Bradford Geyer explains we need to keep an eye on #OIG audits

Bradford Geyer has seen an enforcement agency storm forming around government grants and government procurement and he argues that contractors and grantees would be well served to keep an eye on OIG audit reports that often telegraph enforcement activity.  He provides a quick primer regarding a Department of State Office of Inspector General Audit Report regarding Armored Vehicles below:

For reasons I hope to explain more fully in a future column,  there could be a perfect storm forming for reinvigorated grant fraud and procurement fraud enforcement (GFPFE) in a Trump Adminisitration. Assuming that is the case, and we wont know for sure for at least another six months, it becomes very important to keep an eye on OIG audits like this one (DOS-OIG Armored Car Audit Report) because audit reports can signal the deployment of investigative resources.  Audits can also become a platform for an expanded enforcement initiative or provide a low cost basis for new investigative activity even by other agencies.  Armored vehicles is a product market where the government has found procurement problems for close to 15 years and government enforcement agencies have had success at bringing cases in these areas.  This is a toxic mix for contractors who should consider doing internal investigations and brushing up on their compliance programs.  If they find a problem they should carefully consider a voluntary disclsoure to the appropriate agency(ies).

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NINE AUTOMOBILE PARTS MANUFACTURERS AND TWO EXECUTIVES AGREE TO PLEAD GUILTY TO FIXING PRICES ON AUTOMOBILE PARTS SOLD TO U.S. CAR MANUFACTURERS AND INSTALLED IN U.S. CARS

WASHINGTON — Nine Japan-based companies and two executives have agreed to  plead guilty and to pay a total of more than $740 million in criminal fines for  their roles in separate conspiracies to fix the prices of more than 30 different  products sold to U.S. car manufacturers and installed in cars sold in the  United States and elsewhere, the Department of Justice announced today.  The department said that price-fixed automobile  parts were sold to Chrysler, Ford and General Motors, as well as to the  U.S. subsidiaries of Honda, Mazda, Mitsubishi, Nissan, Toyota and Fuji Heavy  Industries–more commonly known by its brand name, Subaru.

“These international price-fixing conspiracies affected more  than $5 billion in automobile parts sold to U.S. car manufacturers, and more  than 25 million cars purchased by American consumers were affected by the  illegal conduct,” said Attorney General Eric Holder.  “The Department of Justice will continue to  crack down on cartel behavior that causes American consumers and businesses to  pay higher prices for the products and services they rely upon in their  everyday lives.”

“Some of the price-fixing conspiracies  lasted for a decade or longer, and many car models were fitted with multiple  parts that were fixed by the auto parts suppliers,” said Scott D. Hammond, Deputy  Assistant Attorney General of the Antitrust Division’s criminal enforcement  program.  “The Antitrust Division has  worked hand in hand with its international competition colleagues who have  provided invaluable assistance to the Justice Department in breaking up these worldwide  price-fixing cartels.”

“Today’s  charges should send a message to companies who believe they don’t need to  follow the rules,” said Ronald Hosko, Assistant Director of the FBI’s Criminal  Division.  “If you violate the laws of  this country, the FBI will investigate and put a stop to the threat you pose to  our commercial system.  The integrity of  our markets is a part of the foundation of a free society.”

Including those announced today, 20 companies and 21 executives have been charged in the Antitrust Division’s  ongoing investigation into price fixing and bid rigging in the auto parts  industry.  All 20 companies have either  pleaded guilty or have agreed to plead guilty and have agreed to pay more than $1.6  billion in criminal fines.  Seventeen of  the 21 executives have been sentenced to serve time in U.S. prisons or have  entered into plea agreements calling for significant prison sentences.

