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

Besides being unfair, or rather because of this, the individual sentencing guidelines are routinely ignored by the Courts. [Read more…]

My partner, Allen Grunes, will be the moderator for this ABA teleconference on July 16^, 2014 beginning at noon.  Mr. Grunes is a former Antitrust Division prosecutor and the panel will include Niall Lynch, Latham & Watkins, San Francisco, CA; Michael Tubach, O’Melveny & Myers, San Francisco, CA; and Wendy Waszmer, King & Spalding, New York, NY. The session will cover the DOJ’s recent real estate foreclosure and municipal tax lien auction bid rigging prosecutions. Several cases allege not only antitrust but also fraud and other criminal statute violations. These excellent panelists, including former prosecutors, will discuss some of the unique features of these cases, DOJ’s enforcement message, and what to expect next.   To tune in, register at: http://www.americanbar.org/content/dam/aba/marketing/20140716_at147016.authcheckdam.pdf.

Auction bid rigging cases garner much less attention than the headline grabbing and record-setting international cartel cases, but buyer collusion cases have a long history and an important role in establishing the legal principles that apply to all cartels—buyer or seller. Buyer cartels were unlawful even before the passage of the Sherman Act in 1890. At common law, agreements among bidders not to bid against each other were set aside as against public policy.   [Read more…]

On July 8, 2014 Rengan Rajaratnam was acquitted by a federal jury of participation in an insider trading conspiracy. This was the government’s first trial loss in its insider trading investigation that has led to 85 convictions, with most defendants sentenced to prison. Raj Rajaratnam, the defendant’s older brother, is currently serving an 11 year jail term. In an earlier post https://cartelcapers.com/blog/fugitves-return-us-upon-indictment-admissible-show-consciousness-innocence/ I reported that in a pretrial motion, Rajaratnam’s counsel persuaded the court that he should be able to introduce evidence that he was in Brazil at the time he learned of his indictment and he immediately returned to the United States to face the charges. This evidence, Rajaratnam argued, and the court agreed, could be considered by the jury as “consciousness of innocence.” The jury acquitted Rajaratnam, and no doubt many factors were at play, but in fact, Rajaratnam did introduce such evidence at trial.   [Read more…]

The Seventh Circuit has decided to rehear the appeal from a judgment dismissing nearly Motorola’s entire $3.5 billion antitrust claim against foreign manufacturers of LCD panels. The Court has not yet set a schedule for the filing of supplemental briefs.

In Motorola Mobility v. AU Optronics Corp, No. 14-8003, 2014 WL 1243797 (7th Cir. Mar. 27, 2014)(vacated), the Seventh Circuit (J. Posner) upheld a lower court ruling dismissing most of Motorola’s damage claims from price fixing of LCD panels. The commerce at issue was LCD panels sold by defendants to Motorola’s foreign subsidiaries and incorporated into products such as cell phones. The finished product was imported into the U.S. The Court found that a damage claim based on the purchases by Motorola’s foreign subsidiaries was barred by the FTAIA. The Court held that because the price-fixed panels were sold to customers overseas, the effect on U.S. commerce was indirect, even though the price of the finished product later imported into the U.S. may have been inflated by the component price fixing. [Read more…]

When I was the Chief of the Philadelphia Field Office, we had the first successful extradition by the Antitrust Division of a fugitive defendant. In 2010 a British executive, Ian Norris, was extradited to the U.S. The UK authorities declined to extradite Norris to face the antitrust violation he was charged with, but he was extradited to face charges of obstruction of justice in connection with an international cartel grand jury investigation. He was ultimately convicted at trial of one count of obstruction and sentenced to 18 months in prison.

More recently, the Division successfully litigated an extradition proceeding on an antitrust charge. Romano Pisciotti, an Italian national who had been placed on an Interpol “red notice” after being indicted for involvement in the marine hose cartel, was arrested in Germany during a layover at the Frankfurt airport. He lost his ten-month fight against extradition and was brought to the United States in April 2014 to face a one-count felony indictment.   Pisciotti quickly reached a plea agreement.  http://www.justice.gov/atr/cases/f305500/305542.pdf.

The Pisciotti case has thrust the mechanics and possibility of extradition to the forefront of attention. The Division has used the Pisciotti case as an opportunity to publicly state in numerous forums that it will seek extradition wherever feasible. And, these days, with the exception of the local real estate bid rigging auction cases, nearly all of the Division’s defendants are citizens of foreign nations.

