The United States Sentencing Commission posted a notice soliciting comments for possible revisions to USSG 2R1.1 (Antitrust Offenses) to be submitted by July 29th.  I have posted about this previously. (here)(here).  This week I submitted my comments to the Commission.  I limited my comments to my concerns over the guidelines as they apply to individual defendants.  My basic concern is that the volume of commerce is a poor measure of an individual defendant’s culpability, yet it is the primary driver of the offense level.  More specifically, my comments set forth my three primary concerns with the antitrust guidelines as applied to individuals: 1) that the maximum prison sentence of 10 years under the Sherman Act should be reserved for the most egregious cases such as recidivism or explicit economic coercion; 2) that the volume of commerce be de-emphasized as the primary determinant of an individuals’ culpability and be applied only for defendants who had the authority to commit their company to the cartel; and 3) that other factors that more accurately reflect culpability (such as motive) play a role in guidelines calculation.

I also discuss how the Antitrust Division has changed its investigative strategy from “Big Fish/Little Fish” to a “Race to the Courthouse.” This strategy, while successful on one level, has highlighted the inequity of the guidelines of relying principally on volume of commerce to determine an individuals’ recommended guideline sentence. The letter also explains how the failure of the guidelines to reflect an individual’s culpability has led Courts to nearly uniformly depart from imposing a  guidelines sentence, even when recommended by the prosecutors.

Finally, the letter asks the Commission to consider my suggested antitrust guideline reforms that I believe will better reflect an individual’s personal culpability.  While I have opinions based on my many years of prosecuting antitrust crimes, I certainly don’t have all the answers. My hope is to contribute to an informed discussion of how the antitrust sentencing guidelines can be amended to punish based on relative individual culpability and also best serve the purpose of general deterrence of price-fixing and bid rigging.

A complete copy of my letter to the Sentencing Commission can be found here.  Or, email me and I would be happy to send you a copy.

Thanks for reading!

 

Earlier this year, the Division had its first trial in its ongoing real estate foreclosure auction bid rigging investigation. Three defendants, two real estate investors and an auctioneer, were indicted for bid rigging and mail fraud. The trial lasted four weeks. The auctioneer was acquitted. The other two defendants were acquitted of the fraud charges, but convicted of the Sherman Act violation. The jury also convicted one defendant, Andrew Katakis, of obstruction of justice.   Katakis was charged with destroying electronic records (emails) related to the conspiracy. The trial judge, however, overturned the obstruction conviction for lack of evidence. [Read more…]

Mark Whitacre was the former Archer Daniels Midland (ADM) executive who blew the whistle on the international lysine price-fixing conspiracy of the early 1990’s. He is the highest ranking Fortune 500 executive to become an FBI whistleblower.  Whitacre’s actions launched the age of international price-fixing prosecutions that dominate cartel enforcement to this day. Mr. Whitacre has written an essay, “When Good Leaders Lose Their Way,” 45 Loy. U. Chi. L.J. 525 (2014), that recounts how he became involved in the conspiracy; why he decided to confess to the FBI; his two year saga as an FBI uncover operative across the globe; his decision to embezzle $9.5 million from ADM (his “self-help” severance pay); his resulting ten-year prison sentence; and how he landed on his feet today as the COO of a biotech company with his family intact.  Whitacre’s journey illustrates how a serious antitrust and ethics compliance program may have prevented a journey of  misery for him and his company.   [Read more…]

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…]