Mr. David’s Flooring: Complementary Bids and Laundered Kickbacks

In the Mr. David’s Flooring antitrust plea, the company admitted rigging commercial flooring bids and concealing kickbacks paid for low manufacturer prices. Its criminal plea agreement follows both sides of the business: bids arranged so a chosen contractor would win, and payments to a supposed consultant who did no consulting. An estimator, manufacturer sales employee or accounts-payable employee could recognize a different part of the same arrangement.

What Did Mr. David’s Flooring Admit?

Mr. David’s Flooring International admitted in its plea agreement to a bid-rigging and price-fixing conspiracy and a separate money-laundering conspiracy involving kickbacks. The agreement describes decisions by company personnel, including senior personnel, about which contractor would win business and how personal payments to a manufacturer’s account executive would be concealed.

The admitted bidding conspiracy began at least as early as 2009 and continued through at least June 22, 2017. The agreement describes the kickback scheme as beginning at least as early as 2013 and continuing through at least June 13, 2018. Customers lost independent competition for their flooring work. The manufacturer lost revenue through low prices its employee offered in exchange for undisclosed personal payments.

How Complementary Bids Worked in Commercial Flooring

Complementary bids gave the agreed winner apparent competitors. In its criminal plea agreement, Mr. David’s admitted exchanging pricing information with other flooring companies so they could submit bids that helped the chosen company win.

The work behind those bids involved removing existing flooring, preparing the floor surface and installing carpet, wood, vinyl, tile or laminate. Mr. David’s provided commercial flooring services and products.

The plea describes company personnel attending meetings and taking part in conversations and other communications with competing providers. They discussed methods for rigging bids and fixing prices, then exchanged the pricing information needed to carry out their agreement. A customer comparing the resulting offers was looking at prices the supposed competitors had helped arrange.

The Request for an Additional Bid

Some cover-bid requests came from people involved in buying or managing the work. The company admitted receiving explicit requests from employees of general contractors, construction management companies, end users and architectural firms. It understood some of those requests were likely unauthorized by the end user.

Other requests were less direct. Employees said additional bids were needed, and Mr. David’s understood that as a request for complementary bids. The wording could sound like an effort to obtain more competition while the purpose was to supply an agreed loser.

For someone inside the business, the conversation behind a bid can explain what the final bid sheet cannot. Who asked for another offer, what price information they supplied and how the recipient understood the request all mattered in the company’s admissions.

What Is an Example of Bid Rigging?

In its criminal plea agreement, Mr. David’s admitted submitting a complementary bid on a contract ultimately awarded to Vortex Commercial Flooring. The plea identifies Vortex as the lowest bidder and says the award followed the conspirators’ agreement.

That is the point of a cover bid. The customer can receive competing-looking offers and select the lowest bidder while the companies have already agreed who should win. In the company’s account, the award carried out the arrangement made before the bids reached the customer.

The plea separately says the antitrust conspiracy affected at least $2.31 million of Mr. David’s own sales. The award to the agreed winner shows how its participation could also help another contractor obtain work.

Manufacturer Discounts Bought With Kickbacks

In its criminal plea agreement, Mr. David’s admitted paying a manufacturer’s account executive personally in exchange for low prices on flooring products. The manufacturer used a pricing matrix that established the range of prices its account executive could offer. The employee’s job was to promote and sell those products to flooring contractors.

The employee concealed the fact that he was receiving personal payments for the low prices. Mr. David’s paid the kickbacks from money its customers paid it for supplying that manufacturer’s products.

The manufacturer’s sales and the employee’s personal income were pulling in opposite directions. The plea says Mr. David’s intended and caused lower revenue for the manufacturer through the prices obtained with those undisclosed kickbacks. The employee received a personal benefit from a transaction that reduced his employer’s revenue.

This puts the manufacturer’s pricing records beside the contractor’s customer payments. The price matrix shows the employee’s authorized range. The sales records show the prices actually offered. The payments to the employee explain whose interests those prices served.

A Consultant Who Did No Consulting

The company’s criminal plea agreement describes MGAB13 Consulting as the vehicle for hiding the kickbacks. A participant suggested that the account executive create a shell company to receive the payments. The account executive then established it under a family member’s nominal ownership.

The family member had signing authority on its bank accounts and was falsely presented as a flooring consultant who provided services to Mr. David’s. The company admitted knowing that this person had no commercial flooring experience and performed no consulting services for it.

There was a consulting company, a supposed consultant and a bank account. The consulting work was missing.

Mr. David’s issued checks payable to MGAB13, signed by company personnel, and the account executive caused them to be deposited into the shell company’s account. The plea’s check ledger totals $40,261 in kickback payments. These payments bought the employee’s help with product pricing while the consulting-company name concealed their purpose.

The Account Executive Could Choose the Cheapest Bidder

The manufacturer’s employee admitted controlling a three-provider rotation covering more than 15 projects worth at least $600,000, as the employee case explains.

How Is Bid Rigging Detected?

Bid rigging can be detected by examining how bids relate to one another and to the cost of the work, then connecting those patterns to the people and communications behind them. The Mr. David’s admissions make those connections concrete: exchanged pricing information, requests for cover bids, an agreed winner and a separate payment trail.

The road-bidding example explains why an installer’s estimated job cost belongs beside instructions to submit a complementary bid.

What Is the Role of Whistleblowers in Bid Rigging Cases?

An insider can connect the prices on paper to the decisions that produced them. In a flooring case, that may mean explaining a request for an extra bid, a manufacturer’s preferential pricing or payments to a consultant who did no work.

We work with the person who knows that part of the business to connect it to the other transactions. An estimator may understand how the cover price was chosen. A manufacturer employee may understand the product discount. An accounts-payable employee may recognize the supposed consulting expense.

For government-funded flooring work, we also examine whether the arrangement produced false claims for government payment. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. We work with you to turn what you know about the bids and payments into a whistleblower case.

You Know How the Flooring Bid Was Made

Our whistleblower experts can follow Mr. David’s complementary bid and the checks to MGAB13 alongside the manufacturer’s product prices.