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Category Archives: Antitrust Monitor by GeyerGorey LLP
Leading Antitrust Lawyers and DOJ Alumni Allen P. Grunes and Maurice E. Stucke Join GeyerGorey LLP
GeyerGorey LLP is pleased to announce that two veteran Department of Justice prosecutors, Allen P. Grunes and Maurice E. Stucke, have joined the firm. Grunes, recently named as a “Washington D.C. Super Lawyer for 2013” in antitrust litigation, government relations, and mergers & acquisitions, joins as a partner. Stucke, a widely-published professor with numerous honors including a Fulbright fellowship, joins as of counsel. Stucke will continue to teach at the University of Tennessee College of Law.
“We are delighted that Allen and Maurice have decided to join us,” said Brad Geyer. “They add considerable fire power to our already impressive antitrust, compliance and white collar roster and give us more capabilities and capacity, particularly on the civil side.”
Robert Zastrow, who was Verizon’s Assistant General Counsel for 15 years before co-founding the firm in October 2012, added, “Allen’s and Maurice’s extensive background and expertise nicely complement our firm’s unique philosophy and enrich our competition and merger practices. We are thrilled they are joining our innovative effort in delivering legal services.”
GeyerGorey LLP presents a new way to practice law. It may be the only law firm in the country where prior federal prosecutorial experience is a prerequisite for partnership. Given its lawyers’ extensive legal expertise, GeyerGorey can handle trials involving the most complex legal and factual issues, and, when advantageous, work with other law firms, economists and specialists, particularly former federal prosecutors and agents, who bolster existing resources, expertise and constantly freshen perspective. As founding partner Hays Gorey added, “We seek to avoid the traditional hierarchal partner-associate pyramid, hourly billing fee structure, and practice fiefdoms. We want to attract entrepreneurial lawyers, like Allen and Maurice, who love competition policy and practicing law. Having worked with them at DOJ, I am excited about the expertise and enthusiasm they bring to our clients.”
Consistent with GeyerGorey’s philosophy, both Grunes and Stucke are alumni of the U.S. Department of Justice, Antitrust Division, in Washington, D.C. At DOJ, they led numerous civil investigations, worked on high-profile trials, and negotiated consent decrees involving significant divestitures across many different industries. In their last case together at the Division, In re Visa Check/MasterMoney Antitrust Litigation, they successfully sought, as a matter of equity and the first time in the Division’s history, for the government’s share of damages in a private class action settlement.
Grunes and Stucke are regarded as leading authorities on competition policy in the media. Their scholarship on media and telecommunications policy has been published in the Antitrust Law Journal, the Northwestern University Law Review, the Connecticut Law Review, the Journal of European Competition Law & Practice, and the Federal Communications Law Journal. They have spoken at numerous conferences on competition policy and the media, including the U.S. Federal Trade Commission’s workshop, How Will Journalism Survive the Internet Age? Both are frequently quoted in the press on mergers and anticompetitive conduct. In addition, both serve on the advisory boards of the American Antitrust Institute and the Loyola Institute for Consumer Antitrust Studies in Chicago.
Allen Grunes joins GeyerGorey from another Washington, D.C. firm, where he was a shareholder. His recent matters include acting as class counsel in litigation against several hospitals and an association in Arizona that allegedly artificially depressed the rates paid to temporary nurses, opposing the merger of AT&T and T-Mobile for a coalition of companies including DISH Network, and representing Warner Music Group in connection with the merger of Universal and EMI. He has counseled dozens of companies and associations on antitrust issues and corporate mergers. He also serves as chair of the antitrust committee of the Bar Association of the District of Columbia.
Maurice Stucke is a tenured professor at the University of Tennessee and a leading competition law scholar. With over 30 articles and book chapters, Stucke has been invited by competition authorities from around the world and the OECD to speak about behavioral economics and competition policy. He currently is one of the United States’ non-governmental advisors to the International Competition Network, the only international body devoted exclusively to competition law enforcement. His scholarship has been cited by the U.S. federal courts, the OECD, competition agencies and policymakers.
