The Justice Department is continuing an investigation into alleged bid rigging by companies moving household goods of troops and defense workers. One company has pleaded guilty and two others are still facing charges.
At least 30 companies have been investigated, said one of the companies charged, in a sweep of an industry that, according to the Justice Department, makes $100 million a year from military coffers for moves from Germany to the United States alone.
All three companies charged so far moved goods between the two countries. The government may charge yet more companies, according to the Justice Department.
In late April, Cartwright International Van Lines pleaded guilty and was fined $250,000 for conspiring with other bidders to raise shipping rates. The Missouri company has since vowed to help advance the investigation if asked.
“Under the agreement, the company has agreed to plead guilty to one count of the Sherman [Antitrust] Act and to pay a recommended fine,” company spokeswoman Gayla Rose told Stars and Stripes, reading from a prepared statement. “The company has cooperated with federal officials from the beginning of the investigation and will continue to do so in the future if requested.”
Rose declined to answer further questions. A Justice Department official said he didn’t know whether Cartwright was banned from future contracts in addition to the fine.
“As far as disbarment, that’s not our mandate,” said the Justice press official. “That’s handled by the agency involved, and that would be the Defense Department.”
The military’s Surface Deployment and Distribution Command in Alexandria, Va., referred questions on Cartwright back to the Justice Department. Michael Alexander, a senior agent with the Defense Criminal Investigative Service, would only say that the broader case remains open.
The two remaining companies facing price fixing and fraud charges are Gosselin World Wide Moving of Antwerp, Belgium, and the Pasha Group of Corte Madera, Calif. Both have entered agreements allowing them to delay a final plea until a judge rules on whether the government has a case. The standard maximum penalty for price fixing is a fine of $10 million. Fraud carries a $500,000 fine.
Additional fines can be added, however, depending upon how much a company made from the crimes. The amount the shippers allegedly made in the suspected price fixing was unavailable.
For now, neither company with an open case is barred from government business.
“They are still eligible to haul our personal property shipments,” said John Randt, a spokesman for the Surface Deployment and Distribution Command. “Basically, they signed an administrative settlement agreement that they’re not in any way restrained from any government contract.”
That agreement, however, has nothing to do with dissolving criminal charges.
“The investigation has not been dropped,” said a Justice Department official.
“Right now, everything is in waiting mode,” said Dany Rasschaert, the coordinator of a new ethics program instituted at Gosselin as part of the deal with the military. “We are very confident that the whole case is wrong. We want to prove we are innocent in this matter.”
Gosselin asked a judge to dismiss the case in early May. Rasschaert said he expects a decision in late summer or early fall. In October, the government arrested the company’s managing director, Marc Smet, in Honolulu but later released him, according to the Justice Department.
Rasschaert said that Gosselin has done nothing illegal because its business falls under the Shipping Act. The 1984 law protects sea carriers from government intervention on a number of fronts, including antitrust prosecution. It allows oceanic transport companies to jointly set rates in order to stimulate exports and strengthen defense.
Pasha issued a statement that was in basic agreement with Gosselin.
According to Pasha, the company has agreed to pay an undisclosed fine if the judge does not dismiss the case. Pasha spokeswoman Joelle Vossbrink said the company did not have to enter an immediate plea.
Court documents allege that the companies manipulated a two-tier bidding process in order to enter low bids at the beginning of a year, then collude with other shippers to jointly raise rates during the second half of the year. Some companies were told to file rates that would raise the government’s bill, some were told to cancel their low rates, according to the documents.
The charges say Gosselin and Pasha “did unlawfully, willfully and knowingly combine, conspire and agree to defraud the United States by increasing the rates paid by the Department of Defense” to “levels higher than would have prevailed in the absence of the conspiracy.”
A top Justice Department official mentioned the cases in a speech to the California State Bar in October, disclosing a three-pronged probe strategy.
“The division is conducting its investigation with the assistance of the Defense Criminal Investigative Service and the Army Criminal Investigative Command,” said Deborah Platt Majoras, principal deputy assistant attorney general for antitrust. She then warned lawyers of obstructing such investigations: “In the last three years, we have brought eight cases charging obstruction of justice in connection with cartel investigations.”
A retired master sergeant who once headed the military’s personal property shipping in Europe said companies often find ways to wring the government wallet. He said the military must keep on constant guard to avoid getting ripped off — but no one’s on watch.
“This has got a very long history,” said Winston Garth, former European superintendent of personal property for the Military Traffic Management Command. He now runs his own shipping firm.
“I’ve been involved with the personal property program here in Europe for 25 years, most of it in government service. This is not something new,” Garth said. “It goes way, way back. The average military person is totally unaware of it. They don’t see it.
“But it’s a very costly thing to the taxpayer. That’s the issue.”
