Justice Department Announces Procurement Collusion Strike Force

Justice Department Announces Procurement Collusion Strike Force

November 10, 2019 0 By Luis Garrison


ASSISTANT ATTORNEY GENERAL MAKAN DELRAHIM:
Good afternoon and welcome to the Justice Department. Thanks for being here for the Department’s
announcement of the establishment of the Procurement Collusion Strike Force. As I’ll explain in a moment, the strike
force is a partnership between the Justice Department’s Antitrust Divisions, multiple
U.S. Attorneys’ Offices, the FBI and several office of Inspectors General. Before I go any further, I want to thank the
Deputy Attorney General Jeff Rosen for being here today and for his support for this criminal
initiative. On behalf of the strike force multiple partner
agencies, I extend my thanks to you and the Attorney General for your support of this
and I will now turn to you for your remarks. DEPUTY ATTORNEY GENERAL JERRFEY ROSEN: Good
afternoon. I am pleased to join the Department of Justice’s
announcement today of our Procurement Collusion Strike Force, along with Assistant Attorney
General Makan Delrahim of the Antitrust Division, our Inspector General Michael Horowitz, our
Deputy Assistant Attorney General Richard Powers, Assistant Director Terry Wade of the
FBI’s Criminal Investigative Division, as well as 10 members of our U.S. Attorney community
and representatives from the offices of the inspector general of the Department of Defense,
the U.S. Postal Service, and GSA. Taxpayers rightfully expect their tax dollars
to be spent responsibly, and this Administration will not tolerate criminal activity that seeks
to profit unfairly at the expense of taxpayers. I am therefore very pleased to be here today
to support the establishment of our Procurement Collusion Strike Force. This Strike Force will target bid-rigging
and other antitrust crimes that can cost American taxpayers billions of dollars each year by
undermining the federal government’s processes for purchasing goods and services and for
money granted to states and municipalities to undertake large, high-dollar-figure public
improvement projects. When government contractors collude with each
other to rig bids for government contracts at the federal, state, or local level, it
leads to artificially higher prices for those goods or services. When the government has to pay those artificially
higher prices, all American taxpayers wind up paying for it. As Assistant Attorney General Delrahim will
explain in a moment, the mission of this Strike Force is to combat this criminal activity
by improving how we leverage the collective expertise and capabilities of the Antitrust
Division, of our U.S. Attorneys’ Offices, the FBI, and Offices of Inspector General
across several agencies, including the Department of Defense. This new Strike Force will better inform federal,
state, and local government procurement communities about these criminal activities and importantly
how to detect and report them. The Strike Force’s mission is important
work that will benefit all Americans. I would like to thank Assistant Attorney General
Delrahim and his Deputy Assistant Attorney General Powers for their leadership in forming
this Strike Force. I would like to recognize and thank our 13
U.S. Attorney Strike Force initial partners who have stepped up to the plate by prioritizing
this important enforcement effort, including the 10 who are here today. And I would like to thank our colleagues at
the FBI, Department of Defense, and our Inspector General partners, whose contributions to this
Strike Force are vital to its success. So I will now ask Assistant Attorney General
Delrahim to further describe the new Strike Force, and I know at the conclusion he will
be looking forward to answering your questions as well. So thank you very much everybody for being
here. AAG DELRAHIM: Thank you again, Deputy Attorney
General Rosen for not only his support but for being here to show the broad support of
the Department’s leadership. Today, I am pleased to announce the establishment
of the Procurement Collusion Strike Force, it’s a joint law enforcement effort that
will combat antitrust crimes and related fraudulent schemes that impact government procurement,
grant, and program funding. I want to begin again, by thanking Deputy
Attorney General and the Attorney General for their support of this initiative. I specifically want to thank my colleagues
and partners who are standing here, at the stage, and have joined forces in this effort
to protect American taxpayers. This Strike Force is an interagency partnership
consisting of prosecutors from the Antitrust Division and prosecutors from a number of
U.S. Attorneys’ Offices around the country. It also includes investigators from the FBI
and four major Offices of Inspectors General. The Strike Force will harness the combined
expertise and capacity of these partners in order to detect, deter, investigate, and prosecute
antitrust crimes and related criminal schemes that undermine the integrity of the government
procurement process. Leaders from these partners are here today,
and I want to recognize them for their commitment to the strike force. 10 of our initial 13 partners are able to
be here: Jessie Liu, from the District of Columbia,
who also serves as Chair of the Attorney General’s Advisory Committee;
Erin Nealy Cox, from the Northern District of Texas, who serves as Vice Chair of the
Attorney General’s Advisory Committee; Nick Hanna, from the Central District of California;
