White Collar Crime Prof Blog

New DOJ Guidance on Evaluating Corporate Compliance in Criminal Antitrust Investigations

The DOJ Antitrust Division issued a new guidance memo on Compliance Programs in Criminal Antitrust Investigations (see here). Providing transparency to the evaluation process of corporate compliance is a smart move as companies will now know what is expected of them from DOJ, and thus there is a greater likelihood of achieving compliance on the part of companies. This process can also reduce costs in providing a more efficient way of getting companies to readjust their compliance programs and assure that internal measures are in place to avoid company and individual criminality.  Providing this 17 page compliance memo to  companies should be applauded.

In issuing this new guidance, Assistant Attorney General Makan Delrahim stated that "effective immediately" the Antitrust Division would, "(1) change its approach to crediting compliance at the charging stage; (2) clarify its approach to evaluating the effectiveness of compliance programs at the sentencing stage; and (3) for the first time, make public a guidance document for the evaluation of compliance programs in criminal antitrust investigations." (see here), A major change from past policy is that credit for having a compliance program will now be given at the charging stage.

Eight considerations are provided, but it is noted that "the guidance emphasizes that these elements and questions are not a checklist or formula, and not all of them will be relevant in every case."  Delrahim states that "[d]ivision prosecutors should ask three preliminary questions at the outset to help focus their analysis. First question: does the company’s compliance program address and prohibit criminal antitrust violations? Second, did the antitrust compliance program detect and facilitate prompt reporting of the violation? Third, to what extent was a company’s senior management involved in the violation?" 

In house corporate counsel and outside attorneys representing companies need to be aware of this new guidance and readjust compliance programs to match the specifics provided by this document. 

(esp)

Italian Accused of U.S. Antitrust Crime Extradited After Switching Planes in Germany

With the growing internationalization of business crime, the question of when a foreign national may be extradited to the United States for crimes charged in the United States is arising more frequently.  Generally speaking, under the requirement of "dual criminality," a resident of a foreign country charged in the United States will not be extradited if the country he is residing in does not deem his conduct criminal.  If, however, that person travels from his "safe haven" home country to another country (even in transit) where such conduct is criminal, he may be extradited.

As reported in a recent Wilmer Hale article, see here, Romano Pisciotti, an Italian citizen charged with an antitrust bid-rigging violation in 2010, this April was extradited from Germany after the connecting flight on his trip from Nigeria to Italy landed there.  Germany generally criminalizes bid-rigging; Italy generally does not.  Presumably, had Pisciotti not left Italy, he would not have been arrested. 

Pisciotti's extradition demonstrates that foreign residents indicted in the United States who are not extraditable from their home country (some nations, like Germany, will not extradite its own citizens other than to another European Union country or the International Criminal Court, for instance) take a considerable risk whenever they travel away from their country of residence.

(goldman)

Extradition in an Antitrust Case

DOJ reports their first ever extradiction on an Antitrust charge. (see here).  The accused is charged with violating the Sherman Act.  The company where the excutive had worked was in Italy, but the arrest and extradition was from Germany. Obviously, the individual is presumed innocent and the Government will bear the burden of proving guilt.

(esp)

Fourth Circuit Extends Required Records Exception to Foreign Bank Accounts

Yesterday, in U.S. v. Under Seal (4th Cir. 2013), the Fourth Circuit, joining several other federal circuits, extended the Fifth Amendment's Required Records Exception to records of foreign bank accounts required to be maintained pursuant to the Bank Secrecy Act ("BSA"). John and Jane Doe received a subpoena to turn over records of their Swiss bank accounts. They responded that complying with the subpoena compelled them to testify against themselves, as they were required to create and maintain such records pursuant to the BSA. They also argued that the long-standing, judicially-created, Required Records Exception did not apply in this case, because the BSA's record-keeping provisions are essentially criminal, rather than regulatory, in nature. The district court disagreed, the Does took civil contempt, and an appeal ensued. Unsurprisingly, the Fourth Circuit sided with the government, accepting its argument that the BSA's record-keeping provisions are essentially regulatory in nature. You are shocked? There's not exactly a strong constituency, public or judicial, for foreign bank account tax evasion. 