Headquartered in Washington, D.C., GeyerGorey specializes in white collar criminal defense, particularly investigations and cases involving allegations of economic crimes, such as violations of the federal antitrust laws (price fixing, bid rigging, territorial and customer allocation agreements), procurement fraud, securities fraud, foreign bribery (Foreign Corrupt Practices Act) and qui tam (False Claims Act) and whistleblower actions. The firm also conducts internal investigations of possible criminal conduct and provides advice regarding compliance with U.S. antitrust and other laws.
GeyerGorey LLP’s Phillip C. Zane Named to 2013 Edition of Washington D.C. Super Lawyers
Phillip C. Zane, Antitrust Practitioner and Scholar, Joins GeyerGorey LLP
GeyerGorey LLP announced today that Phillip C. Zane has joined the Firm as of counsel. Mr. Zane, a former federal appellate clerk, has counseled and defended clients accused of serious crimes and civil offenses for more than twenty years. He received his law degree cum laude from New York University School of Law, and holds a bachelor’s degree in Economic History from Pomona College. Proficient in speaking or reading a number of languages a number of languages, including Swedish, Russian, German, Polish, and Spanish, he has conducted internal investigations of alleged wrongdoing in more than twenty countries and has defended companies and individuals accused of participating in international cartels.
Mr. Zane’s practice areas include civil and criminal antitrust law (including litigation and counseling), fraud, money laundering, foreign asset control, public corruption, whistleblower cases, and national security issues. He will also continue to counsel nonprofit organizations on compliance with tax law and other matters.
Mr. Zane’s work has changed the course of the law. His representation of one of the nation’s leading law firms led to a clarification and narrowing of the meaning of “arising under an Act of Congress relating to patents,” which resulted in the dismissal of a malpractice claim against that law firm. His application of game theory to decisions of whether and when a client should plead guilty to a criminal antitrust offense contributed to the adoption of a new statute limiting civil liability for antitrust offenders who accept responsibility for criminal offenses. His groundbreaking scholarship on criminal procedure and criminal sentencing affected how many scholars, practitioners, and judges think about maximum fines in cases involving the most serious financial crimes. In a case he brought on behalf of an indigent client, he convinced the District of Columbia Court of Appeals to recognize a property interest in subsidized housing benefits, establishing a new procedural due process right in the District of Columbia.
“Mr. Zane is truly a lawyer’s lawyer, and we are delighted that he is joining our Firm,” said managing partner Bradford Geyer.
Mr. Zane will be resident in the Washington office.
Teresa C. Zalcman, the first Vietnamese-American United States Department of Justice prosecutor, joins GeyerGorey LLP.
GeyerGorey LLP today announced that Teresa Zalcman (nee Clinton) has become a Senior Advisor to the firm. Ms. Zalcman was the first Vietnamese-American to serve as a prosecutor with the United States Department of Justice. Her affiliation with GeyerGorey LLP complements the firm’s efforts to provide companies with advice on compliance with federal criminal laws and regulations, in detecting wrongdoing by corporate employees and in providing full-scope, white-collar criminal defense where prevention and mitigation measures fail.
Ms. Zalcman immigrated to the United States in 1968. She is a graduate of the University of California at Davis and received her law degree from Howard University before being hired by the Department of Justice under the Attorney General’s Honor’s Program.
Ms. Zalcman has been engaged professionally in recent years as an investment adviser and money manager. She bides her time among three cities, New York, Los Angeles and Nha Trang.
Ms. Zalcman has maintained extensive contacts within Vietnam and travels throughout the country on a regular basis. She will be a great asset to American companies seeking to enter the Vietnamese market, as well as to Vietnamese companies that wish to market their products in the United States.
GGLLP Alert: Changes to the False Claims Act Under the Patient Protection and Affordable Care Act
Changes to the False Claims Act Under the Patient Protection and Affordable Care Act
The 2010 Patient Protection and Affordable Care Act (PPACA) made a number of significant changes to the False Claims Act, including the following:
Original Source Requirement. A plaintiff may now overcome the public disclosure if he or she qualifies as an “original source.” The PPACA revised the definition of this term. Previously, an original source had to have “direct and independent knowledge of the information on which the allegations [were] based.” Now, an original source may be a person who merely has “knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions.” See 31 U.S.C. 3730(e)(4)(B).
