Case: 2:19-cv-01037-MHW-KAJ Doc #: 1 Filed: 03/20/19 Page: 1 of 11 PAGEID #: 1
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`UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF OHIO
`EASTERN DIVISION
`
`UNITED STATES OF AMERICA,
`
`Plaintiff,
`
`v.
`
`CASE NO. 2:19-cv-1037
`
`HYUNDAI OILBANK CO., LTD.
`182, Pyeongsin 2-ro
`Daesan-eup, Seosan-si, Chungcheongnam-do
`South Korea
`
`and
`
`S-OIL CORPORATION
`192, Baekbeom-ro, Mapo-gu
`Seoul, South Korea,
`
`Defendants.
`
`COMPLAINT: VIOLATION OF SECTION 1
`OF THE SHERMAN ACT, 15 U.S.C. § 1
`
`COMPLAINT
`
`The United States of America, acting under the direction of the Attorney General of the
`
`United States, brings this civil antitrust action to obtain equitable monetary relief and recover
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`damages from Hyundai Oilbank Co., Ltd. and S-Oil Corporation for conspiring to rig bids and
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`fix prices, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, on the supply of fuel to
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`the U.S. military for its operations in South Korea.
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`I. INTRODUCTION
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`1.
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`Since the end of the Korean War, the U.S. armed forces have maintained a
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`significant presence in South Korea, protecting American interests in the region and safeguarding
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`peace for the Korean people. To perform this important mission, American service members
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`depend on fuel to power their bases and military vehicles. The U.S. military procures this fuel
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`from oil refiners located in South Korea through a competitive bidding process.
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`2.
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`For at least a decade, rather than engage in fair and honest competition,
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`Defendants and their co-conspirators defrauded the U.S. military by fixing prices and rigging
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`bids for the contracts to supply this fuel. Defendants met and communicated in secret with other
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`large South Korean oil refiners and logistics companies, and pre-determined which conspirator
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`would win each contract. Defendants or their co-conspirators then fraudulently submitted
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`collusive bids to the U.S. military. Through this scheme, Defendants reaped vastly higher profit
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`margins on the fuel they supplied to the U.S. military than on the fuel they sold to the South
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`Korean military and to private parties.
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`3.
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`As a result of this conduct, Defendants and their co-conspirators illegally
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`overcharged American taxpayers by well over $100 million. This conspiracy unreasonably
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`restrained trade and commerce, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.
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`Defendants have agreed to plead guilty to one count of a superseding indictment charging a
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`criminal violation of Section 1 of the Sherman Act for this unlawful conduct, and in this civil
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`action, the United States seeks compensation for the injuries it incurred as a result of this
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`conspiracy.
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`II. DEFENDANTS
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`4.
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`Hyundai Oilbank Co., Ltd. (“Hyundai Oilbank”) is an oil company headquartered
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`in Seosan, South Korea. Hyundai Oilbank refines and supplies gasoline, diesel, kerosene, and
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`other petroleum products for sale internationally. During the conspiracy, Hyundai Oilbank
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`partnered with a logistics firm (“Company A”) to supply fuel to U.S. military installations in
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`South Korea, with Company A acting as the prime contractor under the relevant contracts.
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`– 2 –
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`5.
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`S-Oil Corporation (“S-Oil”) is an oil company headquartered in Seoul, South
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`Korea. S-Oil refines and supplies gasoline, diesel, kerosene, and other petroleum products for
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`sale internationally. Beginning in 2009, S-Oil partnered with Hanjin Transportation Co., Ltd.
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`(“Hanjin”) to supply fuel to U.S. military installations in South Korea, with Hanjin acting as the
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`prime contractor under the relevant contracts.
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`6.
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`Other persons, not named as defendants in this action, participated as co-
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`conspirators in the offense alleged in this Complaint and performed acts and made statements in
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`furtherance thereof. These co-conspirators include, among others, GS Caltex Corporation (“GS
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`Caltex”), Hanjin, SK Energy Co., Ltd. (“SK Energy”), and Company A.
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`7.
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`Whenever this Complaint refers to any act, deed, or transaction of any business
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`entity, it means that the business entity engaged in the act, deed, or transaction by or through its
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`officers, directors, employees, agents, or other representatives while they were actively engaged
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`in the management, direction, control, or transaction of its business or affairs.
