Assistant Attorney General Makan Delrahim gave a talk on Friday, May 10, 2019 at an ABA Antitrust Section of Law conference in Buenos Aires, Argentina. The full remarks can be read here.
Mr. Delrahim made reference to two policy changes that are in the works involving two key Antitrust Division policies : 1) Corporate Leniency; and 2) Credit for Compliance Programs. This talk did not indicate what changes may be in store, but Mr. Delrahim’s remarks are worth noting (in italics below):
The Antitrust Division has several important tools for detecting cartels, but the leniency program has proven to be our most effective tool by far. Under the Antitrust Division’s Corporate Leniency Policy, the company (and any cooperating employee) that first reports its involvement in illegal activity can qualify for a complete pass from criminal prosecution in exchange for providing comprehensive cooperation to the Antitrust Division during its investigation.
As of now, over 80 jurisdictions across the globe have developed leniency programs, including nine so far in Latin America. These programs have changed the landscape of antitrust enforcement throughout the Americas.
One area where we are taking steps to improve is to protect against the imposition of duplicative penalties. We hope to ensure that each jurisdiction imposes penalties that reflect the specific harm to its own markets and consumers. One simple way to achieve this goal is for enforcers to have open discussions about our methodologies for calculating fines in specific cases. These dialogues not only may help prevent overlapping fines and decrease unnecessary burdens on parties, but also can ensure that penalties cover the full scope of the harm caused by the cartel.
Corporate Compliance Programs
One option [to credit robust compliance programs] would involve formally recognizing that even a good corporate citizen with a comprehensive compliance program may nevertheless find itself implicated in a cartel investigation. While we have credited extraordinary prospective commitment to corporate compliance before, we are also considering how to credit robust compliance programs at the charging stage, even when efforts to deter and detect misconduct were not fully successful in this particular instance.
The Antitrust Division long has been home to the ultimate credit for an effective compliance program that detects and allows prompt self-reporting—leniency. Going forward, however, leniency will no longer be the only benefit.
Whatever the exact nature of our policy changes, the Division will move away from its previous refrain that leniency is the only potential reward for companies with an effective and robust compliance program. In line with the Department of Justice and its other components, we can and must do more to reward and incentivize good corporate citizenship.
Some Thoughts on These Potential Developments
The Criminal Division of the Department of Justice recently released guidelines for the Evaluation of Corporate Compliance Program (April 2019) here. These guidelines do not cover the Antitrust Division but are still helpful in understanding factors that may result in credit for antitrust compliance programs.
Mr. Delrahim quoted Mexican film director Alejandro Gonzalez Inarrutu who said, “To question your own process is a necessity. If you don’t question yourself, it’s impossible to improve.” I encourage the Antitrust Division to question whether sweetening the pot for corporate whistleblowers is the only way to strengthen the Corporate Leniency Policy and increase cartel enforcement. It’s time for a whistleblower provision to reward individuals, not just companies, who come forward. Kimberly Justice (Freed Kanner London & Millen) and I have had careers as prosecutors in the Philadelphia Field Office of the Antitrust Division. We are now in private practice and deal with potential whistleblowers. We have written two articles that more fully explain how and why a cartel whistleblower statute would work: The Political Stars Align for a Criminal Antitrust Whistleblower statute, February 8, 2019, Antitrust Law Daily, available at http://business.cch.com/ald/ALD_Criminal-Antitrust-Whistleblower-Statute_20190208.pdf; and It’s a Crime There Isn’t a Criminal Antitrust Whistleblower Statute, Antitrust Law Daily April 5, 2018, available at http://business.cch.com/ald/ALD_Criminal-Antitrust-Whistleblower-Statute_04-05-2018_final_locked.pdf.
Two points I’d like to address here, because I believe they are misunderstood, is that an individual whistleblower program:
1) would enhance, not undermine, the Corporate Leniency Program; and
2) a cartel individual whistleblower statute would also enhance, not undermine, corporate compliance programs.
- Individual Whistleblowing Incentives Will Lead to Increased Corporate Leniency Applications
Whether one believes that leniency applications are down (at least for major international cartels), or whether leniency applications are in line with historical norms, there is no reason that the Corporate Leniency Program should not be improved. A cartel whistleblower statute will increase, not decrease, the effectiveness of the corporate leniency program.
Type A Leniency
There are no public statistics but anecdotally attorneys suggest that some companies that discover cartel issues are not coming forward with Type A leniency because the costs of cooperation and civil damage suits outweigh the benefits of sitting back and hoping the cartel is never discovered. The discussion in the corporate board room about what to do with a discovered cartel problem will be quite different if the company has to worry about an individual whistleblower having incentives to report the wrongdoing. Currently, a company may (and some allegedly have) bet that another cartel member won’t go in for Type A leniency because that company faces the same enormous collateral consequences of exposing the cartel. An individual whistleblower, of course, faces enormous blowback from being a whistleblower, but a possible financial reward may overcome these disincentives. In terms of destabilizing cartels and promoting Type A leniency, the wildcard of a possible individual whistleblower certainly moves the cost/benefit analysis of seeking Type A leniency towards self-disclosure.