(wisenberg)

Change in Anti-trust Division "Carve-Out" Policy

Guest Blogger - Robert Connolly - DLA Piper

At the ABA Antirust Spring Meeting in Washington DC, Assistant Attorney General for the Antitrust Division William Baer announced a significant change in the Division’s practice of carving out of individuals from the non-prosecution protection offered in corporate plea agreements.  Depending on circumstances, the Division may be willing to enter into a plea agreement with a corporation and provide non-prosecution to some, but not all, of the corporation’s executives.   The Division may reserve for prosecution (carve-out)  some executives it thinks are culpable, or others it whose conduct doesn’t warrant prosecution, but the individual(s) declines to cooperate.  The most contentious part of the carve-out practice was that the Division would name these individuals in a public plea agreement.  This could smear an executive’s reputation by signaling that they were involved in criminal conduct, but provide no way for them to clear their name.   Courts upheld the practice as legal, but one court  found the Division's policy "unappealing," "offensive" and a “perp walk.”

The defense bar had long lobbied for a change in this policy, especially demanding that the names of carved-out individuals not be made public.  See, e.g., Victor, Farber and Duke, “The Policy Case for Eliminating The Public Identification of Carve-Outs In Antitrust Plea Agreements.”   Baer, who has worked on the defense side himself, agreed.  He issued a press release stating: “As part of a thorough review of the Division’s approach to corporate dispositions, we have decided to implement two changes.  The Division will continue to carve out employees who we have reason to believe were involved in criminal wrongdoing and who are potential targets of our investigations.  However, we will no longer carve out employees for reasons unrelated to culpability.”  And, for those carved out “the Division will not include the names of carved-out employees in the plea agreement itself.  Those names will be listed in an appendix, and we will ask the court for leave to file the appendix under seal.”  See Statement of Assistant Attorney General Bill Baer on Changes to Antitrust Division's Carve-Out Practice Regarding Corporate Plea Agreements, April 12, 2013.

(rc) 

New Head of Antitrust

DOJ Press Release, Attorney General Eric Holder Welcomes Bill Baer as Assistant Attorney General for the Antitrust Division  Baer, a Stanford Law grad, comes to Antitrust from Arnold & Porter.

(esp)

Cartels, Corporate Compliance and What Practitioners Really Think About Enforcement.

Check out Daniel D. Sokol's new article titled, Cartels, Corporate Compliance and What Practitioners Really Think About Enforcement available here and to be appearing in the Antitrust L.J.

The SSRN abstract states:

This article shows the limitations to the optimal deterrence-inspired cartel enforcement policy currently used by the Department of Justice Antitrust Division. This article employs both quantitative and qualitative survey evidence of cartel practitioners to shed light upon the realities of US cartel enforcement policy. The empirical evidence provided by the practitioner surveys challenges the traditional assumptions behind the success of the DOJ’s cartel program. Perhaps the most interesting finding is that firms regularly game the leniency program to punish their competitors. For various reasons, firms and the DOJ have strong incentives to settle rather than to litigate cases in which the legality of cartel conduct may be in doubt. The surveys also expose limitations to the optimal deterrence framework for firms and individuals regarding incentives and behavior. These findings suggest the need for an enforcement focus on sub-units within the firm as well as various processes to change behavior that would improve enforcement and deterrence. Finally, the surveys suggest certain structural limitations in organizational behavior within firms that have prevented antitrust compliance programs from becoming embedded in a way that would reduce cartel activity. Additionally, this article provides an analysis of media coverage of cartel enforcement from 1990-2009. The analysis suggests that successful enforcement has not created sufficient awareness of cartel behavior among the public. Relative to other types of financial crimes, such as accounting fraud, the public seems unaware or uninterested in cartel activity. The conclusion summarizes the article’s findings and outlines potential future steps in cartel research."

(esp)

Civil Antitrust for Apple and Others

The media is reporting that Apple and others have a lawsuit filed against them by the Department of Justice for alleged price-fixing, violations under Section 1 of the Sherman Act. (see here, here, and here). The Department of Justice Antitrust Division website has an Antitrust Primer here. It states:

"Price fixing, bid rigging, and market allocation are generally prosecuted criminally because they have been found to be unambiguously harmful, that is, per se illegal. Such agreements have been shown to defraud consumers and unquestionably raise prices or restrict output without creating any plausible offsetting benefit to consumers, unlike other business conduct that may be the subject of civil lawsuits by the federal government."

See also DOJ Press Release, Justice Department Reaches Settlement with Three of the Largest Book Publishers and Continues to Litigate Against Apple Inc. and Two Other Publishers to Restore Price Competition and Reduce E-book Prices

(esp)

Antitrust is Hot!

