Bid-Rigging Bonanza: DOJ Announces Criminal Charges in Three New Investigations
V&E Government Investigations Update, April 17, 2019
The Department of Justice (“DOJ”) ended its recent drought of new criminal antitrust cases by bringing bid-rigging charges under the Sherman Act against individuals in three separate cases over the past few weeks.1 These charges, two of which involve guilty pleas, are the first in each case, and confirm the Department’s continued prioritization of public bid-rigging cases and focus on individual accountability in the prosecution of criminal antitrust violations.
On April 3, the DOJ charged Michael Gannon, an executive of a Chicago-based commercial flooring contractor, for his alleged role in a long-running conspiracy to suppress and eliminate competition in the commercial flooring market. These contractors typically bid on jobs to remove preexisting flooring, prepare the floor surface for installation, and install new flooring such as wood, vinyl, carpet, and tile. The one-count Information alleges that Gannon and a number of other individual co-conspirators at three unnamed companies engaged in a “complementary” bidding scheme whereby the conspirators would first decide who would win a particular contract and then submit bids that were “complementary,” meaning higher and/or less-attractive, to the bid submitted by the intended winner.2 The DOJ asserts that between 2009 and 2017, at least eleven victims were defrauded, including non-profit organizations, schools and other educational institutions, hospitals and business, through the scheme, which involved bids ranging from approximately $14,000 to $3.3 million.3
Less than a week later, the DOJ announced a guilty plea by Gary DeVoe, a branch manager of an insulation contractor, for his role in a conspiracy with other insulation installation contractors to rig bids and engage in fraud on insulation installation contracts in Connecticut, New York, and Massachusetts.4 These contractors install insulation around pipes and ducts on renovation and new construction projects at universities, hospitals, and other public and private entities. According to the DOJ’s announcement, the conspiracy took place from 2011 until March 2018 and duped “hospitals, universities and businesses…into paying corruptly inflated bids on $45 million worth of insulation jobs throughout New England.”5 The conspirators reportedly carried out the collusive communications via email, phone calls, meetings and through the use of encrypted messaging apps and burner phones.6
Finally, the DOJ last week announced a guilty plea by Marshall Holland, the owner of a computer recycling company, for his role in a conspiracy to rig bids at online public auctions of surplus government equipment conducted by the Government Services Administration (“GSA”).7 The GSA operates GSA Auctions, which offer the public an opportunity to electronically bid on used computer and electronic equipment no longer needed by the Federal Government. Proceeds of the auctions are distributed to government agencies or the U.S. Treasury general fund.8 Holland and his co-conspirators agreed on who would submit bids for which auctions, who would win a particular bid, and how items purchased from the GSA Auctions would be split among the conspiracy participants. The plea agreement notes that Holland’s co-conspirators had already formed the conspiracy and carried out conspiratorial conduct before Holland joined in 2017.
The Gannon Information describes in detail how the alleged conspirators perpetrated their scheme. Individuals at the various “competing” contractors would email each other requests for specific bid amounts, scan and send copies of their bids to each other, and confirm in writing that the requested bids had been submitted to the customer.9 Although the DeVoe and Holland Informations provide less color, the relatively quick guilty pleas and cooperation obligations in those cases suggest that the government’s evidence is strong.
Expect more charges to come in each of these cases. Assistant Attorney General Makan Delrahim announced that the charge against Gannon is “the first of what we expect to be many in this ongoing investigation into bid rigging,”10 signaling that at least some of the as-yet unnamed co-conspirators will soon face charges as the investigation continues. Likewise, the insulation contractor investigation is ongoing, and more charges are expected. In the GSA bid rigging case, Holland is the first individual charged and has agreed to cooperate in the ongoing investigation. The GSA Auction investigation is consistent with recent statements by DOJ leadership that routing out collusion and corruption with respect to public procurements and related activities directly impacting the federal government and American taxpayer remains a top priority for the Antitrust Division.
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1 Under 15 U.S.C. § 1. Information, USA v. Gannon, Case No. 1:19-cr-00302, ECF No. 1 (N.D. Ill. Apr. 3, 2019) (“Gannon Information”), available at https://www.justice.gov/opa/press-release/file/1150576/download.
2 See Gannon Information; DEPARTMENT OF JUSTICE, Press Release No. 19-311 (Apr. 3, 2019) (“Gannon Press Release”), available at https://www.justice.gov/opa/pr/former-vice-president-commercial-flooring-contractor-charged-bid-rigging.
3 Information, USA v. Devoe, Case No. 3:19-cr-00086, ECF No. 1 (D. Conn. Apr. 8, 2019); see also DEPARTMENT OF JUSTICE, Press Release No. 19-339 (Apr. 8, 2019) (“DeVoe Press Release”), available at https://www.justice.gov/opa/pr/insulation-contractor-branch-manager-pleads-guilty-bid-rigging-and-fraud.
4 DeVoe Press Release.
5 Id.; see also Plea Agreement at 15, USA v. Devoe, Case No. 3:19-cr-00086, ECF No. 4 (D. Conn. Apr. 8, 2019).
6 Information, USA v. Holland, Case No. 0:19-cr-00065, ECF No. 1 (D. Minn. Mar. 6, 2019); see also DEPARTMENT OF JUSTICE, Press Release No. 19-355 (Apr. 10, 2019) (“Holland Press Release”), available at https://www.justice.gov/opa/pr/texas-bidder-pleads-guilty-rigging-bids-online-auctions-surplus-government-equipment.
7 See Holland Press Release.
8 Gannon Information.
9 Gannon Press Release.