More Charges Announced in Ongoing Investigation into Bid Rigging and

South Korea-based companies Hyundai Oilbank Co. Ltd. and S-Oil Corporation have agreed to plead guilty to criminal charges and pay a total of approximately $75 million in criminal fines for their involvement in a bid-rigging conspiracy that targeted contracts to supply fuel to United States Army, Navy, Marine Corps, and Air Force bases in South Korea, the Department of Justice announced today.  Hyundai Oilbank and S-Oil have agreed to plead guilty to an antitrust charge contained in a superseding indictment that was unsealed today.

The superseding indictment also charges seven individual defendants — associates, managers, and executives of companies that conspired to rig bids for fuel supply contracts — for participating in this bid-rigging conspiracy and in a scheme to defraud the U.S. government. 

In separate civil resolutions, Hyundai Oilbank and S-Oil have agreed to pay a total of approximately $52 million to the United States for civil antitrust and False Claims Act violations related to the bid-rigging conspiracy.  These settlements reflect the important role of both Section 4A of the Clayton Act and the False Claims Act to ensure that the United States is fully compensated when it is the victim of anticompetitive conduct. 

“These charges reflect the Antitrust Division’s commitment to prosecuting bid rigging and fraud — especially when those crimes directly target taxpayer dollars that fund the U.S. military’s critical work.  We will not waver in our dedication to prosecuting corporations and individuals, wherever they are located, that seek to profit at the expense of American taxpayers,” said Assistant Attorney General Makan Delrahim of the Department of Justice’s Antitrust Division.  “We will continue to use Section 4A of the Clayton Act to obtain civil settlements that protect the interests of American taxpayers.”  

“As the superseding indictment shows, the United States will pursue and hold accountable not only corporate malefactors but also individuals who defraud the military,” said U.S. Attorney Benjamin C. Glassman for the Southern District of Ohio.

“Illegal bid-rigging schemes violate fundamental tenets of government contracting and lead to inflated charges and costs to the government,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division.  “The Department remains steadfast in its commitment to upholding the rule of law and protecting our nation’s military and the American taxpayer from conduct that undercuts competition.”

Pursuant to the Department’s Coordination policy, often labeled the Anti-Piling On policy, the Antitrust Division’s criminal and civil sections and the Civil Division’s Fraud Section worked together effectively to reach coordinated global settlements that were equitable and proportionate to the defendants’ conduct.  Furthermore, both divisions successfully coordinated their efforts to avoid imposing fines, penalties, or damages that were unnecessarily duplicative of each other.

The Criminal Case:   

Today, the Department of Justice unsealed a three-count superseding indictment from the U.S. District Court for the Southern District of Ohio that was returned in September 2018.  According to the superseding indictment, the Defense Logistics Agency and the Army and Air Force Exchange Service are two U.S. Defense Department agencies that contract with South Korean companies to supply fuel to the numerous U.S. military bases throughout South Korea. 

Count One charges Hyundai Oilbank, S-Oil, and the seven individual defendants with participating in a combination and conspiracy to suppress and eliminate competition during the bidding process for these fuel supply contracts.  The individual defendants, all residents and citizens of South Korea, are Hee-Soo Kim, Tae Ho Cho, Jiwon Kang, Young-Ho Yoon, Byung Kuk Kim, Byungik Moon, and Eul-Jin Hyung.

Count Two charges Hyundai Oilbank, S-Oil, and the seven individual defendants with participating in a conspiracy to defraud the United States by impairing, obstructing, and defeating the lawful function of the procurement processes for the fuel supply contracts.  As part of its plea agreement with Hyundai Oilbank and S-Oil, the Antitrust Division agreed to move to dismiss Count Two against Hyundai Oilbank and S-Oil upon sentencing. 

Count Three charges Hee-Soo Kim with tampering with a witness by use of intimidation, threats, or corrupt persuasion, with the intent to hinder, delay, and prevent communication with a law enforcement officer of the United States. 

Hyundai Oilbank and S-Oil have agreed to cooperate with the Justice Department’s ongoing criminal investigation.  The plea agreements are subject to court approval.

The investigation began based on a tip to the Defense Logistics Agency Inspector General (IG) Hotline.  The IG office developed the information, interviewed the complainant, and then referred the case to the Defense Criminal Investigative Service. 

“We will vigilantly protect the integrity of our nation’s military procurement process and the enabling capabilities it brings to our warfighters across the globe,” said Deputy Director Paul K. Sternal of the Department of Defense, Defense Criminal Investigative Service (DCIS).  “The criminal charges and fines announced today demonstrate the heavy consequences for those who subvert competition through collusion and price fixing.  Joined by our investigative partners, DCIS stands ready to pursue those who threaten our nation’s military resources.”

“We are pleased with today’s guilty pleas from the defendants for their unconscionable involvement in this bid-rigging conspiracy that threatened to place our forces in jeopardy while fulfilling their missions,” said Frank Robey, the Director of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit.  “As we have stated many times before, the highly trained special agents from our Major Procurement Fraud Unit, along with our federal law enforcement partners, will continue to aggressively investigate organizations that commit crimes against our Army, our Soldiers and our nation.”

“The Air Force Office of Special Investigations has an unwavering commitment to identify, exploit, and neutralize fraud impacting the integrity of the Air Force, Department of Defense and U.S. Government acquisition process,” said Director Timothy Ries, of the Air Force Office of Special Investigations, Office of Procurement Fraud.  “These significant criminal and civil penalties are the result of the exceptional collaborative efforts of our organization and its law enforcement and Department of Justice partners to bring these corporations to justice for engaging in the decade-long bid-rigging conspiracy that targeted fuel supply contracts for U.S. Army, Navy, Marine Corps, and Air Force bases in South Korea.”

“Today’s announcement demonstrates the FBI’s persistence in investigating fraud against the United States wherever it occurs,” said FBI Executive Assistant Director Amy Hess.  “These companies and individuals thought they could cheat the system and the American taxpayer, but the FBI, working with our partners, exposed their scheme.  This case should be a lesson to all:  the FBI will aggressively pursue those who attempt to defraud the United States and will bring them to justice.”

“Open competition remains a cornerstone of our free democratic society,” said Assistant Director in Charge Paul D. Delacourt of the FBI’s Los Angeles Field Office.  “These criminal and civil charges demonstrate the FBI’s determination to investigate companies and individuals, foreign and domestic, who engage in bid rigging and other corruption schemes to defraud the U.S. Government.  Working with our federal law enforcement partners, the FBI is committed to bringing to justice those who enrich themselves through illegal activity at the expense of the U.S. taxpayer.”

An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.

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