In the last Cartel Capers post, I tallied up the criminal cases filed by the Antitrust Division in FY 2018. Measured by that standard, it was a pretty slow year for criminal antitrust enforcement. But, I also noted a couple of pretty important points to keep in mind: 1) criminal enforcement has always been somewhat cyclical. As blockbuster matters such as the auto parts cases wound down, the statistics were bound to slide; and 2) any new administration is initially largely dependent for criminal case filings on matters left in the pipeline by the previous administration. And I should humbly add that for all I know, the next big investigation may be in the works, or just an amnesty application away.
With that being said, below I discuss a few possible reasons why criminal case filings are down. On the TV show Ancient Aliens, the narrator always prefaces his remarks with “Is it possible…..?” or “Some people say…..” That is a good device to use here because I am merely throwing out ideas for consideration–“Is it possible…?” And I while I work with many people in the cartel bar, I never quote conversations unless asked. “Some people say…” is enough said here.
- It Is Possible Cartel Case Filings Are Down Because Deterrence Works?
Is it possible (or naïve) to think that increased jail sentences, extradition, Red Notices, proliferation of active competition agencies and private damage litigation has led to a decline in the formation/existence of price-fixing/bid rigging cartels? After all, as discussed in the next section, there is a growing belief in the antitrust bar that seeking amnesty has become cost prohibitive. Perhaps executives are taking notice that cartels themselves are becoming cost prohibitive. This is clearly not the only explanation—and there is a debate about whether current penalties are sufficient to deter cartels. But, I do recall that in the ADM lysine international cartel prosecution, only two US executives went to jail. All foreign conspirators were immunized. And the corporate defendants paid relatively small fines in relatively few jurisdictions. The only major private class action damage suits were brought in the United States. I don’t have hard figures, but I imagine if you fixed prices all over the world, but paid penalties in few jurisdictions, it may have been a very profitable cartel.
The same cartel today would find many foreign executives indicted, enforcement actions by many more global competition agencies and a growing class action damage bar in many jurisdictions. In very recent testimony to Congress, Makan Delrahim explained that a higher percentage of indicted defendants are actually being sentenced to prison and for a greater period of time. There’s a debate about whether cartels are still profitable, but there can be no debate that the cost of getting caught in a cartel has gone up dramatically for both companies and individuals. While not measurable (at least not by me), logic dictates that increased penalties must have some deterrent effect.
- Is It Possible That It Has Become Too Costly to Obtain Amnesty?
Some people say (and here, some people means many) that leniency is no longer always the best path to take if a cartel problem is uncovered. The corporate decision-making has gone from a “no-brainer we should seek amnesty” to a more cautious “Is amnesty the best option here?” More and more, and this is just anecdotal, companies are sitting on the information they have and taking their chances that they can just stop the problematic conduct and lay low. Seeking amnesty is still often the best course of action if a company discovers cartel activity, but it is not the easy choice it once was–or so some people say.
- Is It Possible That International Cooperation Creates Too Many Mouths for the Amnesty/Leniency Applicant to Feed?
All the difficulties of seeking amnesty in the United States are multiplied by the fact that enforcement agencies all over the world have become more active in cartel enforcement. A company (and individual) seeking amnesty/leniency, faces a decision of whether to report simultaneously in other jurisdictions. This is not always an easy call. If you report elsewhere (and elsewhere could be the EU, Japan, India, China, UK, Canada, Brazil—to name just a few jurisdictions) the costs in money and executives’ time for interviews jumps dramatically. But, if the company does not report elsewhere, it could get beat to the punch by another company seeking leniency in other jurisdictions.
- Is it Possible that the Global Spread of Private Damage Litigation Has Slowed Down the Leniency Rush to the Courthouse?
Private damage litigation is increasing across the globe. At one time, a company may reasonably hope that its private damages would be limited to the United States. That is not so anymore. The United States has done a tremendous job of encouraging competition agencies around the world to take aggressive steps to combat cartels. And private class actions, another form of deterrence and compensation to the victims, have also increased globally. It’s been a bit of a double-edged sword—surely (hopefully) the increased parade of horribles that awaits a cartel that is exposed must deter some cartel formation—or end a cartel in existence. It is likewise logical that the increased cost of seeking leniency has deterred some potential applicants from coming forward.
I discussed some of these issues in more detail in a May 2013 Law 360 article titled Corporate Leniency Should Come With a Warning Label:
When a doctor discovers a patient has a life-threatening condition there is often a good news/bad news discussion. The good news is that there is a treatment; the bad news is that the side effects may be fatal. When a client comes to the antitrust doctor with a case of “cartelitis” the discussion of treatment options can run much along the same lines.
The side effects of seeking the leniency “cure” have only increased in the last five years.
- Is It Possible the Last Administration Scared Away Amnesty Applicants With Certain Public Statements?
