Subcontractor Sentenced to Pay Nearly $9 Million in a Criminal Fine and Restitution for Rigging Bids and Defrauding the U.S. Military

 

First guilty plea and sentence in an ongoing investigation into bid rigging and related fraud at U.S. military installations in South Korea

J&J Korea Inc. (J&J Korea), a company based in the Republic of Korea (South Korea), was sentenced by a federal judge in Austin, Texas, to pay nearly $9 million dollars in a criminal fine and restitution for rigging bids and committing fraud in connection with subcontract work at U.S. military installations in South Korea.

On May 10, J&J Korea Inc. pleaded guilty in the U.S. District Court for the Western District of Texas to one count of wire fraud and one count of conspiracy to restrain trade.

“The significant corporate fine and restitution order in this case demonstrates the importance of protecting U.S. taxpayer dollars both at home and abroad,” said Deputy Assistant Attorney General for Criminal Enforcement Manish Kumar of the Justice Department’s Antitrust Division. “The Antitrust Division and our Procurement Collusion Strike Force partners will continue to aggressively pursue bid rigging and other collusion that targets the United States, even when criminals execute their schemes overseas.”

“This sentencing demonstrates that those who conspire to rig bids to eliminate competition and attempt to defraud the government will be caught and held accountable,” said Special Agent in Charge Michael Curran of the Department of the Army Criminal Investigation Division (CID), Major Procurement Fraud Field Office. “CID will continue to see to it that anyone suspected of contract fraud and corruption is brought to justice.”

“The FBI and its partners vigorously investigate and work to prosecute individuals and entities who conspire to engage in bid rigging,” said Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division. “Today’s sentencing demonstrates the FBI’s dedication and commitment to ensuring that those who defraud the U.S. government and the American people face justice.”

Based on court filings, J&J Korea, along with other co-conspirators, rigged bids and defrauded the U.S. Department of Defense (DOD) to obtain millions of dollars in repair and maintenance subcontract work at U.S military hospitals in South Korea. The subcontract work related to a U.S. Army Corps of Engineers (USACE) contract that provides for operation and maintenance support services at U.S. military facilities around the world, including military hospitals in South Korea. The USACE contract required the prime contractor to use a competitive bidding process when awarding subcontract work under the contract, but J&J Korea and one of its co-conspirators, another company located in South Korea, agreed to submit rigged bids, thereby ensuring that J&J Korea would win most of the subcontract work in South Korea under the USACE contract.

The scheme, which ran from at least November 2018 to March 2021, caused the DOD to overpay for J&J Korea’s services in the amount of approximately $3.6 million. As part of the sentence, the company will pay a $5 million fine and $3.6 million in restitution. This guilty plea and sentence are the first in an ongoing investigation into bid rigging and related fraud at U.S. military installations in South Korea. In March 2022, two officers of J&J Korea were also indicted by a grand jury in connection with the same conduct.

The Antitrust Division’s Washington Criminal II Section, CID and the FBI investigated the case.

Trial Attorneys Daniel E. Lipton and Daniel P. Chung of the Antitrust Division prosecuted the case with assistance from Assistant United States Attorney Matthew B. Devlin for the Western District of Texas.

Anyone with information in connection with this investigation, or with information on other market allocation, price fixing, bid rigging and other anticompetitive contact should contact the Procurement Collusion Strike Force at www.justice.gov/procurement-collusion-strike-force.

The Procurement Collusion Strike Force is Department of Justice’s coordinated, joint law enforcement effort to combat antitrust crimes and related fraudulent schemes that impact procurement and grant and program funding at all levels of government — federal, state and local. The strike force expanded its footprint with the launch of PCSF: Global, which is designed to deter, detect, investigate and prosecute collusive schemes that target government spending outside of the United States. For more information, visit www.justice.gov/procurement-collusion-strike-force.