Former Engineering Exec Sentenced for Fraud
Last month, the U.S. Department of Justice announced that a former executive was sentenced to 18 months in prison for his participation in bid-rigging and fraud schemes against the North Carolina Department of Transportation.
Brent Brewbaker, a former Contech engineering executive, reportedly rigged bids on over 300 aluminum structure projects in the state of North Carolina for almost a decade. His sentencing arrives after his conviction at the beginning of this year.
Between 2009 and 2018, Contech Engineered Solutions LLC of West Chester, Ohio, reportedly submitted bids for NCDOT drainage projects that involved aluminum structures. According to the indictment release, the aluminum structure projects included headwalls and other structures that facilitate drainage underneath or around paved roads, bridges, and overpasses.
A six-count indictment was filed in the U.S. District Court for the Eastern District of North Carolina in October 2020, accusing Contech and Brewbaker of conspiring to rig these bids. Contech and Brewbaker were also charged with defrauding NCDOT by submitted bids that were falsely held out to be competitive and free of collusion, as well as using the U.S. Postal Service and email to carry out the scheme.
According to the indictment, the former executive obtained, or directed another to obtain, bid prices from Contech’s competitor on the projects in advance, then intentionally inflating its bids to be higher than its co-conspirator’s while falsely certifying the bids were submitted free of collusion. He allegedly then manipulated Contech’s bids by increasing the price by a certain percentage above its competitor’s in order to give the appearance of submitting a good faith, competitive bid to NCDOT.
Then, upon submitting the intentionally inflated bid and losing the projects to its co-conspirator, Contech supplied all of the aluminum pieces for those projects.
The indictment alleged that the conspiracy primarily involved Contech soliciting bid prices over the phone, occasionally meeting in person, or exchanging emails and text messages, to share pricing information used to create cover bids. Additionally, the co-conspirators reportedly used the mails and wires in the scheme.
“Activities related to collusion, bid rigging, and market allocation do not promote an environment conducive to open competition which harms the consumer,” said Director Steven Stuller, U.S. Postal Service (USPS) Office of Inspector General, at the time.
“The USPS spends hundreds of millions of dollars on new construction, maintenance, and renovation of USPS facilities. Along with the Department of Justice and our federal law enforcement partners, the USPS Office of Inspector General will aggressively investigate those who would engage in this type of harmful conduct.”
The first offense charged carries a statutory maximum penalty of 10 years in prison and a $1 million fine for individuals, and a criminal fine of $100 million for corporations. The remaining five charges carry a statutory maximum penalty of 20 years in prison and $250,000 fines, and a criminal fine of $500,000 for organizations.
The DOJ noted at the time that the maximum fines for each count may be increased to twice the gain derived from the crime or twice the loss suffered by victims if either amount is greater than the statutory maximum fine.
The case was a result of an ongoing federal antitrust investigation into bid rigging and other criminal conduct in the aluminum structures industry, conducted by the Antitrust Division with the assistance of the USPS Inspector General, the U.S. Department of Transportation Office on Inspector General, and the U.S. Attorney’s Office for the Eastern District of North Carolina.
In March 2021, the court denied Contech’s motion to apply the rule of reason to the case.
In June 2021, Contech pleaded guilty to one count of bid-rigging under Section One of the Sherman Antitrust Act and one count of conspiring to commit mail and wire fraud. The company also agreed to pay a criminal fine of $7,000,000 and restitution to the NCDOT in the amount of $1,533,988.
Earlier this year, in February, Brewbaker was convicted in New Bern, North Carolina, for his participation in the bid-rigging and fraud schemes for more than 300 aluminum structure projects funded by the state of North Carolina.
Evidence reportedly showed that Brewbaker instructed a co-conspirator to submit non-competitive bids to NCDOT and to hide his bid rigging and fraud by varying the amount of inflated bids submitted. The DOJ reported that he also made clear to a co-conspirator that he would hide illegal conduct by deleting text messages he received about the conspiracy.
Brewbaker was convicted of conspiring to rig bids, conspiring to commit fraud, three counts of mail fraud and one count of wire fraud. He faced a maximum penalty of 10 years in prison for conspiring to rig bids and 20 years in prison for each of the other counts.
Following the week-long trial in the U.S. District Court for the Eastern District of North Carolina earlier this year, Brewbaker’s conviction has led to the sentencing of 18 months of imprisonment for his involvement in the bid-rigging and fraud.
Additionally, he was ordered to pay a $111,000 criminal fine and a $600 special assessment.
“Today’s sentence reflects the seriousness of offenses that subvert the competitive process, target state and local governments, and ultimately cost taxpayers money,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division.
“The division and its Procurement Collusion Strike Force (PCSF) partners remain committed to holding executives accountable when they choose to cheat instead of compete.”
“The Justice Department’s Antitrust Division, along with our other federal law enforcement partners, secured a victory today in our fight against bid-rigging and collusion,” said Executive Special Agent in Charge Kenneth Cleevely of the U.S. Postal Service Office of Inspector General (USPS-OIG).
“The USPS-OIG will vigorously investigate those who would engage in harmful anticompetitive practices, and we continue to ask for the public’s assistance in identifying and reporting those engaged in this type of activity.”
“Violations of the nation’s antitrust laws will be taken seriously and those who circumvent federal bidding and contract regulations will be held accountable,” said Special Agent in Charge Craig Miles of the Department of Transportation’s Office of the Inspector General (DOT-OIG) Mid-Atlantic Region.
“The message is clear: we will pursue and investigate individuals who compromise the integrity of the procurement process for corporate greed and personal gain.”
The case was prosecuted by the Antitrust Division’s Washington Criminal I Section, which investigated with the assistance of USPS-OIG and the DOT-OIG. The U.S. Attorney’s Office for the Eastern District of North Carolina also provided support throughout the investigation and trial.