With pricey cases of wine and a source on the inside, a pair of San Francisco software vendors allegedly managed a four-year bid-rigging scheme that steered millions of dollars worth of contracts with California state government to their company.
Now, they’re facing up to 10 years in jail and a $1 million fine under a new bid-rigging indictment released this week by the Justice Department.
The indictment charges that leaders of San Francisco-based Expert Network Consultants manipulated state government procurement protocol between 2008 and 2012 by gaining advanced knowledge of contracts and persuading partners to submit straw bids at inflated prices.
State procurement officers, incorrectly believing they’d obtained multiple legitimate bids, would then award contracts to Expert Network Consultants.
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The indictment has few details, and a criminal complaint in federal court is sealed.
However, the federal investigation followed one carried out by the state Attorney General’s Office. The state last year filed charges against the company in San Francisco Superior Court, where it spelled out how authorities believe Expert Network Consultants manipulated state procurement officers.
“Defendants’ bid-rigging scheme has inflated the prices paid by the state for IT products, substantially harmed the integrity of California’s competitive procurement process, and deprived legitimate competitors of a fair chance at doing business with the government,” reads an April 2015 complaint filed by Deputy Attorney General Adelina Acuna.
A lawyer who represented the company and its representatives John Brewer and Brent Vinch did not return a call for comment. Brewer did not reply to messages left by The Sacramento Bee.
The new indictment also names Loraine Dixon of Granite Bay as co-conspirator. She was a sales representative for a company with an ongoing contract with the state who allegedly tipped off Brewer and Vinch to contracts and dissuaded their competitors from submitting bids.
She also allegedly recommended that state officials seek bids from companies that actually were in league with Brewer and Vinch.
The software contracts tended to cost less than $250,000. In some cases procurement officers had to obtain only two bids before choosing a vendor.
An e-mail obtained by the state showed Brewer once praising Dixon for pulling the “puppet strings” to steer a contract to his company.
Dixon in a May 2015 court filing denied the state’s accusations. Dixon’s attorney declined to comment on this week’s development.
According to the state complaint, Brewer and Vinch won at least 40 contracts worth more than $3 million from the state. It’s not clear whether the subsequent federal investigation identified any other contracts.
The original state complaint named seven other people who allegedly helped Brewer and Vinch by submitting bids for contracts they did not intend to win. They are not named in the federal indictment.
The state complaint alleged that Vinch dictated bid prices to his partners. A typical price quote from him would “beat the straw bidders’ bid, but is small enough to avoid raising questions about an implausible price differential,” it said.
Brewer and Vinch allegedly rewarded their partners with cases of wine, gift cards, laptops and cash.
They won a key round in state court last year before the Sacramento-based U.S. Attorney’s Office for the Eastern District of California took over the case. They successfully argued that they should not have to repay in full the contracts they won from the state because they provided the government with working products.
Instead, a judge ruled that they’d be responsible for how much they overcharged the state.
The state did not “allege that it paid for IT products it never received, only that it often overpaid for those that it did,” San Francisco Superior Court Judge Mary Wilson wrote.