Changes to the Public Disclosure Bar. Previously, relators were precluded from proceeding if there had been a public disclosure of information. This disclosure could have occurred in news reports, a Freedom of Information Act response, court proceedings or in any number of ways. Thus, the public disclosure bar often served as a basis for dismissal. The PPACA amended the False Claims Act to allow the government to have the final say on whether a court could properly dismiss a case based on a public disclosure. The statute now provides that “the court shall dismiss an action unless opposed by the Government, if substantially the same allegations or transaction alleged in the action or claim were publicly disclosed.” See 31 U.S.C. 3730(e)(4)(A).
Overpayments. In the prior law, there was confusion as to the “obligation” under the False Claims Act not to retain overpayments and when such overpayments had to be returned after their discovery. Now, under the PPACA, overpayments under Medicare and Medicaid must be reported and returned within 60 days of discovery, or the date a corresponding hospital report is due. The failure timely to report and return an overpayment exposes a provider to False Claims Act liability.
Statutory Anti-Kickback Liability. The federal Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b) (AKS), makes it a crime for any person to solicit, receive, offer or pay remuneration (monetary or otherwise) in exchange for referring patients to receive certain services that are paid for by the government. Previously, many courts had interpreted the False Claims Act to mean that claims submitted as a result of AKS violations were false claims and therefore gave rise to liability under the False Claims Act (in addition to AKS penalties). Even though this was the majority rule, some courts held otherwise and the issue was always present in every case. The PPACA changed the language of the AKS to provide that claims submitted in violation of the AKS automatically constitute false claims for purposes of the False Claims Act. Further, the new language provides that “a person need not have actual knowledge … or specific intent to commit a violation” of the AKS.
***Antitrust Monitor (2 of 2)*** Informal Blog Post by Robert Zastrow regarding Anheuser-Busch InBev’s Proposed Acquisition of Grupo Modelo
Today’s Wall Street Journal article regarding Anheuser-Busch InBev’s Proposed Acquisition of Grupo Modelo ( US Fights AB InBev With Tested Game Plan by Brent Kendall), brought back memories of my life before Verizon when I was general counsel to the New York State Beer Wholesalers’ Association and prosecuting attorney in connection with the Heileman Schlitz merger.
I commend Mr. Kendall’s article, which emphasizes the degree to which DOJ now relies on “hot documents” in merger cases. In this particular case, DOJ cites emails in which AB executives worried about pricing pressure from Modelo. The key issue is likely to be whether Modelo was a cause for particular concern, or whether other premium brands, e.g. Heineken, posed similar issues, not because the premium brands were sold at the same price as Bud, but because if the gap between Bud and Modelo narrowed, customers would trade up. Presumably, this would not include construction workers such as my wife’s crew chief, who had a large Bud tattoo on his right arm!
This article underscores the importance of early attorney involvement in merger planning. How easier it would have been for AB had the lawyers emphasized the importance of documents to the marketing and sales staffs. And, even if the company seeks counsel later, it is never a bad idea for counsel to get the files from a small number of marketing and sales executives to see what they say about the target. Acquirers can pay premiums reaching the billions if a merger does not consummate, and an early assessment of the risk caused by bad documents is essential.
I vividly recall sitting on a panel in the mid 90’s with a former AAG, who shall go nameless. He assured the audience that corporate counsel would soon develop procedures for monitoring emails and insuring that incriminating statements were not recorded. The Bar did not realize then how ubiquitous electronic communications would become — there was barely an Internet then — and how difficult it would be to monitor hundreds of executives who were generating content at their computers all day.
***Antitrust Monitor (Inaugural Issue): 2013 Forecast***
Renewed Vigilance Regarding Civil Enforcement; Continued Consolidation, Integration and Acceptance of Structural Changes at Criminal Program; Higher Morale
Baer’s Confirmation is unlikely to change momentum, policies or priorities.
