In an earlier post, I explained why I think the antitrust sentencing guidelines for individuals are in need of serious reform (here). The main defect in the current guidelines is that the primary driver of an individuals’ sentence is the volume of commerce of the conspiracy. As discussed in the previous post, under this formulation, the President of a successful bid-rigging scheme is likely to be found less culpable than a salesperson in an international company who is directed by his boss to attend cartel meetings and report back. Also, there is very little difference in culpability under the guidelines between the CEO who initiates and commits his company to a cartel and one of his employees who he directs to go to meetings or talk to a competitor. Both are tagged with the same volume of commerce (if their temporal participation in the cartel was the same).

Besides being unfair, or rather because of this, the individual sentencing guidelines are routinely ignored by the Courts. The guidelines have been advisory since the decision in United States v. Booker.   To date, in antitrust cases, courts sentencing a defendant under the current guidelines have (I believe) always departed downward from the government’s sentencing guidelines recommendations—at least after conviction at trial.   Courts have rejected the guidelines and instead focused on the factors set forth in 18 U.S.C. Section 3553 (Imposition of Sentence)(Factors to be Considered in Sentencing.) This statute directs the court to impose a “sentence sufficient, but not greater than necessary.” In determining the sentence, the court is directed to consider various factors including “the nature and circumstances of the offense and the history and characteristics of the defendant.” The sentence should “reflect the seriousness of the offense,” and “afford adequate deterrence.” Applying these factors, courts have found departure from the antitrust sentencing guidelines warranted.

The most well known case where the Court dramatically departed below the guidelines and the government’s sentencing recommendation was the recent AU Optronics case – a case the Antitrust Division called “the most serious price-fixing cartel ever prosecuted by the United States.” In the AU Optronics case, after conviction at trial, the prosecutors had sought prison sentences of 10 years for both of the defendants H.B. Chen and Hui Hsiung, the president and vice- president of AU Optronics. The sentencing-guidelines range exceeded the Sherman Act maximum,.The defendants each had an offense level of 121-151 months, based on the huge volume of commerce in the global liquid crystal display (LCD) conspiracy. The court soundly rejected the government’s recommendation and sentenced each defendant to three years in prison. A third defendant, a lower-level AU Optronics executive, Steven Leung, was also convicted after a second trial (the jury deadlocked in his first). The top end of Leung’s guidelines range of 108 to 135 months also exceeded the 10-year Sherman Act maximum. The government, however, recognized that the 36-month sentence on Chen and Hsiung set a ceiling for Leung, who had a lesser role in the offense. The government recommended 30 months. Leung was sentenced to 24 months in prison. Three other lower level AU Optronics executives were acquitted at trial; but had they been convicted, their guideline range also would have hit the 10-year maximum based on the volume of commerce.

Another case where the Court departed downward from the guidelines, even after the defendant was convicted at trial, was U.S. v. Frank Peake. Peake, the former CEO and President of Sea Star Lines, was sentenced to a record term of imprisonment for a Sherman Act conviction for his role in a conspiracy to fix prices and surcharges on cargo shipped by water between the United States and Puerto Rico.  While record-breaking, the sentence was substantially below the minimum sentence of 87 months called for by the sentencing guidelines, which the prosecutors had pressed the court to impose.  The defense, in successfully arguing for a departure, cited the sentencing factors in 18 U.S.C. Section 3553.

There is one other notable sentence where the district court departed upward from the sentencing guidelines. In United States v. VandeBrake, 771 F. Supp. 2d 961 (N.D. Iowa 2011), VandeBrake agreed to plead guilty to three counts of price-fixing in the ready mix concrete industry. In return, the government agreed to recommend a sentence of 19 months in prison. This was slightly below the guidelines range the court calculated of 21-27 months. In that case, the court found that the guideline range—driven principally by volume of commerce– grossly failed to measure the defendant’s culpability. Instead, the court turned to the Section 3553(a) factors to consider “the history and characteristics of the defendant.” This analysis was not favorable to the defendant. The court noted that despite being an already very wealthy man, the defendant was motivated by greed when he committed his company to the conspiracy. By contrast, the court took into account that it believed another defendant, with a smaller more vulnerable company, was motivated by an attempt to save jobs and prevent being squelched by the larger competitor. Also weighing against VandeBrake was that he instigated at least two of the conspiracies charged. Finally the Court noted that the defendant was one of the few white-collar defendants “where the sentencing record is totally devoid of any community work, participation in any service organization, or charitable giving.”

While not an antitrust case, it is worth noting that the Division has had two successful municipal bond bid-rigging trials in which it convicted all of the defendants. In the first trial, the prosecutors recommended a term of 10 years in prison for Dominick Carollo (he was sentenced to 3 years); jail time ranging from 14 to 17.5 years for Steven Goldberg (he was sentenced to 4 years); and 10-12 years for Peter Grimm (he was sentenced to 3 years). After the second successful trial, the government recommended 262 months for Peter Ghavami (he was sentenced to 18 months; the government recommended 293 months for Gary Heinz (he was sentenced to 27 months); and the government recommended 168 months for Michael Welty (he was sentenced to 16 months). These cases reflect a drastic departure from the government’s recommendations as well the fact that the guidelines that don’t reflect actual culpability. At the end of Antitrust investigations, when the Division is no longer offering 5K downward departures for cooperation, the guideline sentences in a plea agreement would be draconian. The defendants have little to lose by going to trial. They may get acquitted (three AU Optronics executives have been acquitted). And even if convicted, the trial becomes a prolonged sentencing hearing to demonstrate to the court why the government’s insistence on a guideline range sentence is inconsistent with the sentencing goals set forth in 18 U.S.C. Section 3553.  Unnecessay trials divert limited government resources from other investigations.

The fraud sentencing guidelines (Basic Economic Crimes §2B1.1) has also been the subject of substantial criticism for failing to measure actual culpability by placing undue weight on the loss table–the equivalent of the volume of commerce table in the antitrust guideline. The ABA formed a task force of defense attorneys (many of which were former prosecutors), law professors and federal judges to make recommended changes to the sentencing guidelines for economic crimes other than antitrust.  On September 17, 2013, the task force issued, “A Report on Behalf of the American Bar Association Task Force on the Reform of the Federal Sentencing for Economic Crimes”. The recommendations attempted to insert some measure of culpability into the sentencing guidelines beside the estimated amount of loss. The recommended guideline has five levels of culpability that, for any given case, will depend on array of factors:

“These include, but are not limited to: the defendant’s motive (including the general nature of the offense); the correlation between the amount of loss and the amount of the defendant’s gain; the degree to which the offense and the defendants’ contribution to it was sophisticated or organized; the duration of the offense; extenuating circumstances in connection with the offense; whether the defendant initiated the offense or merely joined in criminal conduct initiated by others, and whether the defendant took steps (such as voluntary reporting or cessation, or payment of restitution) to mitigate harm from the offense.”

The full Task Force report can be found here. http://lawprofessors.typepad.com/files/ussc-presentation-9-17-13.pdf . The antitrust guideline for an individual, like the other economic crimes guidelines, should be changed to better reflect actual culpability. Volume of commerce should be a factor—but it should not have the overwhelming weight it currently has.

On Monday, I am going to post some ideas I have for reforming the antitrust sentencing guidelines for individuals. Any suggestions or feedback is most welcome.

I hope this post was useful. Thanks for reading.