DOJ Press Release, Hitachi-LG Data Storage Inc. Agrees to Plead Guilty to Paritcipating in Bid-Rigging and Price-Fixing Conspiracies Involving Optical Disk Drives - Company Agrees to Pay $21.1 Million Criminal Fine

DOJ Press Release, Furukawa Electric Co. LTD and Three Executives Agree to Plead Guilty to Automobile Parts Price-Fixing and Bid-Rigging Conspiracy - Company Agrees to Pay $200 Million Criminal Fine; Executives Agree to Serve Prison Time

DOJ Press Release, Six Japanese Freight Companies Agree to Plead Guilty to Criminal Price-Fixing Charges - Companies Agree to Pay a Total of $46.8 Million in Criminal Fines; DOJ Press Release, Japanese Freight Company Agrees to Plead Guilty to Criminal Price-Fixing Charge ($1.84 million fine)

(esp)

Apprendi Applies to Alternate Fines Act - Corporate Fines Require Jury Determination

In the Northern District of California, the court in United States v. Au Optronics Corporation, et. al (AUO) was faced with the question of whether Apprendi applied to criminal fines that the government was seeking under the alternative fine statute, 18 U.S.C. s 3571(d). The company and nine individuals were charged with price-fixing in violation of the Sherman Act. A Superceding Indictment claimed that the government would seek a criminal fine against the corporate defendants (not the individuals)  under the alternative fine statute, which would mean that "the government could seek a fine in this case of up to $1 billion against AUO." The government sought bifurcation into separate guilt and penalty phases and also sought an "order that the evidence presented in the penalty phase need not be presented to a jury."  In essence they were arguing that Apprendi did not apply here.  

The court saw it differently then the government. Initially two circuits had found that Apprendi applied and even a declaration of the antitrust division had said it was applicable with fines.  Then came the case of Oregon v. Ice, where the Court held "that a judge could impose consecutive sentences without any jury findings beyond those of guilt."  Following this decision, the First Circuit found that criminal fines were exempt from Apprendi.

The government argued here that the First Circuit decision should be followed because "under historical practices fines fell within the sole discretion of the trial judge."

The problem for the government, however, is that they were relying on dicta from the Ice case.  Thus, the court in AUO held that Apprendi's mandate applied here.  Hon. Illston states, "[t]he magnitude and primacy of such punishment puts it in a separate class from an ordinary criminal fine imposed against a defendant who faces incarceration." (the government was seeking a fine that could amount to $1 billion, which is "ten times more than the fine authorized by the Sherman Act")

The court also denied the government's request to bifurcate the trial into a guilt phase and penalty phase, stating that "the Court is disinclined to bifurcate without a more substantial showing that a separate penalty phase will save judicial resources."

Court's Order - Download July 18 2011 Order re bifurcation motion

There are two lessons for the government here  - 1) there are consequences to overcharging, and 2) stop wasting money.  

(esp)

NACDL's 1st Annual West Coast White Collar Conference, “Turning The Tables On The Government” – “Nowhere to Run, Nowhere to Hide: Antitrust Defense in the Age of Amnesty Agreements & Corporate Self-Reporting,” Friday, June 17, 2011

Guest Blogger: Darin Thompson, Assistant Federal Public Defender, Office of the Federal Public Defender (Cleveland,OH)

The morning of day two of the seminar concluded with a panel discussion of the current issues facing antitrust defense practitioners. The panel consisted of Richard H. Deane, Jr., David Gerger, Eric Grannon, Christine Levin, and Jessica K. Nall.

Ms. Levin began by referencing the concerns expressed yesterday regarding the trend towards cooperation by corporate counsel. She indicated this has been driven, in part, by the Anti-trust Division’s amnesty program and DOJ’s aggressive marketing thereof. She reviewed the requirements of eligibility for the amnesty program: first to approach DOJ; prompt and effective action to terminate the wrongful conduct; full, continuing and complete cooperation; it must be “a true corporate act”; restitution must be made if possible; the company cannot have been the architect of the scheme, and cannot have coerced the others.

The benefits of the amnesty program include: the company receives complete protection from fines; no jail or fines for employees; no joint and several liability exposure in the subsequent civil actions; and no treble damages. Potential pitfalls include the following: the agreement only binds the Antitrust Division; a failed application, which can result in a prosecution using the information provided during the application process; “Amnesty Plus”, a program giving a break to companies which are not first in reporting to DOJ if the company reports additional violations, but which can lead to new grand jury investigations; and the use of amnesty as an anticompetitive tool, i.e., a way to cause headaches or worse for a company’s competition.

