The latest updates and analysis from Morrison Foerster
January 27, 2021 - Protests & Litigation

Companies Pay Criminal Penalties and Compensation for Undermining Competition

GAO Finds CIO-SP4 Solicitation Is Unduly Restrictive of Competition

On Tuesday, January 19, 2021, the Department of Justice announced charges against two providers of foreign language services for conspiracy to defraud the government on a multimillion dollar contract by impeding, impairing, obstructing, and defeating competitive bidding. The two companies, Comprehensive Language Center Inc. (CLCI) and Berlitz Languages Inc. (Berlitz), have admitted to the charges.

Berlitz and CLCI admitted to violating 18 U.S.C. § 371 by discussing, agreeing to, and facilitating the submission of false and misleading information to the National Security Agency (NSA) between March and December 2017. The charges relate to a multiple award indefinite delivery, indefinite quantity (IDIQ) contract vehicle for foreign language instruction, under which the NSA awarded three prime contracts. To qualify as technically acceptable, offerors needed the capacity to provide language training in all six specified geographic areas. Following award of the IDIQ contracts, the awardees would then compete against each other for individual delivery orders to provide training in a particular language at particular locations.

According to their stipulations, Berlitz and CLCI submitted invoices and received payments based on non-competitive bids. In furtherance of the conspiracy, and to qualify as technically acceptable when it otherwise would have been ineligible for award, CLCI falsely and misleadingly claimed the capacity to perform training services at a particular facility in Odenton, Maryland – a facility that turned out to be solely owned and operated by its competitor, Berlitz. Berlitz provided CLCI with a floor plan to the Odenton facility, which CLCI submitted as “our Odenton, MD location” in its proposal. In exchange for this favor, CLCI agreed not to bid against Berlitz for any delivery orders involving language training near the Odenton facility. CLCI memorialized the agreement with a draft letter in an email to Berlitz. On two separate occasions in August 2017, the companies maintained the agreement by email exchanges, confirming that CLCI would not bid on a delivery order NSA sent out for instruction in Maryland.

Under the deferred prosecution agreements, which resolved the charges, both companies agreed to cooperate fully in any related criminal investigation and prosecution, and to implement a compliance and ethics program to detect and prevent future violations. Both companies also agreed to pay criminal penalties, $147,000 for Berlitz and $140,000 for CLCI, and victim compensation to NSA to the tune of $57,000. Violations of 18 U.S.C. § 371 carry a maximum company fine of $500,000.

Takeaway: Contractors and prospective contractors would do well to heed the lessons here. When submitting information to the government, truthfulness is paramount. And it should go without saying that colluding with other competitors to stifle competition is illegal. Companies that violate these legal and ethical norms not only face criminal penalties, but also may end up suspended or debarred from government contracting. Companies should ensure their regular ethics training addresses these and other aspects of integrity in the bidding process.