Some people say that during the last administration the Antitrust Division took a much less welcoming tone with potential leniency applicants. Where the Division speeches previously emphasized the benefits of leniency and the Division’s willingness to work with leniency applicants to perfect the leniency application, certain speeches in the last administration focused on some of the burdens of being a leniency applicant. In one speech, former Assistant Attorney General Bill Baer stated:
We expect leniency applicants to make those investments, including conducting a thorough internal investigation, providing detailed proffers of the reported conduct, producing foreign-located documents, preparing translations, and making witnesses available for interviews. Companies unwilling or unable to make the investments necessary to meet these obligations, or those that think they can do so on a timetable of their own choosing, will lose their opportunity to qualify for leniency.
When companies apply for leniency, their current employees may earn it too. (emphasis added). As with employers, however, leniency for employees is not an entitlement; it requires full and timely cooperation. To cooperate fully, individuals must be prepared to admit to all collusive conduct they participated in or know about. They need to be prepared to be candid and credible witnesses in front of a grand jury and at trial.”
Mr. Baer added:
In recent years we have on occasion investigated jointly with other DOJ components conduct reported by a leniency applicant that involves both antitrust violations and other crimes, such as fraud, tax evasion, or corruption. Our leniency policy is quite clear that it governs only the Antitrust Division’s exercise of its prosecutorial discretion in connection with self-reported criminal violations and does not prevent other components from prosecuting offenses other than Sherman Act violations. See, Bill Baer, Assistant Attorney General Antitrust Division, USDOJ Prosecuting Antitrust Crimes, September 10, 2014, Georgetown University, available at, https://www.justice.gov/atr/file/517741/download
These statements are true, but quite a different tone than the more inviting “We are going to work with you to help you perfect your marker” tone that was central to many previous Division speeches.
On a similar note, in the very last days of the Obama Administration, the Antitrust Division issued a new and revised Frequently Asked Questions. Some people say the changes in the document reflected a less certain path for individuals to amnesty—particularly former employees. The revisions also highlight that the amnesty protection does not extend to non-antitrust offenses. There has been no revision or explanation by the new administration of the changes in the FAQ. FREQUENTLY ASKED QUESTIONS ABOUT THE ANTITRUST DIVISION’S LENIENCY PROGRAM AND MODEL LENIENCY LETTERS, Originally Published November 19, 2008, Update Published January 26, 2017
The real question is whether the practice of the Antitrust Division reflects a more demanding route to obtaining amnesty. Some people say it has with an ever-increasing demand from the Antitrust Division to produce witnesses and documents, and a more uncertain fate for cooperating employees, in a very lengthy and exhaustive investigation before receiving a conditional leniency letter.
- Is It Possible that ACPERA Has Been a Failure at Encouraging Leniency Applicants?
When the Antitrust Criminal Penalty Enhancement and Reform Act (“ACPERA”) was passed in 2004, an important provision designed to help promote whistleblowers (i.e. amnesty applicants) was that amnesty recipients who also provided “substantial cooperation” to the private damage plaintiffs would have their civil exposure limited to single, instead of treble damages. Some people say that the single damage “carrot” has been ineffective for reasons similar to those mentioned above. The cost of cooperating with the private bar has become too high in terms of the extent and cost of cooperation demanded. And, the process of knowing whether you have satisfied “substantial cooperation” and qualify for the single damages is too lengthy and uncertain.
- Is It Possible Closing Four Field Offices in 2013 Hurt Cartel Enforcement?
Some people, including me, say YES. In 2013, the Antitrust Division closed four field offices (Atlanta, Cleveland, Dallas and Philadelphia). Each of these offices had brought international price-fixing cases. Notably, the Dallas Office brought the Vitamins cases and the Philadelphia Office brought the Graphite Electrode cases. Each closed field office (and the ones still open) brought international cartel cases—too many to mention. But Vitamins and Graphite Electrodes are worth a mention because these two matters were some of the early successes of the international cartel program bringing in hundreds of millions of dollars of fines.
The field offices were in large measure responsible for developing their own cases through various outreach efforts. This was a huge incentive to get out and talk to investigative agents, run down every lead and conduct thorough investigations. This not only led to certain large international price-fixing cases, but gave the Antitrust Division a regional presence that was key to developing bid rigging cases on government contracts based on leads brought by agents in our respective territories.
- Is It Possible The Antitrust Division Has a Shortage of Experienced Investigators?
The Antitrust Division has always attracted top talent; people who believe in the antitrust laws, and cartel enforcement specifically. That is still the case as the Antitrust Division is stocked with talent. But some people say that current staff may collectively have less than optimal experience in investigating cartel cases. Two decades or more of amnesty applicants bringing cases to the Division with amnesty applications can deaden the hunter’s skill in chasing down the prey. And closing the field offices scattered many experienced hunters into retirement, private practice and even blogging! People may forget, but before there was leniency there was still robust cartel enforcement. The grand jury is still an effective tool to take a lead and see if it can uncover a cartel. But, since leniency has predominated there has been less of a need to make cases “the old fashion way.” To cite a lack of investigative experience, of course, is a generalization but I can say that early in my career I was in the grand jury several times a month questioning lower level executives (and sometimes very senior executives), working our way up to try to build a case. The Philadelphia Office usually had three standing active grand juries—in Philadelphia, Pittsburgh and New Jersey. By the time I left in 2013 we did not have any exclusive antitrust grand juries. Cooperating witness interviews had taken the place of grand jury interrogation. Our use of grand jury time was limited. When needed, we would use time in a US Attorney’s grand jury—usually simply to put on the evidence we needed to return an indictment. But since most cases were voluntary pleas–Informations– even the indicting grand jury was not used very often.
