On January 17, the Antitrust Division of the Department of Justice announced that it had obtained another in a recent string of guilty pleas as a result of investigations into government contracting by the Procurement Collusion Strike Force (PCSF). According to his plea, Aaron Stephens conspired with others to rig bids on certain government contracts from May 2013 to January 2018 to obtain government payments in excess of $17.2 million. Stephens faces a maximum statutory penalty of 10 years’ jail time and a fine of up to $1 million or twice the gross loss resulting from the offense.
What is the PCSF?
Launched in 2019, the PCSF is an interagency strike force made up of federal prosecutors from the Antitrust Division of the Department of Justice and 22 U.S. Attorneys’ Offices, as well as law enforcement agents from seven national partner agencies: the FBI, two Offices of Inspector General of the DOD, the Department of Homeland Security, DOJ, the General Services Administration, and the Postal Service. The PCSF’s primary mission is to deter, detect, investigate, and prosecute public procurement collusion and fraud cases at all levels of government—federal, state, and local—focusing on antitrust crimes that target government procurement, such as bid rigging, price fixing, market allocations, and others.
What are the Impacts?
Last year, Attorney General Merrick Garland announced that the Department of Justice’s Antitrust Division is the most active it has been in 30 years. In 2022, the Antitrust Division brought 25 criminal cases against 29 individual and 14 corporate defendants, and has 146 open grand jury investigations — the most in 30 years. At the start of 2022, the Antitrust Division was trying or preparing to try 18 indicted cases against 10 companies and 42 individuals, including 8 current or former CEOs or company presidents. Individuals involved in criminal antitrust offenses face imprisonment, fines, and potential debarment from government programs.
Guilty pleas such as the one discussed above can often lead to the proposed debarment of both the individual and the associated federal contractor. FAR § 9.406-2 specifically includes violation of federal or state antitrust statutes as cause for debarment. Under FAR § 9.406-5, the fraudulent, criminal, or other seriously improper conduct of any officer, director, shareholder, partner, employee, or other individual associated with a contractor may be imputed to the contractor when the conduct occurred in connection with the individual’s performance of duties for or on behalf of the contractor, or with the contractor’s knowledge, approval, or acquiescence.
What Does the Future Hold?
The Biden Administration issued an Executive Order on promoting competition in 2021, and his appointees are working to follow through. The authors understand that there are multiple investigations in the PCSF’s pipeline and more pleas and perhaps cases will follow. The PCSF is of the view that government spending as a result of the $1.2 trillion Infrastructure Investment and Jobs Act seems likely to attract bad actors. In anticipation, the PCSF has expanded its roster of law enforcement partner agencies around the country and abroad. In addition, the PCSF is focusing on outreach and training to a range of procurement officers, auditors, and accountants to educate and inform the civil service on procurement crimes.
What Can You Do?
Companies would be well advised to implement, if they have not already, or refresh robust antitrust and general legal compliance programs. The most obvious benefit is to keep the company and its personnel out of trouble in the first place. In addition, implementing or refreshing the program and updating training can assist in spotting incipient violations, which may allow remedial action. Moreover, the Antitrust Division has a Leniency Policy that rewards self-reporting under certain conditions. Lastly, a robust compliance program can reduce sentences from the Antitrust Division, which gives credit for programs that are well designed, applied earnestly and in good faith, and effective.
Federal contractors should maintain a Code of Business Ethics and Conduct that meets the requirements FAR Subpart 3.10. For purposes of a debarment proceeding, FAR § 9.406-1 lists mitigating factors to be considered by the government, including whether the contractor had effective standards of conduct and internal control systems in place at the time of the activity which constitutes cause for debarment and whether the contractor brought the activity to the attention of the government in a timely manner.
For more detail on effective compliance programs, antitrust training, leniency, government contracting or the PCSF, please contact any of the authors.