Recently the Justice Department’s Antitrust Division and the FBI jointly announced the launch of a new online portal for information on international fugitives who have been charged with antitrust offenses and other crimes affecting the competitive process.  There are 77 fugitives on the list. As the press release notes, these individuals were not indicted under seal so they presumably understand that they have been indicted and are on a Red Notice, making travel outside of their home country hazardous.  If  the offense they are charged with (e.g. price fixing or bid rigging) is not a criminal offense in their country, they are likely not subject to extradition Even if a country has a criminal antitrust statue it may not be willing to extradite its citizens to the United States for this offense.

          When I was the Chief of the Philadelphia Field Office, however, we did successfully extradite a British executive—not for the Sherman Act offense he was charged with, but for related obstruction of justice charges. He was convicted and sentenced to prison. My office also indicted an Israeli national under seal and he was arrested at the Canadian border as he entered the U.S.  He was tried and convicted as well. See Cartel Capers, Compliments to the Procurement Collusion Strike Force and a Trip Down Memory Lane, December 2, 2024.  There have since been other successful extraditions and apprehensions by the U.S. and Interpol.

          The Antitrust Division maintains a “Fugitive” web page. Among the items on the page is a YouTube video of a former fugitive who, in 2024, resolved his criminal charges by entering into a plea agreement with the Antitrust Division.  The agreement was negotiated approximately five years after indictment. “Jim” Chu of Taiwan and the United States entered a “C”[1] plea agreement that included a fine of $300,000 for Chu (the equivalent of what might have been the corporate fine but Chu’s company had been dissolved) but most importantly, the plea agreement explicitly recommended no sentence of imprisonment. In return, Chu agreed to provide assistance to the U.S. Department of Justice, Antitrust Division in connection with antitrust compliance and other public education efforts. See United States v. Yeh Fei Chu aka Jim Chu and G Nova Corporation,  4:19-cr-00070 ECF 34 (2/22/2014)(plea agreement). The YouTube video appears to be the product of that assistance.

          Mr. Chu advises Sherman Act fugitives to consider reaching out to the Antitrust Division, accept responsibility and try to resolve the outstanding charges.  Mr. Chu is certainly correct when he speaks of the real consequence of being a fugitive—especially not being able to travel outside of the home country without risking arrest. This may severely limit business travel/opportunities.  It also can cut off connections with relatives living in other countries.  Being picked up on a Red Notice is no joke:  In 2014, Romano Pisciotti, an Italian citizen, was indicted under seal for violating Section One of the Sherman Act, seized by Interpol while changing planes in Germany and eventually extradited to the United States.[2]  Even before conviction,

 Romano Pisciotti spent 669 days in custody. This included two hours in a police station in Lugano, Switzerland; 10 months in a jail in Frankfurt, Germany fighting extradition [on a Sherman Act indictment]; and eight months in a US federal prison in Folkston, Georgia, in a room with around 40 mainly Mexican inmates and a single corner toilet.” [3]

         The consequences of being a fugitive are real and serious.  But other fugitives reaching out to the Antitrust Division are unlikely to get the kind of deal Mr. Chu received.  Chu was involved in price fixing for “koozies,” also known as can coolers: a foam or rubber sleeve that thermally insulates beverage containers such as cans or bottles. The volume of commerce was small: $2,665,695.60.  Most importantly, no other defendant had been sentenced to prison. In my experience, once a single defendant agrees to a prison term, a non-prison deal is off the table for subsequent defendants.

The Fugitive Disentitlement Doctrine

          The subject of foreign fugitives reminded me of a series of Cartel Capers blog posts I wrote on the subject jointly with a distinguished lawyer from Japan, Masayuki Atsumi.  See Cartel Capers, Defending the Foreign “Fugitive” Against the Fugitive Disentitlement Doctrine[4]   The fugitive disentitlement doctrine is an equitable doctrine under which a court has the discretion to decline to consider a petition of a defendant if that defendant does not submit the jurisdiction of the court. The “paradigmatic object of the doctrine is the convicted criminal who flees while his appeals is pending….” (Gao v. Gonzales, 481 F.3d 173,175 (2d Cir. 2007). Today, however, the fugitive disentitlement doctrine has been applied to bar a foreign citizen indicted by an Antitrust Division grand jury from raising any matters with the court unless he first appears personally before the court. It may be surprising to learn that a person who has never set foot in the United States may be considered a “fugitive.” For example, if a grand jury in Detroit indicts a Japanese executive while he is having breakfast in Tokyo, he has become a “fugitive” if he does not surrender in the United States.

            The cliff notes version of our article is that the fugitive disentitlement doctrine can be overbroad when applied to foreign defendants.  The doctrine is fair (i.e. equitable) in prohibiting a foreign fugitive from litigating his case from abroad (e.g. by getting discovery and then deciding whether to submit to the jurisdiction of the court).  But, we argue, a foreign fugitive should be able to attack the facial validity of an indictment, for example on statute of limitations or jurisdictional grounds.  To have to appear before the court to raise these challenges would require the fugitive to come to the United States, get arrested, and likely spend time in jail, or at a minimum, a very long time in the United States awaiting trial since his passport would be revoked. Allowing a foreign fugitive to attack the facially validity of an indictment would provide prudent restraint on prosecutors because, without that possibility, there is no realistic way to contest what might be prosecutorial overreach on its face.  And as Mr. Chu attests in his video, and Roman Pisciotti can strongly second, there are dire consequences for a foreign business person that flow from simply being indicted.  The equitable position would be to at least allow the foreign fugitive an opportunity to facially challenge to indictment.  To be sure, this is not a situation that will be common but it is not out of the realm of possibility.  The issue is of further prevalence because it can also arise in the context of other criminal prosecutions such as FCPA or securities criminal prosecutions.