Jason Dunn, from the District of Colorado; Ariana Orshan, from the Southern District
of Florida; “BJay” Pak, from the Northern District
of Georgia; John Lausch, from the Northern District of
Illinois; Matthew Schneider, from the Eastern District
of Michigan; William McSwain, from the Eastern District
of Pennsylvania; and Zach Terwilliger, from the Eastern District
of Virginia. Although they could not be here today, I also
want to recognize Greg Scott, U.S. Attorney for the Eastern District of California; Geoff
Berman, U.S. Attorney for the Southern District of New York; and David DeVillers, U.S. Attorney
for the Southern District of Ohio, for their commitment to this Strike Force. I also want to recognize the FBI and thank
Director Chris Wray for his support in forming this Strike Force. Although Director Wray could not join us today,
I am pleased that Associate Deputy Director Paul Abbate, and Assistant Director of the
Criminal Investigative Division Terry Wade, are here on behalf of the FBI. In addition to that, I would be remised to
miss our key important Inspector General partners in this:
Michael Horowitz, the Inspector General of the Department of Justice, and importantly,
he Chairs. What we call CIGIE, the Council of Inspectors
General on Integrity and Efficiency; Kelly Mayo, the Principal Deputy Director
of the Defense Criminal Investigative Service, from the Department of Defense Office of Inspector
General; Deputy Inspector General William Siemer, from
the U.S. Postal Service Office of Inspector General; and
Assistant Inspector General James Adams, from the GSA Office of Inspector General. Thank you all for your commitments and resources
to support this new Strike Force, and I look forward to partnering with you. Finally, I want to recognize the key members
of the Antitrust Division’s team who have helped make this possible today. As the Deputy Attorney General mentioned,
my Deputy for Criminal Enforcement, Richard Powers, Deputy Assistant Attorney General
Rene Augustine, and William Sloan, who is an accomplished federal prosecutor who has
been tireless in making this Strike Force a reality and will serve as its key coordinator
as the Strike Force’s director. In a moment, I will explain more about the
PCSF, it’s structured and what it will do, but let me speak to the problem it will address. When competitors in any given industry collude
and conspire to rig bids, fix prices, or allocate markets—that is, committing antitrust violations—they
distort the free market and harm customers with high prices and lower quality goods and
services. This is no less true in the area of public
procurement, where the customer is the government and the American taxpayers foots the bill
for the artificially higher prices. Let me state the problem in more concrete
terms. Roughly one out of every 10 dollars of federal
spending is allocated to government contracting. Last year, the federal government spent more
than $550 billion, or about 40 percent of all discretionary spending, on contracts for
goods and services. And federal money for procurement is not limited
to federal agencies; it also flows to state and local governments for public works and
infrastructure projects. The 2018 federal budget included more than
$79 billion in grants to state and local governments to fund major public physical capital investment. Given the large sums of federal money involved
in public procurement, it’s easy to see how any amount of overcharge caused by illegal
bid rigging or other anticompetitive conduct inflicts significant economic harm on the
government and the taxpayer. We also know from our experience prosecuting
these crimes that the problem is a real one. I could, but won’t, detail the extensive
history—going back decades—of prosecuting criminal conduct in this space. Let me share one fact that informs our thinking
as we move forward today: Today, more than one third of the Antitrust Division’s open
100-plus criminal investigations relate to public procurement or otherwise involve the
government being the victim by criminal conduct. Let me now turn to what we are doing about
this problem and give you an overview of how the Procurement Collusion Strike Force will
work to protect the integrity of the government procurement process. The Strike Force has two core objectives. The first is to deter and prevent antitrust
and related crimes at the front end of the procurement process through outreach and training. And, the second objective is to effectively
detect, investigate, and prosecute such crimes that do occur through better coordination
and partnership in the law enforcement and inspector general communities. I want to talk about several key features
of this Strike Force that will allow us to meet these objectives. First, the Strike Force will conduct targeted
outreach training and education to key constituencies in the public procurement field. This outreach will serve both to prevent criminal
activity and to identify crimes when they do occur. The Strike Force will conduct outreach to
federal, state, and local government procurement officials to educate them on how to identify
potential indicators, or “red flags,” to identify the collusion, and to assist with
structuring their acquisition processes to remove vulnerabilities in the first place. We also will conduct outreach to government
contractors, their trade associations, and public contract lawyers in order to educate
them about criminal antitrust violations and associated penalties. The Division has done similar types of outreach