On June 24^th, the ABA Antitrust Section, Criminal Cartel and Practice Committee http://apps.americanbar.org/dch/committee.cfm?com=AT307000 hosted a timely and informative teleconference to discuss current issues around extradition. [Read more…]

Criminal antitrust trials occur relatively infrequently these days, so an occasional review of some of the issues that arise at trial can be useful as a refresher. Many government witnesses at a criminal antitrust trial are testifying pursuant to some type of agreement with the government. Such agreements include amnesty, immunity, non-prosecution/cooperation agreements and plea agreements. The essence of the agreement is that the witness will receive some type of benefit in the form of a reduced punishment (or immunity). In return, the witness agrees to cooperate with the government and testify at trial. If the witness does not give truthful testimony, he/she is theoretically subject to prosecution for perjury, and may also lose the benefits conferred by the agreement

A recent Second Circuit decision, U.S. v. Certified Environmental Services, Inc., No. 11-4872 (2d Cir. May 28, 2014), provides a chance to review the proper use of plea agreements at trial.   The court reversed convictions on several counts related to a scheme by defendants to violate various state and federal environmental regulations. The convictions were reversed based, in part, on the government having improperly bolstered the witness’s credibility by referring to the cooperation agreement requirement that the witness tell the truth.
[Read more…]

The United States Sentencing Commission periodically reviews and revises current guidelines and submits proposed guideline amendments to the Congress for approval not later than the first day of May each year.   The Sentencing Commission is currently seeking comments on possible priority policy issues for the amendment cycle ending May 1, 2015.   One of the priority guidelines the Commission is seeking comment on is the guideline for sentencing antitrust individuals and corporations for Bid Rigging, Market Allocation and Price Fixing, §2R1.1. Comments are due by July 29, 2014.

An area that is of great interest to me is how the guidelines calculate guideline range individual jail sentences.   This area needs major reform if this guideline is to be rational and equitable and taken seriously by the Courts. I’ll just touch on one critical aspect of the individual sentencing guideline in this post. [Read more…]

We are all familiar with the doctrine of “consciousness of guilt” wherein the prosecutor may introduce evidence such as flight or cover-up that permits an inference that the defendant believed he was guilty. But, there is also a less well-known and less widely accepted doctrine of “consciousness of innocence.” [Read more…]

One of the hottest topics in cartel enforcement today is the question of how the Foreign Trade Antitrust Improvements Act of 1982 (“FTAIA”) limits the extraterritorial reach of the Sherman Act. The FTAIA applies to both governmental and private actions. On June 4, 2014 the Second Circuit offered its views on the subject in Lotes Co., v. Hon Hai Precision Industry, No. 13-2280, slip op. (2d Cir. June 4, 2014).

The Foreign Trade Antitrust Improvements Act of 1982 (“FTAIA”), 15 U.S.C. Section 6a, limits the extraterritorial reach of the Sherman Act. The Supreme Court has explained that the FTAIA initially lays down a general rule placing all (nonimport) activity involving foreign commerce outside the Sherman Act’s reach. The FTAIA then brings such conduct back within the Sherman Act’s reach provided that the conduct both (1) sufficiently affects American commerce, i.e., has a “direct, substantial, and reasonably foreseeable effect” on American domestic, import, or (certain) export commerce, and (2) has an effect of a kind that antitrust law considers harmful, i.e., the “effect” must “giv[e] rise to a [Sherman Act] claim.” F. Hoffmann‐La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 162 (2004) (quoting 15 U.S.C. § 6a(1), (2)).   [Read more…]

In the last several months, the Antitrust Division has obtained indictments of a number of Japanese executives in the auto parts investigation. This is the hallmark of an investigation that is shifting gears. For the most part, but not entirely, the Division has picked the low hanging fruit with amnesty and non-prosecution agreements. It has shaken a few trees and obtained plea agreements with individuals who received substantially reduced 5K sentences in return for their plea and cooperation. Now begins the phase where individuals are indicted, either because the Division believed they were too senior to offer 5K discounts, the Division no longer needed cooperation, or because the individual declined the invitation to come to the United States and submit to US jurisdiction. Now the investigation enters what could be likened to the “100 Years War,” depending upon the longevity of the fugitive defendant. The hostile parties keep their distance, with an occasional battle fought if there is an extradition or voluntary surrender.   [Read more…]