Month: May 2022

Source: United States Department of Justice News

A federal grand jury in the Eastern District of Texas returned an indictment charging a military contractor for rigging bids on public military contracts in Texas and Michigan and defrauding the United States.

According to the indictment, from at least as early as May 2013 through at least April 2018, Aaron Stephens, 52, formed agreements with multiple co-conspirators to rig bids on certain government contracts in order to give the false impression of competition and secure government payments, and to defraud the United States.  As a part of two different schemes, Stephens and his co-conspirators allegedly rigged eight military contracts and received more than $15 million from the government for those contracts. The contracts included work performed for the Red River Army Depot in Texarkana, Texas; the U.S. Army Contracting Command in Warren, Michigan; and the Sierra Army Depot in Herlong, California.

“U.S. taxpayers deserve to know that the government contracting process is not subverted through collusion,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “Bid rigging undermines the competitive process, wastes taxpayer dollars and deprives businesses that follow the rules of fair competition. Investigating and prosecuting this case and others involving government contracting is a top priority for the Department of Justice and all members of the Procurement Collusion Strike Force.”

“Protecting U.S. tax dollars and the government contracting process is very important,” said U.S. Attorney Brit Featherston for the Eastern District of Texas. “The government provides significant economic opportunities for businesses, and the bidding process must be fair for qualified applicants. Any action taken to thwart this fair process will be investigated and prosecuted.”

“This indictment reflects the unrelenting approach and tenacity we employ daily in pursuing individuals who dare to attempt to defraud the federal government and the U.S. Army,” said Special Agent in Charge L. Scott Moreland of the U.S. Army Criminal Investigation Division’s Major Procurement Fraud Field Office. “When it comes to government contracting and purchasing, the superbly skilled and highly-trained special agents in our fraud unit use their finely honed investigation skills to combat and uncover fraud, deception, bribery and other criminal acts.”

“Bid rigging subverts the government contracting process and defrauds the American taxpayer,” said Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division. “The FBI and our law enforcement partners are committed to investigating those who conspire to undermine the principles of fair and free competition.”  

Stephens was charged in the U.S. District Court for the Eastern District of Texas with one count of bid rigging in violation of the Sherman Act and two counts of conspiracy to defraud the United States.

The maximum penalty for conspiracy to restrain trade under the Sherman Act is 10 years in prison and a criminal fine of $ 1 million. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either amount is greater than the statutory maximum fine. The maximum penalty for conspiracy to defraud the United States is five years in prison and a fine of twice the amount of the gain or loss associated with the offense. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other relevant factors.

The Antitrust Division’s Washington Criminal II Section is prosecuting the case, which was investigated with the assistance of the U.S. Attorney’s Office for the Eastern District of Texas, the U.S. Army Criminal Investigation Division’s Dallas Fraud Resident Agency, and the FBI’s Dallas Field Office. 

Anyone with information in connection with this investigation should contact the Antitrust Division’s Complaint Center at 888-647-3258, or visit http://www.justice.gov/atr/report-violations.

In November 2019, the Department of Justice created the Procurement Collusion Strike Force (PCSF), a joint law enforcement effort to combat antitrust crimes and related fraudulent schemes that impact government procurement, grant and program funding at all levels of government – federal, state and local. To learn more about the PCSF, or to report information on market allocation, price fixing, bid rigging and other anticompetitive conduct related to defense-related spending, go to https://www.justice.gov/procurement-collusion-strike-force.

An indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Source: United States Department of Justice News

Cape Henry Associates (Cape Henry), located in Virginia Beach, Virginia, has agreed to pay $425,000 to resolve allegations that it violated the False Claims Act by failing to inform contracting officers of the company’s organizational conflicts of interest (OCI) in connection with the award and performance of task orders on government contracts. Cape Henry performs manpower analysis, personnel analysis and training services for the U.S. Armed Forces.

The Justice Department alleged that Cape Henry failed to disclose that one of the company’s officers had an ownership interest in KOVA Global, a company to which Cape Henry awarded subcontracts to provide warehouse services in connection with two sole source task orders issued by the Army and General Services Administration (GSA).

“It is critical that companies disclose potential conflicts of interest to protect the integrity of the federal procurement process,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “We will hold accountable those who knowingly conceal relevant information that may affect the award or performance of a government contract.” 

“The failure of government contractors to disclose organizational conflicts of interest harms government procurement, creates unfairness, and can cost the taxpayers money,” said U.S. Attorney Jessica D. Aber for the Eastern District of Virginia.

The Justice Department also alleged that Cape Henry failed to disclose relevant information about a conflict of interest arising from advisory & assistance services (A&AS) performed in 2015 by Q.E.D. Systems Inc. (Q.E.D.), a Cape Henry subcontractor. In connection with a multi-year delivery order under a Navy SeaPort-e contract, Cape Henry would submit project-specific proposals to a Navy program management office that was responsible for determining the scope and funding for each project. At the same time that Cape Henry was submitting proposals to the Navy, Cape Henry was also funding the direct labor of a Q.E.D. employee through a subcontract. This Q.E.D. employee was providing A&AS services to the Navy program office and making recommendations that could potentially affect Cape Henry’s funding and treatment in connection with these project proposals. Cape Henry failed to disclose this conflict of interest to the contracting officer as required by the OCI clause in Cape Henry’s contract with the Navy.   

“The Department of Defense requires its contractors to divulge any potential conflicts of interest to maintain the integrity of the military’s procurement process,” said Acting Special Agent in Charge Greg Gross of the NCIS Economic Crimes Field Office. “NCIS and our federal law enforcement partners remain committed to ensuring the good stewardship of taxpayer dollars by fully investigating all allegations of procurement fraud.”

“This settlement highlights the resolve of Army CID and our law enforcement partners to hold government contractors accountable for their actions. The ability to protect and defend the assets of the United States Army is always our top priority,” said Special Agent in Charge L. Scott Moreland of the U.S. Army Criminal Investigation Division’s (Army CID) Major Procurement Fraud Field Office.

“GSA OIG special agents are committed to working with DOJ and investigative partners to ensure that taxpayer dollars are properly spent and protected,” said Special Agent in Charge Eric D. Radwick of the GSA Office of Inspector General, Mid-Atlantic Division.

“This settlement agreement demonstrates the commitment of the Department of Defense, Office of Inspector General, Defense Criminal Investigative Service (DCIS) and our law enforcement partners to vigorously pursue those who attempt to exert improper influence over the federal government contracting process and to protect American taxpayer dollars,” said Special Agent in Charge Christopher W. Dillard of the Department of Defense, Office of Inspector General, DCIS.

The resolution obtained in this matter was the result of a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Office for the Eastern District of Virginia with assistance from the DCIS, the Army CID, the GSA Office of Inspector General, the Defense Contract Audit Agency, and the Naval Criminal Investigative Service.

The matter was handled by Trial Attorney Jason M. Crawford of the Civil Division and Assistant U.S. Attorney Clare Wuerker for the Eastern District of Virginia.

The claims resolved by the settlement agreement are allegations only; there has been no determination of liability.