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Monday, June 15, 2015

Procurement controversies series -- Puerto Rico school buses

School bus company owners indicted for bid-rigging and fraud in Puerto Rico by attorneys Jennifer A. Dixon and Deirdre A. McEvoy
A federal grand jury in San Juan, Puerto Rico indicted five individuals for bid rigging and fraud conspiracies in connection with an auction for public school bus transportation contracts. The Justice Department filed a seven-count felony indictment in U.S. District Court of the District of Puerto Rico against the five school bus transportation company owners. The first count alleges that the bus owners conspired to rig bids and allocate the market for public school bus transportation services in Caguas municipality, a violation of Sherman Act § 1. Each defendant faces a maximum sentence of ten years in prison and a $1 million fine on this charge.

According to the Justice Department, the conspiracy occurred from around August 2013 until May 2015, and related to a 2013 auction to award four-year contracts for public school bus transportation. According to a statement by Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division, “The defendants are charged with depriving taxpayers, the Municipality of Caguas and the Puerto Rico Department of Education of the benefits of a competitive bidding process for school bus contracts.”

This indictment is part of an “ongoing effort to investigate and prosecute financial crimes” in the District of Puerto Rico. In particular, this is the first case resulting from an ongoing federal antitrust investigation into price fixing, bid rigging, and other anticompetitive conduct in Puerto Rico’s school bus transportation services industry.
Plus ça change ...:

According to the Spanish historian Carlos Madrid, in his book Beyond Distances (Saipan, Northern Mariana Islands Council for Humanities, 2006), there was an uncommon distress in the Marianas Islands in 1876, brought about by a combination of factors, chiefly Spain’s forcible introduction into the Islands of hundreds of political and other criminal deportees from Spain, but also typhoon and drought. The situation on Saipan had become particularly dire. 

As he tells the story
“Chamorros and Carolinians together with the deportees were facing a famine without precedent that could bring the island to catastrophe. Martín [the Saipan Spanish authority] wrote Governor Brabo [the Guam-based Governor of the Marianas] with an urgent request for provisions, since in a few days they would literally have nothing to eat. In Guam this request would have been received with great concern as resources in Agaña were also extremely limited. But the situation in Saipan was nevertheless so pressing that Governor Brabo authorized, on his account, the purchase of all the necessary rice, which was to be sent in the launch San José as soon as possible.

The obligatory legal procedures, which mandated that government requisitions had to be contracted through free and open auction, still had to be fulfilled. The gobernadorcillo of Agaña, following the custom, ordered the prominent display of the notice announcing the public auction in the busiest areas of the capital. At the same time the pregonero, or town crier, spread the news in the streets for three consecutive days. In order to save time, knowing that in the whole of the Marianas only George Johnston could provide the necessary quantities of meat from his leasehold in Tinian, the request for the purchases of barrels of cured pork was directly made to his representative Vicente Calvo. The barrels were to be sent to Saipan in the amount of a pound daily per deportee.

The conditions of the auction of palay or unthreshed rice were basically to be able to provide dry rice, free of dust and preferably from the last harvest. The minium quantity for each bid being ten cavanes, it had to be delivered to the Tribunal in Agaña within forty-eight hours. In return, it was guaranteed that the payment would take place on the day after delivery, which was an incentive to all who knew that the colonial administration was a late and often bad customer.

The auction was held in the government offices on the ground floor of the Palace, at ten o’clock in the morning of Monday, July 26, 1876. To speed up the process, bids were submitted not in writing but vocally. All the bidders must have agreed on a price among themselves before the auction, as everyone offered the same bid of two pesos per cavan. “The mention of these individuals is very significant since they undoubtedly represented a social class of means.

What was the social background of these people? How the principalía of the villages and the capital had the right to use the title “Don” was earlier discussed, but in actual fact many individuals not belong[ing] to the principalía were also referred to as “Don” or “Doña” probably because [of] their social or economic ascendancy."

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