As the Obama Administration prepares for a second term, Bill Baer has been confirmed as Assistant Attorney General. The Antitrust Division’s informal profile photo of Baer captures his genuine humility and good will that many Antitrust Division attorneys will immediately recognize from numerous interactions with him when he represented clients as a partner at Arnold & Porter. Baer’s easygoing nature is no contrivance and he will build on this long track record of good relations with many of the attorneys and mid-level managers at the Antitrust Division. In addition to the normal productivity enhancements associated with having confirmed leadership at the helm, Baer’s tenure at the FTC suggests that he will implement an effective management style and push more expansive enforcement goals. We also believe that Baer’s confirmation will improve morale (discussed more fully below) and Baer will quickly calm the ripples caused by programmatic changes that resulted in field office closure and attrition of seasoned prosecutors in the criminal program.
Continued Civil Enforcement Vigilance
In its first term, the Obama Administration took some modest steps toward its goal of revitalizing civil enforcement. The Division repudiated the Bush administration’s monopolization guidelines and expressed a greater willingness to challenge unilateral conduct and exclusionary business arrangements, although it only brought one monopolization case. That the Obama administration managed a slight increase in second requests is significant since it occurred in the midst of significantly dampened merger activity caused by the financial crisis. Perhaps the most telling metric was discovered by the Stanford Law Review (SLR Online, 65 STAN. L. REV. ONLINE 13, July 18, 2012):
“[t]he Bush Administration conducted 0.04 investigations per Hart-Scott filing; Obama conducted 0.05 investigations per filing. The Bush Administration made 0.013 second requests for information per Hart-Scott filing; Obama’s made 0.020—a 50% increase on a per capita basis.
Combine this 50% increase with a few more high profile enforcement actions that included AT&T/T-Mobile, H&R Block/TaxAct, NASDAQ/NYSE, and BCBS/Physicians Health, and the Obama administration can make a plausible case that it has already reinvigorated enforcement. During his Senate confirmation hearings in July, Baer told lawmakers that he supported Congressional action to repeal the Supreme Court’s Leegin decision which imposed rule of reason analysis for resale price maintenance where per se analysis, albeit with loopholes, had sufficed in the past.
This was music to Democratic ears in the Senate that clearly prefer more aggressive enforcement. Senator Herb Kohl, D-Wis had expressed concerns back in July regarding Google potentially using its market power in search engine technology to favor its products and services. Baer did not answer Kohl’s question as to Google, but he did share his enforcement philosophy generally: “being vigilant whether its Microsoft or Alcoa Aluminum about firms that are successful, and we don’t want to penalize success but to make sure it’s not improperly translated into unfair advantage in other markets, is really a key part of what antitrust is all about.” This comment suggests a revival of monopoly leveraging, always a favorite of Democrat administrations even if the courts have been less receptive.
Will Baer lead the Division on a path to reinvigoration? He may have provided an answer last week when he came out of the box swinging against the merger between Bazaarvoice and Powerreviews Inc. (involving online customer reviews for retailers) and Oklahoma Chiropractors (which challenged joint contracting agreements with insurers). Of these first two significant actions of Baer’s tenure, Bazaarvoice is the one that is suggestive of reinvigoration and expansion. The customer reviews market is evolving at rocket speed, there are challenges for the government regarding market definition and it is unclear that the barriers to entry can be all that high, particularly when well-funded behemoths like Google and Facebook seem to have position for market entry. Notably, the company was vocal in its frustration about the “six months” it spent in negotiations with the Antitrust Division, suggesting that it could have announced this challenge prior to Baer taking the helm. The fact that Baer announced it after he assumed his duties suggests that he sees a strong case. Certainly it would not have escaped Baer’s attention that a decision like this would allow many to interpret this is a bullish signal that Baer plans to reinvigorate, revitalize and expand the Antitrust Division’s mission regarding civil enforcement.
At the FTC, Chairman Leibowitz, a Democrat, has served as an FTC commissioner for eight years and as chairman for almost four years. As rumors circulate regarding his likely departure, President Obama must consider potential replacements. The president could appoint a new chairman from the sitting Democratic commissioners, or he could choose someone from outside the agency. The president recently nominated Joshua Wright, a Republican, to replace outgoing Republican commissioner J. Thomas Rosch, whose term expired in September. Commissioner Rosch has indicated that he will stay in his position until the Senate confirms Wright. Although no more than three of the FTC’s five commissioners, who each serve seven-year terms, can be of the same political party, President Obama’s reelection ensures a Democratic majority at the FTC. Three of the five FTC commissioners will continue to be Democrats, and the chairman, who appoints the directors of the Bureaus of Competition and Consumer Protection, will also be a Democrat. Accordingly, there is little reason to expect a new direction in antitrust enforcement priorities.