Each of the companies and executives  charged today has agreed to cooperate with the department’s ongoing antitrust investigation.  The plea agreements are subject to court approval.  The companies’ and executives’ agreed-upon fines and sentences are:

  • Hitachi Automotive Systems Ltd. to pay a $195 million criminal fine;
  • Jtekt Corporation to pay a $103.27 million criminal fine;
  • Mitsuba Corporation to pay a $135 million criminal fine;
  • Mitsubishi Electric Corporation (MELCO) to pay a $190 million criminal fine;
  • Mitsubishi Heavy Industries Ltd. to pay a $14.5 million criminal fine;
  • NSK Ltd. to pay a $68.2 million criminal fine;
  • T.RAD Co. Ltd. to pay a $13.75 criminal fine;
  • Valeo Japan Co. Ltd. to pay a $13.6 million criminal fine;
  • Yamashita Rubber Co. Ltd. to pay a $11 million criminal fine;
  • Tetsuya Kunida, a Japanese citizen and former executive of a U.S. subsidiary of a Japan-based automotive       anti-vibration rubber products supplier to serve 12 months and one day in a U.S. prison, and to pay a $20,000 criminal fine; and
  • Gary Walker, a U.S. citizen and former executive of a U.S. subsidiary of a Japan-based automotive products supplier to serve 14 months in a U.S. prison, and to pay a $20,000 criminal fine.

MELCO and Hitachi conspired with each other and other  co-conspirator firms not charged today on sales of certain auto parts,  including starter motors, alternators, and ignition coils, the department said. Mitsuba and Mitsubishi Electric conspired together and with other  co-conspirators not charged today on certain sales of starter motors.  Each of the other companies charged today  colluded with other unnamed co-conspirators.

Generally, the companies, executives and co-conspirators  engaged in the various price-fixing schemes by attending meetings and  communicating by telephone in the United States and Japan to reach collusive  agreements to rig bids, set prices and allocate the supply of auto parts sold  to the car manufacturers.  They took  measures to keep their conduct secret by using code names and meeting in remote  locations.  Those charged also had  further communications to monitor and enforce the collusive agreements.

The multiple conspiracies also harmed U.S. automobile plants  in 14 states: Alabama; California; Georgia; Illinois; Indiana; Kansas;  Kentucky; Michigan; Mississippi; Missouri; Ohio; Tennessee; Texas and  Wisconsin, the department said.

The department has coordinated  its investigation with the Japanese Fair Trade Commission, the European  Commission, Canadian Competition Bureau, Korean Fair Trade Commission, Mexican Federal  Economic Competition Commission and Australian Competition and Consumer  Commission.

The following charges were filed today in U.S. District Court  for the Eastern District of Michigan in Detroit:

Hitachi Automotive Systems Ltd.

According to a one-count  felony charge, Hitachi and co-conspirators engaged in a conspiracy, by agreeing  during meetings and conversations, to rig bids for, and to fix, stabilize and  maintain the prices of auto parts it sold to Ford, General Motors, Honda,  Nissan and Toyota, in the United States and elsewhere. The affected auto  parts include starter motors, alternators, air flow meters, valve timing  control devices, fuel injection systems, electronic throttle bodies, ignition  coils, inverters and motor generators. According to the charge, Hitachi and its  co-conspirators carried out the conspiracy from at least as early as January 2000  until at least February 2010.

Hitachi manufactures and sells auto parts to automobile manufacturers  throughout the world. The affected auto parts perform an array of  functions in automobile engines, from regulating air and fuel flow to starting  the engine to controlling the timing of engine valves.

Mitsuba  Corporation

According to a two-count felony charge,  Mitsuba and co-conspirators engaged in a conspiracy, by agreeing during  meetings and conversations, to rig bids for, and to fix, stabilize and maintain  the prices of windshield washer systems and components, windshield wiper  systems and components, starter motors, power window motors, and fan motors it  sold to Chrysler, Honda, Subaru, Nissan and  Toyota in the United States and elsewhere. According to the charge,  Mitsuba and its co-conspirators carried out the conspiracy from January 2000  until February 2010.  Mitsuba also agreed  to plead guilty to one count of obstruction of justice, because of the  company’s efforts to destroy evidence ordered by a high-level U.S.-based  executive after learning of the U.S. investigation of collusion in the auto  parts industry.

Mitsuba manufactures and sells numerous automotive parts to automobile  manufacturers throughout the world.  The  affected auto parts perform an array of functions in automobiles.  Windshield washer and wiper systems include a  number of components and are designed to clear water or snow from vehicle  windows.  Starter motors are small  electric motors used in starting internal combustion engines.  Power window motors are small electric motors  used to raise and lower vehicle windows.   Fan motors are small electric motors used to turn radiator cooling fans.

