This page explains how to identify anticompetitive conduct that occurs after a natural disaster and how to report possible violations to the Antitrust Division.
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Related prosecution: Bid rigging after Typhoon Paka in Guam
In the wake of devastation caused by a natural disaster, the Federal Emergency Management Agency (FEMA) works with state and local government agencies to solicit competitive bids for cleanup and rebuilding contracts. Anticompetitive conduct that subverts the competitive bidding process includes:
Bid rigging: Two or more firms agree to bid in such a way that a designated firm submits the winning bid.
Price fixing: Two or more competing sellers agree on what prices to charge, such as by agreeing that they will increase prices a certain amount or that they won't sell below a certain price.
Customer or market allocation: Two or more firms agree to split up customers, such as by geographic area, to reduce or eliminate competition.
These agreements are generally secret, and the participants defraud customers by holding themselves out as competitors despite their agreement not to compete. They harm consumers and taxpayers by causing them to pay more for products and services and by depriving them of other byproducts of true competition.
The Division’s role in disaster recovery efforts is to assist Federal, state, and local government agencies in preventing and deterring violations of criminal antitrust laws, such as bid rigging and collusion in the competitive bidding process.
Training: Antitrust Division attorneys are available to provide training to law enforcement agents, auditors, and procurement personnel to assist them in identifying and preventing fraud in the competitive bidding process.
Enforcement: If collusive conduct is discovered, the Antitrust Division stands ready to investigate and criminally prosecute the individuals and corporations seeking to unjustly profit from these tragedies.
In 2002, a record-breaking ten-year sentence was imposed on Austin "Sonny" Shelton, a former Guam government official, for orchestrating a bid-rigging, bribery, and money-laundering scheme involving FEMA-funded contracts in Guam.
After Typhoon Paka hit Guam in 1997, leaving thousands of people homeless, FEMA made more than $70 million in federal funds available to Guam for disaster relief. The Antitrust Division conducted a bid-rigging and public corruption investigation jointly with the U.S. Attorney’s Office in Guam and agents from the FEMA Office of Inspector General, the FBI, the IRS, and the Department of Interior.
This investigation resulted in numerous convictions, including that of Austin J. “Sonny” Shelton, who was the Director of Guam’s Department of Parks and Recreation and was responsible for awarding contracts for FEMA-funded construction projects to repair typhoon damage. Shelton was convicted after trial of 12 counts of criminal activity for orchestrating three separate bid-rigging conspiracies, soliciting and receiving over $100,000 in bribes in return for the award of contracts, committing wire fraud, and conspiring to launder money.
Related page: U.S. v. Austin J. "Sonny" Shelton case filings
If you have information about possible anticompetitive activity related to disaster recovery efforts, please contact us:
Phone: 1-888-647-3258 (toll free in the U.S. and Canada) or 202-307-2040
Mail: Citizen Complaint Center
950 Pennsylvania Ave., NW
Washington, DC 20530
We recommend that you use these questions as a guideline for reporting the activity:
- What are the names of companies, individuals, or organizations that are involved?
- Can you give examples of the conduct that you believe violates the antitrust laws? If so, please provide as much detail as possible.
- What is the product or service affected by this conduct?
- Who are the major competitors that sell the product or provide the service?
- What is your role in the situation in question?
Related page: Reporting Antitrust Concerns
As a member of DOJ's Hurricane Katrina Fraud Task Force, the Antitrust Division is committed to offering our expertise and assistance in the wake of the devastation caused by Hurricanes Katrina, Rita, and Wilma. If you would like us to give a presentation to your group on antitrust laws and detection of criminal antitrust violations, please contact us:
Frank J. Vondrak, Assistant Chief, Chicago Field Office
Mail: Antitrust Division
209 South LaSalle Street, Suite 600
Chicago, IL 60604-1204
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