            The recent published list of criminal antitrust fugitives is unlikely to spur any new plea deals but it is a useful reminder and deterrent to executives that an indictment does not go away with time.  Being indicted for an antitrust crime is a serious handicap to a successful (and less stressful) career in international business.

I’d like to thank Erin Lyman, JD Candidate University of Wisconsin Law School (2025), for her help in producing this blog post.

Thanks for reading.

Bob Connolly  [email protected]

[1] “Pursuant to Federal Rule of Criminal Procedure 11(c)(1)(C), the Defendant may withdraw from this agreement or the guilty plea if the Courtrejects the parities’ sentencing recommendations and imposes a sentence of imprisonment at the sentencing hearing.”

[2]  Lewis Crofts and Leah Nylen, December 9, 2015, Mlex Interview with Romano Pisciotti, available at https://mlexmarketinsight.com/insights-center/reports/interview-with-Romano-Pisciotti,

[3] Id.  See also Plea Agreement with Roman Pisciotti, https://www.justice.gov/atr/case-document/file/507541/download, which was discussed by Renata Hess in her remarks. See Remarks of Renata Hess,  https://www.justice.gov/opa/speech/acting-assistant-attorney-general-renata-hesse-antitrust-division-delivers-remarks. Pisciotti was not the only foreign citizen extradited and sent to prison,  In her remarks Hesse added:

And earlier this year, John Bennett, former CEO of a Canadian hazardous waste company, was convicted in a New Jersey court and sentenced to more than five years in prison for his role in a Superfund cleanup kickback scheme following his extradition from Canada in November 2014.

Id.

[4]  See Cartel Capers, Defending the Foreign “Fugitive” Against the Fugitive Disentitlement Doctrine Part 1, Part 2.

            The Supreme Court has now denied cert in three different challenges to the per se rule in criminal antitrust cases, the latest being the denial of the cross-cert petition by Brent Brewbaker. It is unlikely that a Court of Appeals will overturn the per se rule given the extensive precedent—although it is not impossible.  Instead, courts that find fault with the per se rule will likely make an end run around, as has been done in certain labor collusion cases. See e.g., United States v. DaVita Inc., 2022 WL 833368, *2, *5 (D. Colo. 2022) (finding that the DOJ had to show more than that the defendants entered the non-solicitation agreement but would have to prove beyond a reasonable doubt that the defendants entered into an agreement with the purpose of allocating the market” and that the defendants “intended to allocate the market as charged in the indictment.”). The Fourth Circuit also chipped away at the per se rule in United States v. Brewbaker, 87 F.4th 563, 583 (4th Cir. 2023), finding that a vertical component in a relationship between two horizontal competitors who rigged bids on a government contract took the agreement out of the per se rule and into rule of reason land.

            It is probably time for me to find a new hobby besides writing on my view of the unconstitutionality of the per se rule. But first, there are a couple of questions to explore: 1) would the lack of a per se rule seriously crimp criminal antitrust enforcement? and 2) if the jury charge did not receive a per se rule charge (i.e. if the court did not instruct the jury that the agreement alleged is an unreasonable restraint of trade) what would the judge charge the jury concerning finding whether the agreement unreasonably restrained trade? The latter question is for later blog post.  Below, I  share some thoughts on the potential effects of removing the per se rule from criminal antitrust enforcement.

• Would Criminal Antitrust Enforcement be Materially, Negatively Impacted Without the Per Se Rule?

           No..  Let’s start with Brewbaker.  It was, in most antitrust observers’ opinion, a classic bid rig. One bidder (Pomona) gave its final bid price to another bidder with the understanding that the second bidder (Contech/Brent Brewbaker) would submit an intentionally higher price.  In addition to bid rigging, Brewbaker was charged with and convicted on fraud counts which alleged that he falsely and fraudulently certified that the bids his company submitted were competitive and not subject to collusion.  This finding makes it highly likely that the jury would also have found Brewbaker guilty of the Sherman Act count if they were the fact finder on whether the alleged agreement was an unreasonable restraint of trade.  Of course an acquittal on bid rigging was possible; the ingenuity of defense lawyers should not be underestimated, but neither should the ability of jurors to reach rational decisions.

            One  justifications for the per se rule is that it “avoids the necessity for an incredibly complicated and prolonged economic investigation into the entire history of the industry involved, as well as related industries, in an effort to determine at large whether a particular restraint has been unreasonable….”  Northern Pac. Ry. v. United States, 356 U.S. 1, 5 (1958).  Constitutionally speaking, that hardly seems like a justification for having the court decide an element of the offense, and the most crucial one at that—did the agreement restrain trade?  But, if there were no per se rule, would the trial really necessarily involve a “complicated and prolonged investigation into the entire history of the industry involved?” Id. Not necessarily. Going back to Brewbaker, what about the proffered defense that dual distribution agreements can be procompetitive?  The trial court excluded this defense because of the per se rule. However, even without a per se rule, the trial court may have also excluded this defense on relevance ground.  The rules of evidence apply to a criminal trial. Was the proffered expert testimony relevant describing the procompetitive benefits of dual distribution relationships? Not without a foundation.  Who for the defense was going to establish that the bidders were in a dual distribution arrangement?  What documents would they have to support this?  I suspect none. Voir dire of Brewbaker’s proffered expert may well have resulted in the expert’s testimony being excluded under Fed. R. Evid 702 and/or 403.

