DOJ Procurement Collusion Strike Force Earns Conviction
On June 7, 2021, under the terms of a plea agreement, Judge Louise Flanagan of the US District Court for the Eastern District of North Carolina ordered Contech Engineered Solutions LLC (Contech) to pay a $7 million criminal fine and more than $1.5 million in restitution after the company pleaded guilty to one count of bid-rigging and one count of conspiracy to commit mail and wire fraud in connection with a scheme involving the North Carolina Department of Transportation’s (NCDOT) bid solicitation process. The plea resolves a six-count federal antitrust and fraud indictment against Contech, although the charges remain pending against Contech’s co-defendant and former executive Brent Brewbaker. As part of the plea agreement, Contech avoided a term of probation by agreeing to improve its compliance program. The NCDOT investigation remains ongoing, and Contech also agreed to produce documents and make witnesses available as the Antitrust Division of the Department of Justice (DOJ) continues to investigate the bid-rigging scheme.
Contech’s guilty plea marks a victory for DOJ’s Procurement Collusion Strike Force, which is credited with spearheading the investigation. In November 2019, DOJ announced the formation of a multi-agency Procurement Collusion Strike Force that is tasked with detecting, investigating, prosecuting, and deterring antitrust crimes such as bid-rigging and related fraudulent schemes in the grant, government procurement, and program funding areas. Arnold & Porter wrote about the Task Force and provided an outlook as to what to expect from the Task Force in 2021.
NCDOT is responsible for overseeing and maintaining the state’s transportation infrastructure. As a result, it manages projects to improve structures used to control the flow of water around roads, bridges, overpasses, and other civil engineering projects. During the relevant offense period (“from at least 2009 and continuing until at least June 2018”), NCDOT used aluminum for these projects and solicited bids from companies that had the capacity to work on projects with this material. Contech manufactures iron, steel, plastic and aluminum pipes for construction projects in Kentucky but ships its pipes to North Carolina for fabrication and installation.
Contech admitted that, during the relevant time period, it conspired with one of its dealers, referenced in the plea agreement only as “Company A,” to rig bids for aluminum structure projects. Company A, an aluminum structure design and installation corporation, purchased aluminum pieces from Contech and used them to complete projects for NCDOT. According to the indictment against Contech and Brewbaker, Contech allegedly coordinated with Company A to rig the NCDOT solicitation process by intentionally submitting losing bids so that Company A could prevail when it submitted higher bids. As a supplier to Company A, Contech allegedly reaped the benefit of an illegally inflated contract price.
In a statement, Acting Assistant Attorney General for DOJ’s Antitrust Division Richard A. Powers stated that Contech’s sentencing “demonstrates the [Division’s] unwavering commitment to holding accountable those who cheat the competitive process at the expense of the American taxpayer.” This prosecution reaffirms DOJ’s commitment to the Strike Force and illustrates DOJ’s use of aggressive tools to prosecute schemes affecting the procurement process. Specifically, DOJ charged Contech with both antitrust and fraud conspiracies for the same scheme. Convictions for fraud offenses may carry more severe consequences at sentencing and greater risk of debarment.
With the influx of federal spending programs in response to COVID-19, as well as the prospect of a massive new infrastructure spending law, the Strike Force’s multi-agency scope uniquely positions it to enforce antitrust and procurement fraud laws. The potential for stepped-up enforcement of antitrust and related laws against companies operating in the public procurement space will require contractors and subcontractors to take protective measures. These measures may include instituting and utilizing robust compliance policies and coordinating training focused on preventing anticompetitive conduct and ensuring procurement integrity.
For questions about the Procurement Collusion Strike Force and the Antitrust Division’s focus on anticompetitive behavior in the government contracts sphere, please reach out to the authors or any of their colleagues in Arnold & Porter's Antitrust, Anti-Corruption, or White Collar Defense & Investigations practice groups.
© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.