in the past, but I want to highlight a unique aspect of this Strike Force’s structure,
which I believe will enhance the effects of our outreach. The Strike Force will use a district-based
organization model, beginning in the 13 partner federal districts. Specifically, from among our approximately
100 criminal prosecutors, the Division has designated Trial Attorneys to serve as liaisons
for each of the 13 partner U.S. Attorneys’ Offices. Each participating U.S. Attorney has designated
an at least one Assistant U.S. Attorney to serve as a PCSF Liaison for that district. The FBI is designating Special Agents from
the field offices in each of the 13 districts to serve as the Strike Force liaisons. Working together, these teams will lead the
outreach training in their districts, focusing on where federal dollars are being spent in
each district in order to get the most mileage out of their outreach efforts. Let me turn to a second important way the
PCSF will work to protect the integrity of the procurement process. The Strike Force will work on ways to improve
our use of data analytics to identify potential “red flags” of collusion in government
procurement data. Many investigative agencies individually have
made great strides on this front, and the PCSF will serve to facilitate collaboration
and the sharing of best practices between these agencies. To that end, the Strike Force is planning
an interagency roundtable for early 2020 to bring together data scientists from across
the law enforcement and Inspector General Community. Third, and finally, the Strike Force’s district-based
approach will not start and stop with outreach. When potential illegal antitrust or related
conduct is detected, prosecutors and agents from the Strike Force’s district teams will
work together to jointly investigate and prosecute such crimes. Leveraging the collaborative expertise and
resources of our partners will enable us to maximize our enforcement efforts. To conclude, I want to underscore that criminal
antitrust conduct that affects government procurement is a costly problem, and the creation
of this Strike Force marks an important milestone in the federal law enforcement community’s
efforts to deter and prosecute illegal conduct in this area. We also have the website, as you can see,
that will go public starting today, that will include a reporting feature for, not only
citizens, but for our law enforcement agencies and procurement officials to help us identify
any potential crimes. I will now ask the Inspector General Michael
Horowitz for his remarks. We’ll have a couple more folks, and we’ll
open it up to some questions. INSPECTOR GENERAL MICHAEL HOROWITZ: Thank
you AAG Delrahim. It is a pleasure to be here, and on behalf
of the IG community and, as was mentioned, I’m Chair of the Council of Inspectors General. Contracting fraud, procurement fraud, and
illegal collusion is a serious problem that we in the IG community have been looking to
address, have addressed, and continue to seek new ways to improve our efforts to address. As you heard, it involves hundreds of billions
of dollars each year of taxpayer money going to contracting. And, fraud and collusion are undermines the
bidding processes, undermines ensuring the taxpayers get the best price for the money
they’re spending, and it needs to be attacked. And, we in the IG community, certainly look
forward to partnering with the U.S. Attorneys, with prosecutors across the country, with
folks from the Antitrust Division, with folks and agents, law enforcement from the FBI,
and with each other in the IG community to address this problem. We work through our audits, through our investigations,
we bring to the table data analytics, and other tools and expertise that we have in
doing the oversight work that each of us do across our agencies to ensure that taxpayer
money is well spent. An important part of that, as you heard, is
making sure we’re deterring and preventing wrongdoing from occurring before it occurs. We want to uncover it, if it is occurring
we want to fight it, we want to see it prosecuted to the fullest extent of the law. But, one of our most important goals as Inspectors
General, is to ensure that it doesn’t happen and take steps to ensure it doesn’t happen. And, so we also look forward in working with
the National Strike Force in figure out ways we can better educate those who seek government
contracts, to ensure that they understand how to play by the rules. That’s a core function also of IGs. We do that, for example, in the grants space
already, working closely together to educate grantees, and those who are applying for grants,
and we look forward to doing that with the Strike Force in the contracting space as well. So, appreciate you for including us in this
Strike Force. We look forward to being active participants. As, to seeing results on behalf of the American
public. Thanks. AAG DELRAHIM: Thank you, again. If I could ask Assistant Director of the FBI
Terry Wade for his comments please. TERRY WADE: Good afternoon, thank you for
being here this afternoon. Speaking on behalf of the men and women of
the Criminal Investigative Division of the FBI, I am excited to be here to be as part
of this important announcement. I want to thank our partners at the Department
of Justice, and we look forward to our participation in this strike force. The FBI recognizes the price-fixing, bid-rigging,