Mitsubishi  Electric Corporation (MELCO)

According to a one-count felony charge, MELCO and co-conspirators engaged  in a conspiracy, by agreeing during meetings and conversations, to rig bids  for, and to fix, stabilize and maintain the prices of automotive parts,  including starter motors, alternators and ignition coils, it sold to Chrysler, Ford,  General Motors, Honda, Fuji Heavy Industries Ltd. (Subaru), Nissan, and certain  of their subsidiaries in the United States and elsewhere. According to  the charge, MELCO and its co-conspirators carried out the conspiracy from at  least as early as January 2000 until at least February 2010.

MELCO manufactures and sells automotive parts, including starter  motors, alternators, and ignition coils. Starter motors are small  electric motors used in starting internal combustion engines. Alternators  generate an electric current while the engine is in operation.  Ignition coils are part of the fuel ignition  system and release electric energy suddenly to ignite a fuel mixture.

Mitsubishi  Heavy Industries Ltd.

According to a one-count felony charge, Mitsubishi Heavy Industries  Ltd. (MHI) and co-conspirators engaged in a conspiracy, by agreeing during  meetings and conversations, to rig bids for, and to fix, stabilize and maintain  the prices of compressors and condensers it sold to General Motors and  Mitsubishi Motors North America in the United States and elsewhere.  According to the charge, MHI and its co-conspirators carried out the conspiracy  from at least as early as January 2001 until at least February 2010.

MHI manufactures and sells compressors and condensers. A  compressor produces and circulates highly pressurized refrigerant gas  throughout the car air conditioning system. A condenser cools the engine  by condensing the refrigerant gas into liquid and releasing heat.

T.RAD  Co. Ltd.

According to a  one-count felony charge, T.RAD Co. Ltd. and co-conspirators engaged in a  conspiracy, by agreeing during meetings and conversations, to rig bids for, and  to fix, stabilize and maintain the prices of radiators it sold to Toyota and  Honda and the prices of automatic transmission fluid warmers (ATF warmers) sold  to Toyota in the United States and elsewhere. According to the charge, T.RAD  and its co-conspirators carried out the conspiracy from November 2002 until  February 2010.

T.RAD manufactures and sells heat exchangers, including radiators and  ATF Warmers. Radiators are devices  located in the engine compartment of a vehicle that cool the engine. ATF warmers are devices located in the engine compartment of  a vehicle that warm the automatic transmission fluid.

Valeo  Japan Co. Ltd.

According to a  one-count felony charge, Valeo Japan Co. Ltd. and co-conspirators engaged in a  conspiracy, by agreeing during meetings and conversations, to allocate the  supply of, rig bids for, and to fix, stabilize and maintain the prices of air  conditioning systems it sold to Nissan North America Inc., Suzuki Motor  Corporation and Subaru, in the United States and elsewhere.  According to the charge, Valeo and its  co-conspirators carried out the conspiracy from April 2006 until February 2010.

Valeo was engaged in the manufacture and sale of automotive air conditioning  systems, which are systems that cool the interior environment of a  vehicle. Air conditioning systems, whether sold together or separately,  are defined as automotive compressors, condensers, HVAC units (typically  consisting of a blower motor, actuators, flaps, evaporator, heater core, and  filter embedded in a plastic housing), control panels, sensors and associated  hoses and pipes.

Gary  Walker

According to a  one-count felony charge, Gary Walker, a U.S. citizen and former executive of a  U.S. subsidiary of a Japan-based automotive products supplier, engaged in a  conspiracy to rig bids for, and to fix, stabilize and maintain the prices of  seatbelts sold to Honda, Mazda, Nissan, Subaru and Toyota in the United States  and elsewhere. According to the charge, Walker and his co-conspirators  carried out the conspiracy from at least Jan. 1, 2003 until at least February  2010.

The  following charges were filed today in U.S. District Court for the Southern  District of Ohio in Cincinnati:

Jtekt  Corporation

According to  a two-count felony charge, Jtekt and co-conspirators engaged in a  conspiracy, by agreeing during meetings and conversations, to allocate  markets, to rig bids for, and to fix, stabilize and maintain the prices of bearings it  sold to Toyota and electric powered steering assemblies it sold to Nissan,  in the United States and elsewhere. According to the charge, Jtekt and its  co-conspirators carried out the bearings conspiracy from 2000 until July 2011  and the steering assemblies conspiracy from 2005 until October 2011.

