DOJ-Presentation by fjwuxn

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									 Understanding, Detecting &
Reporting Antitrust Violations
             Barry Kaplan
       U.S. Department of Justice,
            Antitrust Division
           Midwest Field Office
                312.353-9286
           barry.kaplan@usdoj.gov    1
What is Antitrust?




                     2
  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
• Price fixing, market allocation and bid
  rigging are all criminal violations
                                                    3
        Elements of an Offense

• Concerted action in the restraint of trade –
  i.e., an agreement among competitors
• Between two or more independent entities
• Affecting interstate or foreign commerce



                                                 4
            Bid Rigging
• Agreement in advance to manipulate
  outcome of bidding process
• Types:
  – Bid Suppression
  – Complementary Bidding
  – Bid Rotation




                                       5
What do you think the penalties are
  for Sherman Act violations?




                                 6
It's risky, of course---if we're caught, it could mean many
hours of community service.


                                                         7
     Antitrust Criminal Penalty
     Enhancement Act of 2004
• Increased maximum criminal penalties:
   – Individuals- 10 years and/or $1,000,000;
   – Corporations- $100 Million


• Alternative fine provisions of 18 U.S.C. § 3571
   – Twice the gross financial loss or gain resulting from the
     violation where this number would exceed $100
     Million.



                                                                 8
          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)

                                                   9
  Why am I here?


$819,000,000,000



                   10
NO PRESSURE


       Risk Management
       “Agencies must
       immediately review the
       risk framework . . . and
       initiate risk mitigation
       strategies.”



                             11
Evolution of Collusion
   Agreement    4



  Opportunity   3



       Means    2



      Motive    1

                         12
BATTLING BID RIGGING
        See the Signs

• Market
• Application
• Patterns
• Suspicious Behavior
                        13
Market: Are Conditions
Conducive to Collusion?




                          14
   Market: Are Conditions
   Conducive to Collusion?
• No readily available substitutes
• The product is standardized
• Vendors repeatedly sell to the same
  buyers
• Competitors in an industry frequently
  interact
• Bidders personally submit bids at the
  same physical location                  15
           APPLICATION:
            The Dumb Crook
• Similar applications – handwriting; typeface;
  stationery
• 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

                                              16
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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.



                                          20
Metadata
Can be
Revealing:




             21
    Patterns in Bids or Prices
• The vendors take turns as the winning
  bidder (bid rotation)
• The winner subcontracts work to losers
• It all evens out
• The same guys always win (or lose)
• Bids are unusually high
• Fewer than normal number of bidders

                                           22
     PATTERNS:
     Bid 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

                            23
              PATTERNS:
             Bid 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!
                                            24
         PATTERNS:
       Who 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
                                             25
   SUSPICIOUS BEHAVIOR:
        Itching to Get Caught

• No Chance Bidder – Bids submitted by vendor
  known to lack the ability to perform
• Betting Bidder – Vendor brings multiple bids
  to an opening or submits bid once other
  bidders are determined
• Loud Mouth Bidder – Suspicious statements


                                            26
    Detecting Bidding Fraud –
          Best Practices
Examine the bid files for:
  – Incomplete files
  – Irregularities
     • Same phrasing
     • Same return address
     • Same price calculations or errors

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     PARTING WORDS

• Remember M.A.P.S.
• Err on the side of reporting suspicions
• We are here to assist you

                 Barry Kaplan
      U.S. Department of Justice, Antitrust
                    Division
               Midwest Field Office
                    312.353-9286
               barry.kaplan@usdoj.gov
                                              28

								
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