1. Presentation by the U.S. Department of Justice, Antitrust Division
#NTLAANNUAL18
Presentation by the U.S. Department of Justice, Antitrust Division
March 1, 2018
Stephanie Raney, Trial Attorney
New York Office
(212)
© 2018 National Tax Lien Association

2. U.S. Department of Justice
Disclaimer
The views expressed herein are not purported to reflect those of the United States Department of Justice.
U.S. Department of Justice
Antitrust Division

3. U.S. Department of Justice
Agenda
The Antitrust Division
Criminal Antitrust Violations
Detecting Antitrust Violations
Recent Cases
Questions
U.S. Department of Justice
Antitrust Division

4. I. The Antitrust Division
Our mission is the promotion and maintenance of competition in the American economy.
U.S. Department of Justice
Antitrust Division

5. © 2014 National Tax Lien Association www.theNTLA.com
Source: ATR Intranet
© 2014 National Tax Lien Association

6. U.S. Department of Justice
The Sherman Act: 15 U.S.C. § 1
“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”
Within this broad group of conduct, certain agreements in restraint of trade are considered per se illegal.
U.S. Department of Justice
Antitrust Division

7. II. Criminal Antitrust Violations
Price Fixing
Bid Rigging
Market Allocation
U.S. Department of Justice
Antitrust Division

8. U.S. Department of Justice
Agreement is the Key
A Sherman Act conspiracy is an agreement or understanding among competitors to restrain competition
Must be horizontal to be per se illegal
The Agreement itself is the crime – no overt act required
Co-conspirator liability applies
Members of the conspiracy liable for all foreseeable acts in furtherance of the conspiracy
U.S. Department of Justice
Antitrust Division

9. U.S. Department of Justice
Price Fixing
Competitors agree to fix or otherwise collectively determine the prices at which their products or services are sold.
Illegal to agree to charge the same price or specific prices
Illegal to agree on any component of price – such as discounts, shipping terms, etc.
U.S. Department of Justice
Antitrust Division

10. U.S. Department of Justice
Bid Rigging
Competitors agree in advance who will win in a competitive bidding process
Types of Bid Rigging
Bid Rotation or Allocation
Competitors agree to take turns winning bids
“Complementary” or “Cover” Bids
Competitors agree to submit intentionally high or unacceptable bids
Bid Suppression or Limitation
Competitors agree to refrain from bidding
U.S. Department of Justice
Antitrust Division

11. U.S. Department of Justice
Market Allocation
Competitors agree to divide up a market – usually by territory, customer, or type of product.
May also include a bid rigging component intended to carry out the allocation scheme.
U.S. Department of Justice
Antitrust Division

12. U.S. Department of Justice
Consequences
Criminal Penalties
Other Losses
Applies to individuals (including supervisors and executives) and corporations
Incarceration up to 10 years
Virtually unlimited fines
Up to $1 million for individuals
Up to $100 million for corporations
Restitution paid to identified victims
The Antitrust Division will prosecute regardless of the type of victim – whether private parties or government entities
Civil lawsuits for treble (3x) damages
U.S. Department of Justice
Antitrust Division

13. Other Crimes We Prosecute
As part of our mission to protect competition, we prosecute cases where the competitive process has been affected or circumvented – often in the procurement context.
Mail and Wire Fraud
Conspiracy to Defraud
Major Fraud Against the U.S. / Program Fraud
Commercial Bribery
Obstruction of Justice
False Statements
Tax Crimes
Often found in schemes where kickbacks are paid to procurement officials in exchange for the award of contracts
U.S. Department of Justice
Antitrust Division

14. Victims of Antitrust Violations
Private Parties
Ordinary Consumers
Public and Private Corporations
Government Entities
Federal
State
Local
ANTITRUST DIVISION WILL PROSECUTE REGARDLESS OF TYPE OF VICTIM
U.S. Department of Justice
Antitrust Division

15. III. Detecting Antitrust Violations
Bid History / Patterns
Warning Signs in Pricing
Suspicious Behavior / Statements / Conduct
Typical Conditions for Collusion
U.S. Department of Justice
Antitrust Division

16. Reporting Antitrust Violations
Leniency Program – Self Reporting
Anonymous Complaints
Citizen Complaint Center
You!
© 2014 National Tax Lien Association

17. U.S. Department of Justice
Bid History / Patterns
Same company always wins or loses
Certain companies only submit bids in certain geographical areas
Companies appear to take turns winning
Winning company subcontracts to losing company
Regular suppliers / vendors fail to bid for work they typically perform, but continue to bid for other work
Bids are much higher than estimates or previous bids
Large differences between price of winning bid and other bids
U.S. Department of Justice
Antitrust Division

18. U.S. Department of Justice
Pattern 1:
Bid Rotation
Bid 1: Company A wins
Bid 2: Company B wins
Bid 3: Company C wins
Bid 4: Company A wins
Bid 5: Company B wins
Bid 6: Company C wins
U.S. Department of Justice
Antitrust Division

19. U.S. Department of Justice
Pattern 2:
Bid Suppression
Bid 1: Companies A, B, C, and D bid
Bid 2: Companies B, C, and D bid
Bid 3: Companies A, C, and D bid
Bid 4: Companies A, B, and D bid
Bid 5: Companies A, B, and C bid
Watch for subcontracts to the company that sits out!
U.S. Department of Justice
Antitrust Division

20. U.S. Department of Justice
Pattern 3:
Who is getting what?
Bid 1: A wins a $3 million contract
Bid 2: B wins a $5 million contract
Bid 3: C wins a $1 million contract
Bid 4: C wins a $4 million contract
Bid 5: A wins a $2 million contract
Each competitor gets $5 million
U.S. Department of Justice
Antitrust Division