and market allocation schemes deprived consumers of true competition within the market. This is a matter of significant importance
to the health of the United States economy. In 2015, recognizing the threat of anticompetitive
behavior globally, the FBI established three international corruption squads, and we added
another squad in 2019 due to the volumes of cases that we took in. We are now happy to extend these efforts even
further with our participation in this strike force. This growing and evolving threat makes cooperation
with our domestic partners more vital as we move forward. Together, we will be able to share best practices,
coordinate closely with our federal, state and local partners, and grow in our capability
to respond to evolving threats. This strike force is the realization of years
of strong cooperation between the FBI and DOJ’s Antitrust Division. This is an important step in the future of
responding to these violations. By creating regional teams of select FBI agents,
DOJ attorneys, and Assistant United States Attorneys, along with other federal partners,
we will have specialized groups of dedicated individuals who will proactively meet the
threat within their area of responsibility. As the Assistant Director of the Criminal
Investigative Division, I have firsthand seen our International Corruption Unit take aggressive,
innovative steps to combat threats within its purview—in large part, through the development
of the strong relationship with the Department of Justice. DOJ Antitrust is well-positioned to aggressively
tackle these violations and anticompetitive behaviors. Additionally, we have partnered with them
to directly interact with the public and private sector in a variety of forms to encourage
self-reporting and greater recognition of illegal contact within these industries. This partnership has been successful in the
past, and the Strikes Force will certainly strengthen the partnership and lead continued
successes as we move forward. Again I want to thank you for this opportunity,
and we look forward to our continued success. AAG DELRAHIM: We’re also pleased to have
with us the Deputy Director of the Defense Criminal Investigative Service Kelly Mayo,
if I could ask for your remarks please. KELLY MAYO: Good afternoon, thank you very
much for this opportunity. In this case, amongst this august body, last
really is least, so got little to look forward to. My special assistant told me, he said, boss
you like to talk a lot and you need to keep your comments real short, so I am going to
do that. He wrote this for me, and he did a wonderful
job. As Mr. Delrahim said, I am with the Department
of Defense, so I’ll read these and then I have a personal announcement afterwards. So good afternoon. On behalf of the Criminal Defense Investigative
Services workforce, I’d like to offer my sincere thanks for the Department of Justice
for spearheading this important initiative. It is with collaboration with the Department
of Justice and our longstanding partnership with superb agencies like the FBI and various
OIGs that we’ve realized investigative success as your partners. DCDIS is committed to protecting the integrity
of our federal procurement processes, and ensuring the continued safety and security
of our war fighters. This relevant and vital strike force will
endeavor to do just that. We are proud to be a part of this significant
undertaking and share the confidence of our partners that this will be impactful. Thank you. Now on a personal note, because this is probably
my last opportunity, and I have this August body here. In my 43 years at the Department of Defense,
the only reason I’ve enjoyed any success is because of these types of people, the military
JAG Corps—and I know I’m going off script I apologize, but I have the microphone—and
the various U.S. Attorney’s Offices, and the Department of Justice. And I’d like to thank them all personally,
first of all, for your incredible public service. I appreciate it a great deal, it means a lot
to me. As a guy on the Department of Defense, I thank
you for your constant commitment to us and thank you for giving me any success I’ve
ever had. And last, thank the press for coming. Your time is the most valuable asset, and
you’ve chosen to spend it with us. Thank you very much and thank you. AAG DELRAHIM: Well, thank you so much. It has been a great honor working with you
and your colleagues, the Department of Defense, and all of our partners particularly, in the
“Korea Fuels” matter. I am again, grateful, personally grateful
for all of our colleagues from the U.S. Attorneys Offices, and from the Inspectors General community
who have joined us today. They have agreed to be open to a number of
questions. I’m happy to answer any questions you might
have — that we can answer for you, for this. REPORTER: Two logistical questions. One, you’re talking about — I want to
figure out how many resources are being devoted to this. So, it says there is additional funding to
the PCSF, do you have a number in mind? And also — if I may ask Inspector General
Horowitz — if he has an updated timeline on when we could expect to see the report
into the origins of the Russia report? AAG DELRAHIM: Thank you for the first question. [Laughter]
I’m sure that the Inspector General is delighted to answer any questions about the strike force
— INSPECTOR GENERAL MICHAEL HOROWITZ: (unintelligible)
I’m sorry, I can’t answer that question, but now a bunch of people’s hands are not
going to go up. [Laughter]
AAG DELRAHIM: We have, you know, through the great support of the Deputy Attorney General