There will likely always be periods when the amnesty pipeline is a little dry. It’s good to have a few people around who remember how to dig from the ground up.
Some things that may decrease amnesty applications such as increased international enforcement and greater ability globally for customers to seek damage remedies are good things, even if they are expensive toll booths on the road to amnesty. But, some people also think there are ideas consistent with robust cartel enforcement that may help return a sheen of attractiveness to seeking amnesty. It’s possible I’ll discuss those in an upcoming blog.
Thanks for reading.
On October 3, 2018 Antitrust Division Assistant Attorney General Makan Delrahim testified before the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights. A copy of Mr. Delrahim’s prepared remarks can be found here.
- Investigated and prosecuted criminal antitrust violations across many sectors of the economy, with over $3.243 billion in criminal fines imposed in FYs 2016-17. In fiscal year 2017, investigated and prosecuted individual cases that resulted, in the highest number of individuals sentenced to prison terms since 2012. (30 individuals were sentenced to prison terms in FY 2017.)
- Devoted substantial resources to individual prosecutions and sentencings.
- Over FYs 2016-17, 52 defendants in Antitrust Division cases have been sentenced to prison terms, totaling 15,110 days of incarceration.
- Many of the Division’s individual convictions were the result of investigations into anticompetitive conduct at public real estate foreclosure auctions. This conduct was widespread and harmed homeowners and others.
- Trial due to start on October 9 in a price-fixing case against three traders from major banks, who are charged with manipulating the foreign currency exchange spot market for U.S. dollars and Euros. This follows corporate pleas in 2015.
- A record-setting number of criminal cases (nine) went to trial in FY 2017—the highest number in the last two decades.
- Actively engaged in outreach and training for agents at offices of inspectors general at numerous federal agencies. Such engagement and training arms these agents with the ability to detect and report antitrust crimes. In many instances these agencies also join our investigative efforts.
- Implemented no-poach initiative, investigating and prosecuting “no-poach” and wage-fixing agreements.
- Updated Leniency Program information designed to increase transparency and self-reporting of cartel behavior.
- Held a public roundtable discussion on “the role that corporate antitrust compliance programs play in preventing and detecting antitrust violations and ways to further promote corporate antitrust compliance.”
- Hosted event on the 25th anniversary of the Division’s Leniency Program
Mr. Delrahim expanded on these highlights:
The Division investigated and prosecuted antitrust violations across many sectors of the economy, with over $3.243 billion in criminal fines imposed in FYs 2016-17. In the most recent fiscal year, the Division investigated and prosecuted individual cases that resulted in the highest number of individuals sentenced to prison terms since 2012. The Division also has made efforts to increase self-reporting of cartel behavior through its clarification of its amnesty program.
Criminal enforcement has long been a vital tool to protect competition and consumers. The Sherman Act has been a criminal statute ever since it was signed into law in 1890. Antitrust violations such as price-fixing, bid-rigging, and market allocation unambiguously disrupt the integrity of the competitive process, harm consumers, and reduce faith in the free market system. Such harmful agreements among competitors are subject to a rule of per se illegality, and individuals who engage in such conduct appropriately face criminal accountability along with the corporations they serve. At the Division, we focus our criminal enforcement efforts on holding culpable corporations and individuals accountable, including high-level executives.
In an important example, the Division brought charges against and obtained guilty pleas from executives of a generic pharmaceutical company for price fixing, bid rigging, and customer allocation for an antibiotic and a drug used to treat diabetes. (E.g., Plea Agreement, U.S. v. Glazer, 2:16-cr-00506 (E.D. Pa. Jan. 9, 2017), https://www.justice.gov/atr/case-document/file/931381/download.) It is particularly galling that, when healthcare prices in the United States are already high, certain corporations and executives engaged in anticompetitive activities at the expense of individuals who depend on critical medications.
In another area that has a profound impact on American consumers, the Division actively prosecuted bid rigging and fraud relating to real estate foreclosure auctions. To date, 138 individuals and 3 companies have been charged as a result of the Division’s investigations of bid rigging and fraud relating to real estate foreclosure auctions in California, Alabama, North Carolina, Georgia, and Mississippi. (E.g., Press Release, U.S. Dep’t of Justice, Seventh Mississippi Real Estate Investor Pleads Guilty to Conspiring to Rig Bids At Public Foreclosure Auctions (July 19, 2018), https://www.justice.gov/opa/pr/seventh-mississippi-real-estate-investor-pleads-guilty-conspiring-rig-bids-public-foreclosure.) On an individual basis, each of these cases is relatively small, but on an aggregate basis, these cases are important to the economy, particularly because the convicted investors subverted competition and lined their pockets by illegal bid rigging and fraud while diverting money from the homeowners and mortgage holders entitled to any proceeds.
