Judge orders South Korean subcontractor to pay $9m for defrauding US military

Image: United States Department of JusticeVectorization: Ali Zifan, Public domain, via Wikimedia Commons

A US federal judge has ordered a South Korean repair and maintenance subcontractor to pay a fine and restitution totalling nearly US$9 million for bid rigging and defrauding the US military.

The fine comes after J&J Korea pleaded guilty in the US District Court for the Western District of Texas to one count of wire fraud and one count of conspiracy to restrain trade in May.

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 US military hospitals in South Korea.

The subcontract work related to a US Army Corps of Engineers (USACE) contract that provides for operation and maintenance support services at US 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.

The US Department of Justice said that the guilty plea and sentence are the first in an ongoing investigation into bid rigging and related fraud at US 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.

Deputy assistant attorney general for criminal enforcement Manish Kumar of the Justice Department’s Antitrust Division said, “The significant corporate fine and restitution order in this case demonstrates the importance of protecting US taxpayer dollars both at home and abroad.

“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.”