            It is also revealing that the Fourth Circuit acknowledged that Brewbaker went to some lengths to deceive the consumer and keep the complementary bidding scheme secret:  “Also during this time [of submitting complementary bids] Brewbaker tried to cover his tracks. He deleted conversations between Pomona and Contech employees, otherwise opted for phone calls over digital paper trails, and made sure that the percent he added to Pomona’s bid varied to avoid raising ‘red flag[s]’ to NCDOT.” United States v. Brewbaker, 87 F. 4th at 569. The Contech/Pomona agreement was kept secret to conceal the collusion from NCDOT.  Would the jury have bought a procompetitive argument, if the court had even allowed it?  Highly doubtful. Of course, instructing the jury on the per se rule removes all doubt, and as such it is a great tool for the prosecution.  But, if the Constitution requires that the jury, not the court, made the finding of whether the agreement was an unreasonable restraint of trade, it is highly likely that the jury would have done so.

            Brewbaker is just one case but it is representative of typical government procurement collusion cases.  The bidders arrange in advance who the winning bidder will be.  Other bidders submit intentionally high (complementary) bids in return for some form of future payoff.  The collusion allows the winner to inflate the bid. The winning bidder shares or pays off the loser(s) often with future reciprocated complementary bids. The payoff, however, could also be money.  The payoff also is often a subcontract from the winning bidder or an agreement to buy an input(s) from the winning bidder, also at an inflated price to share the spoils of the collusion.  The great irony of the Fourth Circuit’s Brewbaker ruling is that this form of payoff would establish a vertical relationship and take the collusion out of the reach of the per se rule.  Given the fraudulent nature of bid rigging, the division of the spoils among the colluders and the secrecy necessary to deceive the buyer, it is highly unlikely a defendant would admit the agreement to collude but successfully argue it was not an unreasonable restraint of trade.

            The other class of agreements prosecuted by the Antitrust Division as criminal cases are price fixing cases.  In cartels cases, the issue at trial has been whether there was an agreement or whether the particular defendant(s) on trial were members of the cartel.  Given the secretive nature of the cartels and other ample evidence of consciousness of guilt and deception of customers, it would be unlikely a defendant would admit that he was a member of the cartel but then defend on the ground that it was not an unreasonable restraint of trade. In any case I ever tried, I would gladly have traded for an admission from the defendant that he was a member of the charged conspiracy in return for the defendant’s’ right to argue that the agreement was not an unreasonable restraint of trade.

            Every head of the Antitrust Division in recent memory has made statements such as, “price fixing, market allocation and bid rigging steal from, and commit fraud upon American business and customers.”¹  The Antitrust Division has taken the position that “the [criminal] cases that we are charging and prosecuting are unmistakable fraud.”²  It is true that having the jury, not the court, decide whether an agreement was an unreasonable restraint of trade adds an element of uncertainty that may make conviction more difficult by some unmeasurable degree, depending on the circumstances of the case.  But as long as the DOJ sticks closely to this fraud standard (which is entirely appropriate for a crime that carries a maximum jail sentence of 10 years) it is likely that the jury would find the alleged agreement constituted an unreasonable restraint of trade.

            Without reliance on a per se rule, prosecutors may be restrained from bringing criminal cases that are not clear-cut fraud. This would be a beneficial restraint. The kinds of cases that come to my mind where lack of a per se rule would seriously impact the government’s prospects might be the labor market cases and Heir Locators (where Judge Sam initially ruled the case was a rule of reason case but changed course after the government’s successful appeal to the Tenth Circuit).  See Cartel Capers, Heir Locators Is Now A Per Se Production, February 25, 2019. However, a criminal indictment is not the only option to punish and deter antitrust violations.  Many jurisdictions, such as the EU, have vigorous anti-cartel programs relying only on civil prosecutions.  The threat of jail is the most significant form of deterrent and hard core bid rigging and price fixing prosecutions would continue without a per se rule.  But in some circumstances,  much can be accomplished, and perhaps sometimes more efficiently, by bringing certain cases as civil prosecutions.

           Thanks for reading.  I understand that the topics raised here warrant much more consideration than a blog post, unless they warrant no consideration at all, but it’s a start.

Bob Connolly  [email protected]

I’d like to thank Erin Lyman, JD Candidate University of Wisconsin Law School, for her help in producing this blog post.

***********

1. Anne K. Bingaman, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, The Clinton Administration: Trends in Criminal Antitrust Enforcement, Remarks Before the Corporate Counsel Inst. (Nov. 30, 1995), available at http://www.justice.gov/atr/public/speeches/0471.htm.