The Division has many open criminal investigations. The Division is trying more criminal cases than ever before and obtaining more prison sentences for individuals than in recent years. Corporate leaders and business executives who consider deviating from the rules of our free enterprise system should take notice.
Moreover, the American public should know that the Antitrust Division is looking out for their salaries, as well. We have put employers on notice that agreements between employers that eliminate competition for hiring employees in the form of no-hire or non-solicitation agreements (often referred to as “no-poach” agreements) are per se violations of the Sherman Act when they are not ancillary to legitimate collaborations. In October 2016, the Division reminded the business community that no-poach and wage-fixing agreements can be prosecuted as criminal violations when they are not reasonably necessary to a separate, legitimate transaction or collaboration between employers. As a matter of prosecutorial discretion, the Division will pursue no-poach agreements terminated before October 2016 through civil actions. Defendants should anticipate potential criminal enforcement actions for any such naked no-poach agreements we uncover that post-date our October 2016 guidance, although we reserve discretion as appropriate in making our ultimate determinations.
The Division will continue to be diligent in detecting and deterring collusion that harms American consumers, and we will remain focused on crucial industries that affect Americans deeply, such as real estate, food, financial services, and health care, just to name a few.
As mentioned, the full statement on the Antitrust Division’s activities can be found here and its worth checking out.
Thanks for reading!
The first team I can remember rooting for was the 1962 Mets. They went 40–120 (.250) and finished last in the National League, 60 1⁄2 games behind the NL Champion San Francisco Giants. The statistics for criminal cases filed by the Antitrust Division for the 2018 Fiscal Year that closed on September 30, 2018 were pretty close to being that bad. There were 14 case filings naming 18 defendants; 8 of the cases were real estate foreclosure auctions. By contrast, a high water mark was FY 2011 when 90 cases were filed against 109 Defendants.
Before anyone thinks, “Well it’s the Republicans” or somehow Makan Delrahim isn’t doing a good job, recall that the 1962 Mets were skippered by Casey Stengel—a Hall of Fame manager. Stengel’s Yankees won the World Series five consecutive times (1949–1953). Stengel remarked about the 1962 Mets “Can’t anyone here play this game?” Delrahim may have quipped: “Didn’t they (the prior administration) leave me any cases in the pipeline?” The investigation period for a criminal antitrust case is lengthy. To a large extent, a new administration is bringing charges stemming from investigations that began under the previous administration. So, don’t shoot the current Sheriff.
The next Cartel Capers post will explore some of the reasons the Antitrust Division’s case have tailed off so dramatically. Also, I’d like to talk about some ways to get the pipeline full again (perhaps it is but its not yet apparent). I welcome any reader comments about why case filings–particularly international cartel cases– may be down (other than it’s a cyclical business and auto parts and financial crime cases ran their course). Are there ideas out there about what the Antitrust Division could be doing to generate a more robust criminal enforcement program?
Below are my very unofficial statistics for Antitrust Division criminal case filings for Fiscal 2018. I have not compiled fines, but I believe the only “substantial fine” is the $90 million imposed on BP Paribas in a currency manipulation case.
PS. I was a Casey Stengel fan even later in life. When I was Chief of the Antitrust Division’s Philadelphia Field Office I always followed Casey’s advice on being a successful manager: “The secret of successful managing is to keep the five guys who hate you away from the four guys who haven’t made up their minds.” And, like Casey, I was eventually canned; when my office got whacked in 2013.
