1 understanding, detecting & reporting antitrust violations john terzaken, assistant chief u.s....
DESCRIPTION
3 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.” Prohibits agreements among competitors in restraint of trade or commerceTRANSCRIPT
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Understanding, Detecting & Reporting Antitrust Violations
John Terzaken, Assistant ChiefU.S. Department of Justice,
Antitrust DivisionNat’l Criminal Enforcement Section
(202) 307-0719 / [email protected]
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Procurement Fraud & The Building Block Principle
TITLE 15
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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.”
• Prohibits agreements among competitors in restraint of trade or commerce
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Sherman Act Elements• Agreement• Unreasonable restraint of
trade– Price-Fixing– Customer/Market Allocation– Bid-Rigging
• Interstate commerce• Statute of Limitations: 5
years from the last act in furtherance of the conspiracy
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Penalties Are Significant• Corporation
– Up to $100 million
• Individual– $1,000,000; and/or– 10 years incarceration
• Corporation or Individual– Twice gain to defendant; or– Twice loss to victim
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Companion Violations
• Bribery/Gratuities (18 U.S.C § 201)• False & Fictitious Claims (18 U.S.C. § 287)• Conspiracy to Defraud U.S. (18 U.S.C. § 371)• False Statements (18 U.S.C. § 1001)• Mail/Wire Fraud (18 U.S.C. §§ 1341, 1343)• Obstruction of Justice (18 U.S.C. § 1519)
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Evolution of Collusion
Motive 1
2Means
3Opportunity
4Agreement
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PRE-AWARD COLLUSIONSee the Signs
M.A.P.S.• Market
• Application
• Patterns
• Suspicious Behavior
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MARKETAre Conditions Conducive to Collusion?
• There are few sellers in an industry, or a small group of major vendors controls a large percentage of the market
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T-37 Nose Wheel F-5 Main Wheel
Estimate $275 $1000
2009 Bids Smith & Smith
$465 Jay-Em $1416
HYPOTHETICAL
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MARKET Other Indicators
• The product is standardized and other competitive factors, such as design, quality, or service are not prevalent
• Repeat competing vendors • Competitors frequently interact through
social conventions, trade association meetings, shifting employment, etc.
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APPLICATIONThe Dumb Crook
• Similar applications – handwriting; typeface; stationery; typos; mathematical errors
• 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
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Paper v. Electronic
• Same basic fraudulent conduct • Other M.A.P.S. factors to look for:
– Metadata (hidden data)– Cover e-mail header info. incorrect– Same math errors, typos, etc.
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PATTERNSStudy 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
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PATTERNSBid 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
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PATTERNSBid 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
Also watch for subcontracts to the company that sits out!
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PATTERNSWho 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
Everyone = $5 million
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HYPOTHETICAL
T-37 Nose Wheel F-5 Main Wheel
2007 Smith & Smith
$275 Jay-Em $1000
2008 Jay-Em $455 Smith & Smith
$1390
2009 Smith & Smith
$465 Jay-Em $1416
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SUSPICIOUS BEHAVIORItching to Get Caught
• No Chance Bidder – Bids submitted by vendor known to lack the ability to perform the contract
• Betting Bidder – Vendor brings multiple bids to an opening or submits bid once other bidders are determined
• Loud Mouth Bidder – Suspicious statements indicating advance notice of a competitor’s prices or that vendors have discussed bids
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HYPOTHETICAL
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WHAT YOU CAN DODiscourage Collusion
• Expand the list of bidders/applicants• Require sealed bids/applications to be delivered
by a specified time and to a specified location and date and time stamp the packages when they are received
• Require a certification of independent price determination to be submitted with all bids/applications
• Ask questions
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WHAT YOU CAN DODetect Collusion
• Use a highlighter to mark typos, errors, etc.• Retain bids, envelopes, Federal Express slips, fax
transmittal sheets, e-mail messages, etc.• Keep a chart of competition over time for products
and services you purchase• Keep your eyes and ears open• Ensure your whole team is familiar with M.A.P.S.
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Prevention Enforcement
Best Practices
Use Us As A Resource
EFFECTIVE DETERRENCE
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PARTING WORDS• Remember M.A.P.S. • Use us as a resource• Find more information at: www.usdoj.gov/atr/public/criminal/recovery_
initiative.htm
John Terzaken, Assistant ChiefU.S. Department of Justice, Antitrust Division
Nat’l Criminal Enforcement Section(202) 307-0719 / [email protected]