CRIME: Director Of The Procurement Collusion Strike Force Daniel Glad Delivers Remarks At ABA Section Of Public Contract Law’s Public Procurement Symposium

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dWeb.News Article from Daniel Webster dWeb.News

The Procurement Collusion Strike Force: A Whole-of-Government Approach to Combating a Whole-of-Government Problem

Remarks as prepared for delivery

Introduction

Thank you for the kind introduction, and good morning, everyone. It is a pleasure to be with you online, but like many of you, I wish we could meet in person. Thank you for inviting me to speak at the Public Procurement Symposium. The Symposium examines issues related to local, state and federal government contracting each year. It draws insights from peers at the forefront in the procurement industry.

It was just two years ago, at the 2019 Symposium that Richard Powers, the Antitrust Division’s Deputy Assistant Attorney General, took to the stage in San Diego to reintroduce our criminal enforcement program. [1] He described the mission of the Division to investigate, charge, and prosecute criminal corruption of the competitive process in all areas of the American marketplace–including government procurement. The Procurement Collusion Strike Force was created from that mission and calling. Today marks the second anniversary for the PCSF. We are now approaching the global integration of our effort to stop collusion that targets public procuration. This is a good time to look back on our accomplishments and set out our enforcement priorities for the future.

I am the Director of Procurement Collusion Strike Force. It is an honor to be here representing Antitrust Division of Department of Justice. This year’s Symposium will kick off and will feature a lively conversation about current issues and challenges in the public sector, including collusion and fraud risk, compliance efforts and enforcement trends. Your work in the Section of Public Contract Law, and the dialogue with the Antitrust Division, advances public procurement discourse and ensures ethical public procurement practices.

Collusion and Competition in Public Procurement

This discourse is significant for us, because the Antitrust Division’s mission is to promote and maintain competition in the American economy–including safeguarding taxpayer money spent in public procurement. Consumers benefit from lower prices, more options and greater innovation when the markets work properly. This is also true for government customers who spend hundreds of billions each year on goods and services.

To put some numbers on it, in FY2019, the federal government spent more than $586 billion–about 40% of all discretionary spending–on contracts for goods and services. This is only federal spending. This does not include federal funds flowing to the state or local level. These funds are used to build infrastructure such as roads, bridges and airports, schools, transit systems, water treatment plants, pipes and other services. When you factor in the additional CARES Act funding to address the COVID-19 public health crisis and the support for economic recovery, the numbers spike. Grant funding, in particular, has increased exponentially due to the COVID-19 pandemic, along with increased government spending for goods and services. These numbers show the importance of government dollars at all levels as well as to the nation’s economy.

Losing even a fraction of this money to anti-competitive or collusive criminal conduct is incredibly costly. The Organization for Economic Cooperation and Development estimates that were we to successfully eliminate bid rigging from public procurement, our cost savings would be 20% or greater. Reducing illegal and anticompetitive collusion in procurement could save U.S. taxpayers tens of billions of dollars per year–approximately $117 billion in FY 2019 alone, based on the OECD statistic.

It is more than faithful stewardship. This administration has made it a priority to protect the American consumer as well as the taxpayer by ensuring that there is competition on the market. An Executive Order issued by President Biden earlier this year calls for a whole of-government approach to deal with various aspects that lead to unfair competition in the economic sector. [2] These instructions and encouragements were reinforced by a memorandum drafted by Associate Attorney General Gupta to the Antitrust Division. [3] We stand at an exciting and unprecedented time of opportunity for the Antitrust Division to lead the way in vigorously enforcing the existing laws and working with various agencies to partner well in this endeavor. The Procurement Collusion Strike Force is a model of whole-of-government efficiency in protecting competition and embodies the ideals for working together with other agencies.

PCSF: Our Mission and Model

The PCSF is the Justice Department’s coordinated, national response to collusion in public procurement. It is an interagency partnership that focuses on deterring, investigating, investigating, prosecuting, and prosecuting antitrust offenses and related schemes at all levels of government, federal, state, or local. The Antitrust Division and several U.S. Attorney’s Offices located in strategically important areas are key partners. The PCSF, a virtual strike force, is well-suited for the current global environment. It mobilizes resources through a district-based model to provide outreach, training, and conduct joint investigations and prosecutions. We have 22 districts that are staffed both locally and remotely, and with Division trial attorneys, AUSAs, and agents from our national law enforcement partners.

This is a strategic partnership. The PCSF was created with two main objectives:

The first is to prevent antitrust and related crime at the front end. This can be done through outreach and training. The PCSF works to leverage interagency collaboration–utilizing that whole-of-government approach to ensure that bidding and award processes are fair, open, and competitive; and to eliminate potential barriers to full and equal participation by underserved communities and individuals in public procurement.

The second objective is to make it easier for investigators and lawyers to find out what conduct undermines or distorts the competition in procurement. Collaboration in public procurement corrupts the integrity and costs of government purchasing goods and services.