Mr. Gergen noted pending litigation in which the government has asserted that an employee may not seek to enforce the amnesty agreement.

To facilitate discussion of these problems and how they apply in real-world settings, the panel reviewed a number of cases in which a successful defense was mounted against leniency application prosecution.

Mr. Deane compared antitrust defense to white collar defense generally. He analogized the amnesty program to “proffering” in other white collar cases, noting the differences – particularly as it results in tension between the goals of corporate counsel and the interests of the individuals involved, and the potential conflict between such goals and a joint defense agreement.

Ms. Nall discussed endgame negotiation strategies. She noted that positioning a client is very fact-specific, but some general principles do apply. For example, cooperation is always viewed favorably by the government. She cautioned that DOJ views with great disfavor the argument that a defendant should be treated with leniency because the defendant is foreign and doesn’t understand or isn’t familiar with American antitrust laws. Legal arguments (regarding jurisdiction, for example) may also be strong bargaining chips.  Mr. Grannon suggested jurisdiction may provide a defense at trial as well.

Mr. Grannon also discussed the decision making process involved in evaluating a plea offer. These decisions often take place after a company has received amnesty, your client’s company has pled guilty, and your client has been left as a “carve-out.” Mr. Grannon presented data on sentences for defendants, comparing different kinds of defendants and providing examples from specific cases.  He noted that DOJ indicates that “no jail” pleas are no longer an option. He noted one particularly troubling DOJ strategy as follows: DOJ has a Memorandum of Understanding with Immigration, indicating that Sherman Act violations are crimes of moral turpitude – which results in deportation and exclusion for 15 years. This agreement exists despite a strong argument that it is not a crime of moral turpitude as that term is commonly defined. DOJ will use this threat as a bargaining chip, agreeing to waive the application of the Memorandum of Understanding it has with Immigration in exchange for a plea of guilty.

(dt)

News Reports on Verdict in Barry Bonds Trial

AP, AJC, Barry Bonds found guilty of obstruction

Maura Dolan, LATimes, Barry Bonds Convicted of Obstruction of Justice in Steroids Case

Ben Forer, ABC News, Barry Bonds Convicted of Obstruction of Justice, but Jury Hung on Other Charges

Fox News, Bonds guilty of obstruction of justice

Juliet Macur, NYTimes, Bonds Guilty of Obstruction of Justice

Laird Harrison & Dan Levine, Reuters, U.S. jury finds Barry Bonds guilty on one count

Alan Duke, CNN, Bonds convicted of obstruction of justice

 Why is it that the headlines tend to focus on the conviction and not the counts that did not result in a conviction (although it is noticed that ABC News did not do this).  Was this long investigation and trial worth it?  Is this how our tax dollars should be spent?

For background see here.

(esp)

30 Million Dollar Fine - Another LCD Antitrust Case

A DOJ press release, tells that "[a] Taiwan thin-film transistor-liquid crystal display (TFT-LCD) panel producer and seller has agreed to plead guilty and to pay a $30 million criminal fine for its role in a global conspiracy to fix the prices of TFT-LCD panels. . ."  The press release states:

"According to a one-count felony charge filed today in U.S. District Court in San Francisco, HannStar Display Corporation, based in Taipei, Taiwan, participated in a conspiracy from Sept. 14, 2001, to Jan. 31, 2006, to fix the prices of TFT-LCD panels sold worldwide. According to the plea agreement, which is subject to court approval, HannStar has agreed to cooperate with the department’s ongoing TFT-LCD investigation."

DOJ notes that this investigation so far has resulted in 17 executives being charged and "seven companies have pleaded guilty or have agreed to plead guilty and have been sentenced to pay or have agreed to pay criminal fines totaling more than $890 million."

(esp)

Epson Imaging Devices Pleads and Pays

A DOJ Press Release reports that "Epson Imaging Devices Corporation (Epson) agreed to plead guilty and pay a $26 million criminal fine for its role in a conspiracy to fix prices in the sale of Thin Film Transistor-Liquid Crystal Display panels (TFT-LCD) sold to Motorola Inc."  It also states that "[a]ccording to a one-count felony charge filed today in U.S. District Court in San Francisco, Epson, a subsidiary of Seiko Epson Corporation, participated in a conspiracy to fix the prices of TFT-LCD panels sold to Motorola for use in Razr mobile phones from the fall of 2005 to the middle of 2006. According to the plea agreement, which is subject to court approval, Epson has agreed to cooperate with the Department’s ongoing antitrust investigation."  It is a common practice for companies to plead guilty and cooperate in the investigation of individuals.  Many a plea or deferred prosecution agreement with a cooperation clause has led to later indictments of individuals within or associated with the company.