Antitrust Division Fiscal 2018 Cases (unofficial)
Criminal Cases Filed: 14
Total Defendants: 18
Corporate Defendants: 3
Cases by Subject Matter
Foreclosure auction -8
Financial services – 2
1) August 20, 2018 U.S. v. Detloff Marketing and Asset Management, Inc. et al. District of Minnesota
2) June 8, 2018 U.S. v. Ivan Spinner Mississippi, Southern District
https://www.justice.gov/atr/case/us-v-ivan-spinner (real estate foreclosure auctions)(SD Miss.)(no press release)
3) May 16, 2018 U.S. v. Christopher Lischewski California, Northern District
4) May 10, 2018 U.S. v. Akshay Aiyer New York, Southern District
https://www.justice.gov/atr/case/us-v-akshay-aiyer(currency exchange, S.D. NY);press release:
5) April 10, 2018 U.S. v. Chad Nichols Mississippi, Southern District
https://www.justice.gov/atr/case/us-v-chad-nichols (real estate foreclosure auction bid rigging)(SD Mississippi)(no press release)
6) April 3, 2018 U.S. v. Kevin Moore Mississippi, Southern District
https://www.justice.gov/atr/case/us-v-kevin-moore (real estate foreclosure auction bid rigging)(no press release)
7) April 3, 2018 U.S. v. Terry Tolar Mississippi, Southern District
https://www.justice.gov/atr/case/us-terry-tolar (real estate foreclosure auctions bid rigging) (no press release)
8) February 1, 2018 U.S. v. Jason Boykin Mississippi, Southern District
https://www.justice.gov/atr/case/us-v-jason-boykin (real estate foreclosure bid rigging) (no press release)
9) Feb 1, 2018 U.S. v. Shannon Boykin Mississippi, Southern District
https://www.justice.gov/atr/case/us-v-shannon-boykin (real estate foreclosure bid rigging) (no press release)
10) January 25, 2018 U.S. v. BNP Paribas USA, INC. New York, Southern District ($90 million fine)
https://www.justice.gov/atr/case/us-v-bnp-paribas-usa-inc (price fixing currencies)(no press release)
11) November 2, 2017 U.S. v Avi Stern, Stuart Hankin, Christopher Graeve Florida, Southern District
https://www.justice.gov/opa/press-release/file/1008621/download(copy of Indictment); press release:
12) October 19, 2017 U.S. v. Kenneth Keyes and Leroy Weber
California, Eastern District
https://www.justice.gov/atr/case/us-v-kenneth-keyes-and-leroy-weber (Conspiracy to Defraud United States—commercial construction); press release; https://www.justice.gov/opa/pr/roofing-company-owner-and-former-facilities-manager-sierra-army-depot-indicted-conspiracy
13) October 18, 2017 U.S. v. Nippon Chemi-Con Corporation
California, Northern District
https://www.justice.gov/atr/case/us-v-nippon-chemi-con-corporation (capacitor price fixing), press release https://www.justice.gov/opa/pr/leading-electrolytic-capacitor-manufacturer-indicted-price-fixing
There is a sentencing hearing for Nippon Chemi-Con on October 3, 2018. The plea agreement calls for a fine of between $40 and $60 million. NCC may withdraw its plea if the Judge imposes a fine greater than that called for by the plea agreement. See Cartel Capers: http://cartelcapers.com/blog/will-antitrust-division-need-compliance-monitor/
14* October 19, 2017 U.S. v. Yama Marifat  E.D. Cal
Case No. 2:17-cr-00189
[This is an unusual case. The original Information was filed in 2011. The defendant pled guilty but later successfully withdrew his guilty plea. The Antitrust Division subsequently indicted him in 2017. I counted this Indictment in the statistics, though it was already counted in 2011.]
https://www.justice.gov/atr/case-document/file/502276/download (1/28/2011); press release
Note: Because of my interest (obsession?) in price-fixing/bid rigging whistleblower legislation and False Claim Act cases, I started a new blog: The Bid Rigging Whistleblower. This is a repost from that blog.
I have been advocating for some time that antitrust cartel whistleblower legislation be passed. Whistleblower legislation has been phenomenally successful for the SEC and other agencies and there is no reason price fixing/bid rigging cartels shouldn’t face the threat of a whistleblower. Kimberly Justice and I wrote a short article: It’s a Crime There Isn’t an Antitrust Whistleblower Statute, Wolters Kluwer, Antitrust Law Daily, April 8, 2018. We are working on a longer version of that article with cites to law review articles, business publications, prosecutors, defense attorneys, felons, statistics and all the usual ingredients of a “law review” style article. But, nothing makes an argument better than a good story so I’ll get ahead of myself and share one now.
To illustrate why a cartel whistleblower statute is needed, consider Hypothetical Bill:
Hypothetical Bill is the US sales rep for a foreign manufacturer of Widget Company. There are five main players in the industry. Bill had heard whispers of a cartel. After a recent promotion, Bill has been assigned to attend “working group” meetings. The “top guys” set price targets, but the working group has the more hands-on task of implementing the prices by region, accounting for exchange rates, maintaining relative allocations, and host of other details that can derail a cartel. Bill understands that it is none too smart for him to be going to these meetings—especially as an American who may go to prison if caught. He confides in a friend of his who is a lawyer who knows about criminal law. The lawyer tells Bill he can hire an attorney to go to the government and he will likely be able to negotiate an immunity/cooperation agreement. But, negotiations time and likely multiple trips by Bill and his lawyer to visit the prosecutors for interviews. Obviously Widget Company will not be paying for Bill’s travel, lawyer fees, etc. The cooperation agreement lasts for the duration of the investigation—a slightly shorter version of the Hundred Years War. The Antitrust Division will ask Bill for documents to corroborate his story—travel records, emails, etc. Bill may be called upon by foreign competition commissions to appear for interviews. Besides the time and expense of cooperation, Bill’s attorney friend tells him he will likely will be fired by the company when they learn of his cooperation (after all, he is a confessed criminal and they are shocked he was talking to competitors). Widget Company may also sue Bill for “stealing” documents from the company. Bottom line: “Bill, this will likely bankrupt you, make you forever non-employable in your industry and drag your family through hell. What would you like to do?”
