CCC’s: Court Dismisses Heir Locator Indictment

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Kemp & Associates, Inc. and its vice-president and part owner Daniel J. Mannix, were indicted on August 17, 2016 in the District of Utah on a single-count conspiracy to violate the Sherman Act, 15 U.S.C. § 1, by engaging in a customer allocation agreement.  The agreement at issue was a set of guidelines which governed the joint activity between defendants and co-conspirators.  On March 31, 2017, the defendants filed a Motion for Order that the case be Subject to the Rule of Reason and to Dismiss the Indictment as time barred on Statute of Limitations grounds.  On August 29, 2017, the district court affirmed an earlier ruling that the indictment would be tried under the Rule of Reason, but then made that ruling moot by dismissing the case on statute of limitations grounds.  The court ruled that the conspiracy ended three years outside the statute of limitations.  In a nutshell, the court found the conspiracy ended when the last customer was allocated, while the government argued, unsuccessfully, that the conspiracy continued while the defendants reaped the supra competitive profits from allocating the customers.  The government’s “payment theory” usually prevails, but not in this case.

When I have time, I’d like to comment on the court’s ruling but for now I simply provide the ruling (US v. Kemp & Associates, Inc and Daniel J. Mannix) for your perusal.

Thanks for reading.

P.S.  Want to write a guest post?  The pay stinks but contributors welcome.

E-Commerce Company and Top Executive Agree to Plead Guilty to Price-Fixing Conspiracy for Customized Promotional Products

Monday, August 7, 2017

Conspiracy Was Conducted Through Social Media and Encrypted Messaging Applications

An e-commerce company and its top executive have agreed to plead guilty to conspiring to fix prices for customized promotional products sold online to customers in the United States. Zaappaaz Inc. (d/b/a WB Promotions Inc., Wrist-Band.com and Customlanyard.net) and its president Azim Makanojiya agreed to plead guilty to a one-count criminal violation of the Sherman Act.

Acting Assistant Attorney General Andrew Finch of the Department of Justice’s Antitrust Division, Acting U.S. Attorney Abe Martinez and Special Agent in Charge Perrye K. Turner of the FBI’s Houston Field Division made the announcement.

According to the felony charges filed today in the U.S. District Court for the Southern District of Texas in Houston, the conspirators attended meetings and communicated in person and online. The investigation has revealed that the conspirators used social media platforms and encrypted messaging applications, such as Facebook, Skype and Whatsapp, to reach and implement their illegal agreements. Specifically, the defendants and their co-conspirators agreed, from as early as 2014 until June 2016, to fix the prices of customized promotional products sold online, including wristbands and lanyards. In addition to agreeing to plead guilty, Zaappaaz has agreed to pay a $1.9 million criminal fine.

“As today’s charges show, criminals cannot evade detection by conspiring online and using encrypted messaging,” said Acting Assistant Attorney General Andrew Finch. “In addition, today’s charges are a clear sign of the Division’s commitment to uncovering and prosecuting collusion that affects internet sales. American consumers have the right to a marketplace free of unlawful collusion, whether they are shopping at retail stores or online.”

“Schemes like the defendants’ cause financial harm to consumers who purchase goods and services and to businesses who sell goods and services in compliance with the laws of the United States,” said Acting U.S. Attorney Abe Martinez. “The United States will continue to investigate and prosecute individuals and businesses who seek to gain an illegal advantage.”

“The FBI stands ready to protect consumers from unscrupulous business practices,” said Special Agent in Charge Perrye K. Turner. “Antitrust laws help protect the competitive process for the benefit of all consumers.”

Makanojiya is charged with price fixing in violation of the Sherman Act which carries a maximum sentence of 10 years in federal prison and a maximum fine of $1 million for individuals. The maximum fine for an individual may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either of those amounts is greater than the statutory maximum fine.

Both defendants have agreed to cooperate with the Antitrust Division’s ongoing investigation. The plea agreements are subject to court approval.

This prosecution arose from an ongoing federal antitrust investigation into price fixing in the online promotional products industry, which is being conducted by the Antitrust Division’s Washington Criminal I Section with the assistance of the FBI’s Houston Field Office. Anyone with information on price fixing or other anticompetitive conduct in the customized promotional products industry should contact the Antitrust Division’s Citizen Complaint Center at 888-647-3258 or visit www.justice.gov/atr/contact/newcase.html.

CCC’s: The Sherman Act is An Unconstitutional Criminal Statute (Part II)

July 19, 2017 by Robert Connolly 2 Comments

In Part 1 of this article (here), I argued that the Sherman Act was unconstitutional as a criminal statute because it is void for vagueness.  A statute that criminalizes all restraints of trade cannot be saved by the Supreme Court explaining what Congress really must have really meant. What passed constitutional muster when the Sherman Act was a misdemeanor[1] merits another look now that the statute carries a maximum jail time of 10 years in prison.

In Part II I discuss how I think the criminal element of the Sherman Act should be fixed.

