Robert E. Connolly [email protected] LinkedIn
On Dec. 23, 2020, the Criminal Antitrust Anti-Retaliation Act (the “Act”), finally became law. The legislation had passed in the Senate several times previously but until this last Congress, had never been brought up for a vote in the House. Congratulations to Senators Grassley and Leahy for their persistent advocacy for this legislation.
The Act prohibits employers from retaliating against certain individuals who report criminal antitrust violations. It allows an individual to file a retaliation complaint with the Secretary of Labor it they are retaliated against for reporting to the federal government information about what they believe to be criminal violation of the antitrust laws. The remedies include reinstatement, back pay and special damages including litigation costs, expert witness fees and reasonable attorney fees. This is a positive piece of legislation. As discussed below, however, without the potential of a financial reward for being a whistleblower, this legislation alone is unlikely to encourage anyone to come forward. But, the Act shows that Congress understands the power of whistleblowing, including on criminal antitrust violations, and further legislation will hopefully follow.
The picture facing a potential whistleblower for an antitrust violation is confusing. In the broad sense of “whistleblowing” anyone can make a complaint to the Antitrust Division about what they think might be anticompetitive conduct. The Antitrust Division has a “Report Violations” page on its website (“Your e-mails, letters and phone call could be our first alert to a possible violations of the antitrust laws and may provide the initial evidence need to begin an investigation.”). But when it comes to possible whistleblower rewards (i.e. a financial reward for a successful outcome resulting from the whistleblower’s information), there are several statutes in play. There is a serious gap in the law because whether a whistleblower can receive financial compensation for reporting a criminal antitrust violation (price fixing bid rigging, market allocation) depends upon whether the victim of the fraudulent scheme was a government entity or private individuals.
This anomaly is best shown through the Antitrust Division’s criminal cases against South Korean fuel oil dealer who rigged bids on DOD contracts in South Korea. In November 2018 the Antitrust Division announced that three South Korean oil refiners had agreed to plead guilty and to enter into civil settlements for rigging bids on United States Department of Defense Fuel Supply Contracts (here). The investigation was started by a whistleblower filing a False Claims Act case. The DOJ press release noted, “The United States’ False Claims Act civil investigation resulted from a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act. Those provisions allow for private parties to sue on behalf of the United States and to share in any recovery.” Claims submitted for payment are “false” if the underlying contract has been fraudulently obtained by rigged. The government has entered into civil settlements of $205 million. DOJ Press Release April 8, 2020 DOJ Agrees to Civil Settlement with Additional Firm Involved in Bid Rigging and Fraud Targeting Defense Department Fuel Supply Contracts for U.S. Military Bases in South Korea. While the amount awarded to the whistleblower[s] who initiated the investigation is not known, at 15-25% of the total recovery, there was ample reward for coming forward and exposing the scheme.
Suppose, however, the fuel oil dealers fixed prices on contracts on commercial buildings in the United States. While this would be a criminal price fixing violation of the Sherman Act, there would be no ability for a whistleblower to collect a reward for coming forward. Being a whistleblower can be a career killing act of public service; a life altering event–and not in a good way. A criminal antitrust whistleblower is likely to have criminal exposure if he was involved in the cartel so the ability to hire a lawyer on a content fee basis is crucial. It is likely No Potential Reward = No Whistleblower.
There is no statute to incentivize criminal antitrust whistleblowers that mirrors the SEC’s powerful Dodd-Frank whistleblower legislation which allows whistleblowers who come forward to the SEC to share between 10 and 30 percent of the government’s total monetary recovery, if any. The effectiveness of the SEC program has exceeded expectations in terms a flood of new fraud cases brought to the SEC by individuals willing to stick there neck in return for the possibility of financial incentives offsetting the risks of being a whistleblower. See SEC Whistleblower Program Ends Record-Setting Fiscal Year With Four Additional Awards, SEC Press Release, September 30, 2020.
The Criminal Antitrust Anti-Retaliation Act is a welcome start towards protecting criminal antitrust whistleblowers. Further reform is needed to mirror the financial incentives provided by Dodd-Frank for securities violations and the False Claim Act where the government is the victim of fraudulent schemes. Why should there be financial incentives for whistleblowing if the federal government is the victim of bid rigging, but not if private entities are the target? There shouldn’t be. Another point worth highlighting is that there may be many potential whistleblowers who have valuable information that could form the basis for an Antitrust Division grand jury or search warrant, but not enough to file a False Claims Act case. This potential whistleblower may well remain silent, even on government contracting fraud. The False Claims Act can be effective in certain circumstances but also a cumbersome and public tool compared to the SEC whistleblower incentives and anonymity protections. Criminal antitrust whistleblower legislation that mirrors the SEC legislation could revitalize criminal enforcement in a way not seen since the revised Corporate Leniency Policy of 1993. Often companies who consider coming forward for leniency decide against it because the collateral consequences can be so severe. The threat of an individual whistleblower coming forward would reduce the likelihood of potential corporate leniency applicant turning away from that decision. So come on President Biden, Congress and AG Garland, let’s keep the whistleblower ball rolling and complete the criminal antitrust whistleblower legislation.
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 Sam E. Antar, Former Crazy Eddie CFO, former CPA, and a convicted felon. quoted in, Henry Cutter, SEC Seeks Right to Cut Whistleblower Bounties, Wall Street Journal, June 29, 2019, (comment by Sam E. Antar, Former Crazy Eddie CFO, former CPA, and a convicted felon).
For further reading see, It’s a Crime There Isn’t a Criminal Antitrust Whistleblower Statute, Antitrust Law Daily, April 2018