 

2.  Scott D. Hammond, Deputy Assistant Att’y Gen., Antitrust Div., U.S. Dep’t. of Justice, Transcript of Testimony Before the United States Sentencing Commission Concerning Proposed 2005 Amendments to Section 2R1.1 at 3 (Apr. 12, 2005), available at http://www.justice.gov/atr/public/testimony/209071.pdf

             The Antitrust Division of the USDOJ recently celebrated the Fifth Anniversary of the Procurement Collusion Strike Force.  The event, held at the Great Hall of the Department of Justice, featured speeches by Assistant Attorney General Jonathan Kantor and Strike Force Director Dan Glad (here).  “Since its inception in November 2019, the PCSF has opened more than 145 criminal investigations and trained more than 39,000 people. In that time, the PCSF and Antitrust Division have obtained over 60 guilty pleas and trial convictions and have investigated and prosecuted over 85 companies and individuals involving over $575 million worth of government contracts and contract kickbacks.”

            Detecting and prosecuting procurement collusion on government contracts is a worthwhile expenditure of Antitrust Division (and their partners’) resources for a number of reasons.  Due to bidding regulations, government buyers often lack the flexibility of procurement agents in the commercial world.  Government contract $$ can be a target for bid rigging and other forms of collusion.  The harm caused by price fixing is generally spread out to many consumers (thus, class action civil suits) while bid rigging is targeted against the government and can undermine public confidence that tax dollars are being spent wisely.  Staff—prosecutors, paralegals and other members of the team–accordingly, take great satisfaction in successfully prosecuting government procurement bidding corruption.  Importantly, government procurement bid rigging cases have provided valuable trial experience for a significant number of Division attorneys.

            As an antitrust “old timer”  I like to recall that investigating and prosecuting bid rigging against the government (federal state and local) is not a recent development. I joined the Antitrust Division in 1980 and relatively quickly became involved in one of the greatest procurement fraud efforts the Division has ever known—prosecuting road construction bid rigging cases.  The road construction cases throughout the country were the first of what became known as “way of life” government procurement prosecutions.  Antitrust Division attorneys up to that point had typically conducted investigations largely on their own.  But with the road construction cases, prosecuted by every field office (there were seven field offices in the “old days”—as well as a criminal section in DC), we learned the value of teaming up with investigative agencies—in the road construction cases the Inspector General’s Office of the Department of Transportation.  It was very helpful and highly educational to work with another agency.   Over the years, government procurement cases led to a huge number of case filings in other “way of life” markets like  electrical and mechanical contracting, school milk, school E-rate programs, and government auctions.  From 1990 to 2000, the Antitrust Division filed an average of 63 criminal cases each year, and I believe these were mostly government procurement cases.

            Field offices were responsible for developing their own cases so “outreach” to various Inspector General offices, and procurement officials within those agencies, was essential to survival.  You “eat what you kill” was the motto.  “Case Development” was even a critical element in each attorneys’ evaluation.  Being in a field office with a defined region gave us the advantage of maintaining continued contact with agents in our region as opposed to one-off encounters on particular cases.  Field office management was also charged with maintaining cooperative relations with US Attorney’s Office in our territory.  The synergies of working with agents was so powerful that for some time, some field offices even had an FBI agent “detailed” to their office to work full time with that office.  There was healthy competition among the field offices and the criminal DC section [I can’t remember the name—it had several over the years] led first by Tony Nanni and then Lisa Phelan to find, develop and prosecute government procurement cases and to make more use of investigative techniques available to us such as search warrants, consensual monitors and border watches with the help of these agents.

       I can’t recount the many successes of the other Division offices bringing government procurement fraud cases.  But I clearly recall one of the most interesting cases in Philadelphia Filed Office history involving a scheme to rig bids for medical supplies purchased by the Defense Department at the Defense Personnel Support Center in South Philadelphia [now defunct—like the Philadelphia, Cleveland Atlanta and Dallas field offices.] After a bid rigging detection talk, an astute buyer alerted us to suspicion bidding patterns for certain contracts she handled. Her tip led to the exposure of a long-running bid-rigging scheme. The first defendant to be charged pled guilty, but a co-conspirator elected to go to trial.  It was a multi-count indictment charging both bid rigging and fraud. The jury convicted and the defendant was sentenced to five years in prison — a record-breaking sentence at the time. Another defendant was an Israeli national who was indicted under seal and placed on a border watch. This defendant, Amir Porat, was arrested at the Canadian border as he entered the United States. He was a likeable, smart, funny and charismatic character who acted as his own defense lawyer 9with the help of a prominent defense attorney).  Part of the government’s case was a $200,000 payoff check that Porat had deposited in his Swiss bank account. (How our team obtained records from a Swiss bank is a story that can’t be told—initially because I was sworn to secrecy and now because I can’t remember.) Porat claimed that anyone could have opened a Swiss bank account in his name, and to prove his point, he opened an account in the name of the co-lead prosecutor, Antonia Hill!  Unfortunately for Hill, there was no money in the account, but fortunately for her, Porat was convicted. While the case was on appeal, the Supreme Court overruled established precedent that materiality was an element for the court to decide, as had been the case in this trial, and held that materiality of an allegedly false statement was an issue for the jury. [I believe someday the Supreme Court will make a similar finding with respect to the per se rule].  Porat’s conviction was vacated. The prosecution team and the defendant put the gloves down and a non-jail plea agreement was reached, avoiding a retrial.

      Government procurement fraud cases have been and should always remain a top priority for the Antitrust Division.  The Procurement Collusion Strike Force will almost certainly continue its good work under the second Trump administration because it was created during Trump’s first administration.  Good luck in this important mission!