 The Heir Locators Criminal Indictment May Make This Issue Topical

I want to explain why this topic has come to mind. The Antitrust Division’s heir locators investigation/prosecution garners little attention in the world of massive international cartel investigations, but an indictment in this investigation could have major implications for criminal antitrust prosecutions.[2]  In a recent development, the trial judge ruled that the criminal case should be tried under the Rule of Reason. It is possible this development will set off a chain of events that leads to the Supreme Court revisiting what is necessary for a criminal conviction under the Sherman Act.

Heir locator firms locate potential heirs to an estate from public records and agree to help with their claim in return for a contingency fee.  The amount of the contingency fee depends on factors such as the complexity of the claim, potential recovery etc.  Since the potential heirs are located from public records, they may be contacted by more than one heir locator firm.  According to the indictment, the defendants agreed to allocate customers on a “first to contact basis.”  The firm to which the customers were allocated would pay the firm that “backed off” a percentage of the contingency recovered.  The Division has obtained two guilty pleas in the investigation but defendants Kemp & Associates and its co-owner Daniel J. Mannix were indicted in August 2016 and have pled not guilty.

The indictment appears to be a straight forward customer allocation scheme—a per seviolation.  The defendants:

  • agreed, during those conversations and other communications, that when both co-conspirator companies contacted the same unsigned heir to an estate, the co-conspirator company that first contacted that heir would be allocated certain remaining heirs to that estate who had yet to sign a contract with an Heir Location Services provider;

  • agreed that the co-conspirator company to which heirs were allocated would pay to the other co-conspirator company a portion of the contingency fees ultimately collected from those allocated heirs;

If anything is a per se violation, customer allocation should earn the title.  It eliminates price competition and it can be an easier agreement to monitor/enforce than price fixing.  If you lose a customer you were supposed to get, you know it.  But, the defendants moved that the case should be tried under the rule of reason.  The briefs in the case were filed under seal so it is impossible at this point to understand the defendants’ argument and the government’s response.  Nonetheless, on June 21, 2017 U.S. District Judge David Sam heard oral argument and then granted the defendants’ motion that the case is subject to the rule of reason. He reserved judgment on the motion to dismiss “for further disposition pending the government’s further evaluation of the case.”

I predict that the Antitrust Division will not try a criminal case under the Rule of Reason.  The government will either seek an interlocutory appeal to reverse the district court’s ruling, or drop the case.  The Division is in a tough position because three defendants have already pled guilty.[3]  The Division will not lightly walk away from a prosecution where others have already taken a plea.  On the other hand, the Antitrust Division will not want a precedent that allows the defendant to raise the reasonableness of the conduct.  Defendants have argued in previous criminal cases that the restraint should be judged under a rule of reason, but the Division has had ample authority to beat that argument back.  But, what if the defendants go for the whole enchilada, and seek not just a rule of reason trial, but a complete dismissal of the charges?   It certainly would be helpful to the defendants to have a criminal case tried under the rule of reason, but it would be a home run, or antitrust Hall of Fame material to get the indictment dismissed in its entirety as unconstitutionally void for vagueness.

A Rule of Reason Criminal Case?

One reason the defendants may have moved for a rule of reason trial is that the Supreme Court has already said that this would be permissible.  In United States v. U.S. Gypsum,[4]the Supreme Court held that in a criminal prosecution under the Sherman Act that was subject to rule of reason analysis, “action undertaken with knowledge of its probable consequences and having the requisite anticompetitive effects can be a sufficient predicate for a finding of criminal liability under the antitrust laws.”[5]  That would seem to settle the question, but the Supreme Court has been rightly flexible with stare decisis in overruling numerous other “conventional wisdom” tenets in the antitrust area.  Think vertical restraints, maximum resale price maintenance and resale price maintenance as examples.[6]  Would the Supreme Court decide that a rule of reason criminal case (or a per se case) is unconstitutional.  Would an after-the-fact rule of reason determination (after a quick look?) (or full blown inquiry?) meet the “notice” standard required for a criminal statute?  But, what about the Gypsum required showing of intent of anticompetitive conduct?  Does that save the statute?  But what does that even mean?  Anticompetitive under the “consumer welfare model?”  Measured by the Chicago School?  Post Chicago School?  School of Rock?

I have a proposal to amend the elements of a Sherman Act criminal conviction that eliminates these questions/issues and is warranted in light of the 10-year maximum jail sentence.  (And not to forget, a corporation has paid a $500 million criminal fine.)

If the Restraint is Fraudulent—It’s Criminal

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.”[7] Similarly, an Antitrust Division official has testified, “the [criminal] cases that we are charging and prosecuting are unmistakable fraud.”[8]  Simply put, the litmus test for criminality should be whether the restraint of trade also involves fraud (i.e. a per se violation).  The substantial hammer of justice –lengthy prison sentences, Red Notices, extradition, should be reserved for when a jury finds the defendant engaged in a restraint of trade that involved fraud.

