Pasha Group, American MOPAC and Gateways Settlement: The Low Bid Had to Go

In the Pasha Group, American MOPAC and Gateways settlement, the companies and two employees paid $13 million to resolve allegations of rigging military moving bids. The government’s account connects local packing prices in Germany to the rates American freight forwarders charged the Pentagon. If you worked on either side of those quotes, you may recognize how a price fixed below the prime contractor can reach the government’s bill.

What the Pasha Settlement Resolved

The Justice Department announced the settlement on May 29, 2008. It identified The Pasha Group as an American transportation company, American MOPAC International and Gateways International as its subsidiaries, and the individual settling parties as employees. The government alleged that Pasha joined a conspiracy to rig bids, fix prices and divide the work of moving military and Defense Department personnel’s household goods between Europe and the United States.

The case began with two whistleblower suits from different parts of that business. One came from two people who had worked with a German moving company, the other from the owner of an American freight forwarding company. The Justice Department announced a collective whistleblower share of $2.6 million from the Pasha settlement. Their positions on opposite sides of the shipping chain help explain why knowledge of the local work and knowledge of the government bid both mattered. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

One Move, Several Prices

The International Through Government Bill of Lading program bought a door-to-door move at a single through rate. The Fourth Circuit’s account of the moving programs explains that the Defense Department’s Military Traffic Management Command solicited bids from American freight forwarders on routes between particular states and European countries. A route in one direction was bid separately from the return direction, so Germany-to-Virginia and Virginia-to-Germany were distinct business opportunities.

That through rate covered packing, inland transport, port services, ocean transport and delivery with unpacking at the destination. European subcontractors supplied the local portions, and their prices fed into the forwarder’s bid. The landed rate bundled European service costs that the American bidder had to account for before quoting the government a price for the whole move.

The Direct Procurement Method bought packing, loading and transportation services within Europe directly from foreign businesses. Some of the same companies that worked as subcontractors under the through-rate program could deal directly with the military under the Direct Procurement Method. The local service provider could therefore influence a government price through its own bid or through the rate it quoted someone else.

How the Alleged Rate Agreement Reached the Pentagon

The alleged bid rigging began below the American freight forwarder’s through rate. According to the Justice Department, Gosselin and four German moving companies signed a written agreement in November 2000 to raise packing, unpacking and German port-service rates. They agreed that none would perform the work below the agreed price for an American forwarder awarded a military contract.

The government’s allegation against Pasha went further than accepting an expensive subcontract quote. The Justice Department said Pasha and Gosselin caused two American forwarders to cancel low bids already submitted to the Defense Department. They also allegedly caused dozens of other forwarders to bid at elevated levels, backed by a threat to boycott anyone who refused the bidding instructions. The government said the Pentagon overpaid beginning in 2001 and continuing at least through 2002.

The court’s account gives the pressure a concrete form. In the government’s allegation involving Covan International, Gosselin threatened to withdraw financing for the lift vans Covan needed to perform the work. Covan canceled its low bid. The opinion describes a similar sequence involving Cartwright International Van Lines: Gosselin and Pasha persuaded it to withdraw its low bid, then secured matching bids at the second-lowest level with the local-service boycott behind them.

Both Pasha and Gosselin pleaded guilty in the separate criminal case. As the Fourth Circuit recounted Gosselin’s plea agreement and Statement of Facts, Gosselin admitted conspiring with Pasha to prevent the second-round, or me-too, bids from matching the lowest through rate. German agents agreed to refuse work from forwarders unless those forwarders matched the second-lowest rate or bid above it.

The competitive pressure had been turned backward. A forwarder bidding low was supposed to make its rivals sharpen their prices. Under the alleged boycott, that forwarder instead risked losing access to the local services needed to do the job. We see the absurdity in a procurement that invites competitive bids while the companies controlling essential work allegedly tell bidders how high to go.

The Other Moving Companies Had Separate Outcomes

ITO and Birkart reached separate settlements announced on June 23, 2009. ITO agreed to pay $150,000 and Birkart $222,146 over the bid-rigging allegations. Both also agreed to cooperate with the government as it pursued the remaining defendants. These were the German subcontractors whose local prices allegedly helped raise the bids reaching the Pentagon. Gosselin’s separate cases produced a $24 million civil-penalty judgment for direct-procurement invoices, a verdict in its favor on the Covan claim and, after a contrary jury verdict, a ruling in its favor on the broader through-rate claim.

What Evidence Is Needed to Prove Fraud?

For a moving-rate case, the evidence connects the agreement over prices to the bids, the work awarded and the bills the government paid. The useful evidence of defense contractor fraud may sit in different parts of the same shipment: the subcontract quote, the forwarder’s rate filing, a message about withdrawing a bid, or the invoice generated after the award. Subcontract allocations can connect the winning bidder to companies that had appeared to compete against it. We work with insiders to connect those records to the people who made the pricing decisions.

Transparency International’s 2022 report Hidden Costs: US Private Military and Security Companies and the Risks of Corruption and Conflict makes a broader point about seeing beyond the prime contractor. It recommends disclosure of subcontractors, their ownership and the itemized value of their services when invoices are submitted. Its explanation is blunt:

For this moving case, the connection is concrete: the government’s price depended on local companies beneath the American bidder. An insider who understands those relationships can explain far more than the name printed on the government’s contract.

You Know Who Chose the Moving Rate

If you saw a low bid withdrawn, local agents told to refuse work or competing movers dividing an award, talk with our whistleblower experts about what you saw. We build the case around your knowledge of the rates and the work, and bring in defense contractor fraud whistleblower lawyers who understand coordinated bidding. We stay beside you as that inside knowledge becomes a case for recovering the government’s money.