DOJ Snares Two More Guilty Pleas in Ongoing Criminal Investigation of Commercial Flooring Business

The Volkov Law Group

The Volkov Law Group

The Justice Department’s Antitrust Division has had a rough year in the criminal arena.  While the Antitrust Division has aggressively blocked several proposed mergers, it has lost several significant criminal cases. 

The Antitrust Division lost two significant cases for price-fixing in the labor market and is now in the middle of a third criminal trial against five defendants in the chicken producing industry.  The Division suffered two mistrials and persuaded the district judge to permit a third trial.  DOJ restructured the case and appointed new prosecutors for the third trial.

Last week, Commercial Carpet Consultants, Inc., a commercial flooring contractor, and Jerry Watson, its former president, plead guilty to bid-rigging and price-fixing charges and agree to pay a $1.2 million fine.  Commercial Carpet is the fourth company to plead guilty in an ongoing investigation in the commercial flooring industry.  Watson is the sixth individual to plead guilty to charges stemming from the investigation. 

Commercial Carpet and Watson admitted to collusive agreements with competitors from 2009 until June 2017.  Commercial Carpet and Watson agreed with competitors to suppress competition in the award of contracts from bidding procedures.  The members of the conspiracy submitted complementary bids so that the designated company would win the contract.

The commercial carpet companies seek contracts with government agencies to remove flooring, prepare the surfaces for new flooring, and install new flooring, including carpet, wood, vinyl, tile and laminate flooring.

Three other companies have plead guilty in this investigation — Mr. David’s Flooring International, PCI FlorTech, and Vortex Commercial Flooring. 

The first prosecution involved charges in April 2019 against Michael Gannon, the former vice president of sales for a flooring company. PCI FlorTech was the first company to plead guilty in August 2019.  PCI FlorTech agreed to cooperate.  The next year, Vortex plead guilty and agreed to pay $1.4 million and cooperate in the probe of the industry.

Subsequently, Mr. David’s Flooring agreed to pay $1.2 million in fines after pleading guilty to bid-rigging and money laundering. Mr. David’s Flooring concealed kickback payments made to an account executive of a flooring manufacturer in exchange for discounts. 

The account executive plead guilty to antitrust and money laundering violations in March 2020.  Three former executives from Vortex plead guilty to antitrust charges.  In September 2021, Michael Zmijewski, the former president of Mr. David’s Flooring, was indicted for money laundering.

A violation of the Sherman Act carries a statutory maximum penalty of a $100 million criminal fine for corporations.  For individuals, a Sherman Act violation carries a maximum penalty of 10 years in prison and a $1 million criminal fine.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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