Saturday, December 1, 2007

Stolt-Nielsen Indictment Dismissed

International shipping company Stolt-Nielsen and two of its former officers finally got a measure of vindication when the U.S. District Court dismissed the indictment for antitrust violations (opinion available below).  The company was originally accepted into the Antitrust Division's Corporate Leniency Program, which rewards the first one in the door who reports on antitrust violations by giving immunity from prosecution for the corporation and individual officers.  In 2003, however, the Department of Justice asserted that the company had not met the requirements for the immunity by continuing in the bid-rigging conspiracy, and stated it intended to proceed with an indictment.  Stolt-Nielsen filed for an injunction to prevent the grand jury from indicting it, which a district court judge granted but the Third Circuit reversed on separation of powers grounds (Stolt-Nielsen S.A. v. United States, 442 F.3d 177 (3d Cir. 2006) (available here).  The Department of Justice indicted the company shortly thereafter, and the defendants filed a motion to dismiss, arguing that they had not violated the agreement with the government and therefore were immune from prosecution.

U.S. District Judge Bruce Kauffman of the Eastern District of Philadelphia agreed with the defendants, concluding that there was no proof that they had continued to participate in the antitrust conspiracy with two other international shipping companies.  In the opinion, the Judge discredited the testimony of executives from the other companies that were part of the cartel who maintained that Stolt-Nielsen continued with the bid-rigging scheme.  In assessing the credibility of the witnesses, Judge Kauffman found particularly telling the fact that the witnesses had a motive to retaliate against a competitor who rolled over on them.  The Judge stated:

The [Antitrust] Division has failed to produce any credible evidence that Stolt-Nielsen’s participation in the customer allocation conspiracy continued past March 2002.  Nor has the Division proposed a conceivable personal motive for the misconduct it alleges, as there is no indication that either Cooperman or Wingfield stood to profit in any way from continued anticompetitive activity.  Indeed, it would defy logic for executives such as [individual defendants] Wingfield and Cooperman to risk their careers to continue a criminal conspiracy that had been exposed publicly and repudiated by their company’s revised Antitrust Compliance Policy.  With the exception of Jansen, who the Division ultimately attempted to treat as a hostile witness, the only testimony adduced in favor of the Division’s version of the events of March-November 2002 was the testimony of a Jo Tankers employee and a number of Odfjell employees whose accounts were fraught with contradiction and uncorroborated by documentary evidence.  Each Odfjell and Jo Tankers witness testified in return for individual or corporate cooperation agreements that promised immunity or a reduced sentence in exchange for testimony against Defendants.  Each witness thus had a strong motive to seek leniency from the Division and to retaliate against a competitor that had implicated him in a criminal conspiracy. [Italics added]

Ouch!  The Department of Justice was aggressive in pursuing the appeal of the earlier order barring the grand jury from indicting because it involved an issue of great significance far beyond the case.  Whether it will appeal this decision in the face of a stinging rebuke by the Judge who found the government's key trial witnesses to be quite a bit less than credible -- he doesn't call them liars, but comes awfully close -- remains to be seen, but I suspect the Antitrust Division does not want to play with fire.

This case is the first, and so far only, time the Antitrust Division has tried to yank a corporate immunity agreement.  The Criminal Division and the U.S. Attorneys Offices generally do not grant immunity to companies that cooperate in an investigation, preferring to use deferred and non-prosecution agreements to resolve corporate crime investigations.  Those agreements routinely include provisions allowing the government to pull the deal if there is additional misconduct, usually not limited to the particular violation involved in the case.  It's an interesting question whether the government will ever reopen a prosecution for a purported violation of a deferred or non-prosecution agreement.  Bristol-Myers Squibb came close to such a situation in 2006, but prosecutors chose not to claim a breach of the original deferred prosecution agreement, settling instead for the ouster of the company's CEO and general counsel.  Pulling the agreement is the "nuclear option" in a case, and it appears to be something the Antitrust Division may have leaped at with Stolt-Nielsen without thinking through its options.  (ph)

Download us_v_stoltnielsen_opinion_dismissing_indictment_nov_29_2007.pdf

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