The University and several other public institutions allegedly lost hundreds of thousands of dollars to a lighting-supply price-fixing scheme which officials say was in operation since 1990.
The Minnesota Attorney General’s office is collecting evidence to support criminal and civil charges against several lighting manufacturers, wholesalers and their employees for alleged price-fixing and bid-rigging.
“Public agencies, like private consumers, are entitled to the benefits of a competitive marketplace,” said Attorney General Hubert “Skip” Humphrey III in a prepared statement. “When suppliers to public projects fix prices in a scheme like the kind we filed charges against, the public is the ultimate victim.”
Three individuals and four lighting companies were named in the complaint, which was filed in December. They include Luma Sales Associates, Lighting Associates/Eon Light, Jordano Associates Ltd. and Norwest Lighting. All are metro-area based companies.
But John Lee, attorney for Lighting Associates/Eon Light, disputes the charges.
“We believe that our clients’ business practices were appropriate,” Lee said. “We intend to plead not guilty and look forward to appearing at our next court date.”
More than 30 public projects in 12 counties were affected by the alleged swindle, including the Metrodome, the St. Paul Civic Center and several metro-area public school districts.
A 1995 Centennial Hall safety upgrade, including installation of fire alarms, exit signs and emergency lights, was one University project allegedly affected by the price-fixing scheme.
The complaint also said the University was affected when contractors for the University’s Basic Sciences and Biomedical Engineering building purchased lighting from David Osborne, a former employee of Viking Electric, in July 1994.
Osborne was named in the criminal and civil complaints as the scheme’s mastermind. Last year, Viking learned of the wrongdoing and immediately contacted the Attorney General’s office, which investigated the matter. Viking fired Osborne when they discovered the alleged illegal activity.
Osborne and the manufacturing companies with which he allegedly conspired were charged with several anti-trust violations ranging from commercial bribery to unreasonable restraint of trade.
Also detailed in the complaint was the intricate mechanism of the alleged price-fixing scheme.
The complaint says that Osborne, a lighting quote specialist for Viking, made arrangements with manufacturer’s representatives to inflate prices of equipment to Viking’s competitors, enabling Viking to attract sales with the lowest price quotes.
He would in turn sell the equipment to unknowing electrical subcontractors at a price somewhere between the price he actually paid and the price quoted by Viking’s competitors.
The representatives involved with Osborne and Viking Electric profited from the sales, and Osborne was sometimes awarded a kickback, the complaint alleges.
The complaint named Osborne, Steven Powell, William Hunt, Thomas Eggert and all companies involved except Luma. They were charged with conspiracy to commit commercial bribery for the alleged kickbacks paid to Osborne.
Attorney General representative Holly Ziemer said that while the case is still too young to speculate on the outcome, it is possible that monies recovered from the defendants could be returned to the allegedly victimized institutions. But Ziemer said an undisclosed amount of money is not the crux of the issue.
“Ultimately, we want to put a stop to the behavior,” Ziemer said.
University head attorney Mark Rotenberg said the University does not intend to pursue any individual claims, though it could profit.
“The Attorney General may be able to recover fines and other compensation for this alleged conspiracy, and the University might benefit,” Rotenberg said.