Today, criminal antitrust indictments contain an element of fraud, because of [wise] prosecutorial discretion, not because of the dictates of the statute.  But, antitrust jurisprudence could have taken the path down a fraud requirement instead of veering off to a per se rule (a conclusive presumption that takes the issue of reasonableness out of the juries’ hand), and found that the criminality in the Sherman Act is confined to those agreements that have an element of fraud. Early cases interpreting what was an unreasonable restraint of trade were heading in that direction.

What we now call per se offenses were originally called fraud.  This was recognized as early as 1875 in Craft v. McConoughy,[9] a case involving a secret scheme to fix prices among four Illinois warehouses. The court stated, “To the public the four houses were held out as competing firms for business. Secretly they had conspired together.”[10]  The scheme enabled the parties “by secret and fraudulent means, to control the price of grain.”[11]  In the seminal antitrust case of United States v. Addyston Pipe,[12] the court found secret agreements to refrain from bidding to be a form of fraud: “It is well settled that an agreement between intending bidders at a public auction or a public letting not to bid against each other, and thus prevent competition, is a fraud.”[13] In McMullen v. Hoffman,[14] the Court refused to enforce a contract when one conspirator sued for his portion of the profits from a successful collusive bidding scheme. The Court explained that the agreement “tend[ed] to induce the belief that there really is competition . . . although the truth is that there is no such competition.”[15] The Court held that “the illegal character of the agreement is founded not alone upon the fact that it tends to lessen competition, but also upon the fact of the commission of a fraud by the parties in combining their interests and concealing the same.”[16] The Court distinguished a secret agreement from a known joint venture, where “[t]he public may obtain at least the benefit of the joint responsibility. . . . The public agents know then all that there is in the transaction, and can more justly estimate the motives of the bidders, and weigh the merits of the bid.”[17]  Over a century later, in response to a question as to whether antitrust crimes are crimes of moral turpitude, Antitrust Division Assistant Attorney General Bill Baer responded that “price-fixing, bid-rigging and market allocation agreements among companies that hold themselves out to the public as competitors are inherently deceptive and defraud consumers who expect the benefit of competition.”[18]

Drawing on the wisdom of early Supreme Court decisions and the recent pronouncements of the Antitrust Division, the demarcation between a restraint of trade that can subject the violator to civil penalties and one that subjects the violator to criminal penalties is whether there was an element of fraud.  The Sherman Act should reflect this, either by amendment in Congress, or by Supreme Court further interpretation of what the government is required to prove to subject the defendant to criminal penalties.   In a criminal case the government’s burden should include proving that the agreement was a restraint of trade where the agreement was actively concealed or where the defendant held him/itself out to the public as a competitor when in fact an agreement not to compete or limit competition had been reached without the knowledge of the customer.  In a previous article, I have labeled this standard Per Se Plus.[19]

How would the heir locators indictment fare under such a standard? It is hard to know for sure but the indictment suggests that customers shopped around or there would have been no need for an agreement at all.  And when customers got quotes from more than one company, the customer would reasonably assume there was competition.  And the fraud would be, as the Supreme Court said long ago, “in [the defendants] combining their interests and concealing the same.”

Conclusion

Would requiring the government to prove an element of fraud to obtain a criminal conviction make obtaining convictions more difficult?  The answer must be yes, but as a former Antitrust Division prosecutor, to convince a jury to convict you must argue that the crime wasn’t an “unreasonable restraint of trade” whatever the heck that is—but it was fraud by the lying cheating defendants.  There are benefits to the Antitrust Division that would flow from having to prove fraud, but that’s for another post. Here, I’ll end with this.  The crime should fit the punishment; and with punishment of up to ten years in prison for an individual and hundreds of millions of dollars for a corporation, the Sherman Act needs to be amended to include an element of fraud for a criminal conviction because it is currently unconstitutional.

Thanks for reading.

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[1] When the per se rule was announced in United States v. Socony-Vacuum Oil Co., 310 U.S 150 (1940). a jail sentence was virtually a non-existent possibility. The maximum sentence imposed on any of the convicted individual defendants in Socony Vacuum was a fine of $1000. See Daniel A. Crane, The Story of United States v. Socony Vacuum: Hot Oil and Antitrust in the Two New Deals, in ANTITRUST STORIES 107 (Eleanor M. Fox & Daniel A. Crane eds., 2007).

[2]  U.S. v. Kemp & Associates, Inc. and Daniel J. Mannix, Case: 2:16-cr-00403, (D. Utah 2016) (DS), available at  https://www.justice.gov/atr/file/887761/download.

[3]  Richard Blake agreed to plead guilty in January 2016 as part of a proposed plea agreement between the Antitrust Division and Blake.  His company was not charged, most likely because it had received leniency. California-based Brandenburger & Davis and its president Bradley Davis agreed to plead guilty in December 2015.

[4]  438 U.S. 422 (1978).

[5]  Gypsum, 438 U.S. at 444. fn 21.