The Epson Imaging company website acknowledges this agreement (see here) and states that "[t]he United States Department of Justice has been investigating the pricing practices of the world’s major TFT-LCD manufacturers since December 2006, and Epson Imaging has fully cooperated in this investigation. After careful consideration of the law, the facts and other factors, Epson Imaging has decided that the best course of action was to conclude the agreement with the United States Department of Justice."  The company also states that "In consideration of the inconvenience caused to its customers, Epson Imaging’s directors will voluntarily adjust their remuneration."

(esp)

Head of DOJ's Antitrust Division to Leave

A DOJ Press Statement issued by Attorney General Mukasey speaks to the resignation of Assistant Attorney General Thomas Barnett of the Antitrust Division. AG Mukasey states:

"Tom Barnett has been an effective enforcer of the antitrust laws and a strong advocate for consumers. Under his leadership, the Antitrust Division has increased cartel enforcement to record levels with unprecedented fines and prison sentences, improved the efficiency and efficacy of its merger enforcement, and enhanced cooperation with our foreign counterparts."

The Press Release also notes that:

"Under Barnett’s leadership, the Division obtained $1.8 billion in criminal fines against 50 corporations and 91 individuals. The average prison sentence for incarcerated defendants charged by the Division reached an all-time high of 31 months in FY 2007 with an overall average of 23 months during Barnett’s 3 ½ years as head of the Division. Foreign executives in international cartel cases also faced longer jail sentences, averaging 12 months in FY 2007."

What others are saying:

Joe Palazzola, BLT Law Blog, Barnett to Resign as Antitrust Chief

Trade Regulation Talk Blog, Barnett Resigns as Justice Department Antitrust Chief

(esp)

Defense Contractor Pleads Guilty

A Department of Justice Press Release reports that "[a] former manager of a West Sayville, N.Y., company pleaded guilty and has agreed to serve a jail sentence and pay a criminal fine for his role in two separate conspiracies, one to rig bids on U.S. Navy contracts for metal sling hoist assemblies and another to accept kickbacks from vendors and subcontractors."  The agreement calls for a year and a day in prison, payment of a $10,000 fine and cooperation in the government's investigation.

(esp)(blogging from Firenze, Italy)

The Government is Working With Air

Two airline related cases reached agreements -

1. A plea agreement was filed in United States v. Japan Airlines International Co., Ltd. on a Sherman Antitrust Act, 15 U.S.C. § 1, matter. The criminal fine of $110 million is offered with cooperation by the company.  There are a few interesting aspects of this plea -

• It actually outlines an agreed upon payment plan -

"The United States and the defendant agree to recommend, in the interest of justice pursuant to 18 U.S.C. § 3572(d)(1) and U.S.S.G. §8C3.2(b), that the fine be paid in the following installments: within thirty (30) days of imposition of sentence -- $20 million; at the one-year anniversary of imposition of sentence ("anniversary") -- $20 million; at the two-year anniversary -- $20 million; at the three-year anniversary -- $20 million; at the four-year anniversary -- $20 million; and at the five-year anniversary -- $10 million; provided, however, that the defendant shall have the option at any time before the five-year anniversary of prepaying the remaining balance then owing on the fine."

One can't help but think if the accountants were considering tax implications here.

• It accounts for the need to secure testimony from those outside the United States -

"16. The United States agrees that when any person travels to the United States for interviews, grand jury appearances, or court appearances pursuant to this Plea Agreement, or for meetings with counsel in preparation therefor, the United States will take no action, based upon any Relevant Offense, to subject such person to arrest, detention, or service of process, or to prevent such person from departing the United States. This paragraph does not apply to an individual's commission of perjury (18 U.S.C. § 1621), making false statements (18 U.S.C. § 1001), making false statements or declarations in grand jury or court proceedings (18 U.S.C. § 1623), obstruction of justice (18 U.S.C. § 1503, et seq.), or contempt (18 U.S.C. §§ 401-402) in connection with any testimony or information provided or requested in any Federal Proceeding."

2. A DOJ/Antitrust Press Release notes that "[t]he former highest-ranking Qantas Airways Limited cargo executive employed in the United States has agreed to plead guilty, serve 8 months in jail, and pay a criminal fine for participating in a conspiracy to fix rates for international air cargo shipments."

(esp)