Antitrust Law Daily Wrap Up, ANTITRUST NEWS: More indictments returned over bid rigging and fraud on military installations in Korea, (Mar 7, 2024)

By Martin A. Steinberg, J.D.

The scheme extended over a three-year period and affected multiple defense agencies.

The Justice Department’s Antitrust Division announced that a federal grand jury in Texas returned a superseding indictment charging three South Korean nationals and a South Korean company for a bid-rigging conspiracy and scheme to defraud the U.S. in operation and maintenance work at U.S. military installations in South Korea. Hyuk Jin Kwon and Hyun Ki Shin were previously indicted on March 16, 2022. The superseding indictment also named DESCA Co. Ltd. and its CEO, Hye Yeon Jo. They are accused of rigging bids and fixing prices for subcontract work on operation and maintenance support services administered by the Army Medical Command (MEDCOM), the Army Corps of Engineers (USACE), and the Defense Logistics Agency (U.S. v. Kwon, Case No. 1:22-cr-00049-RP).

Background. From November 2018 until December 2021, Defendants conspired to rig bids and fix prices for subcontract work and defrauded the U.S. Department of Defense to obtain millions of dollars in repair and maintenance subcontract work at U.S military installations in South Korea. The new eight-count superseding indictment charged Defendants with one count of conspiracy to restrain trade in violation of the Sherman Act, one count of conspiracy to commit wire fraud and six counts of wire fraud. They face a maximum penalty of 10 years in prison and a $1 million fine for individuals and a maximum penalty of a $100 million fine for corporations for the violation of the Sherman Act. They also face a maximum penalty of 20 years in prison and a $250,000 fine for violating the wire fraud statute. The maximum fines 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.

This is the second indictment into bid rigging and price fixing for operation and maintenance work on U.S. military installations in South Korea. A South Korean company was sentenced on Sept. 12, 2023, for participating in the conspiracy and fraud scheme.

Conspiracy to restrain trade. In furtherance of the conspiracy, Defendants and their co-conspirators are alleged to have done did the following: (1) agreed to provide each other complementary and rigged bid proposals for subcontract work to contractors servicing MEDCOM, the USACE, and the Defense Logistics Agency (DLA); (2) exchanged pricing information and bid proposals with each other in order to submit rigged bid proposals and fixing prices for subcontract work to contractors servicing these agencies; and (3) caused the submission of rigged bids and fixed prices for subcontract work so that J&J Korea would win subcontract work under the USACE Contracts and DESCA would win subcontract work under the DLA Contracts. J&J Korea was majority owned by J&J Maintenance, Inc., a Texas-based corporation, which was engaged in the sale of operation and maintenance support services to the United States government. J&J Korea’s other owner was Defendant Kwon.

Conspiracy to commit wire fraud. In the Western District of Texas and elsewhere, Defendants and their coconspirators transmitted by interstate wire communication as part of executing their scheme, according to the charges. The indictment identified eight instances where a total of over $1.5 million was transferred from J&J Maintenance to J&J Korea between April 2020 and October 2020. Each transmission was listed as a separate count.

Forfeiture and damages. The indictment also gave Defendants notice that the government will be seeking civil forfeiture of Defendants’ property upon conviction. The government will also be pursing money damages to recover the amount that Defendants reaped as a result of the charged offenses. Finally, the indictment notified Defendants that the government may pursue forfeiture of substitute property should the subject property not be able to be located, transferred out of the court’s jurisdiction, comingled, or substantially diminished in value as a result of the acts or omissions of Defendants.

The case is No. 1:22-cr-00049-RP.

Attorneys: Daniel P. Chung, U.S. Department of Justice, for the U.S.

Companies: DESCA Co. Ltd.

News: Antitrust AntitrustDivisionNews TexasNews