Therefore, the PCSF is committed to protecting competition in the procurement process at all levels of government–federal, state, and local–because, truly, the effects of collusion are felt at all levels. Public procurement often pertains to goods and services that have incredible economic and societal impacts–transportation, roads, hospitals, schools, and defense. Faith in the public procurement system is essential, especially with the current level of disaster recovery and pandemic spending. Effective competition promotes trust in our governing systems and allows for continued economic growth. It is also essential for our democracy’s well-being.

Fundamentally, this work matters. Collaborative procurement undermines trust in government and damages taxpayers. This is especially true for those of us who work in local and state government. It’s long been cliche to refer to “limited resources” in the local government space, but in the last 18 months, state and local governments have been particularly resource constrained. Besieged by the continuing COVID-19 pandemic, which is many areas has been followed by a summer of crises and weather disasters–ranging from wildfires in California and the west, to Hurricane Ida wreaking havoc on path that started in Louisiana and continued through the Ohio River Valley to the Northeast. Indeed, nearly 1 in 3 Americans live in a county that declared a weather-related disaster in the summer of 2021,[4] which, aside from the incomprehensible human toll, resulted in the need for significant public spending to rebuild and recover. Any violations in this area can also cause significant financial harm to the American taxpayer. The harm does not stop there. But procurement collusion can cause intangible harm that cannot be quantified in a spreadsheet but is just as harmful to our system for ordered liberty. Today I am speaking from Chicago, where I was once an Assistant Inspector General. My job was to eradicate fraud, waste and abuse within the city’s government. As a federal prosecutor, I’ve seen how corruption and collusion can be destructive in that position and many others. Collaboration and fraud can erode the trust of the public in public institutions and services, whether it is in a city near Lake Michigan or elsewhere in the United States. This is fundamentally detrimental to democracy.

These cases matter, too, because of the victims. These cases matter because of the victims. In a recent Antitrust Division investigation in the Midwest,[5] which focused on one city, and one construction trade, the scope of potential victims hurt by the bid-rigging scheme included public-school districts, from one dedicated to serving children with special needs to another that serves a student body that almost entirely qualifies for free lunches. Local park districts, social service charities, colleges, universities and community colleges were also among the victims. Finally, federal and state agencies were also defrauded. This is one investigation in one city and one trade in construction.

Therefore, pursuing procurement collusion has been, and will remain, a top priority for the Division.

PCSF: Our Enforcement Priorities

. The PCSF: Our Enforcement Priorities. .
PCSF: Our Enforcement Priorities

Given the importance of competition in public contracts and the mission of the PCSF, I’d like to turn now to our enforcement priorities and how the PCSF–through its members at the Antitrust Division, in twenty-two U.S. Attorney’s Offices, and at the seven national law enforcement partner agencies–has risen to the task during our first two years. The scope of our ongoing investigations includes local, single-district conduct in relation to a single bid as well as multi-district, national conduct and contracts worth millions of money. Some are in the nines. Although I have limited information to share about our ongoing investigations I can speak about the public cases that have been charged in PCSF and the illustrative Antitrust Division investigations. This will demonstrate our enforcement strategy and priorities.

As I stated earlier, we are focused on investigating, charging and prosecuting conduct that undermines or distorts procurement processes. It includes the traditional antitrust crimes, per se violations of the Sherman Act–bid rigging, price fixing, and market allocation affecting government procurement at any level. Our mainstay, the Sherman Act, has been, will continue to be.

But our focus also includes prosecuting other competition-corrupting crimes uncovered during our investigations. On the eve our second anniversary, I would like to speak briefly about the Division’s work in two areas. First, I will highlight our work against corruption and procurement fraud in government programs designed to encourage participation by underserved communities. Second, I will discuss our work in infrastructure spending and what we anticipate in the coming days.

A. Set-Aside Fraud

The federal government has a series of programs–at least one of which is more than a century old–designed to provide opportunities to disadvantaged communities to participate more fully in public procurement, which is an important part of the economic life of the United States. [6] The Administration recognized that government contracting and procurement opportunities should be available on an equal basis to all eligible providers of goods and services. In January, President Biden issued an executive directive that calls for the removal of all barriers to full participation in government procurement opportunities and contracts. [7]

But as long as these programs and their noble goals have existed, there have been those who greedily sought to take advantage of the programs by participating when ineligible or otherwise undermining the programs. The PCSF’s most important task is to combat fraud and collusion in these programs. We promote economic justice and a fair and free economy by ensuring that these programs are kept in good standing to continue serving disadvantaged and underserved populations. [8] The PCSF does its part through outreach, responding to tips from a variety of sources, and conducting thorough investigations. These are often difficult cases that require a lot of work by our agents and prosecutors.

To illustrate, I will give you a recent example showing our work in this area. We opened an investigation into set-aside construction contracts out of San Antonio valued at approximately $250 million. [9] These set-aside contracts were intended for service-disabled veteran-owned small businesses. One individual who was not eligible for the set-aside program owned multiple construction companies. He conspired with others to put a disabled veteran in the company to help him win the set aside contracts. This is called set-aside procurement fraud. These companies were not eligible to win contracts, even with the figurehead. This was because the companies remained under financial and operational control by someone else, someone who wasn’t a veteran and didn’t qualify for the program.