and the Attorney General, we have been able to be allocated some additional funds to support
this. And, it’s less than a million dollars. That came out of certain discretionary funds
— to support this — for recovery of taxpayer losses. The idea of this strike force is really — this
is the first time — you know, that the anti-trust division has monopolized anti-trust enforcement
over the years. And, we have not shared it with our great
partners in the U.S. Attorneys Offices. So, we thought that this made a lot of sense. These are some of the most capable — not
only prosecutors themselves, but the offices that they lead have some of the best lawyers. And, we thought that this was a way to partner
with them and their resources to be able to do this. It’s going to be a virtual strike force. It’s not housed in any particular place,
by design. So, I think that particular design is what’s
going to lead to its success. REPORTER: In the past three fiscal years,
the Division brought fewer criminal anti-trust prosecutions than at any point since the 1970s. So, I want to ask you, “a” why has there
been that drop off, and “b” is this designed to turn that around? AAG DELRAHIM: Thanks for that. I read your story this morning, when it was
forwarded over to me, with some surprise. I’d be happy to engage with you about the
exact statistics that matter here. Criminal prosecutions have a gestation period,
so I think you’ve seen in the last three fiscal years, prosecutions going forward. And a number of — and also as I’ve mentioned
we’ve had over 100 open investigations, so we are constantly improving our capabilities
to prosecute these types of crimes. We have not turned away a crime that has been
brought to us, or that we have been able to detect. Of course, this is one way, as was the compliance
program that we announced in July, to continue to help us recover or detect the types of
activities that goes on where the taxpayer is a victim. REPORTER: Sorry, I just have a question for
the IG. Could you explain to the public why you won’t
say when the report on the FISA process is coming out? And, have you uncovered any criminal wrongdoing
during that investigation? INSPECTOR GENERAL MICHAEL HOROWITZ: I’m
not here to talk about the FISA review, so I’ll defer back to —
AAG DELRAHIM: Thanks. REPORTER: (unintelligible) I’m wondering
if evidence of bid rigging and crimes involving government contracts arises in the context
of merger reviews, and if there are certain industries that should be more aware of this? AAG DELRAHIM: So, a lot of times the merger
investigations lead to other investigations that we have. I’ll give you an example, the tuna prosecution
that is going on in San Francisco right now. We are prosecuting, as you know, the CEO of
Bumble Bee Tuna. That came out of an attempted merger of two
of the big players there, and we uncovered documents. The most recent no poach investigations we
had dealt with, the WAPCO merger where we uncovered the information. So, sometimes they come through that, and
a lot of times they come through our amnesty program, and are brought to our attention
REPORTER: You mentioned briefly in the “South Korea Fuel Supply” cases that there is a
reference to the international corruption squad. How much of this is an international thing,
versus a domestic company thing? AAG DELRAHIM: This is — this specific initiative
is focused on the domestic markets. Of course, we may uncover a procurement collusion
on Department of Defense contracts — that will serve contracts for services abroad. “Korea Fuels” is a perfect example of
that, because we had some domestic players, but largely they were South Korean companies
who engaged in price fixing of fuels to the Department of Defense. But, this is specifically targeted not only
to the local domestic federal agencies and, and hence the IGs, but also at the state and
local levels there is a lot of money — as I mentioned in the opening remarks, that goes
from the federal government, that goes down there. And we are able to now expand the reach of
the criminal prosecutions with the partnership of these initial U.S. Attorneys Offices. REPORTER: You mentioned earlier that 20 percent
— that your goal is to reduce procurement costs by 20 percent. Is that the amount of fraud that you believe
exists in the system of the 5-50, and could you tell us how you got to that number? AAG DELRAHIM: So the OECD, the Organization
for Economic Co-operation and Development, had done a study and they had estimated the
potential harm to the taxpayer to be about 20 percent of overcharges. I don’t really know, we’re going to have
very specific measurement metrics in our — in the strike forces activities. We are going to measure that. A lot of times when you have collusion, you
try to estimate the amount of damages for the purposes of sentencing and also recovery. So, we will see. The other thing I should mention is that — our
section 4A of the Clayton Act — Congress gave us the power to recover treble damages
for the taxpayers. We have not used that authority, we used it
in the “Korea Fuels” to recover over two hundred million dollars. Where we become the plaintiffs on behalf of
the taxpayers we intend to fully use those authorities in the strike force when we uncover
collusion where the taxpayer is a victim. So, we hope to recover not only criminal penalties,
but civil damages for the taxpayer Great. Thank you very much for being here, and thank
you again to our partners.