Department of Justice Does the Two-Step and Announces Criminal Conspiracy Charges Against Aerospace Executives
When the Department of Justice warns businesses and individuals, everyone needs to listen and respond accordingly. Starting in 2016, the Justice Department’s Antitrust Division warned businesses that the Antitrust Division intended to bring criminal prosecutions for illegal agreements, price-fixing/wage-fixing, in labor markets. No one should be surprised – DOJ has been bringing criminal cases against companies, executives and human resource professionals.
In the beginning of a new and serious enforcement action, the District Court in Connecticut unsealed a criminal complaint charging a single aerospace outsourcing executive with a long-running conspiracy to restrict the hiring and recruiting of engineers and skilled workers at the various companies.
The charged official, Mahesh Patel, was the former director of global engineering services at Pratt Whitney. According to the criminal complaint, Patel carried out this conspiracy as the designated intermediary between co-conspirator engineering suppliers. Patel appeared in court and was released on a $100,000 bond.
Interestingly, the next week, DOJ returned an indictment charging six executives, including Patel with participating in a long-running criminal antitrust conspiracy to restrict the hiring and recruiting of engineers and skilled workers. The five additional defendants include Harprett Wasan, of Connecticut; Steven Houghtaling, of Connecticut; Tom Edwards, of Connecticut, Gary Prus, of Florida; and Robert Harvey, of South Carolina.
The timing of Patel’s arrest and the indictment of the remaining defendants suggests that DOJ sought Patel’s cooperation initially. Under this scenario, it appears that Patel may have rejected an opportunity to cooperate and therefore was included in the initial indictment.
While the indictment doesn’t identify the specific companies at which the defendants worked, a separate civil complaint in a class action lists the defendants’ companies and positions as Pratt Whitney, QuEST Global Services NA Inc., Belcan Engineering Group, Cyient Inc. and Parametric Solutions Inc. Edwards was President of North American operations at Cyient Inc., an engineering and technology company.
Pratt Whitney employs more than 39,000 employees and is one of the largest engine makers in the world. Patel recently retired but was employed at Pratt Whitney for 27 years. Pratt Whitney is a subsidiary of Raytheon Technologies, which released a statement confirming it is cooperating with the DOJ investigation.
In the last ten years, competition for aerospace engineers heated up because of thousands of new jets produced by Boeing and Airbus, as well as increased demand for engines from Pratt Whitney and competitors General Electric and Rolls-Royce. The supply of aerospace engineering professionals has been diminishing relative to the increased demand for services by participants in the aerospace industry.
The criminal complaint identifies eight members of the conspiracy working with five outsource engineering suppliers. Two of the outsources engineering companies involved in the case are based in East Hartford, Connecticut, one in Windsor, Connecticut, and one each in Jupiter and Palm Beach Gardens, Florida.
Patel retired in 2020. Starting in 2003, Patel was a manager at Pratt Whitney and later promoted to director in charge of outsourcing suppliers. Patel managed a team of associates in East Hartford.
Patel participated in the conspiracy among the aerospace engineering companies over the last ten years. The conspiracy occurred between 2011 and 2019, and involved a total of 6 companies, including Pratt Whitney.
Patel enforced agreed upon restrictions designed to restrict competition/bidding to recruit each other’s employees. Patel enforced these agreements and often confronted engineering suppliers who violated or cheated on the agreement among the companies. Patel often sought to enforce the agreement at the request of other engineering suppliers and threatened to punish such engineering suppliers by removing them from various project opportunities. Patel and the co-conspirators recognized that the illegal agreement amongst themselves help to keep pay levels lower for engineering service employees.
In one communication, a co-conspirator wrote “Mahesh says he does not want the salaries to increase.” In another communication, a co-conspirator warned that if poaching between suppliers did not stop, it would “drive the price structure up.”
In a September 2016 email from Patel to a co-conspirator, Patel stated “Last time we talked you assured me that you will not hire” any Pratt Whitney “partner employees.” Patel warned, “This must stop, otherwise others will also start poaching your employees.”
In an January 2017 email, Patel stated he would not hire partner employees as the only way to prevent “poaching and price war.”
Patel was not the highest ranking official at Pratt Whitney involved in the antitrust conspiracy. Patel attended a September 2011 dinner at which his supervisor, a Pratt White Vice President, and a manger of one of the co-conspirators discussed an agreement that Pratt Whitney would not hire employees from the supplier until they had worked there for two years.
Under the Sherman Act, the maximum penalty is ten years’ imprisonment and a fine of $1 million for individuals. Patel is alleged to have participated in this long-running conspiracy for the explicit purpose of reducing salaries paid to engineers hired under outsourcing contracts.
The charges signal a new federal antitrust investigation into illegal price fixing in the aerospace industry. The Antitrust Division’s New York Field Office is leading the investigation. More prosecutions are expected.