Monday, 10 April 2017

Japanese firm sued for faking partnership to qualify as a US-based company

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The $84 million contract involved the extension of Kilo Wharf inside Naval base.

Guam - A four-year-old lawsuit that details an elaborate scheme involving International Bridge Corporation was recently unsealed in federal court. The case involves the Kilo Wharf construction and a procurement award of $84 million in which IBC allegedly agreed with a Japanese corporation to bid on fraudulently.

The case was filed nearly four years ago but only now has been unsealed in federal court. It involves a contract by the US Navy for $84 million, the Kilo Wharf project, International Bridge Corporation, which filed for bankruptcy two years ago and a Japanese firm called TOA corporation.


It starts in October 2007 when the US Navy put out for bid the extension of Kilo Wharf. Federal regulations make it easier for US-based companies to bid on Navy projects but for foreign companies who want to bid, they would be assessed a 20 percent fee.

According to 29-page complaint filed in May 2013, TOA corporation and IBC agreed to enter into a joint venture giving IBC 51 percent shareholder recognition in order to qualify as a US-based firm and in doing so, they would avoid the 20 percent fee.

But according to court documents, this joint venture was “only nominal, a sham and the real relationship between the parties should the joint venture be awarded the Kilo Wharf contract would be one in which TOA was the prime contractor.”

The US Navy says this is because IBC and TOA signed a secret agreement that was never disclosed to the Navy that essentially nullified the joint venture. TOA continued to assure the federal government that their joint venture was legitimate even amid speculation from the Navy and losing bidder Watts-Healy. 

At one point, Watts-Healy, in hits protest of the IFB, even pointed out to the Navy that TOA corporation had been investigated and sanctioned in their home country of Japan for bid rigging. But with assurances from TOA, the Navy awarded the $84 million contract to TOA Corporation in 2008.

It wasn’t until years later that the Navy found out about this apparent scheme to defraud the federal government. How did they found out? IBC executives apparently revealed the conspiracy to them. And two years later, IBC, which was largely known for the construction of the new JFK High School campus, filed for bankruptcy.

Although it’s not clear why IBC revealed the conspiracy, but IBC says in court papers that at one point, TOA bribed them into signing another agreement that listed IBC as just a subcontractor and not the prime contractor as they had represented to the Navy in the IFB. IBC feared they would get caught if they signed this secret agreement, but with threats that TOA would not front the cash, IBC caved and signed the agreement. 

It was further alleged that TOA filed claims for payment for the construction work that was done on Kilo Wharf, but many of its subcontractors, including IBC, were never paid the amounts they were owed.

IBC relators are the primary plaintiffs in this case while the US government will have until April 26 to decide if they will intervene and join the case as plaintiffs as well.


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