Revelations include company set up to make false invoices and details of £500,000 ‘compensation’ payment made between firms
The Competition and Markets Authority has made public details of why three directors of demolition firms have been banned for a total of nearly 18 years following its probe into bid-rigging in the sector.
The revelations include how one director set up a firm to receive £175,000-worth of so-called “compensation” payments, how another agreed to a £500,000 payment in return for his firm taking a “back seat” bidding a job and a how a third was involved in bid-rigging on jobs totalling nearly £60m.
The shocking details are revealed in an update on the cartel-buster’s website spelling out why it has banned Cantillon founder Michael Cantillon, David Darsey, a former managing director of Erith, and a previous president of the National Federation of Demolition Contractors, and Paul Cluskey, the managing director of Cantillon, from being company directors.
Announcing last month that 10 firms had been fined nearly £60m for their involvement in the scandal, the CMA said “bids were rigged by one or more construction firms which agreed to submit bids that were deliberately priced to lose the tender [known as cover pricing]”. Five of the 10 were also found guilty of making and receiving “compensation payments” under which, the CMA said, “the designated ‘losers’ of the contracts were set to be compensated by the winner”.
Michael Cantillon, who stepped down as chairman of the business in July 2020 after it was bought by Morrisroe, admitted that he raised nine invoices totalling £175,000 to be paid by another demolition firm, Scudder.
The invoices related to two jobs in 2014 where Scudder, which has since been discontinued by its parent Careys, made payments to Cantillon in return for the firm making cover bids. A third job, a scheme for the Metropolitan Police in Hendon, in which Scudder agreed to pay Cantillon £20,000 for making a cover bid, was, in fact, never actually paid.
Michael Cantillon, whose ban for seven years and six months began earlier this month, admitted: “In order to facilitate the payments of compensation from Scudder, I prepared a series of monthly invoices for fictional logistical support services in relation to a Selfridges contract under the authority of a separate company [name redacted].
“I was the sole shareholder and director of [name redacted] at the time. I used [name redacted] to receive these compensation payments, as I viewed them as money owed to my family, as distinct from the Cantillon company, which I knew was soon to be sold. [Name redacted] raised nine invoices for an overall total of £175,000 (excluding VAT).”
Michael Cantillon also admitted he was involved in seven cases of cover pricing, adding: “I took a central role in either individually negotiating the cover bid arrangements with the other party/parties involved or in authorising Cantillon employees to undertake such negotiations. In those cases where I delegated the negotiations, Cantillon employees acted under my supervision and at my direction.”
Darsey, whose ban for five years and 10 months began in February, was involved in three cases of compensation payments including one amount of £500,000 under which Erith agreed to be paid by McGee for “taking a back seat” on bidding the Shell Building contract over summer 2013 that was eventually won by McGee for £21m.
The compensation payment “involved Erith providing a cover bid for McGee. I [Darsey] was contacted by [name redacted] in relation to this tender. He told me that he was desperate for the job and that he would make payment to Erith in consideration for Erith taking a ‘back seat’. I agreed to this proposal on Erith’s behalf, including agreement of a compensation payment of £500,000 (excluding VAT) and directed my staff to not compete for the contract.
“Subsequently, Erith issued a series of purported invoices to McGee, ostensibly for supply of ‘reusable steel’. Although, during my interview with the CMA, I was unable to independently recall the agreed and invoiced amount, I admit these payments were received from McGee solely in compensation for the cover price that Erith submitted in the tender process relating to the Shell Building, Southbank. I further admit that these invoices were issued by Erith in respect of fictional services and goods that were not in fact ever supplied by Erith to McGee, for the purpose of ensuring that these compensation payments would not ‘stand out’ in Erith’s books and records.”
Cluskey, whose ban for four years and six months starts next week on 1 May, admitted that he was “personally involved in and/or aware of five of the cover bidding agreements” referred to as the ‘Admitted Infringements’.
Cluskey, who has been Cantillon managing director since the end of 2014, added: “The Admitted Infringements with which I was involved related to contracts valued at a total of £58,996,903.”
On one of the jobs affected by cover pricing, a £5.1m scheme won by McGee at 44 Lincoln’s Inn Fields, which became the site of the Marshall Building for the London School of Economics, Cluskey admitted: “When McGee provided us with feedback on our cover bid, I noted, in an email dated 6 February 2017, that they had inflated our bid by £150,000 and expressed a concern that the arrangement would be spotted by the client. I nevertheless permitted CCH [Cantillon] to submit a tender that acted as a cover price for McGee.”
As well as Cantillon, Erith, McGee and Scudder the other firm found guilty of making compensation payments was Brown and Mason. All five were also found guilty of bid-rigging as well along with Keltbray, John F Hunt, DSM, Clifford Devlin and Squibb.
Keltbray, fined £16m, and Squibb, hit with a £2m penalty, are both appealing the level of their fines. The largest penalty, £17.6m, has been handed to Erith.