Unless Bill is nuts (not a good quality in a witness), Bill will almost certainly not expose the cartel. He could go to the company’s compliance counsel but since the CEO is involved in the illegal activity, he’s guessing that he, not the CEO, will regret his internal reporting. At best, Bill will leave his job, get out the situation and keep quiet. But most likely, Bill will think of how his family needs the money the new promotion brought (kids/college etc.), stay in the job and hope for the best. After all, even if the cartel gets exposed, isn’t there a chance he could get immunity then? And, if Bill is a bit delusion, he may think “The company will take care of me” if anything happens. Bottom line, Bill does not expose the cartel.
Now, imagine this scenario. Bill’s lawyer friend tells him that he has the option of being a whistleblower. Many of the bad things that can happen to a whistleblower may happen anyway, but you have the potential of recovering perhaps millions of dollars if you cooperate with the government. You can get a great lawyer who will work on a contingency basis and get paid only if you get a whistleblower award. The government will likely grant immunity in return for your full cooperation, which may include even asking you to record conversations. But, the government will grant you a whistleblower reward of between 10-30% and the more you cooperate, the higher the likely award. There is, however no reward, unless guilty pleas and fines are imposed so you have an incentive to cooperate as much as you can. As a whistleblower under this new legislation, you are protected from retaliation. You still get fired (would you want to stay there anyway?), but being a protected whistleblower should deter the company from other forms of retaliation.
In this case, Bill decides to cooperate and become a whistleblower. He gives the Antitrust Division all they need to obtain a search warrant on Bill’s company. Warrant in hand, the Antitrust Division asks for a meeting with Widget Company’s US counsel. At the meeting, government lawyers explain that Widget Company has 48 hours to get a Leniency Marker in before the investigation goes public and search warrants (and perhaps dawn raids in other parts of the world) are executed. Widget Company folds and starts the leniency process. Bill’s cooperation as a whistleblower is never known, except by his banker. He now becomes one of many witnesses under Widget Company’s leniency coverage. A cartel that may never have been exposed, falls like dominos. The cost to the public is a whistleblower’s share paid to Bill, who then pays his lawyer.
This hypothetical uses an international cartel, but think of the possible collusion taking place domestically in the wake of hurricanes and natural disasters across the United States. After Hurricanes Harvey, Irma and Maria, the Antitrust Division and Federal Trade Commission recognized that collusion could emerge on a wide scale as rebuilding efforts begin. In a joint statement, the agencies said, “While natural disasters often bring out the best in human compassion and spirit, they can also lead to unscrupulous individuals and organizations taking advantage of those in need.” There may be a lot of “Bills” out there who don’t like what they see but can’t afford the risk/expense of being a whistleblower without whistleblower legislation.
Note: Where the government is a victim of fraud, a whistleblower can currently bring a suit under the False Claims Act, but whistleblower legislation would make the process much more attractive.
Thanks for reading.
 If not obvious yet, let me be clear that I have a bias—a personal interest –in seeing cartel whistleblower legislation passed. I have represented whistleblowers and would be particularly interested in representing cartel whistleblowers since I spent the bulk of my career investigating and prosecuting cartels for the Antitrust Division.
 FTC Antitrust Division Joint Statement: Antitrust Guidance: Hurricanes Harvey and Irma, September 12, 2017, available at https://www.ftc.gov/system/files/documents/public_statements/1253313/hurricanes_harvey_and_irma_ftc_doj_statement.pdf.
Below is an excerpt from a monthly newsletter published by the Competition Law team of the New Delhi, India law firm of Shardul Amarchand Mangaldas & Co. (The firm has kindly given me permission to share this excerpt.) The full newsletter covers developments in Vertical Agreements, Abuse of Dominance and Mergers.
Indian Competition Law Roundup: August, 2018
In this Roundup, we highlight the main developments in Indian competition law in August 2018.
Dry Cell Batteries
Following a leniency application filed by Panasonic Corporation, Japan, the CCI found that Panasonic Energy India (Panasonic India) and Geep Industries (Geep) participated in a cartel in the sale of dry cell batteries from October 2010 to April 2016. This cartel was ancillary to a cartel between Panasonic India, Eveready Industriesand Indo National, which was the subject of an earlier order.
The case involved the sale of batteries by Panasonic India to Geep pursuant to a product supply agreement. The agreement provided that Geep would not take any steps detrimental to Panasonic India’s interests and that it would maintain prices at agreed levels. Through e-mail correspondence between the parties, the CCI also found that there was a price monitoring system and exchanges of commercially sensitive pricing information.
The CCI imposed a penalty on Panasonic India of 1.5 times its profit for each year of the cartel, amounting to INR 74 crores (USD 10.4 million approximately), and imposed a maximum penalty on two of its officials of 10% of their average income for the last three financial years. However, Panasonic India and its officials benefited from a 100% reduction in penalty as they had fulfilled the conditions for leniency. Given Geep’s small size and lack of bargaining power, the CCI imposed a penalty of only 4% of its turnover for each year of the cartel, amounting to INR 9.6 crores (USD 1.35 million approximately). However, it imposed a 10% penalty on three of its officials.
 Suo Moto Case No. 2 of 2017 In Re: Anti-competitive conduct in the Dry-Cell Batteries Market in India (30 August 2018).
