The Antitrust Division continues to send a strong message to businesses, executives, and individuals engaged in potential bid rigging and price fixing schemes. Recent investigation of ready mixed concrete industry, roofing products industry, and the E-rate program have resulted in guilty pleas and indictments. The recent activity indicates that the Antitrust Division continues to make criminal enforcement a priority.
Ready Mixed Concrete Investigation
On April 28, Larry Lee, the former president of an Indiana ready mixed concrete company, agreed to plead guilty, to serve eight months in prison and two months of home confinement, and to pay a $70,000 criminal fine for his role in a conspiracy to fix the price of ready mixed concrete sold in certain counties in Indiana.
Allegedly, Mr. Larry Lee conspired with an unnamed co-conspirator executive from another ready mixed concrete producer to fix specific price increases and the specific timing of those price increases at which ready mixed concrete was sold in Bartholomew, Jackson, and Jennings, Indiana beginning in or about February 2003 and continuing until approximately June 2004. During the period covered by the conspiracy, Mr. Lee’s company allegedly sold at least $7 million worth of ready mixed concrete that was affected by the conspiracy to its customers using the agreed-upon prices.
The charge resulted from the Antitrust Division’s ongoing investigation of the ready mixed concrete industry being conducted by its Chicago Field Office in conjunction with the Indianapolis office of the FBI.
Roofing Products Investigation
On April 1, Sean Moran, a former representative of a New York roofing products manufacturer pleaded guilty to rigging bids and allocating contracts for roofing products and services in the Albany, New York area.
According to the charge, Mr. Moran participated in a conspiracy to rig bids for, and allocate roofing contracts awarded by, the General Electric Company’s Waterford, New York facility, the Albany Medical Center, and other purchasers of roofing products and services in the State of New York, from sometime in 1996 until at least July 2001.
Mr. Moran and co-conspirators are charged with carrying out the conspiracy by: discussing the submission of prospective bids on certain roofing contracts; agreeing among themselves which company would be the low bidder; and arranging for co-conspirators to submit bids that were intentionally higher.
With the guilty plea by Mr. Moran, the Division has now obtained three guilty pleas relating to its investigation of the roofing industry in the Albany area. In June 2004, Waterblock Roofing and Sheetmetal Inc. and its president, Walter J. Vivenzio, pleaded guilty to bid rigging and fraud charges. Mr. Moran and Mr. Vivenzio have agreed to cooperate with the Antitrust Division’s ongoing investigation of the alleged bid rigging and allocation of contract activity for roofing products and services in the Albany, New York area.
On April 7, a federal grand jury in San Francisco returned a 22-count indictment against six companies and five individuals on charges of fraud, collusion, aiding and abetting, and conspiracy in connection with E-Rate projects at schools in seven states: Arkansas, California, Michigan, New York, Pennsylvania, South Carolina, and Wisconsin.
The E-Rate program subsidizes the provision of Internet access and telecommunications services, as well as internal computer and communications networks, to economically disadvantaged schools and libraries. The E-Rate program fosters connectivity between the Internet and schools or libraries and is funded by monies collected from telephone users. Under the E-Rate program, schools apply for monies to provide cabling, internet backbone equipment (i.e. servers, PBX, and switches), and for reimbursement of monthly connectivity service fees.
The six companies and five individuals charged with participating in the schemes to defraud the E-Rate program are: Video Network Communications Inc. (“VNCI”); Howe Electric Inc.; Sema4 Inc.; Digital Connect Communications; Expedition Networks, Ltd.; ADJ Consultants Inc.; Judy Green, former sales representative for VNCI, co-owner of ADJ; Allan Green, co-owner of ADJ; George Marchelos, former sales representative for VNCI; Steven Newton, former vice president at Premio Computer Inc.; and Earl Nelson, former Branch Manager for Inter-Tel Technologies Inc.
According to the 22-count indictment, the defendants charged with wire fraud and aiding and abetting in counts 1 through 11 entered into schemes to defraud the FCC and USAC on E-Rate projects at 11 school districts in California, Michigan, South Carolina, Arkansas, and Wisconsin from about November 1998 through at least sometime in November 2003. Counts 12 through 20 of the indictment charged certain defendants with participating in, and aiding and abetting, separate conspiracies to rig bids and allocate projects at school districts in California, Michigan, South Carolina, Arkansas, and Wisconsin during the same time period.
The defendants charged with Counts 12 through 20 of the indictment and co-conspirators allegedly carried out the conspiracy by: discussing prospective bids for the project; agreeing who would be the lead contractor on the project and who would participate on the project as subcontractors to the designated lead contractor; submitting fraudulent and non-competitive bids; and engaging with Judy Green and George Marchelos who took steps to ensure the success of the conspiracy by eliminating and disqualifying bids from non-conspirators and by ensuring that the projects were awarded to the defendants and co-conspirators. In return, some of the defendants and co-conspirators allegedly agreed to pay and paid Judy Green and VNCI, a fee and agreed to purchase and purchased and installed VNCI’s equipment on the project. Count 21 also charges three companies and three individuals with a single conspiracy to rig bids and allocate projects for 15 E-Rate projects at school districts in California, Pennsylvania, New York, South Carolina and Arkansas. The conspiracy allegedly began in October 2002 and continued through at least January 2004.
The investigation of the E-Rate program is still ongoing and is being conducted jointly by the U.S. Attorney’s Office for the Northern District of California along with the Antitrust Division, with the assistance of the FBI.