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`III. JURISDICTION AND VENUE
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`8.
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`The United States brings this action under Section 4 of the Sherman Act, 15
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`U.S.C. § 4, and Section 4A of the Clayton Act, 15 U.S.C. § 15a, seeking equitable relief,
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`including equitable monetary remedies, and damages from Defendants’ violation of Section 1 of
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`the Sherman Act, 15 U.S.C. § 1.
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`9.
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`This Court has subject matter jurisdiction over this action under 15 U.S.C. §§ 4
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`and 15a and 28 U.S.C. §§ 1331 and 1337.
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`10.
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`Defendants have consented to venue and personal jurisdiction in this district for
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`the purpose of this Complaint.
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`– 3 –
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`11.
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`Defendants or their co-conspirators entered into contracts with the U.S. military to
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`supply and deliver fuel to U.S. military installations in South Korea. Under the terms of these
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`contracts, Defendants or their co-conspirators agreed that the laws of the United States would
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`govern all contractual disputes and that U.S. administrative bodies and courts would have
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`exclusive jurisdiction to resolve all such disputes. To be eligible to enter into these contracts,
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`Defendants or their co-conspirators registered in databases located in the United States. For
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`certain contracts, Defendants or their co-conspirators submitted bids to U.S. Department of
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`Defense offices in the United States. After being awarded these contracts, Defendants or their
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`co-conspirators submitted invoices to and received payments from U.S. Department of Defense
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`offices in Columbus, Ohio, which included use of wires and mails located in the United States.
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`12.
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`Through these contracts with the U.S. military, Defendants’ activities had a direct,
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`substantial, and reasonably foreseeable effect on interstate commerce, import trade or commerce,
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`and commerce with foreign nations. Defendants’ conspiracy had a substantial and intended
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`effect in the United States. Defendants caused U.S. Department of Defense agencies to pay non-
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`competitive prices for the supply of fuel to U.S. military installations. Defendants or their co-
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`conspirators also caused a U.S. Department of Defense agency located in the Southern District of
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`Ohio to transfer U.S. dollars to their foreign bank accounts.
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`IV. BACKGROUND
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`13.
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`From at least March 2005 and continuing until at least October 2016 (“the
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`Relevant Period”), the U.S. military procured fuel for its installations in South Korea through
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`competitive solicitation processes. Oil companies, either independently or in conjunction with a
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`logistics company, submitted bids in response to these solicitations.
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`– 4 –
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`14.
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`The conduct at issue relates to two types of contracts to supply fuel to the U.S.
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`military for use in South Korea: Post, Camps, and Stations (“PC&S”) contracts and Army and
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`Air Force Exchange Services (“AAFES”) contracts.
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`15.
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`PC&S contracts are issued and administered by the Defense Logistics Agency
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`(“DLA”), a combat support agency in the U.S. Department of Defense. DLA, formerly known
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`as the Defense Energy Support Center, is headquartered in Fort Belvoir, Virginia. The fuel
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`procured under PC&S contracts is used for military vehicles and to heat U.S. military buildings.
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`During the Relevant Period, PC&S contracts ran for a term of three or four years. DLA issued
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`PC&S solicitations listing the fuel requirements for installations across South Korea, with each
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`delivery location identified by a separate line item. Bidders offered a price for each line item on
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`which they chose to bid. DLA awarded contracts to the bidders offering the lowest price for each
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`line item. The Defense Finance and Accounting Service (“DFAS”), a finance and accounting
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`agency of the U.S. Department of Defense, wired payments to the PC&S contract awardees from
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`its office in Columbus, Ohio.
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`16.
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`AAFES is an agency of the Department of Defense headquartered in Dallas,
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`Texas. AAFES operates official retail stores (known as “exchanges”) on U.S. Army and Air
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`Force installations worldwide, which U.S. military personnel and their families use to purchase
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`everyday goods and services, including gasoline for use in their personal vehicles. AAFES
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`procures fuel for these stores via contracts awarded through a competitive solicitation process.
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`The term of AAFES contracts is typically two years, but may be extended for additional years.
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`In 2008, AAFES issued a solicitation that listed the fuel requirements for installations in South
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`Korea. Unlike DLA, AAFES awarded the entire 2008 contract to the bidder offering the lowest
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`price across all the listed locations.
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`V. DEFENDANTS’ UNLAWFUL CONDUCT
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`17.