[6] The Supreme Court stated in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 899 (2007).   “Stare decisis is not as significant in this case, however, because the issue before us is the scope of the Sherman Act,” which the Court has treated as a common-law statute.  The Court has been receptive to reviewing the per se rule in light of “new circumstances and new wisdom.”  The severe loss of personal liberty and other consequences now at stake in a Sherman Act criminal case is a new circumstance that warrants an evolution in the application of the per se rule to criminal antitrust cases so that the test for liability will better match the evolution of the law on consequences

[7] 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.

[8] 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.

[9] 79 Ill. 346 (1875).

[10] Id. at 348.

[11] Id. at 349.

[12] 85 F. 271 (6th Cir. 1898).

[13] Id. at 293 (emphasis added) (citations omitted).

[14] 174 U.S. 639 (1899)

[15] Id. at 646.

[16] Id. at 649.

[17] Id. at 652 (citations omitted).

[18] Letter from Peter J. Kadzik, Principal Deputy Assistant Att’y Gen., U.S. Dep’t of Justice, to Senator Patrick Leahy Attaching Responses of William Baer, Assistant Att’y Gen. Antitrust Div., U.S. Dep’t of Justice to Questions for the Record Arising from the Nov. 14, 2013 Hearing of the Senate Comm. of the Judiciary Regarding Cartel Prosecution: Stopping Price Fixers and Protecting Consumers at 3 (Jan. 24, 2014) (emphasis added), available at http://www.judiciary.senate.gov/imo/media/doc/111413QFRs-Baer.pdf.

[19]  Robert E. Connolly, Per Se “Plus:” A Proposal to Revise the Per se Rule in Criminal Antitrust Cases, Antitrust, Vol. 29, No. 2, Spring 2015, p. 105.

CCC’s: The Sherman Act is Unconstitutional as a Criminal Statute: (Part 1)

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If you get lost, sometimes you must go back and start again from the beginning. I’ve been a bit lost on whether the Sherman Act is unconstitutional as a criminal statute. It is well accepted that per se violations of the Sherman Act can be prosecuted criminally.  An individual can be sentenced to up to ten years in prison.  But, is the accepted learning on this issue wrong?  I think I’ve found my way to the Sherman Act being unconstitutional as a criminal statute.[1]

Forget everything you know about Supreme Court jurisprudence involving the criminal application of the Sherman Act (that was easy for me).  Take a look at the statute:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.

Can you advise your client what exactly is declared to be illegal?  And watch his face show even more alarm when you explain that whatever it is that he can’t do, if he does do it, the penalty is up to 10 years in prison.[2]   The Sherman Act is void for vagueness.  Justice Sutherland explained the void for vagueness doctrine in Connally v. General Construction Co, 269 U.S. 385, 391 (1926):

The terms of a penal statute…must be sufficiently explicit to inform those who are subject to it what conduct on their part will render them liable to its penalties….and a statue which either forbids or requires the doing of an act so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application violates the first essential of due process of law.

The Sherman Act does not sufficiently inform business people (including foreigners) what conduct can land them in jail or on a Red Notice.  This must be true because even the Supreme Court has said the Sherman Act cannot possibly mean what it says because every contract is in restraint of trade, and every contract cannot be illegal.  Thus, the first Supreme Court triage on the Sherman Act was that only “unreasonable restraints” of trade were prohibited.[3]  But, that doesn’t clear things up too much—What is an unreasonable restraint of trade?  Under the Rule of Reason, a restraint is unlawful only, if after an inquiry to balance the pro-competitive benefits of the agreement versus its anticompetitive effects, the agreement is found to unreasonably restrain trade.  But can you find someone guilty of a crime after weighing the pro-competitive and anticompetitive effects of the agreement?  That doesn’t seem like the notice required by due process either.  Further Supreme Court surgery on the Sherman Act separated out per se violations–restraints of trade that are so highly unlikely to have any redeeming competitive benefits, that the restraints (price-fixing, bid rigging and customer/market allocation) are per se illegal.  As a result, juries are charged in a criminal antitrust case that they do not need to find that the restraint was unreasonable, but simply that the defendant(s) entered into an agreement to fix prices, which, by judicial fiat, is per se unreasonable.

Does the per se rule solve the void for vagueness problem?  The conventional wisdom is that it has.  But changed circumstances sometimes compel a “fresh look” at accepted wisdom.  It is time for that fresh look.  The changed circumstance that comes to mind is that the Sherman Act is no longer a misdemeanor.  It is not a “gentlemen’s crime” meriting a slap on the wrist with a mild scolding from the judge.[4]  The Sherman Act, as a criminal statute, provides for an individual to be sentenced to up to 10 years in jail.  And the ten years is not just theoretical; the Antitrust Division sought a 10-year prison sentence for the CEO of AU Optronics after his conviction.  While the ten-year sentence was not achieved, the record prison sentence for a criminal antitrust violation is now 5 years. [5]