 Suo Moto Case No. 2 of 2016 In Re: Cartelisation in the Zinc Carbon Dry-Cell Batteries Market in India (19 April 2018).
This is intended for general information purposes only. It is not a substitute for legal advice and is not the final opinion of the Firm. Readers should consult lawyers at the Firm for any specific legal or factual questions.
© Shardul Amarchand Mangaldas & Co
On August 20, 2018 the Antitrust Division announced in a press release (here) the return of an indictment (here) against a real estate company, a realtor and an accountant that does not include a charge of violating the Sherman Act.
The press release states:
[T]he Detloffs devised a scheme requiring repair contractors to pay the Detloffs kickbacks. In return, Jeffery Detloff used his position as a realtor for the victim companies to steer housing repair contracts to contractors who paid the kickbacks. The contractors paid kickbacks to the Detloffs through Detloff Marketing. The indictment further alleges that Jeffery Detloff procured and submitted sham bids as part of the scheme to defraud the victim companies.
The indictment is unusual for the Antitrust Division in that it does not charge a violation of the Sherman Act. Unusual, but certainly not unheard of. The indictment alleges that the realtor who was handling the sale of forced properties was demanding kickbacks from contractors for work repairing foreclosed properties in preparation for sale. The investigation, and indictment, likely grew out of the Antitrust Division’s real estate foreclosure auction bid rigging investigation.
It is not uncommon during a bid rigging/price fixing investigation for evidence of other crimes to be uncovered. The question can then arise “What to do with the evidence?” Title 18 violations, such as the charges in this indictment, are the province of the United States Attorney for the district in which the crimes were committed. The Antitrust Division is pretty careful to “stay in their lane” and defer to US Attorneys for Title 18 crimes. There are many situations where the evidence and investigation of non-Sherman Act wrongdoing is turned over to the Unites Sates Attorneys’ Office. This is not always the case, however. If Antitrust Division attorneys are immersed in the facts, and the crime does relate to a bidding process, for efficiency reasons, the Antitrust Division will often continue the prosecution. It can be inefficient to turn the matter over to a new set of attorneys. If the Antitrust Division wishes to continue with the matter and prosecute the case, it will consult with the US Attorney for the relevant district and seek her permission. That is what appears to have happened in this case.
During my time as Chief of the Philadelphia Field Office we prosecuted quite a variety of criminal offenses; from tax evasion, kickbacks, Iraq war zone graft cases and Buy American Act violations. Typically, Antitrust Division lawyers are trying to leverage potential other charges to “turn” a witness to cooperate in price fixing/bid rigging investigation. But, sometimes it turns out that there was no Sherman Act violation, but other offenses have been uncovered and should be prosecuted. Naturally, the Antitrust Division attorneys who have spent time on the matter would like to finish what they started and prosecute the cases. It can be great experience for an Antitrust Division lawyer who operates in a field where almost every matter is handled by Information (voluntary plea) as opposed to Indictment, with the prospect of a trial. The down side, and the push back sometimes from the Division’s front office, is that Antitrust Division resources should be focused on developing cartel cases. I recall one senior Division official commenting that he would rather have Antitrust Division attorneys standing on a street corner handing out copies of the Corporate Leniency Policy than getting bogged down in the trial of small or Title 18 cases. Bottom line don’t be surprised when the Antitrust Division files non-Sherman Act cases, but don’t expect it to be the norm either.
Thanks for reading. Bob Connolly
I just returned from a function of the Section of Antitrust Law of the American Bar Association. It was such an enjoyable and educational experience that I wanted to reflect a bit on why belonging to the Antitrust Law Section is so important to me and how it may be of benefit to you.
I hope every lawyer takes pride in what they do in representing their clients and upholding the rule of law. But to me, there is something special about antitrust law. In U.S. v. Topco Associates, Inc., Justice Thurgood Marshall announced that “[a]ntitrust laws in general, and the Sherman Act in particular, are the Magna Carta of free enterprise.” I feel privileged to have spent my career in the antitrust field. Through the Antitrust Section, I have met lawyers from across the street and around the world.
The Antitrust Section is not the largest section in the ABA, but it is one of the most productive in terms of the literature published, podcasts produced, conferences held around the world, including the crown jewel, the ABA Antitrust Spring Meeting in Washington DC, and the unparalleled opportunity to get involved and network. These are just a few of the highlights of the Section:
- There are over 9,000 members, predominantly from the United States, but also representing most jurisdictions from around the world.
- There are over 35 committees including Consumer Protection, Intellectual Property and various civil and criminal antitrust related committees. Most committees publish newsletters and presents teleconferences. It is easy to join a committee and help with these projects.
- Besides numerous teleconferences on antitrust, consumer protection, privacy, big data and a host of other subjects, there are major international conferences throughout the year. These conferences provide top-notch substance and CLE credit, but also are great networking opportunities. They are a great way to get involved.