To date, two coconspirators have pleaded guilty. In March, a grand jury indicted one more coconspirator. In March, a grand jury indicted the remaining coconspirator. He is charged with conspiracy to defraud government and eight counts for wire fraud. He, like all other defendants, is presumed innocent unless proven guilty beyond reasonable doubt. These charges show our determination to hold individuals accountable for cheating the government procurement process and stealing opportunities from those who have been injured in service of our country.

B. Infrastructure

Second, I’d also like to take a moment to talk about our work in the infrastructure space. Infrastructure is a topic that is often in the news. It is essential for American society and economic growth. Infrastructure is where citizens have the closest connection to government. It includes the roads we drive on, sidewalks we use for our kids, and bike or public transit routes we use on our commutes. This area deserves greater attention from the public contract bar due to its importance for Americans and the large amount of resources that are currently being devoted to infrastructure. There is a lot of opportunity for greed to overcome ethical conduct due to the increasing amount of government spending that could be authorized to meet national needs. This area is a key focus of the PCSF. It requires aggressive enforcement and focused deterrence.

To provide three recent examples of our work in this area:

In February 2020, a Connecticut insulation contracting company and one its owners pleaded guilty to bid rigging and fraud. They conspired to rig bids for insulation projects at universities, hospitals, schools, and other public and private institutions. In total, there have been five convictions connected to this $45 million scheme. [10]
In June of this year, an engineering firm in North Carolina pleaded guilty to rigging bids and defrauding that state’s department of transportation. It was part of a scheme that ensured it won infrastructure contracts without having to compete. These contracts were for drainage structures that would be built under and around roads, bridges and overpasses. [11]
Even more recently, just a few weeks ago, a concrete contractor pleaded guilty to rigging bids on public concrete repair and construction contracts in Minnesota. The plot, which lasted nearly five years, saw rigged bids submitted to local governments in Minneapolis-St. Paul so that a predetermined contractor was awarded the contract. [12]

These three examples illustrate that the Antitrust Division, the PCSF, and its law enforcement partners, are working to hold accountable the companies and individuals who subvert and distort, and who operate in secret, to avoid competition in the public contracting space. Together, we are taking direct aim at the extra costs procurement collusion adds to the government’s bottom line–whether it is the 20% OECD estimate or otherwise. The second part of the PCSF’s mission is prosecuting. I’d like to circle back and emphasize our first mission: deterrence–preventing collusion and preserving competition within government procurement for the benefit of the American people.

Conclusion

And it is here, that you have a role to play. You are also on the frontlines. Private practice allows you to help your clients, which can be companies or other participants in government procurements, to understand their role in ensuring competition flows freely and that enforcement is not impeded. My colleagues and I can help prevent crimes from happening. For our part, since the Strike Force’s inception, we have trained over 17,000 special agents, attorneys and prosecutors, investigators, analysts, auditors, data scientists, and procurement officials. During the panel discussion, my colleagues will discuss how it is crucial that companies make informed business decisions about ethical and lawful conduct. It can begin with you. You will be able to advise your clients on how to create a culture that encourages compliance. Compliance with the law is good business and good for the country. The current arrangement of incentives is a good constellation. It enhances enforcement, protects taxpayers and government purchasers, and benefits government contractors that do business legally and ethically.

In closing, I will say that every law enforcement agency has the goal to prevent crime until we are unable to do our job. We are continuing to educate and enhance deterrence. When that is not enough, an integrated team of federal agents, prosecutors and other federal agents will be ready to investigate and prosecute collusion within the procurement space for the American people. We appreciate your time and best wishes for a successful Symposium.

[5] See Press Release, U.S. Dep’t Justice, Commercial Flooring Company Pleads Guilty to Antitrust and Money Laundering Charges (Aug. 30, 2021), https://www.justice.gov/opa/pr/commercial-flooring-company-pleads-guilty-antitrust-and-money-laundering-charges; Press Release, U.S. Dep’t Justice, Former Vice President of Commercial Flooring Contractor Charged With Bid Rigging (Apr. 3, 2019), https://www.justice.gov/opa/pr/former-vice-president-commercial-flooring-contractor-charged-bid-rigging; Press Release, U.S. Dep’t Justice, Commercial Flooring Contractor Agrees To Plead Guilty To Bid Rigging (Aug. 27, 2020), https://www.justice.gov/opa/pr/commercial-flooring-contractor-agrees-plead-guilty-bid-rigging; Press Release, U.S. Dep’t Justice, Commercial Flooring Contractor Agrees to Plead Guilty to Antitrust Charge (Aug. 19, 2019), https://www.justice.gov/opa/pr/commercial-flooring-contractor-agrees-plead-guilty-antitrust-charge.

[6] Buy Indian Act of 1910, codified at 25 U.S.C. SS 47.

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The post CRIME: Director Of The Procurement Collusion Strike Force Daniel Glad Delivers Remarks At ABA Section Of Public Contract Law’s Public Procurement Symposium appeared first on dWeb.News dWeb.News from Daniel Webster Publisher dWeb.News – dWeb Local Tech News and Business News

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