Thanks for reading.

Bob Connolly             [email protected]

There has been a series of announcements by the Department of Justice of pilot programs designed to lure “insiders” to expose crimes, particularly financial crimes. The first announcement was a new Whistleblower Pilot Program to financially reward whistleblowers in certain circumstances. See DOJ Announces New Whistleblower Pilot Program, Cartel Capers, March 14, 2024. More recently, on April 15, 2024, the DOJ’s Criminal Division announced another pilot program, Criminal Division Pilot Program On Voluntary Self-Disclosures For Individuals, designed to offer potential non-prosecution agreements to individuals [‘little fish”] who come forward and provide “original information” about criminal misconduct by “big fish.”

The Whistleblower Pilot program is a particularly hopeful development for criminal cartel enforcement. The Antitrust Division already has an Individual Voluntary Discovery Program.

Individual Leniency–Voluntary Self Disclosure for Individuals

The Antitrust Division has long had a program similar to the Criminal Division Pilot Program on Voluntary Self Disclosure. It is so rarely used it is easy to forget it exists. The Individual Leniency Program was announced in 1993 at the same time as the well-known, successful revised Corporate Leniency Program.

DOJ Manual- 7-3.330 – Individual Leniency

“Leniency will be granted to an individual reporting their participation in illegal activity.
before the Antitrust Division has begun an investigation.”

Like the pilot DOJ disclosure policy, a key condition of the program is: “At the time the individual reports the illegal activity, the Antitrust Division has not received information about the illegal activity from any other source.” I believe the main reason that individual leniency has been unused is financial—an individual can’t afford the expense or risk, without the support of a corporate backer, that it takes to engage in the leniency process with the Antitrust Division. Negotiating leniency, including individual leniency, is dance and often a “dance marathon.” Both sides, the Antitrust Division and the individual making a proffer, will proceed cautiously. A [sane] individual, not knowing what information the Antitrust Division may already have, will not come forward without experienced (i.e. costly) antitrust counsel. This can be a very expensive proposition. The negotiation with DOJ will likely require numerous interviews and travel for the witness and her attorney. If conditional leniency is granted, the cooperating individual is at the Division’s beck and call for many years come. This is an expensive and uncertain undertaking for a lone individual to take without the benefit of an employer [or former employer] paying for the individual’s attorney fees. An individual who successfully obtains conditional Individual Leniency will likely be saddled with significant attorney fees at a time when she is likely a former employee and now unemployable in whatever industry she has reported illegal conduct. I’m sure there are other reasons why the Individual Leniency Policy is rarely pursued, but the expense of doing so seems to be an effective roadblock to its use. This hurdle in the Individual Leniency Policy is instructive for the Pilot Whistleblower Program because a potential whistleblower may well be deterred by the same prospect of significant legal fees for doing the right thing.

Pilot Whistleblower Program

At one time I was hopeful that comprehensive SEC-like criminal antitrust whistleblower legislation would be passed. Senator Amy Klobuchar introduced sweeping antitrust legislative reform that included, among many items, a whistleblower program that would “establish a bounty system to reward criminal whistleblowers for providing evidence in antitrust cases resulting in the collection of a criminal fines.” See, Senator Klobuchar Unveils Wide Ranging Antitrust Enforcement Legislation, Cartel Capers, February 4, 2021. The proposed legislation covered many aspects of antitrust reform, too many it turns out, and as a package, could not muster sufficient support. Someday, perhaps, the whistleblower provisions will be taken up on their own. After all, the Biden Administration has introduced numerous antitrust initiatives, and s program for uncovering and prosecuting cartels that inflate prices would seemingly fit this agenda.

Nonetheless, there has been some incremental progress on the antitrust whistleblower program. On Dec. 23, 2020, the Criminal Antitrust Anti-Retaliation Act, sponsored by Senator Charles Grassley, was signed into law. The Act prohibits employers from retaliating against certain individuals who report criminal antitrust violations. While a step forward, the potential aid of the Department of Labor is not likely to give much comfort to a potential whistleblower worried about being wrongfully sacked and blackballed.

Will the Pilot Whistleblower Program be of any help in criminal antitrust enforcement? Too early to tell, but again, any step forward is appreciated. The most significant roadblock which must be removed to enable willing whistleblowers to come forward is the burden of substantial attorney fees. Like a potential cooperating witness, a whistleblower must expect to sit for multiple interviews with the DOJ. A great deal of attorney preparation would take place before the first encounter with the DOJ. Whistleblowers, in my experience, are not in it to get rich; but they also are not looking to burden themselves and their families with significant debt, especially at a time when their career prospects are likely to take sharp downward turn. One of the most attractive elements to the SEC-style whistleblower regime as well as the qui tam statutory regime is the ability, if successful, to receive a monetary award. The certainty of the monetary award, and a track record of fairly administering the program, enables a legitimate whistleblower to come forward with an attorney on a contingent fee basis. A contingency fee set up also has the salutary effect of having the whistleblower bar act as a screening mechanism for the DOJ. While certainly no guarantee that the whistleblower has credible, material evidence of a crime, the fact that an attorney has taken on the case adds some weight to the whistleblower. The whistleblower attorney is motivated to assist the DOJ and avoids the DOJ having to engage directly with an unrepresented person. To be effective, the Pilot Whistleblower Program will need a transparent and predictable basis for obtaining a financial award. This may not be true in all potential whistleblower situations, but is likely so for more complex matters such as criminal cartel enforcement.

