On March 16, 2016, Antitrust Division’s New York Field Office obtained a conviction against John Bennett the former Chief Executive Officer with Bennett Environmental Inc., a Canadian-based company that treated and disposed of contaminated soil. Bennett was convicted on an indictment returned on Aug. 31, 2009 that charged that he participated in the conspiracy by approving kickbacks to Gordon McDonald, the project manager at the Federal Creosote site, for “last looks” (i.e. the bids submitted by other contractors that Bennett could then undercut).  The kickbacks were in the form of money transferred by wire to a co-conspirator’s shell company, lavish cruises for senior officials of the prime contractor, and various entertainment tickets. The indictment alleged conspiracy began at least as early as December 2001 and continued until approximately August 2004. The Antitrust Division had sought Bennett’s extradition from Canada since 2009. On November 17, 2014 Bennett was extradited and made his first appearance before a US District Court Judge in New Jersey.

Bennett’s trial started about three and a half weeks ago and featured the testimony of a Bennett subordinate who himself had pled guilty and was sentenced to 14 years in prison. The jury convicted Bennett of both counts: one count of conspiracy to commit wire fraud and major fraud against the United States and one count of substantive major fraud for his role in the bid-rigging scheme, which prosecutors said netted the contractor $43 million in ill-gotten contracts. An $80,000 Mediterranean cruise, a $4,000 flat-screen television and a pricey wine refrigerator were among the gifts Bennett Environmental Inc. gave in exchange for information about the bid prices of Bennett’s competitors for a toxic waste cleanup project.

The interesting part of the case for me was the question of why Bennett chose to go to trial, and, of course, I can only speculate. One reason to go to trial is because you believe you are innocent (or believe the government cannot prove its case beyond a reasonable doubt), and you hope to be acquitted.  It can be often difficult for the government to convict “the boss” because the evidence often is solely that of a subordinate who says the boss knew what was going on and approved the illegal conduct. Subordinates are subject to tough cross-examination for the “deal” they got for cooperating with the government and other possible impeachment problems that may be in their background. If the sole or principal evidence against the “boss’ is the testimony of a subordinate, a jury will often conclude the boss probably knew, but the government did not prove its case “beyond a reasonable doubt.”

Indeed, Bennett said he was unaware of the illegal conduct of a subordinate who he called a “misguided drug addict.” And, since the conspiracy ended long ago in 2004, and Bennett’s extradition fight delayed the trial by many years, Bennett might also have hoped that he would benefit from fading memories. But here, the testimony of the subordinate was corroborated by incredibly incriminating emails that showed Bennett’s direct knowledge of the scheme. One email to Bennett detailed the particulars of the scheme; another incriminating email said “Print and Delete.” Bennett’s explanations varied from, “I’m not sure I even had a computer at that time, if I did, it might not have been working, if it was working, I never read the emails.” He also testified that he thought the “Print and Delete” email was some kind of joke.  There were also very incriminating phone records.  Still, given the long sentence Bennett faced under the guidelines, and the long fourteen year sentence already received by his subordinate that might normally be a “floor” for the boss, Bennett might have thought that even a small chance of acquittal was worth the chance. [And a convicted defendant gets another shot on appeal.].

Another reason cases sometimes go to trial, in my opinion, is because they can serve as an extended sentencing hearing, giving the defense a chance to show the court the limited role of the defendant, or how the defendant’s role compared to other conspirators who may have gotten leniency, or very reduced sentences. Even after conviction after trial, courts have typically departed downward from the Antitrust Division’s recommendation of a very long guideline sentences. But, as noted above, in this case Bennett made the unusual choice to testify. The choice to testify was particularly risky in light of the damning emails the government had.  Its true, that without some explanation of the emails, it highly probable Bennett would have been convicted. But, by testifying, Bennett seemingly put himself in a worse position for sentencing. The jury did not believe his testimony and it is highly unlikely the sentencing judge found him credible. Putting the government to its proof, while the defendant’s right to be sure, is a sentencing “demerit” on the acceptance of responsibility score. Bennet likely made his situation much worse by testifying. One reason white-collar defendants don’t often take the stand is because if the judge believes that defendant has given false testimony, under oath, in their courtroom, this can really put the defendant in the hole (not literally).  Under the circumstances, it would be unlikely that Mr Bennet could receive a sentence less than 14 years received by his subordinate.  Mr. Bennett, however, is 80 years old, so his sentencing presents so interesting issues.

Sentencing is scheduled for June 27, 2016 before Judge Susan D. Wigenton. The fraud conspiracy for which Bennett was found guilty carries a maximum penalty of five years in prison and a $250,000 criminal fine. The major fraud against the United States conviction carries a maximum of ten years in prison and a $1 million criminal fine for individuals. The maximum may be increased to twice the gain derived from the crime or twice the loss. Mr. Bennett intends to appeal his conviction.

A Word About “Last Look” Schemes

The case involved a “last look” scheme, not an “antitrust”bid-rigging scheme. No Sherman Act violation was charged. In a Sherman Act bid rig, one competitor asks another (or multiple competitors) to come in over a certain bid price with a complementary (cover) bid. (i.e. be over $1 million).  In this case, the conspirators paid off an insider for a “last look” so they can come in with a lower price. In theory, the “last look” may be somewhat less anticompetitive than traditional bid rigging because the company paying the bribe still has to beat a bid submitted by a bona fide competitor. But, it is still corruption of the competitive bidding process because instead of possibly coming in significantly under the competition, the conspirator company learns the price they have to be “just under.”  This typically leaves enough illegal gain to pay the kickbacks and make a nice profit.  Its fraud, and in this case, because of this scheme corrupted a federal contract over $1 million, the crime was Major Fraud. (18 U.S. Code § 1031 – Major fraud against the United States).

Thanks for reading.