Fraud and public works: challenge for 'jobs' bill
As Congress considers President Reagan's multibillion-dollar highway projects-jobs bill, a federal probe into highway bid rigging has turned into the largest antitrust investigation in US history.
Some 170 people and 145 companies have been found guilty of highway construction bid rigging in a 15-state investigation that is ''not likely to end soon,'' according to an official with the Justice Department's antitrust division.
Would pumping more federal money into state highway projects lead to further abuse of taxpayers' dollars? Perhaps, but probably less than before the current wave of prosecutions began, several federal and state officials say.
Because of the extensive bid-rigging prosecutions, ''states are in the best posture they've ever been for detecting antitrust violations,'' says Walter A. McFarlane, a deputy attorney general in Virginia, where some prosecutions have occurred. States have been ''trying to plug the holes that were leaking'' in their bidding safeguards, he says.
Massachusetts, Florida, and a number of other states have begun using computers to help spot patterns of possible bid rigging. Several national conferences have been held among state highway officials to teach them better detection methods. Some 20 states now exchange information on companies and individuals indicted on bid rigging.
But ''there are still some states out there that say this (bid rigging) couldn't happen,'' says Mr. McFarlane, who heads a legal affairs subcommittee of the American Association of State Highway and Transportation Officials.
Bid rigging had been ''a way of life'' for many years, according to many of those convicted, says Hugh T. O'Reilly, an assistant chief counsel with the Federal Highway Administration.
According to federal and state investigators, officials from highway contracting companies conspiring to rig bids would agree which company among them would get a particular job. Then one or two of the other companies would submit higher bids to make it appear to state officials that there had been actual competitive bidding. Sometimes the conspirators would pay other companies to keep them from bidding.
The massive bid rigging would have been detected sooner if state officials had been more alert and if officials of companies not rigging bids, but aware of the practice, had reported it to law enforcement authorities, McFarlane says.
Some convicted contractors have argued that the public was not hurt by all this - that bidding would have been higher without the illegal agreement among bidders. One federal investigator says there is no way to know, but other officials say the public paid more for the projects because of the bid rigging.
Big companies and small have been involved, as have low-ranking officials and company presidents, says Joe Widmar of the Justice Department's antitrust division.
So far in the three-year investigation, some $40 million in fines and a total of 37 years of prison sentences (the average term has been 4 1/2 months) have been handed down by the courts.
''It happens to be the biggest antitrust investigation in history,'' in terms of number of cases, geographic scope, and federal effort, says Mark Sheehan, a Justice Department spokesman. To date there have been acquittals of only 14 persons and 8 companies.
Prosecutions have been made in Pennsylvania, Maryland, Virginia, North and South Carolina, Georgia, Florida, Mississippi, Tennessee, Kentucky, Texas, Oklahoma, Nebraska, Kansas, and Iowa.
In most cases the defendants pleaded guilty. The key to convictions has been the use of partial immunity granted to defendants who implicate others, who in turn implicate still others.
Prosecutions in other states are likely, according to the Justice Department. And the bid-rigging probe has spread into alleged conspiracy on sewer construction projects.
''I think we've pretty well gotten through the first generation of conspiracies - the clumsy ones,'' says Mr. O'Reilly. Still ahead is the challenge of detecting the more ''sophisticated'' bid-rigging methods, he says.