I am not a constitutional scholar, but I do have a blog so I’ll opine what I think is wrong with the Sherman Act as a criminal statute.[6]  First, the Supreme Court cannot save a criminal statute by grafting on elements such as condemning only “unreasonable” restraints of trade, and further holding that only certain types of agreements are per se unreasonable.  But even if the Supreme Court could address the void for vagueness doctrine by holding that only certain restraints are per se illegal, this violates another constitutional tenet; the Supreme Court takes away the issue from the jury with an unrebuttable presumption.  Charles D. Heller has written on this subject and argued that the current practice of instructing the jury that price-fixing is per se illegal, i.e., presumptively unreasonable, is unconstitutional.  The jury should be the fact-finder of whether a restraint is unreasonable.[7]  Finally, the definition of a per se offense is that the restraint (price-fixing for e.g.) is so highly likely to be anticompetitive that there is no inquiry as to whether the actual restraint the defendant is charged with was anticompetitive.  This may be fine for a civil case, but in a criminal case the defendant must be allowed to argue that the charged restraint was the exception to the rule.  Instead, in a criminal case the jury may be charged:

It is not a defense that the parties may have acted with good motives, or may have thought that what they were doing was legal, or that the conspiracy may have had some good results.

This seems like a very odd jury instruction for a crime that carries a ten-year maximum prison sentence, especially when one considers that many of the defendants in criminal antitrust indictments are foreigners.[8]

In short, the Sherman Act is void for vagueness.  But, if the Act does pass the void for vagueness hurdle by grafting on the per se rule, juries should decide whether the restraint in question is unreasonable, and that inquiry should not be contained by a presumption the restraint was per se unreasonable if it was price-fixing, bid rigging or market allocation.  If these standards were applied, however, the Sherman Act would be unworkable.  If juries decided, in an after the fact deliberation, whether a restraint was unreasonable, the void for vagueness doctrine would trump a conviction.  Sad.  Very sad.

My solution to the problem, if there really is a problem, will come as soon as I figure it out—but no later than next week– in Part II.

Thanks for reading.  Comments would be much appreciated, but maybe hold your fire until after Part II?

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[1]  I am not the first to reach this conclusion.  The work of several other authors who find likewise is mentioned in the post.

[2]   Maybe this language that is in Sherman Act indictments will clear things up: “For the purpose of forming and carrying out the charged combination and conspiracy, the defendant and his co-conspirators did those things that they combined and conspired to do.”  To be fair, the indictments then “bullet point” a list of acts the defendant(s) engaged in to carry out the conspiracy.

[3]   Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911).

[4]   I was a brand new Antitrust Division attorney in one trial where we obtained convictions not too long after Sherman Act had been made a felony.  At sentencing, the first convicted defendant got a wicked tongue lashing, but the judge said that, due to his youth and relative inexperience, he would not be sentenced to prison.  The next defendant—ditto on the tongue lashing—but the judge found he should not be sentenced to prison because he was elderly and now retired.

[5]  Frank Peake was sentenced to 5 years in prison for his participation in a conspiracy to fix the prices on cargo shipped by water between the United States and Puerto Rico.  See,  https://www.justice.gov/opa/pr/former-sea-star-line-president-sentenced-serve-five-years-prison-role-price-fixing-conspiracy.  Foreign executives are frequent defendants in criminal antitrust cases and may be put on a Red Notice with dire consequences simply by being indicted.

[6]   For a more scholarly article that takes a look at the void for vagueness doctrine and its implications for the Sherman Act, see Sherman Act and Avoiding Void-for Vagueness, Matthew G. Sipe, posted May 16, 2017, available at, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2968933&download=yes.

[7]  See Charles D. Weller, The End of Criminal Antitrust Per se Conclusive Presumptions, 58 ANTITRUST BULL. 665 (2013).

[8]   Some strict liability crimes (i.e., statutory rape) can have no intent element but the Sherman Act is not a strict liability crime.

REAL ESTATE INVESTOR PLEADS GUILTY TO BID RIGGING

WASHINGTON — A Georgia real estate investor pleaded guilty today for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Georgia, the Department of Justice announced.

Felony charges against Eric Hulsman were filed on March 27, 2015, in the U.S. District Court of the Northern District of Georgia in Atlanta.  According to court documents, from at least as early March 6, 2007, and continuing at least until Dec. 6, 2011, in Fulton County, Georgia, and from at least as early as Jan. 2, 2007, and continuing at least until Jan. 1, 2008, in DeKalb County, Georgia, Hulsman conspired with others not to bid against one another, but instead designated a winning bidder to obtain selected properties at public real estate foreclosure auctions.  Hulsman was also charged with a conspiracy to use the mail to carry out a scheme to fraudulently acquire title to selected Fulton and DeKalb properties sold at public auctions, to make and receive payoffs and to divert money to co-conspirators that would have gone to mortgage holders and others by holding second, private auctions open only to members of the conspiracy.  The selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions.

“Homeowners and lenders in Fulton and DeKalb counties deserved free and fair public real estate foreclosure auctions,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “The defendant conspired with others to keep for themselves money that should have gone to those homeowners and lenders.  The division remains committed to rooting out this kind of anticompetitive conduct at foreclosure auctions.”

The primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at Fulton and DeKalb county public foreclosure auctions at non-competitive prices.  When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.  According to court documents, these conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and in some cases, the defaulting homeowner.

“Today’s guilty plea of another real estate investor engaged in unfair bidding practices is further evidence of the FBI’s support for the U.S. Department of Justice’s Antitrust Division in ensuring that public foreclosure auctions remain a level playing field for all,” said Special Agent in Charge J. Britt Johnson of the FBI’s Atlanta Field Office.  “Anyone with information regarding such criminal activities as seen in this case should promptly call their nearest FBI field office.”

A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals.  The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either amount is greater than the statutory maximum fine.  A count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine in an amount equal to the greatest of $250,000, twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators.

Including Hulsman, eight cases have been filed as a result of the ongoing investigation being conducted by Antitrust Division’s Washington Criminal II Section and the FBI’s Atlanta Division, and the U.S. Attorney’s Office of the Northern District of Georgia.  Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions in Georgia should contact Washington Criminal II Section of the Antitrust Division at 202-598-4000, call the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258 or visit www.justice.gov/atr/contact/newcase.htm.

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.

Third Ocean Shipping Executive Pleads Guilty to Price Fixing on Ocean Shipping Services for Cars and Trucks

An employee of Japan-based Nippon Yusen Kabushiki Kaisha (NYK) pleaded guilty today and was sentenced to 15 months in a U.S. prison for his involvement in a conspiracy to fix prices, allocate customers and rig bids of international ocean shipping services for roll-on, roll-off cargo, such as cars and trucks, to and from the United States and elsewhere, the Department of Justice announced today.

According to the one-count felony charge filed in U.S. District Court for the District of Maryland in Baltimore on Jan. 16, 2015, Susumu Tanaka, who was a manager, deputy general manager and general manager in NYK’s car carrier division, conspired to allocate customers and routes, rig bids and fix prices for the sale of international ocean shipments of roll-on, roll-off cargo to and from the United States and elsewhere, including the Port of Baltimore.  Tanaka participated in the conspiracy from at least as early as April 2004 until at least September 2012.

Roll-on, roll-off cargo is non-containerized cargo that can be both rolled onto and off of an ocean-going vessel.  Examples of this cargo include new and used cars and trucks and construction and agricultural equipment.

“Today’s sentence is another step toward bringing to justice the perpetrators of this long-running cartel and restoring competition to the ocean shipping industry,” said Bill Baer, Assistant Attorney General for the Antitrust Division.  “But this investigation is far from over.  We are continuing our efforts to hold accountable the companies and executives who seek to maximize profits through illegal, anticompetitive means.”

Pursuant to the plea agreement, which the court accepted today, Tanaka was sentenced to serve a 15-month prison term and pay a $20,000 criminal fine for his participation in the conspiracy.  In addition, Tanaka has agreed to assist the department in its ongoing investigation into the ocean shipping industry.

Tanaka was charged with a violation of the Sherman Act, which carries a maximum sentence of 10 years in prison and a $1 million criminal fine for an individual.  The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

Today’s sentence is the third against an individual in the division’s ocean shipping investigation, and the first against an individual from NYK.  Three corporations have agreed to plead guilty and to pay criminal fines totaling more than $136 million, including NYK, which has agreed to pay a criminal fine of $59.4 million, pending court approval.

This plea agreement is the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the international roll-on, roll-off ocean shipping industry, which is being conducted by the Antitrust Division’s Washington Criminal I Section and the FBI’s Baltimore Field Office, along with assistance from the U.S. Customs and Border Protection Office of Internal Affairs, Washington Field Office/Special Investigations Unit.  Anyone with information in connection with this investigation is urged to call the Antitrust Division’s Washington Criminal I Section at 202-307-6694, visit www.justice.gov/atr/contact/newcase.html or call the FBI’s Baltimore Field Office at 410-265-8080.

Second Ocean Shipping Executive Pleads Guilty to Price Fixing on Ocean Shipping Services For Cars and Trucks

A former executive of Japan-based Kawasaki Kisen Kaisha Ltd. (K-Line) pleaded guilty today and was sentenced to 14 months in a U.S. prison for his involvement in a conspiracy to fix prices, allocate customers and rig bids of international ocean shipping services for roll-on, roll-off cargo, such as cars and trucks, to and from the United States and elsewhere, the Department of Justice announced today.

According to the one-count felony charge filed in U.S. District Court for the District of Maryland in Baltimore on Dec. 29, 2014, Takashi Yamaguchi, who was a general manager and executive officer in K-Line’s car carrier division, conspired to allocate customers and routes, rig bids and fix prices for the sale of international ocean shipments of roll-on, roll-off cargo to and from the United States and elsewhere, including the Port of Baltimore.  Yamaguchi participated in the conspiracy from at least as early as July 2006 until at least April 2010.