A Modest Proposal—Antitrust Division Special Counsel for Whistleblower

As the whistleblower landscape develops, a low/no cost tool would be for the Antitrust Division to appoint a Special Counsel for Whistleblowers. [An Office of Whistleblowers would be better but my recollection is that step would require Congressional approval.] There could be many benefits:

• Visibility, Visibility Visibility When the revised Corporate Leniency program was launched it was the subject of intense promotion by the Antitrust Division and Gary Spratling. The Division/Spratling wanted to defense bar to know the Division was open for Leniency business and wanted to create a win/win environment for the leniency applicant and the Division. By any measure it was a smashing success.
At this point in time, the Antitrust Division may not have much to offer a potential whistleblower, but a “point person” is at least a signal that the Division will help where it can.

• The Special Counsel for Whistleblowers would be a central and visible place for potential whistleblowers to begin an interaction. They will have questions. Perhaps they would not have a path to a monetary award for price fixing in the public market, but is there a qui tam (i.e. government purchasing angle) to be explored.?

While I have focused on the expense as a deterrent to a whistleblower coming forward, it is possible that in certain situations a whistleblower could aid the Antitrust Division with a fairly discreet piece of information. The Antitrust Division would help by being sensitive to the cost associated with numerous interviews. And even if it is not clear that someone can qualify as a whistleblower for a monetary award, that person may decide to simply provide information that can start an investigation. There have been numerous major cartel investigations that have begun by an industry person providing the Antitrust Division with information.

Another issue that could come up: there is a fine line between being a whistleblower and a co-conspirator. Does the individual contemplating coming forward have criminal liability? Conspiracy law is sweeping. Knowledge of the agreement and even one act to carry it out can make someone a co-conspirator. This would have to be worked out in most cases before a potential whistleblower could/should come forward.

• A Special Counsel can keep abreast of all developments. Hopefully, the Antitrust Division has already has a seat at the table to give input for the DOJ Pilot Whistleblower Program. The Special Counsel for Whistleblowers could interact with foreign counterparts who are experimenting/implementing various whistleblower ideas. There are many interesting developments in foreign competition agencies regarding whistleblowers. The EU for example has an encrypted message system where a whistleblower can communicate with enforcers anonymously. See EU Sanctions Whistleblower Tool.

• A Special Counsel for Whistleblower could interact with members of Congress who may be interested in pushing a more comprehensive criminal antitrust whistleblower package.

• It’s possible a Special Counsel for Whistleblower won’t have much to do [it doesn’t have to be their only responsibility]. Or that person may have duties that evolve to a greater extent than brainstormed here [with just one brain]. It’s a cost free additional tool to help potential whistleblower and uncover criminal antitrust cartels.

A Final Thought

The revised 1993 Leniency Policy came at the right time. International cartels were plentiful. Foreign executives/conspirators, who had no idea they could be subject to US jurisdiction and the nightmare that awaited them, were plentiful as well. A compilation of the “greatest hits” hot document of the era would fill a file cabinet or its gig equivalent. Now, however, after many successful criminal prosecutions with foreign executives indicted, placed on red notices, and occasionally captured and brought to the US and jailed, executives have taken notice. Certainly many have learned “Don’t engage in cartels” but others have learned “Don’t write incriminating emails or other documents.” No paper or electronic trail cartels are the order of the day. Ephemeral messages were now part of Cartel 101 code of conduct. None of this is news to cartel practioneers.

Corporate Leniency is still a great enforcement tool but today there is a real need for a tool that attracts a cooperator while the cartel is still operating. Well-hidden, document-free cartels make it harder for a willing applicants to obtain a leniency marker even if they are considering it. When a corporate leniency applicant had a collection of hot documents such as “pricing notes from a working group meeting,” the applicant could be more certain that conditional leniency would be granted. Today, the proffer will likely rely more on testimony. Prosecutors may be skeptical of a testimony heavy/document lean application. There is concern that as soon as the ink is dry on the leniency agreement, memories will fade as the cooperator’s company faces an avalanche of civil suits. Lack of hot docs make it riskier for the leniency applicant to come forward, and risky for the govt to issue a conditional leniency, which makes it riskier to come forward…..

A whistleblower can expose a cartel—while it is still in progress. This opens up significant avenues of covert investigation–consensual monitoring, wire taps, etc. In addition, or instead, a whistleblower can help start the investigation with search warrants, perhaps coordinated with dawn raids. The destabilizing potential of an effective whistleblower program can be a catalyst to a corporate leniency applicant racing in. There are limited situations where the Antitrust Division can accomplish these things with a Type A leniency applicant, but a robust whistleblower monetary award program could discourage, destabilize and detect criminal antitrust cartels with the same success the Corporate Leniency Program once enjoyed. See A Practical Look at Why A Criminal Antitrust Program is Needed, Cartel Capers March 28, 2023.

Corporate Leniency once transformed criminal cartel prosecution and ushered in a n era of record breaking prosecutions fines and jail sentences. The next step in the evolution of criminal price fixing prosecutions is a whistleblower program to incentivize someone to come forward who can assist the investigation while the cartel is still ongoing. A Special Counsel or whistleblowers is a modest step, but modest steps seems to be the only way to advance the ball of developing whistleblower tools in criminal antitrust investigations.

