The Department of Justice’s antitrust division is focusing resources on a new task force designed to detect criminal anticompetitive behaviour that affects purchases by the government.
Last week, the division posted a notice in the Federal Register requesting public comment on its implementation of a “Procurement Collusion Strike Force” complaint form. This will allow members of the public to tip the DOJ off to potential antitrust crimes related to public procurement, grants and programme funding.
Several antitrust practitioners compared the new strike force to past government-wide efforts to detect illegal public procurement activity. They also said the new initiative matches the rhetoric of assistant attorney general Makan Delrahim, who has been outspoken in his desire to stamp out anticompetitive conduct harming the government and US taxpayers.
In 2006, the administration of President George W Bush announced the formation of the National Procurement Fraud Task Force aimed at protecting an influx of national security-related contracting following the US government’s invasion of Iraq and Afghanistan.
The task force’s participants spanned a range of federal agencies, including US attorneys’ offices, the Federal Bureau of Investigation, the US inspectors general community, the Office of Management and Budget and the DOJ’s civil, antitrust, environmental, national security and tax divisions. President Barack Obama established the Financial Fraud Enforcement Task Force via executive order in 2009 with the purpose of stopping crimes related to the financial crisis and economic recovery efforts. The group similarly included a wide swathe of the federal government.
For decades, the Antitrust Division has criminally prosecuted alleged anticompetitive conduct related to government procurement. This includes charging food companies with rigging bids for meals offered to students at New York public schools and extraditing a Canadian man convicted of conspiracy to pay kickbacks related to Environmental Protection Agency contracts.
Under Delrahim, the Antitrust Division has secured guilty pleas from an insulation contractor accused of defrauding schools and hospitals; from a private contractor accused of conspiring to fix bid prices for the General Services Administration’s excess computers; and from South Korean fuel suppliers that admitted to fixing prices for fuel contracts with the US military.
The Korean fuel supply case represented the largest recovery for bid-rigging obtained using section 4a of the Clayton Act, which empowers the government to seek antitrust damages on behalf of itself as an injured party.
Cartel specialists react
While the division has long been focused on the public procurement process, antitrust practitioners said the creation of a task force focused on collusion related to procurement was new and potentially significant.
Latham & Watkins partner Elizabeth Prewitt said prosecutors have traditionally educated procurement departments of local, state and federal governments and inspectors general offices on how to detect collusion in the contracting process.
Prewitt, a former assistant chief of the division’s New York office, said practitioners had been hearing about a recent uptick in outreach efforts by the agency.
“This could be part of a DOJ push to address the steep decline in filed cartel cases over the last few years that many have correlated to a decline in leniency applications,” she said.
Lisa Phelan, a former head of the Antitrust Division’s criminal section, also emphasised the agency's training to inspectors general and auditors about “red flags” for finding collusive procurement behaviour.
Now a partner at Morrison & Foerster, Phelan said that the government had usually looked at three to four cases a year related to public procurement, but the subject has become a larger portion of the agency’s work under Delrahim.
Past procurement task forces had led to significant investigations, Phelan said. But she also noted that the public has been submitting these tips through the Citizen Complaint Center for decades.
Simpson Thacher & Bartlett partner John Terzaken, also a former head of the division’s criminal enforcement section, said the strike force initiative “represents good fundamentals for the DOJ” to protect public investment and make sure taxpayers “are getting the best bang for their buck”.
Unlike past task forces, this one appears to be led by the Antitrust Division, Terzaken said, and it will be interesting to see if other agencies join and expand the pool of resources dedicated to the project.
Linklaters partner Douglas Tween, a former trial attorney at the Antitrust Division's New York field office, said it could be tough for the division’s public outreach to compete with the False Claims Act, which allows a whistleblower to collect a portion of potential damages secured by the US government related to a tip.
Regardless, he said: “Even if you get one a year it’s worth the effort I would think.”
The outreach probably requires a “minimal investment of time”, Tween said, and the division should be doing everything that it can to secure more tips, especially when the government is the victim.
Roxann Henry, senior of counsel at Morrison & Foerster, said the strike force’s significance remains to be seen but that it has potential.
“This initiative provides not only ease of reporting but also can serve as a tool to keep collusion concerns top of mind and to provide a convenient reference for those looking at government procurement,” she said.
Henry added that it could remind contractors that they are being watched for potential collusive schemes.
The DOJ declined to comment at this time.