Special Issues with a Bid Rigging Whistleblower
To recap from the Bid Rigging Whistleblower Part 1 and Part 2, a potential whistleblower with information about bid rigging on government contracts cannot receive a financial whistleblower award simply by providing that information to the Antitrust Division. Criminal antitrust whistleblower legislation is needed to provide the Antitrust Division with the same tools that the SEC has used to recover tens of millions of dollars based on whistleblower tips. See, It’s a Crime There Isn’t a Criminal Antitrust Whistleblower Statute. But, there is a way a person with information about a cartel involving government contracts can become a whistleblower and be compensated. That person would have to file a civil complaint under the False Claims Act alleging that the United States was defrauded by means of collusion on a government contract. Once the suit is filed, the information underlying the allegations must be supplied to the Attorney General. The government will then decide whether to intervene and prosecute the case. If the government declines, the individual can still pursue the case on his/her own. But the damage claims from the overcharges are the government’s. If there is a settlement, the whistleblower (“Relator”) can recover between 15 and 30% of the government’s damages; plus, attorney fees and expenses. These issues are discussed more fully in the Bid Rigging Whistleblower Part 1 and Part 2.
There are two types of potential whistleblowers—the non-culpable and the culpable. An example of a non-culpable whistleblower might be an auditor or bookkeeper who discovers unexplainable payments from one company to a competitor. This may be a payoff for submitting a high bid or for not bidding at all. Another non-culpable whistleblower may be an assistant who is suspicious of round-robin calls between competitors that seem to coincide with price movements. The problem with having to file a lawsuit to be a whistleblower (as opposed to simply providing the information and cooperation to the government) is that the suspicion of collusion may fall well short of the evidence needed to file a case. In addition, the whistleblower will not have the expertise needed to develop the facts. Filing a False Claims Act case can be a life changing event for an individual (and not always for the better) so it is not an area in which to be reckless with accusations. In all likelihood, many valuable leads about cartels are simply lost because there is no incentive for a person with knowledge of bid rigging collusion to come forward and bear the expense and disruption of being a witness for the Antitrust Division.
The other type of whistleblower is the “culpable” whistleblower such as an estimator who knows his boss is working with competitors to rig a government contract. The estimator will likely be the one that has to inflate the bogus bid either to win at a supra competitive price or to inflate the bid enough to lose with a complementary bid. These are exactly the types of whistleblowers the Antitrust Division should welcome and encourage. As the Antitrust Division and Federal Trade Commission acknowledged in a joint September 12, 2017 press release, with all the rebuilding from natural disasters such as Hurricanes Harvey and Irma, the temptation and opportunity to rig bids is real: “While natural disasters often bring out the best in human compassion and spirit, they can also lead to unscrupulous individuals and organizations taking advantage of those in need.” If there is collusion going on, whether it be the result of natural disaster rebuilding or any other type of federal or state contract, it is highly likely an estimator or some other lower level employee will have knowledge of the wrongdoing and be enlisted in some manner, no matter how minor, to carry out the collusive agreement. The problem a lower level employee may have in being a whistleblower is that he may also be culpable and potentially prosecutable if, having knowledge of the bid rigging, he takes any action to help rig the bid, such as preparing an inflated bid in accordance with the boss’s instruction. Given the scope of conspiracy law, it is pretty easy to find yourself a member of the conspiracy if you are aware of the agreement—even if you were simply putting together a bid as directed or taking any other action “in furtherance of the conspiracy.” One of my pet peeves with the United States Sentencing Guidelines is that the estimator who follows the CEO’s bid rigging orders is tagged with the same volume of commerce increase (value of contracts that were rigged) under the sentencing guidelines as the CEO. It is, therefore, perilous for an estimator, or anyone who might have culpability under conspiracy law, to report a bid rigging conspiracy without first obtaining experienced antitrust counsel and securing immunity. The Antitrust Division has an Individual Leniency Policy and a lower lever employee would almost certainly qualify for immunity in return for information and cooperation, but the process requires negotiation and should be handled by an experienced attorney. Attorneys cost money, which is why some financial incentive for coming forward is an important ingredient for a cartel fighting program.
Under Assistant Attorney General Makan Delrahim, the Antitrust Division has made a point of stating that getting restitution for taxpayers from cartel activity is a priority for the Division. AAG Delrahim, and other spokespersons have said that when the U.S. is a victim of cartel activity, the agency is going to use its authority under Section 4A of the Clayton Act to recover taxpayer dollars from the offending companies to provide an additional deterrence against cartel activity. This is good. Encouraging and supporting whistleblowers who have valid False Claims Act cases would be better. And, supporting enactment of SEC style whistleblower legislation would be best.
Strong whistleblower incentives can not only help uncover bid rigging cartels but prevent them in the first place. The Antitrust Division mentions how the possibility of leniency can prevent a cartel from forming because of fear that a cartel member may someday fold for leniency. It is even more likely a business owner concerned that an employee could file a whistleblower suit might recalculate the odds and conclude that bid rigging could end up with a jail sentence. I just came across this statement in the Wall Street Journal from “Not Quite as Crazy As he Used to Be ‘Crazy Eddie’”
In the two decades I was deeply involved in the Crazy Eddie fraud, the only threat made us lose sleep at night was the possibility of a whistleblower blowing the lid on our crimes. Consistent studies by the Association of Certified Fraud Examiners have shown that most frauds are exposed by whistleblowers, far ahead of frauds exposed by any other source. The SEC will be handing a gift to white-collar criminals if it reduces whistleblower bounties.—- Sam E. Antar, Former Crazy Eddie CFO, former CPA, and a convicted felon.
Thanks for reading. Bob Connolly
 Many state contracts are funded with federal government money. In addition, most states have False Claim Acts that mirror the federal False Claims Act.