This is a rambling post but use a quote attributed to Mark Twain {among others]: “I didn’t have time to write a short letter [post], so I wrote a long one instead.”

Thanks for reading [if you got this far].

Bob Connolly [email protected]

Deputy Assistant Attorney General Lisa O. Monaco gave the keynote speech at the recent ABA Annual White Collar Institute, and announced a new DOJ Program to incentivize individuals with knowledge of corporate financial crimes to come forward.  Video here; Print copy here. Currently, the DOJ is authorized to pay awards for information or assistance leading to civil or criminal forfeitures. But, DAGG Monaco said, “In the past, we’ve used this authority here and there — but never as part of a targeted program.” The targeted program is in the works:  Today [March 7, 2024], we’re launching a 90-day sprint to develop and implement a pilot program, with a formal start date later this year.”

There are numerous whistleblower programs already available but they are limited in scope.  The  SEC, IRS, CFTC and other agencies have had very successful whistleblower program but the incentives only apply to conduct within their jurisdiction.  And qui tam actions are limited to exposing fraud against government.  The new whistleblower program is intended to fill in the gaps.

While the program is in the developmental stage, there are a least four conditions that will apply.  A whistleblower monetary award will be available:

• Only after all victims have been properly compensated;
• Only to those who submit truthful information not already known to the government;
• Only to those not involved in the criminal activity itself;
• And only in cases where there isn’t an existing financial disclosure incentive — including qui tam or another federal whistleblower program.

And the key condition is: “To be eligible for a reward, you have to tell us something we didn’t already know. You have to be the first in the door.”

Antitrust Division, Please Get a Seat at the Table

Deputy Attorney General Monaco noted a few areas in particular where the DOJ hoped the new whistleblower program could be applied:

• Criminal abuses of the US financial system;
• Foreign corruption cases outside the jurisdiction of the SEC;
• Violations of the recently enacted Foreign Extortion Prevention Act, which targets foreign officials on the “demand” side of foreign bribery cases;
•  Domestic corruption cases, especially involving illegal corporate payments to US government officials.

While the list was not meant to be exhaustive, it’s unfortunate that criminal antitrust violations were not mentioned.  The Sherman Act was passed in 1890 so it is the longest running criminal enforcement program that has “fallen through the cracks” of whistleblower programs.

Sherman Act enforcement is eligible to be addressed in the new whistleblower program.  DOJ’s statutory authority is tied to the department’s forfeiture program. Forfeiture is a remedy for antitrust violations. 15 U.S. Code § 6. For example, a 1992 case against Salomon Brothers Inc. was settled with a $27.8 million forfeiture penalty for charges it violated antitrust laws by coordinating the auction of U.S. Treasury notes. (here).

Establish an Office of Whistleblower or Special Counsel: Whistleblowers

Given the focus of the Biden administration on antitrust enforcement, the Antitrust Division should be exploring ways to implement the new whistleblower program to ramp up its criminal enforcement program. In his recent State of the Union speech, President Biden, referring to the newly formed Antitrust Division/FTC  [“Strike Force on Unfair and Illegal Pricing”], said, “We’re cracking down on corporations that engage in price gouging or deceptive pricing from food to health care to housing.”  Hopefully, part of that crackdown will be exploring ways the Antitrust Division can participate in the DOJ Pilot Whistleblower Program. 

There are opportunities and obstacles to establishing a program for cartel whistleblowers. 

Price fixing/bid rigging cartels generally have a large pool of potential whistleblowers but the pilot program will exclude “only those not involved in the criminal conduct itself.”  To attract cartel whistleblowers, that will need some clarification.  The scope of who is a conspirator in a  price fixing cartel is wide.  Anyone with knowledge of the agreement and then carries out an act in furtherance of the agreement is a coconspirator.  A salesperson who quotes a price to a customer, knowing his company is part of a cartel, is in theory a coconspirator.  But that level of employee would almost certainly be immunized by the Antitrust Division because of the extremely low level of potential culpability.  But even if this type of person is excluded from the whistleblower program, it would still behoove the Antitrust Division to create an “Office of the Whistleblower” or some other outreach to let people know they may be eligible for a monetary award for coming forward [if the Pilot Program includes antitrust].  At times, clerical staff or even customers may know of a cartel but the cost of coming forward have seemingly outweighed the benefits.  A monetary whistleblower award may change that calculus, at least in limited circumstances.  A Special Counsel for Whistleblowers may also encourage meritorious qui tam suits where the government is defrauded.  An Office of the Whistleblower may be a modest start without further development, but it would be a start. And exploring ways the Division can participate in the DOJ Pilot program would be a first concrete step. 

Even a modestly successful Pilot Program may lead to unleashing full power of whistleblower rewards for criminal antitrust violations with full statutory schemes like the ones the SEC, and other financial fraud agencies are benefiting from. A full range of potential rewards  is needed to offset the enormous time and expense a whistleblower may face in cooperating with the Antitrust Division in a cartel investigation.  (Not a knock on the Antitrust Division; just the reality of lengthy investigations in sometimes complex industries).  All the more reason to participate in the DOJ Pilot Whistleblower Program and see what the realities are in attracting cartel whistleblowers. 