Roll-on, roll-off cargo is non-containerized cargo that can be both rolled onto and off of an ocean-going vessel.  Examples of this cargo include new and used cars and trucks and construction and agricultural equipment.

“Today’s sentencing is another step in our efforts to hold executives accountable for raising the cost of shipping cars, trucks and other equipment to and from the United States,” said Bill Baer, Assistant Attorney General for the Antitrust Division.  “We will continue to pursue the corporations and executives whose illegal agreements have harmed American consumers.”

Pursuant to the plea agreement, which was accepted by the court today, Yamaguchi was sentenced to serve a 14-month prison term and pay a $20,000 criminal fine for his participation in the conspiracy.  In addition, Yamaguchi has agreed to assist the department in its ongoing investigation into the ocean shipping industry.

Yamaguchi was charged with a violation of the Sherman Act, which carries a maximum sentence of 10 years in prison and a $1 million criminal fine for an individual.  The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

Today’s sentence is the second imposed against an individual in the division’s ocean shipping investigation.  Previously, three corporations have agreed to plead guilty and to pay criminal fines totaling more than $136 million, including Yamaguchi’s employer K-Line, which was sentenced to pay a criminal fine of $67.7 million in November 2014.  Another K-Line executive was sentenced one week ago by the court in Baltimore.

Today’s plea agreement is the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the international roll-on, roll-off ocean shipping industry, which is being conducted by the Antitrust Division’s Washington Criminal I Section and the FBI’s Baltimore Field Office, along with assistance from the U.S. Customs and Border Protection Office of Internal Affairs, Washington Field Office/Special Investigations Unit.  Anyone with information in connection with this investigation is urged to call the Antitrust Division’s Washington Criminal I Section at 202-307-6694, visit www.justice.gov/atr/contact/newcase.html or call the FBI’s Baltimore Field Office at 410-265-8080.

MINEBEA CO. LTD. AGREES TO PLEAD GUILTY AND PAY A $13.5 MILLION

WASHINGTON — Minebea Co. Ltd., a small sized bearings manufacturer based in Nagano, Japan, has agreed to plead guilty and to pay a $13.5 million criminal fine for its role in a conspiracy to fix prices for small sized ball bearings sold to customers in the United States and elsewhere, the Department of Justice announced today.

According to a one-count felony charge filed today in U.S. District Court for the Southern District of Ohio in Cincinnati, Minebea conspired to fix the prices of small sized ball bearings in the United States and elsewhere.  In addition to the criminal fine, Minebea has agreed to cooperate in the department’s ongoing investigation.  The plea agreement is subject to court approval.

According to the charge, Minebea and its co-conspirator discussed and agreed upon prices to be submitted to small sized ball bearings customers.  Minebea’s participation in the conspiracy lasted from at least as early as early-to-mid 2008 and continued until at least October 2011.

“Because of the unlawful price-fixing by the defendant and its co-conspirators, American businesses paid more for small-sized bearings than they otherwise would,” said Bill Baer, Assistant Attorney General of the Department of Justice’s Antitrust Division.  “Working with the Federal Bureau of Investigation and our other law enforcement partners, the Antitrust Division will continue our efforts to ensure American businesses and consumers benefit from competitive markets.”

“Any agreement that restricts price competition violates the law,” said U.S. Attorney Carter Stewart of Southern District of Ohio.  “We will continue to work to protect consumers’ right to free and open competition.”

Bearings are used in industry in numerous products to reduce friction and help parts roll smoothly past one another; they “bear” the load.  Small sized ball bearings are those ball bearings whose outside diameter is 26 millimeters or less.

Minebea is charged with price fixing in violation of the Sherman Act, which carries a maximum penalty of a $100 million criminal fine for corporations.  The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

The charge today is the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the bearings industry, which is being conducted by the Antitrust Division’s Chicago Office and the FBI’s Cincinnati Field Office.  Anyone with information on price fixing, bid rigging and other anticompetitive conduct related to the bearings industry should contact the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258, visit www.justice.gov/atr/contact/newcase.html, or call the FBI’s Cincinnati Field Office at 513-421-4310.

OCEAN SHIPPING EXECUTIVE PLEADS GUILTY TO PRICE FIXING ON

Executive Agrees to Serve 18 Months in U.S. Prison

WASHINGTON — An executive of Japan-based Kawasaki Kisen Kaisha Ltd. (K-Line) pleaded guilty today and was sentenced to 18 months in a U.S. prison for his involvement in a conspiracy to fix prices, allocate customers and rig bids of international ocean shipping services for roll-on, roll-off cargo, such as cars and trucks, to and from the United States and elsewhere, the Department of Justice announced today.

According to the one-count felony charge filed today in U.S. District Court for the District of Maryland in Baltimore, Hiroshige Tanioka, who was at various times an assistant manager, team leader and general manager in K-Line’s car carrier division, conspired to allocate customers and routes, rig bids and fix prices for the sale of international ocean shipments of roll-on, roll-off cargo to and from the United States and elsewhere, including the Port of Baltimore. Tanioka participated in the conspiracy from at least as early as April 1998 until at least April 2012.