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`From at least March 2005 and continuing until at least October 2016, Defendants
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`and their co-conspirators engaged in a series of meetings, telephone conversations, e-mails, and
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`other communications to rig bids and fix prices for the supply of fuel to U.S. military
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`installations in South Korea.
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`2006 PC&S and 2008 AAFES Contracts
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`18.
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`GS Caltex, SK Energy, Hyundai Oilbank, and Company A conspired to rig bids
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`and fix prices on the 2006 PC&S contracts, which were issued in response to solicitation
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`SP0600-05-R-0063, supplemental solicitation SP0600-05-0063-0001, and their amendments.
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`The term of the 2006 PC&S contracts covered the supply of fuel from February 2006 through
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`July 2009.
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`19.
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`Between early 2005 and mid-2006, GS Caltex, SK Energy, Hyundai Oilbank, and
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`other conspirators met multiple times and exchanged phone calls and e-mails to allocate the line
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`items in the solicitations for the 2006 PC&S contracts. For each line item allocated to a different
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`co-conspirator, the other conspirators agreed not to bid or to bid high enough to ensure that they
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`would not win that item. Through these communications, these conspirators agreed to inflate
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`their bids to produce higher profit margins. DLA awarded the 2006 PC&S line items according
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`to the allocations made by the conspiracy.
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`20.
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`As part of their discussions related to the 2006 PC&S contracts, GS Caltex,
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`Hyundai Oilbank, and other conspirators agreed not to compete with SK Energy in bidding for
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`the 2008 AAFES contract. In 2008, GS Caltex, Hyundai Oilbank, and other conspirators
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`honored their agreement: GS Caltex bid significantly above the bid submitted by SK Energy for
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`the AAFES contract, while Hyundai Oilbank and Company A declined to bid even after AAFES
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`explicitly requested their participation in the bidding. The initial term of the 2008 AAFES
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`contract ran from July 2008 to July 2010; the contract was later extended through July 2013. As
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`envisioned by the conspiracy, AAFES awarded the 2008 contract to SK Energy.
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`2009 PC&S Contracts
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`21.
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`Continuing their conspiracy, Defendants and other co-conspirators conspired to
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`rig bids and fix prices for the 2009 PC&S contracts, which were issued in response to solicitation
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`SP0600-08-R-0233. Hanjin and S-Oil joined the conspiracy for the purpose of bidding on the
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`solicitation for the 2009 PC&S contracts. Hanjin and S-Oil partnered to bid jointly on the 2009
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`PC&S contracts, with S-Oil providing the fuel and Hanjin providing transportation and logistics.
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`The term of the 2009 PC&S contracts covered the supply of fuel from October 2009 through
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`August 2013.
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`22.
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`Between late 2008 and mid-2009, Defendants and other co-conspirators met
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`multiple times and exchanged phone calls and e-mails to allocate the line items in the solicitation
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`for the 2009 PC&S contracts. As in 2006, these conspirators agreed to bid high so as to not win
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`line items allocated to other co-conspirators. The original conspirators agreed to allocate to
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`Hanjin and S-Oil certain line items that had previously been allocated to the original
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`conspirators.
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`23. With one exception, DLA awarded the 2009 PC&S contracts in line with the
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`allocations made by the Defendants and other co-conspirators. Hyundai Oilbank and Company
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`A accidentally won one line item that the conspiracy had allocated to GS Caltex. To remedy this
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`misallocation, Company A, Hyundai Oilbank, and GS Caltex agreed that GS Caltex, rather than
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`Hyundai Oilbank, would supply Company A with the fuel procured under this line item.
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`2013 PC&S Contracts
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`24.
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`Similar to 2006 and 2009, Defendants and other co-conspirators conspired to rig
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`bids and fix prices for the 2013 PC&S contracts, which were issued in response to solicitation
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`SP0600-12-R-0332. The term of the 2013 PC&S Contract covered the supply of fuel from
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`August 2013 through July 2016.
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`25.
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`Defendants and other co-conspirators communicated via phone calls and e-mails
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`to allocate and set the price for each line item in the solicitation for the 2013 PC&S contracts.
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`Defendants and other co-conspirators believed that they had an agreement as to their bidding
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`strategy and pricing for the 2013 PC&S contracts. As a result of this agreement, they bid higher
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`prices than they would have in a competitive process.