Type B Leniency
Individual whistleblowers will also help generate Type B leniency applications. Type B leniency is available even after an investigation has begun as long as the “[t]he Division, at the time the corporation comes in, does not yet have evidence against the company that is likely to result in a sustainable conviction.” A whistleblower, therefore, does not preclude the granting of a leniency application in the investigation.
Here are couple of realistic scenarios where an individual whistleblower, if protected from retaliation and compensated for the enormous financial cost of exposing a cartel, might come forward, either to start an investigation or greatly advance an existing investigation:
Whistleblower Illustration 1: A sales representative who is assigned to attend working group meetings. Once there is word of an investigation, this type of whistleblower may come forward. Type B Corporate Leniency would still be available to one company and once an investigation obtains credibility/inevitability, the odds of a company breaking ranks and seeking that one leniency are high.
Whistleblower Illustration 2: An estimator who is told to give bid prices to a competitors. When the authors were in the Philadelphia office, we started numerous grand jury investigations that were far from sure things. We would be doing cartwheels in the hall if this type of whistleblower came forward when subpoenas were served. In all likelihood, however, we would need more witnesses and documents before the indictable evidence threshold was reached and leniency was unavailable. With an insider cooperating, the likelihood of a company seeking Type B leniency is high.
In either of these situations, not only would a whistleblower be able to start/enhance a credible grand jury investigation, but the opportunity might exist for search warrants, consensual monitoring and other investigative techniques that can greatly collapse the time and resources needed to uncover, prosecute and extinguish a cartel.
2) An Individual Whistleblower Program Would Have a Positive Effect on Corporate Compliance Programs
Concern has been expressed that an individual whistleblower program would undermine corporate compliance programs because an individual could go directly to the government and financially benefit from exposing an existing a cartel instead of first bringing it to the attention of the corporation. We agree that antitrust compliance programs are a positive part of a corporate culture but we disagree that an individual whistleblower statute would discourage effective corporate compliance programs. We believe a cartel whistleblower statute would make antitrust compliance programs even more necessary because the risk of getting caught would be increased.
The need for a corporate compliance program is related in part to the possibility of wrongdoing being exposed. The words of “Not Quite A Crazy As he Used To Be ‘Crazy Eddie’” might be the lead in to every antitrust compliance program if there was a cartel whistleblower statute:
In the two decades I was deeply involved in the Crazy Eddie fraud, the only threat made us lose sleep at night was the possibility of a whistleblower blowing the lid on our crimes. Consistent studies by the Association of Certified Fraud Examiners have shown that most frauds are exposed by whistleblowers, far ahead of frauds exposed by any other source. The SEC will be handing a gift to white-collar criminals if it reduces whistleblower bounties.
Sam E. Antar, Former Crazy Eddie CFO, former CPA, and a convicted felon.
Also, as noted, even with a credible whistleblower coming forward, the Antitrust Division still has a corporate leniency in its cooperation arsenal. Both authors, when we were with the Antitrust Division, successfully used affirmative amnesty—approaching a subject corporation, making a reverse proffer of their involvement in a cartel and giving a deadline for coming forward with a corporate leniency application. If a whistleblower comes forward, the Division can learn what type of compliance program that company had and make a decision about whether an affirmative amnesty approach may be justified. Of course, it may be the whistleblower did not report the matter internally because the CEO was involved directly. Or perhaps the whistleblower did complain internally and was shut down. Or maybe the company had a good compliance program and this was a mid-level hatched conspiracy. In any event, the existence of a whistleblower does not rule out the possibility of leniency for the whistleblower’s company. Moreover, even if the company does not obtain the leniency, the Antitrust Division has other ways of rewarding a robust—but ultimately unsuccessful whistleblower program.
Let’s Have A Criminal Cartel Whistleblower Roundtable—Please
The Antitrust Division has commendably held roundtables on a number of potential policy issues/changes. A roundtable on this issue “Should there be a whistleblower award for individuals who expose criminal antitrust cartels?” would be a great way to get divergent views on whether and how individual cartel whistleblowers should be rewarded.
 One contributing factor to the apparent decline in leniency applications may be a dramatic reduction in “hot documents” that cartel members—particularly foreign members –are creating. After a decade of being put in jail in the United States and hunted down with Red Notices and border watches, it is likely that cartel members have gotten the message that they (and their records) are not beyond the reach of the US antitrust laws. Hopefully, this has resulted in a reduction in the formation of cartels. It most assuredly has led to a decrease in the amount of explicit cartel emails/documents/travel records that are created. The lack of “hot documents” must also factor into a companies’ decision about whether to seek Type A leniency. The fewer hot documents are being created, the greater the need for individuals to come forward.
 Mr. Antar was commenting on why he thought it was a bad idea for the SEC to put a cap on the dollar amount of whistleblower award. Wall Street Journal, June 29, 2018, SEC Seeks Right to Cut Whistleblower Bounties, available at https://www.wsj.com/articles/sec-proposes-whistleblower-awards-for-smaller-cases-1530212390.
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