By: Paul Emanuelli
This article is an excerpt from the 2021 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its January 2020 decision in United States of America v. Alan Gaines, the United States District Court – District of Minnesota found the defendant guilty as charged of engaging in a combination and conspiracy with his co-conspirators to suppress and eliminate competition by fixing prices, rigging bids, and allocating markets in connection with the auction of federal government assets. As the Court stated:
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The charged combination and conspiracy consisted of a continuing agreement, understanding, and concert of action among Defendant and his co-conspirators, the substantial terms of which were to suppress and eliminate competition by agreeing which co-conspirators would submit bids for particular lots offered for sale by GSAAuctions and agreeing which co-conspirator would be designated to win a particular lot offered for sale by GSAAuctions.
As the Court found, this interstate conspiracy involved the purchase of computers through rigged bids across multiple jurisdictions in which the co-conspirators took turns winning the rigged bids based on non-competitive prices:
MEANS AND METHODS OF THE CONSPIRACY
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For the purpose of forming and carrying out the charged combination and conspiracy, Defendant and his co-conspirators did those things that they combined and conspired to do, including, among other things:
(a) communicating with each other via phone, text message, and email before and during auctions conducted by GSAAuctions to discuss which co-conspirator would submit the winning bid and whether the items purchased from GSAAuctions would be split among the co-conspirators;
(b) agreeing not to compete against each other when bidding on lots offered for sale by GSAAuctions;
(c) agreeing and designating which co-conspirators would bid on particular lots offered by GSAAuctions and which co-conspirators would submit bids or refrain from bidding on those lots;
(d) agreeing and designating which co-conspirator would win a particular lot;
(e) communicating their bidder numbers to each other to facilitate monitoring the bids submitted by the co-conspirators;
(f) submitting rigged bids to GSAAuctions for bid lots located in various states including Arizona, Florida, Hawaii, New York, Pennsylvania, South Dakota, Texas, and Virginia;
(g) deciding whether and how the computers purchased pursuant to the agreement would be split among the co-conspirators; and
(h) submitting payment to GSAAuctions for the lots that were won at collusive and non-competitive prices.
As this case illustrates, in addition to impacting government purchasing contracts, bid-rigging can also undermine the sale of government assets when bidders conspire to undermine competition and deny the taxpayer a fair return for the value of the sold public property.