Antitrust Section membership is a great way for young lawyers to get involved. If you volunteer, you will certainly be put to work. Committee membership is an invaluable experience—the earlier in your career the better. You can build lifelong friendships. I recommend business lawyers join the Antitrust Section. Even if antitrust/consumer protection is not in your daily practice, antitrust issues arise all the time in the business world. Simply being able to spot potential issues is invaluable. (Right now, there are plenty of business lawyers, and their clients, who wish they were more familiar with the antitrust pitfalls of “no-poach” agreements.). The Antitrust Section has also become very international with events held around the globe and a strong foreign lawyer membership.
Here are a few links for further information:
Section of Antitrust Law Homepage:
Events and CLE:
Disclaimer: This post is not endorsed by or represent the views of the Section of Antitrust Law or the American Bar Association. It’s just my own sincere belief about the value of membership
As always, thanks for reading. If you have any questions, feel free to drop me an email or give me a call. Bob Connolly
The DOJ issued a standard press release yesterday announcing yet another individual guilty plea in its long running real estate foreclosure auction collusion investigation: Seventh Mississippi Real Estate Investor Pleads Guilty to Conspiring to Rig Bids at Public Foreclosure Auctions. According to the press release to date there have been “convictions of well over 100 other individuals who rigged foreclosure auctions all across the country.” Many of those convicted have been sentenced to prison.
What jumped out at me about the press release was that the individual is pleading guilty to rigging auctions “from at least as early as August 20, 2009 through at least as late as December 14, 2016.” In other words, while the DOJ investigation, prosecution and sentencing of others to prison, this defendant continued to collude at auctions. And you can’t collude by yourself, so others were still joining in. I suppose it is more sad than surprising. [People still rob banks.] The temptation for a quick (and illegal) buck by colluding at auctions is too great for some to pass up. After all, this the real estate foreclosure auction investigation is by no means the first widespread auction collusion investigation the Antitrust Division has had with large numbers of criminal prosecutions. When I was the Chief of the Philadelphia office we prosecuted auction “rings” in antiques, jewelry, various types of commercial equipment and Department of Defense surplus auctions. In every investigation we learned was that collusion at auctions was a “way of life” in that business. The individuals prosecuted had excuses for their behavior: “it’s the only way to make money” “there were still other bidders we had to compete against” “the auctioneers pulled phantom bids” “it was a cloudy day” “it was a sunny day” and on and on. But, each person I dealt with understood that what they were doing was a fraud. One guy even remarked in answer to a question about the collusion: “You mean the combination?” I remember that many years later because I had never heard the Sherman Act term “combination” actually used by someone who was in one. [Auction conspirators frequently use the term “the ring.”]
Like many white-collar criminals, auction collusion defendants have not had previous encounters with the law. The entire lengthy process of the investigation, prosecution, and jail sentence if there is one, is usually an absolutely devastating experience to the individuals’ business, family life and self. It can be tempting get involved in an auction ring if you compete against the same individuals/businesses time after time. But, in my experience, auctions rings were by far the easiest bid rigging crime to prosecute. The payoffs to the ring members leave a detailed road map of who was involved and what the scam was.
I don’t know who reads Cartel Capers. Probably not many in the auction business. But, if you are and you are invited into an auction ring, RUN. Be conspicuous that you are not part of the group. If you are in an auction ring, GET OUT. You may want to speak with an attorney and consider the Antitrust Division’s Leniency Program. If it’s the only way to make money, find another line of work. (But don’t rob banks.)
Thanks for reading. Bob Connolly
Lisa Phelan has been the Chief of the Antitrust Division’s Washington Criminal 1 Section (called the National Criminal Enforcement before that) for the last 16 years. But, Lisa is now moving on to new challenges as a partner in Morrison & Foerster’s Global Antitrust practice.
Lisa has had an amazing career, first as an Antitrust Division trial attorney, and then as Chief of one of the Division’s busiest criminal sections. Lisa joined the Division in 1986 and worked on fax paper, one of the Divison’s first international cartel investigations. It was the first of many cartel investigations Lisa led, first as lead attorney and later as Chief of the Section. The wide-ranging, record-breaking auto parts international cartel investigation was led by Lisa.
Morrison & Foerster issued a press release announcing Lisa’s joining the firm (here). There is also an article in Law 360 about Lisa’s DOJ career here (behind a pay wall). I’ll just add a few comments as someone who was Lisa’s colleague for many years. I got to know Lisa well because we were both Chiefs of criminal sections. (Lisa had a Hall of Fame career. I managed to get the Philadelphia Field Office closed and now write a blog :-). Lisa is very competitive. There was a healthy competition among the criminal sections for new matters and Lisa would always fight to get good investigations for her staff. And antitrust law, particularly cartel investigations, excited Lisa the entire time she was with the Division. She never lost her enthusiasm or energy. When she began a new investigation it was not uncommon for Lisa (even as Chief) to hop on a train, plane or car to “drop-in” on potential witnesses to try to get that early break. Lisa was a tremendous advocate for the consumers of the United States as a prosecutor and she will no doubt now bring that same talent and energy to assisting clients on the other side of DOJ cartel investigations. She is also just a lot of fun to work with.
Thanks for reading. Bob Connolly