Jtekt manufactures and sells bearings and steering assemblies.  Bearings are widely used in industry in numerous  applications for many products. Bearings reduce friction and help  components to roll smoothly past on another.   Electric powered steering assemblies provide electric power to  help the driver more easily steer the automobile. Electric powered  steering assemblies link the steering wheel to the tires, and include the  column, intermediate shaft and electronic control unit, among other parts, but  do not include the steering wheel or tires.

NSK  Ltd.

According to a one-count felony  charge, NSK and co-conspirators engaged in a conspiracy, by agreeing during  meetings and conversations, to allocate markets, to rig bids for, and to  fix, stabilize and maintain the prices of bearings it sold to Toyota, in the United States and  elsewhere.  NSK manufactures and sells bearings.  According to the charge, NSK and its  co-conspirators carried out the conspiracy from 2000 until July 2011.

The  following charges were filed today in U.S. District Court for the Northern  District of Ohio in Toledo:

Yamashita  Rubber Co. Ltd.

According to a one-count felony charge, Yamashita Rubber Co. Ltd. and  co-conspirators engaged in a conspiracy, by agreeing during meetings and  conversations, to rig bids for, and to fix, raise, and maintain the prices of  automotive anti-vibration rubber products it sold in the United States and  elsewhere to Honda Motor Co. Ltd., American Honda Motor Company Inc. and Suzuki  Motor Corporation.  According to the  charge, Yamashita Rubber Co. and its co-conspirators carried out the  conspiracy from at least April 2003 until May 2012.

Automotive anti-vibration rubber products are comprised primarily of  rubber and metal, and are installed in automobiles to reduce engine and road  vibration.

Tetsuya  Kunida

According to a  one-count felony charge, Tetsuya Kunida, a former executive of a U.S.  subsidiary of a Japan-based automotive anti-vibration rubber products supplier,  engaged in a conspiracy, by agreeing during meetings and conversations, to rig  bids for, and to fix, raise, and maintain the prices of automotive  anti-vibration rubber products.  The  conspiracy affected sales of automotive anti-vibration rubber products to  Toyota Motor Corporation and other automakers in the United States and  elsewhere.  ccording to the charge,  Kunida and his co-conspirators carried out the conspiracy from at least  November 2001 until May 2012.

DENSO Corporation, Nippon Seiki Ltd., Tokai Rika Co. Ltd.,  Furukawa Electric Co. Ltd, Yazaki Corp., G.S. Electech Inc., Fujikura Ltd.,  Autoliv Inc., TRW Deutschland Holding GmbH, Diamond Electric Mfg. Co. Ltd., and  Panasonic Corporation have already pleaded guilty. Fifteen individuals  have been sentenced to pay criminal fines and to serve prison sentences ranging  from a year and a day to two years each.

The companies and individuals are charged with price fixing  in violation of the Sherman Act, which carries maximum penalties of a $100  million criminal fine for corporations and a $1 million criminal fine and 10  years in prison for individuals. The maximum fine may be increased to  twice the gain derived from the crime or twice the loss suffered by the victims  of the crime, if either of those amounts is greater than the statutory maximum  fine.  Additionally, Mitsuba was also  charged with obstruction of justice, which carries a maximum penalty of a $500,000  criminal fine.

The charges are the result of an ongoing federal  antitrust investigation into price fixing, bid rigging and other  anticompetitive conduct in the automotive parts industry, which is being  conducted by each of the Antitrust Division’s criminal enforcement sections and  the FBI. Today’s charges were brought by the Antitrust Division’s Chicago  Office, New York Office, the National Criminal Enforcement Section, and the  FBI’s Cincinnati, Cleveland, Detroit, New York and Washington Field Offices,  with the assistance of the FBI headquarters’ International Corruption Unit.  Anyone with information on price fixing, bid  rigging and other anticompetitive conduct related to other products in the  automotive parts industry should contact the Antitrust Division’s Citizen Complaint  Center at 1-888-647-3258 or visit www.justice.gov/atr/contact/newcase.html.