For a look into the obstacles a potential criminal antitrust whistleblower faces see: 

A Practical Look at Why A Criminal Antitrust Whistleblower Statute is Needed: Cartel Capers, March 28, 2023

Below are a few other articles/posts I’ve written in support of a criminal antitrust whistleblower program:

It’s A Crime There Isn’t a Criminal Antitrust Whistleblower Statute, Cartel Capers, April 9, 2018

It’s Time for a Criminal Antitrust Whistleblower  Statute (Part 1), Cartel Capers, October 30, 2017

Thanks for reading.  [email protected]

All I want for Christmas is a criminal antitrust whistleblower statute.  The SEC, CFTC and other enforcement agencies charged with uncovering and prosecuting financial fraud have had another strong year thanks to their whistleblower programs.  These agencies sing the praises of their reliance on whistleblowers to uncover illegal schemes.  It is not difficult to understand that one way to uncover secret fraudulent activities is to incentivize someone to “blow the whistle.”

 Meanwhile, measured by number of cases filed, the whistleblower-less Antitrust Division continued a downward trend of cases filed. See Criminal Enforcement Trend Charts, Antitrust Division, US Dept of Justice.

The Antitrust Division filed 9 criminal antitrust cases in fiscal 2023, which may be a record low.  This is not a criticism of the Antitrust Division as the reasons for the low case count are varied and complex.  But clearly the Corporate Leniency Policy has lost its luster as an incentive for corporations to self-report.  One foundation of a successful leniency program is the “credible threat of detection.”  With such low prosecution figures, the threat of detection is seemingly very low.  It’s time to add a new powerful criminal enforcement tool—a program that incentivizes individuals with knowledge of a cartel to come forward.  An individual whistleblower program will enhance, not replace, the Corporate Leniency Policy by raising the “threat of detection” –giving pause to a corporation that might want to lay low instead of coming clean.  I cannot say this better than Sam Antar of Crazy Eddie fame:

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.

I hope 2024 will bring forward a “champion” to revitalize the criminal enforcement program by advocating for a whistleblower statute.  I understand the difficulty of passing any legislation in the current environment but criminal antitrust enforcement traditionally enjoys bipartisan support.  Perhaps the whistleblower idea will be an area where Congress can find common ground.

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Below are excerpts from the annual whistleblower reports from two agencies, the SEC and CFTC.  There are numerous other whistleblower program in the federal enforcement arsenal.  I’ve never heard any call for a repeal of any whistleblower legislation because it turned out to be a bad idea to reward whistleblowers who come forward and provide the information that leads to a successful enforcement action.

• Securities and Exchange Commission Office of the Whistleblower Annual Report to Congress for Fiscal Year 2023 November 14, 2023

The U.S. Securities and Exchange Commission’s Whistleblower Program continued to grow and strengthen in Fiscal Year (FY) 2023, establishing new records for the Program. In FY 2023, the Commission awarded nearly $600 million—the highest annual total by dollar value in the Program’s history—to 68 individual whistleblowers.1 These totals include a single award for almost $279 million—the largest in the history of the Program. The SEC has now awarded more than $1.9 billion to 397 individual whistleblowers since the beginning of the Program in 2011.

The impact of the Whistleblower Program was evident in the unprecedented level of public participation in the Program in FY 2023. The Commission received more than 18,000 whistleblower tips in FY 2023, almost 50% more than the previous record set in FY 2022. The Commission also received a record number of applications for awards in FY 2023.

• Statement of Commissioner Christy Goldsmith Romero In Support of the CFTC’s 2023 Annual Report on the Whistleblower Program and Customer Education Initiatives October 31, 2023

As a former Inspector General who knows firsthand how important whistleblowers are, I wholeheartedly support whistleblowers and the CFTC’s Whistleblower Program, and am very proud of the Program’s outsized results.  Cumulatively, the CFTC has awarded almost $350 million to whistleblowers, with more than $3 billion in enforcement sanctions ordered in cases associated with those awards.  This includes $16 million in awards this year, including more than $15 million to two whistleblowers who provided significant information and assistance that led the CFTC to bring separate successful enforcement cases.

Whistleblowers play a vital role in supporting CFTC investigations related to fraud and other illegality.  The CFTC could not fully protect customers and markets without whistleblowers.  Whistleblowers help identify fraud and other illegality, interpret key evidence, and save considerable Commission resources and time.  The faster we can stop fraud, the more we can protect customers from harm.

• Batman & Robin   November 26, 2023

The Dynamic Duo stated: We want to thank Commissioner Gordon and Police Chief O’Hara.  Without the Bat Phone, Robin and I would have been stuck forever in the Batcave with Alfred, clueless about the lawlessness plaguing Gotham City.

“Saints be praised, the Antitrust Division needs a whistleblower statute!,” Police Chief O’Hara exclaimed after his recent trip to the supermarket.

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Below are a few articles/posts I’ve written in support of a criminal antitrust whistleblower program:

A Practical Look at Why A Criminal Antitrust Whistleblower Statute is Needed: Cartel Capers, March 28, 2023

It’s A Crime There Isn’t a Criminal Antitrust Whistleblower Statute, Cartel Capers, April 9, 2018

It’s Time for a Criminal Antitrust Whistleblower  Statute (Part 1), Cartel Capers, October 30, 2017

Thanks for reading.  Happy Holidays and I wish you all the best in 2024.

Bob Connolly   [email protected]