Roll-on, roll-off cargo is non-containerized cargo that can be both rolled onto and off of an ocean-going vessel.  Examples of this cargo include new and used cars and trucks and construction and agricultural equipment.

“For more than a decade this conspiracy has raised the cost of importing cars and trucks into the United States,” said Assistant Attorney General Bill Baer for the Department of Justice’s Antitrust Division.  “Today’s sentencing is a first step in our continuing efforts to ensure that the executives responsible for this misconduct are held accountable.”

Today’s sentence was the first to be imposed against an individual in the division’s ocean shipping investigation.  Previously, three corporations have agreed to plead guilty and to pay criminal fines totaling more than $136 million, including Tanioka’s employer K-Line, which was sentenced to pay a criminal fine of $67.7 million in November 2014.

Pursuant to the plea agreement, which was accepted by the court today, Tanioka was sentenced to serve an 18-month prison term and pay a $20,000 criminal fine for his participation in the conspiracy.  In addition, Tanioka has agreed to assist the department in its ongoing investigation into the ocean shipping industry.

Tanioka was charged with a violation of the Sherman Act, which carries a maximum sentence of 10 years in prison and a $1 million criminal fine for an individual.  The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

Today’s plea agreement is the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the international roll-on, roll-off ocean shipping industry, which is being conducted by the Antitrust Division’s Washington Criminal I Section and the FBI’s Baltimore Field Office, along with assistance from the U.S. Customs and Border Protection Office of Internal Affairs, Washington Field Office/Special Investigations Unit.  Anyone with information in connection with this investigation is urged to call the Antitrust Division’s Washington Criminal I Section at 202-307-6694, visit www.justice.gov/atr/contact/newcase.html or call the FBI’s Baltimore Field Office at 410-265-8080.

Georgia Real Estate Investors Plead Guilty to Bid Rigging and Fraud at Public Foreclosure Auctions

Two Georgia real estate investors pleaded guilty today for their roles in a conspiracy to rig bids and commit mail fraud at public real estate foreclosure auctions in Georgia, the Department of Justice announced.

Separate felony charges were filed against Mohammad Adeel Yoonas and Kevin Shin on Dec. 23, 2014, in the U.S. District Court for the Northern District of Georgia in Atlanta.  According to court documents, from at least as early as April 2008 until at least March 2012, Yoonas conspired with others not to bid against one another, but instead designated a winning bidder to obtain selected properties at public real estate foreclosure auctions in Gwinnett County, Georgia.  Yoonas was also charged with a conspiracy to use the mail to carry out a scheme to fraudulently acquire titles to selected Gwinnett County properties sold at public auctions, to make and receive payoffs and to divert money to co-conspirators that would have gone to mortgage holders, homeowners and others by holding second, private auctions open only to members of the conspiracy.  The department said that the selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions.

Shin, according to court documents, conspired with others not to bid against one another, but instead designated a winning bidder to obtain selected properties at public real estate foreclosure auctions in Gwinnett County from at least as early as March 2009 until at least March 2012.  Shin was also charged with a conspiracy to use the mail to carry out a scheme to fraudulently acquire title to selected Gwinnett County properties sold at public auctions, to make and receive payoffs and to divert money to co-conspirators that would have gone to mortgage holders, homeowners and others by holding second, private auctions open only to members of the conspiracy.  The department said that the selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions.

“These six guilty pleas result from the Antitrust Division’s ongoing investigation into schemes to rig public real estate foreclosure auctions in Georgia,” said Assistant Attorney General Bill Baer for the Department of Justice’s Antitrust Division.  “The division will continue working with its law enforcement partners to expose cartels that harm distressed homeowners and lenders.”

The department said that the primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at Gwinnett County public foreclosure auctions at non-competitive prices.  When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage, and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.  According to court documents, these conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and, in some cases, the defaulting homeowner.

“The criminal actions of the defendants in this case provide a clear example of why enforcement of the Sherman Act remains necessary in maintaining a level and competitive field within commerce,” said Special Agent in Charge J. Britt Johnson for the FBI Atlanta Field Office.  “The FBI will continue to work with the U.S. Department of Justice’s Antitrust Division in identifying such financial schemes that attempt to take unfair advantage, to include those targeting the foreclosure auction process.”

A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals.  The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either amount is greater than the statutory maximum fine.  A count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine in an amount equal to the greatest of $250,000, twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators.

The investigation is being conducted by Antitrust Division’s Washington Criminal II Section and the FBI’s Atlanta Division, with the assistance of the Atlanta Field Office of the Housing and Urban Development Office of Inspector General and the U.S. Attorney’s Office for the Northern District of Georgia.  Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions in Georgia should contact Washington Criminal II Section of the Antitrust Division at 202-598-4000, call the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258, or visit www.justice.gov/atr/contact/newcase.htm.

Today’s charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.  For more information on the task force, please visit www.StopFraud.gov.