.
Companies should remain vigilant of this enforcement scrutiny. Now more than ever, companies that do business with local, state, and federal agencies should be aware of DOJ’s heightened scrutiny on public procurement, which has only intensified during the COVID-19 pandemic. Corporate fines for fraud or antitrust violations routinely top tens of millions of dollars. Given the special focuses of both the Criminal and Antitrust Divisions, companies should assess their risk and ensure their training materials are current and effective. We advise any client involved in public procurement to evaluate its compliance programs now, before DOJ comes knocking at its door.
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