21. Detecting Patterns: Study History
The same vendors submit bids and each one seems to take a turn as the winning bidder (bid rotation)
A winning bidder subcontracts work to competitors that submitted unsuccessful bids or withdrew bids
All bidding companies end up winning the same amount of work over a series of bids
Same company always wins a particular bid
Fewer than normal number of bidders
U.S. Department of Justice
Antitrust Division

22. The Not-So-Clever Crook
Irregularities can be found in paper and electronic bids. Look for:
Similar applications – handwriting, typeface, stationary, typos, mathematical errors, metadata, IP addresses
Last-minute changes – white-outs or physical alterations to prices
Vendor picks up an extra bid package for another vendor or submits a competing vendor’s bid
U.S. Department of Justice
Antitrust Division

23. Taken from Pyun NTLA Presentation 2016

24. Warning Signs in Pricing
Sudden and identical increases in price or price ranges that cannot be explained by cost increases
Anticipated discounts or rebates disappear unexpectedly
Similar transportation costs specified by local and non-local companies (or other similarities that do not make sense)
Trust your instincts!
U.S. Department of Justice
Antitrust Division

25. U.S. Department of Justice
Suspicious Behavior
Have vendors demonstrated behavior that suggests they worked together?
No Chance Bidder – bids submitted by a vendor known to lack the ability to perform the contract
Betting Bidder – vendor brings multiple bids to a procurement, submits multiple bids, or submits bid once other bidders are determined
Loud Mouth Bidder – suspicious statements indicating advance knowledge of a competitor’s prices or its likelihood of winning the award
U.S. Department of Justice
Antitrust Division

26. Suspicious Statements
A customer or territory “belongs” to a certain bidder
References to industry or association price schedules, or “list prices”
References to “respecting” the customers or territories of competitors
References to “courtesy” bids, or “throwing in a number”
Use of same terminology when explaining price increases
Statements indicating advance knowledge of competitor’s pricing
U.S. Department of Justice
Antitrust Division

27. U.S. Department of Justice
Suspicious Conduct
Companies meet privately before bids
Company submits bid for work it cannot perform
Similar irregularities, mistakes, or miscalculations on bid forms
Bids contain last minute changes
Procurement official regularly exempts competitive bidding because of “emergency” work
Invoicing for work awarded contains charges for “consulting” work, when consulting not reasonably within scope of work
Procurement officials associated with “consulting” vendors
Unusual or frequent change orders
U.S. Department of Justice
Antitrust Division

28. Typical Conditions for Collusion
Few sellers
Few substitute products
Standardized products
Repetitive or regularly scheduled purchases
Rush or emergency work
U.S. Department of Justice
Antitrust Division

29. IV. Recent Cases Prosecuted by the New York Office
Municipal Bonds
Environmental Services
New Jersey Tax Lien Auctions
U.S. Department of Justice
Antitrust Division

30. U.S. Department of Justice
Municipal Bonds
Who was convicted?
20 individuals and 1 company
What were they charged with?
Numerous violations including antitrust, wire fraud, and conspiracy to defraud the United States
What penalties were imposed?
These cases have resulted in jail sentences totaling approximately 20 years and approximately $745 million in restitution, penalties, fines, and disgorgement
Background:
Public entities seek to invest money from a variety of sources, primarily the proceeds of municipal bonds that they issue, to, among other things, refinance outstanding debt and for various public works projects, such as for building or repairing schools, hospitals and roads. Evidence at trial established that they cost municipalities around the country and the U.S. Treasury millions of dollars.
Public entities typically hire a broker to conduct a competitive bidding process for the award of the investment agreements and often for other municipal finance contracts.
All cases focused on fraud in connection with bidding process, whether charged as bid rigging (one case) or scheme to fraud
-Provider-to-provider discussions and agreements about who would bid high, who would bid low
-Broker gets provider to put in losing bid or to lower bid (but still win) or to raise bid and win
-Broker and provider negotiate a kickback (side payment) before bid with payment to be made immediately or reasonably quickly
Victims were issuers and, usually, the IRS
All cases involved some transactions where winning provider paid kickbacks to broker. Kickbacks typically in form of inflated or unearned “swap” fees related to contemporaneous hedge
U.S. Department of Justice
Antitrust Division

31. Environmental Services
Who was convicted?
10 individuals and 3 companies pleaded guilty or were convicted (including a project manager and subcontractors)
What were they charged with?
Bid rigging, kickback / fraud conspiracies, international money laundering, major fraud against the United States, accepting illegal kickbacks, tax violations, and obstruction of justice
What penalties were imposed?
Over $6 Million in criminal fines and restitution
Individuals sentenced to serve lengthy prison sentences, including:
Project Manager – 168 months
Executives of Subcontractors: 18 months; 50 months
Manager and Reps of Subcontractors – 5 months; 20 months; 33 months
U.S. Department of Justice
Antitrust Division

32. New Jersey Tax Lien Auctions
Who was convicted?
13 individuals and 3 companies
Convicted individuals included bidders who participated in collusive bidding, and supervisors and executives who directed them
What were they charged with?
Bid rigging and allocation scheme in which competitors decided in advance who would win certain liens, which resulted in the purchase of liens at inflated interest rates and / or with lower costs
What penalties were imposed?
Over $2 million in corporate fines
Individual sentences ranged from probation (for individuals who cooperated in the government’s investigation) to a jail sentence of 1 year & 1 day; fines up to $25,000
U.S. Department of Justice
Antitrust Division

33. V. Reporting Suspicions to the U.S. Department of Justice
Call us with any suspicions – we understand it may only be a suspicion
Complaints are confidential
No charges brought without a full investigation
New York Office: (212)
Stephanie Raney: (212) or

34. U.S. Department of Justice
Questions?
U.S. Department of Justice
Antitrust Division