As gasoline prices climb higher and higher, it's easy to wonder if the oil companies are fixing prices. Our congressional leaders have been wondering the same thing, so they are holding hearings to find out if that is going on. Price fixing is an ugly act in anyone's book.
Another variation of price fixing is known as "bid rigging." It occurs when two or more companies pretend to compete for the same contract, but secretly agree to do it inflate prices. The conspirators each present high bids, so that even the one making the lower bid gets more money than they would have gotten otherwise.
About the only thing worse than bid rigging, would be foreign companies conspiring to rig bids to cheat our soldiers living overseas. Well, the U.S. government has alleged just that in a recent lawsuit.
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According to the Department of Justice, a Belgian company named Gosselin Worldwide conspired with four German moving companies (Birkart Globistics GmbH & Co. Logistik und Service KG; ITO Möbel Transport GmbH; Viktoria International Spedition; and Andreas Christ Spedition & Möbeltransport GmbH) to cheat the military by engaging in bid rigging to fix high prices for moving the household belongings of soldiers living overseas.
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When U.S. soldiers are stationed overseas, such as in Germany, they are allowed to bring certain amounts of their household goods with them. Their belongings are packed into transport crates in the U.S. and then shipped overseas. But who unloads the overseas crates, and who packs them back up when the soldiers move? American moving companies must hire foreign moving companies to do this work.
In 2000 and 2001, the leading foreign companies that worked with the American companies figured out a way to get big fat profits. They secretly met and agreed as to what prices to charge American companies. This meant that each firm would submit fake, but greatly inflated prices, and then split the puffed-up profits.
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In order to get American companies to go along with a scheme to rip-off American soldiers, the foreign companies allegedly threatened to boycott any American company that did not include its inflated prices in bids to the military.
The trouble was, one of the biggest American companies, the Pasha Group, had already submitted its bid. To make their scheme work, the conspirators needed Pasha to withdraw its bid and inflate their costs. They also needed to keep other American companies from submitting lower bids. Apparently, the Pasha Group agreed to cancel its initial bid and resubmit it with higher charges.
The plan backfired when two employees working for one of the foreign companies blew the whistle on the fraud. When the Department of Justice conducted an investigation, they contacted the Pasha Group, which waived a white flag and agreed to settle. It paid the government $13 million for its role in the bid rigging.
The foreign firms, however, are not waiving red, white or blue flags. So the Department of Justice has been forced to sue them in a U.S. federal court, alleging that they violated the False Claims Act through their bid rigging conspiracy. Under that statute, if the government wins, the companies will be required to repay three times the amount of the fraud.
The False Claims Act also provides that the whistleblowers shall receive between 15 and 25 percent of the money that is recovered. Already, the two whistleblowers were paid $2.6 million from the settlement with Pasha. They stand to gain significantly more if the Department of Justice prevails against the conspiring foreign firms.
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Bid rigging and price fixing are terrible crimes against society. If you know of a company, such as an oil firm or defense contractor, that is cheating the government, please step forward. In addition to a potentially large monetary reward, you will have the satisfaction of righting a wrong and leveling the playing field for honest companies.