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`26.
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`However, Hanjin and S-Oil submitted bids for the 2013 PC&S contracts below
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`the prices set by the other co-conspirators. Although lower than the pricing agreed upon by the
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`conspirators, Hanjin and S-Oil still submitted bids above a competitive, non-collusive price,
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`knowing that they would likely win the contracts because the other conspirators would bid even
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`higher prices.
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`27.
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`As a result of their bidding strategy, Hanjin and S-Oil jointly won nearly all the
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`line items in the 2013 PC&S contracts. As in 2009, S-Oil was to provide the fuel for these line
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`items, and Hanjin was to provide transportation and logistics. GS Caltex and other co-
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`conspirators won a few, small line items; SK Energy won none. DLA made inflated payments
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`under the 2013 PC&S contracts through October 2016.
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`28.
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` After the award of the 2013 PC&S contracts, Hanjin, S-Oil, and GS Caltex
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`reached an understanding that GS Caltex, rather than S-Oil, would supply Hanjin with fuel for
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`certain line items. Under this side agreement, Hanjin paid a much lower price to GS Caltex for
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`– 8 –
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`fuel than the price it previously had agreed to pay S-Oil to acquire fuel for those line items.
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`However, the price that Hanjin paid to GS Caltex exceeded a competitive price for fuel.
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`VI. VIOLATIONS ALLEGED
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`29.
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`The United States incorporates by reference the allegations in paragraphs 1
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`through 28.
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`30.
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`The conduct of Defendants and their co-conspirators unreasonably restrained
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`trade and harmed competition for the supply of fuel to the U.S. military in South Korea in
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`violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.
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`31.
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`The United States was injured as a result of the unlawful conduct because it paid
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`more for the supply of fuel than it would have had the Defendants and their co-conspirators
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`engaged in fair competition.
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`VII. REQUEST FOR RELIEF
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`32.
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`The United States requests that this Court:
`
`(a)
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`adjudge that Defendants’ and their co-conspirators’ conduct constitutes an
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`unreasonable restraint of interstate commerce, import trade or commerce,
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`and commerce with foreign nations in violation of Section 1 of the
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`Sherman Act, 15 U.S.C. § 1;
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`(b)
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`award the United States damages to which it is entitled for the losses
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`incurred as the result of Defendants’ and their co-conspirators’ conduct;
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`(c)
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`award the United States equitable disgorgement of the ill-gotten gains
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`obtained by Defendants;
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`award the United States its costs of this action; and
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`award the United States other relief that the Court deems just and proper.
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`(d)
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`(e)
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`Dated: March 2_0, 2019
`
`Respectfiilly submitted,
`
`Makan Delrahim
`Assistant Attorney General for Antitrust
`
`J. Richard Doidge ”"
`julie Elmer
`
`TEDSTATESOFAMERICA:
`FORPLAIN7F
`0% //
`
`Jeremy EvansM JohnA. Holler
`
`Andrew C. Finch
`Principal Deputy Assistant Attorney
`General
`
`Jonathan Sllberman
`Patrick M. Kuhlmann
`
`Attorneys for the United States
`
`US. Department of Justice
`Antitrust Division
`
`Bernard A- Nigro Jr-
`450 5th Street, NW, Suite 8000
`Dep ty Assistant Attorney
`Washington, DC 20530
`Tel.: (202) 514—8944
`f~
`Fax: (202) 616-2441
`.
`4/1
`,
`[3 x,-
`mm— E—mail: Dick.Doidge@usdoj.gov
`Director of Civil Enforcement
`
`ral
`
`Kathleen . J’Neill
`
`Chief
`
`Transportation, Energy &
`ec ion
`
` Robert A. Lepore
`
`Assistant Chief
`
`Transportation, Energy &
`Agriculture Section
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`Dated: March Q, 2019
`
`Respectfully submitted,
`
`FOR PLAINTIFF UNITED STATES OF AMERICA
`
`BENJAMIN C. GLASSMAN
`
`United States Attorney
`
`By:
`
` Andrew M. M lek (Ohio Bar #0061442)
`
`Assistant United States Attorney
`303 Marconi Boulevard, Suite 200
`Columbus, Ohio 43215
`Tel: (614) 469-5715
`Fax: (614) 469-2769
`E—mai l: Andrew.Malek@usd0j .gov
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