The Antitrust Division, through a federal grand jury, indicted seven Japanese executives for conspiring to fix prices in the long running auto parts investigation. There were two separate indictments. One charged executives from Mitsubishi Electric Corp. with conspiring to fix the prices of starter motors, alternators and ignition coils from at least 2000 through 2010. In the second indictment, four executives from Hitachi Automotive Systems were charged with conspiring to fix prices of multiple auto parts including starter motors, fuel injection systems, and ignition coils.
Atsushi Ueda, Minoru Kurisaki, and Hideyuki Saito of Mitsubishi Electric Corp. were charged with conspiring to fix the prices of certain automotive products sold to Ford Motor Company, General Motors LLC, Chrysler Group LLC, Fuji Heavy Industries Ltd., Nissan Motor Company Ltd., and Honda Motor Company Ltd. in the United States and elsewhere. This indictment also charged Kurisaki and Saito with knowingly conspiring to obstruct justice by destroying documents and corruptly persuading, and attempting to persuade others, to destroy documents. Saito was charged in an additional count with knowingly and corruptly persuading, and attempting to persuade, executives to destroy documents and delete electronic data that may contain evidence of antitrust crimes.
The second indictment charged Takashi Toyokuni, Ken Funasaki, Kazunobu Tsunekawa and Tomiya Itakura of Hitachi Automotive Systems Ltd. with conspiring to fix the prices of at least nine automotive parts sold to various automobile manufacturers such as, Ford Motor Co., General Motors LLC, Nissan Motor Co. Ltd., Toyota Motor Corp., and Honda Motor Co. Ltd., in the United States and elsewhere.
In the auto parts investigation 28 companies, mostly Japanese, have been fined more than $2.4 billion. In addition, 43 individuals have been charged. Twenty-six individuals have pleaded guilty and have been sentenced to prison terms ranging from a year and a day to two years. Both Mitsubishi Electric and Hitachi Automotive pleaded guilty in November 2013 to criminal price-fixing charges, and were fined $190 million and $195 million, respectively. As discussed below, the indicted executives were “carve-outs” from the corporate plea agreement and subject to prosecution. Many if not all of the corporate plea agreements have likely included carve-outs, so there may be additional indictments against individuals as the auto parts investigation moves through its final phase.
Corporate plea agreements between the Antitrust Division and corporate defendants typically deal with individual executives as well. The corporation would like to receive non-prosecution protection for as many executives as it can in return for their cooperation with the government. But, the Antitrust Division seeks to hold individuals accountable and will demand that certain individuals be “carved out.” Carve-outs are not covered by the plea agreement and are subject to prosecution. Of these carve-outs, some reach a separate plea agreement of their own with the Division and agree to plead guilty, serve some jail sentence and cooperate in the investigation. Twenty-six individuals have done so in the auto parts matter. Other “carve-outs” who don’t reach plea agreements are identified in the corporate plea agreement in an Appendix that is filed under seal. These individuals are subject to prosecution. The individuals indicted yesterday were carve-outs from the corporate plea agreements reached last year between the Antitrust Division and Mitsubishi Electric and Hitachi. Not all carve-outs are ultimately indicted, but it is current DOJ policy to name only those likely to be indicted as carve-outs in the filing placed under seal. A carved-out individual may also be indicted under seal.
In every Antitrust Division international investigation there are numerous foreign executives who are indicted and remain fugitives. Some foreign executives will simply refuse to plead guilty and come to the U.S. to serve jail terms. They can find themselves indicted and graduate from carve-out to fugitive status. Also, as the investigation progresses, the length of the jail term sought by the Antitrust Division in a plea agreement increases so the calculus for a foreign executive thinking about coming to the U.S. and serving a jail term changes. The cost in jail time of “putting the matter behind him” increases. An executive’s age, his need to travel internationally, his employment situation, and other factors all affect the decision of whether to plead and submit to U.S jurisdiction and serve a jail term.
The Antitrust Division has expressed determination to seek extradition of foreign indicted executives. It remains to be seen whether the Japanese government will cooperate with U.S. extradition wishes for auto parts fugitives. Price-fixing is a crime in Japan so there is “dual criminality,” meaning that it is an extraditable offense since price-fixing is illegal in both countries. But, price-fixing is treated quite differently in Japan and typically punished with civil penalties against the company. No Japanese executive has ever been extradited to the United States for price-fixing and there are Japanese nationals as fugitives in nearly all of the Antitrust Division’s international price-fixing investigations.
The executives who face a greater possibility of extradition may be the ones who were also indicted for obstruction of justice. [Obstruction of justice is also a sure way to get put on the Division’s carve-out list.] When I was the Chief of an office in the Antitrust Division, we extradited a British national on obstruction of justice charges, although the British refused to permit his trial on the antitrust charge because dual criminality was lacking on the price-fixing charge. [Price fixing is now a crime in the U.K.] He was convicted and sentenced to 18 months in prison. More recently, Romano Pisciotti, an Italian national, was extradited from Germany in April 2014 to face criminal charges in the U.S. for participating in a worldwide cartel. This was the first time an individual was extradited from Germany to the U.S. on antitrust charges. Pisciotti pled guilty to price-fixing and agreed to serve a prison term. The German government, however, would not extradite one of its own citizens to the U.S. to face price-fixing charges and Pisciotti is appealing his treatment by the Germans through international court.
Extradition is a hot topic primarily because the Antitrust Division has focused its efforts on international cartels, which in turn implicates many foreign executives. I think the relatively recent increase in Sherman Act jail sentences to a 10-year maximum will hamper the efforts of the Division in its quest to extradite foreign nationals. The U.S. is still relatively alone in imposing jail sentences for price-fixing (though more countries have made price-fixing a criminal offense and a prison sentence is not unheard of). Countries may be less willing to subject their executives to possible ten years in jail than they might have been for shorter sentences. The Antitrust Division actually requested the maximum ten-year prison sentence for two executives of AU Optronics convicted in the LCD panel cartel. The court rejected that request and imposed sentences of three years—still serious jail time.
For further information, check out the Antitrust Division press release: http://www.justice.gov/atr/public/press_releases/2014/308747.pdf
And for a different flavor, here is an article from the Japanese press. The comments section is interesting to see how the paper’s readers react to the news: http://www.japantoday.com/category/crime/view/u-s-charges-7-japanese-auto-executives-with-price-fixing
Stay tuned. There will be important developments in the auto parts investigation that will have implications for all cartel investigations.
Thanks for reading.