Wednesday, May 30, 2007

The Case, Part I

By now, you may not care what the substance of the case was, but I'm ready to tell you. I won't mention the names and locations because I don't want the blog to be connected to the case. If you're curious about specifics, I'll answer your questions in the comments.

The crime
The crime was bid-rigging on three construction contracts. The contracts were undertaken in a middle eastern country (not Israel) and were the result of high-profile negotiations undertaken by our last single-term Democratic president (you know, the [Redacted] Peace Accords).  The contracts were paid for and facilitated by USAID. Thus, US anti-trust laws pertain. The work was eventually performed in the mid-late 1980's and early 1990's. When we were all wee babes.

The plaintiff argued that the defendants engaged in a conspiracy to rig the bidding. By their actions, which included meetings with competitors and payoffs, they created a non-competitive atmosphere that caused the US government to pay more than was fair for the jobs. The defense against the charge was that the contracts were competitive, the work was difficult and the contractors performed well. No one disagreed that the work was done to everyone's satisfaction, but that did not negate the conspiracy.

To give you a sense of how this is expressed formally, here's a quote from the first count of the indictment, CONSPIRACY TO RESTRAIN TRADE, "...the defendants and others entered into and engaged in a combination and conspiracy to suppress and eliminate competition on construction contracts funded by the United States...." The second count is CONSPIRACY TO DEFRAUD THE UNITED STATES and reads, in part, "...It was a part and object of the aforesaid conspiracy to defraud USAID that the defendants and co-conspirators would and did agree to inflate and manipulate the prices bid on USAID-funded construction contracts..."

The Plaintiffs
The plaintiffs were the US Government and a private individual called a "relator." The case was first brought by the relator under the false claims act. The case was then joined by the Government. Thus, two sets of attorneys sat at the plaintiff tables--three from DOJ and three from a private firm. Both groups did a good job, but the private attorneys were more polished. The relator also gets a percentage of the judgement. The defense tried to make some hay with this, but, even though none of the jury were big fans of the relator as an individual, he did "open the door" and "shine some light" on the case (to quote the prosecution). Without him, no one would have known about the conspiracy. And without a reward he might never have brought the case, so it didn't bother me too much that he would get a cut. The relator was an accountant with a firm that (we found out later) eventually settled. His firm was in joint venture for several contracts with the defendants.

The Defendants
The four defendants consisted of two individuals and four companies. All of the company's names contain the same family name (I'm using "Smith," but it's not the real name), which confused the jury up to almost the end of the trial. Here's a list of the defendants:
  • Smith Corporation; Smith International Inc.; and Joe Smith (the two firms have their headquarters in a southern state, are incorporated in Delaware and the companies shared office space)
  • Smith International Establishment (incorporated in a tiny European country, no offices)
  • Joe Smith International Construction + Smith UK Services, Ltd (a UK company with offices in London)
  • John Green (not related to Joe Smith, but a VP of Smith International Inc.; he hired the Managing Partner of Smith UK and spent a lot of time in their offices)
The "Smith" in the company names refers to Joe Smith and/or his older brother. The older Smith died a few years ago, but he wasn't involved in this part of the business at the time of the contracts, but he was CEO and Chair of Smith Corporation. He was never implicated in any wrong doing as part of the trial.

The evidence
The Plaintiff's case was grounded on the evidence of (illegal) pre-bid agreements and meetings between the defendants and other contractors (the co-conspirators). They also presented evidence of questionable invoices submitted after contracts were signed (payoffs). 

The defendants presented a mountain of evidence about the substance of the contracts. All that information was irrelevant to what we had to decide: whether or not there was a conspiracy. A peculiar side-effect of the trial is that I'm now a semi-expert in shoring methods, including sheet piling, soldier piling and lagging, and the Krings system. I have some knowledge in a few other areas related to digging trenches and tunnels as well: dewatering, pipe jacking, and tunnel boring. If you need to do deep trenching, I can advise you on the best way to go about it. We had dewatering explained to us at least a half a dozen times, along with the general principles and techniques involved in shoring. It was unbelievable and almost totally unnecessary.

Stay tuned for the next section, "The deliberations." If you have questions, I'll answer them in the comments....

Grateful for: construction expertise.

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