Continued Consolidation and Integration of Structural Changes at Criminal Program
In the first Obama term, cartel enforcement was the Division’s top criminal priority to the exclusion of things like procurement fraud. Almost certainly, these headwinds still exist, but time will tell whether Baer can be successful at reducing impediments to opening investigations that do not present themselves on first impression as Section 1 conduct. Although people can argue over the causes, the Antitrust Division grand jury investigations plummeted from over 150 to fewer than 60 overall and new openings fell from 66 to 29. Most of this came at the expense of Department’s procurement fraud program and overall anti-competitive deterrence in the area of government procurements has been grievously affected as a result.
On paper, cartel enforcement was little changed from the Bush years, although some of the Division’s numbers were marginally inflated by splitting criminal information’s in non-traditional ways and there is a widespread concern that the pipeline of “small” or “bread and butter” investigations is dry. Airline Shipping and Auto Parts are behemoth investigations that generate a wealth of statistics, but there are 90 fewer industries that are the subject of grand jury investigations and it is impossible to measure deterrence that is not happening.
In procurement fraud, the Bush administration gave the Antitrust Division a long leash and authorized its use of resources in most allegations that affected the pre-award contract process. As the Obama Administration strained its resources to support invigorated civil enforcement and it pushed investigative resources toward financial crimes, the administration implemented a series of policy changes that significantly reduced Antitrust Division criminal investigations. First, it was made much more difficult for attorneys to open grand jury investigations involving matters that did not present themselves on first impression as suspected antitrust conspiracies. Since very few antitrust criminal cases ever “present” as fully-fledged antitrust conspiracies (i.e.. evident participation by more than one competitor), investigation requests plummeted. This effect was particularly pronounced in procurement because so few government contracts are awarded through an invitation for bid (”IFB”) process and more are awarded sole source, best value and through a request for proposal procedure where price is not the only factor. These contracting schemes make it difficult, if not impossible as a matter of law, to use the Sherman Act to prosecute schemes affecting contracts that were not awarded through an IFB process.
Second, the Antitrust Division implemented a new, computerized tracking system that made it harder to keep open investigations that were not being actively investigated. Because grand jury authority is held at the AAG level in contrast to the Criminal Division (delegated to the DAAG) and the United States Attorneys’ Offices (delegated to line assistants), getting grand jury investigations opened takes the Antitrust Division greater resources than other components. Line attorneys refer to this process with dread as “the investigation to get grand jury investigative authority.” Because the Antitrust Division has to invest greater resources into securing grants of grand jury authority and because this authority requires higher levels of approval, it is relatively unusual to reopen a grand jury investigation after closure. In the past, keeping investigations “on the books” might allow a staff to focus on another industry or to offer help to another investigative staff on an investigation that had “gone hot.” It also might allow another contract to be awarded or another coordinated price increase to be implemented that might significantly further the investigation. For these and other reasons, putting open cases on the back burner became verboten and if investigations did not hit success early on they got closed. The new case matter tracking system often pushes staffs to make tactical decisions that would be better made later after the emergence of new leads, information or evidence. Ironically, in some respects, the Antitrust Division now pursues an operations policy that reminds line attorneys of some partner investigative agencies who years ago would have to close investigations and then struggle to reopen them if a staff determined that a three month delay was advisable. Because case filings (i.e. stats) are the paramount metric, this provides disincentives to working any case that is at all considered “marginal” and the Division’s deterrence footprint has shrunk.
Third, by January 30, 2013, the Division will have closed four of its seven field offices, a move that has adversely impacted morale. Although this was sold as a serious consolidation plan for which many employees would avail themselves and relocate to Washington D.C. or the remaining field offices (San Francisco, New York, and Chicago), this does not seem to be happening in any great numbers. Using the Philadelphia and Cleveland Field Offices as examples, we count a total of three attorneys who will be staying with the Division.
Baer’s mission is not an easy one. He joins the Antitrust Division just prior to the formal shut down of four offices and significant attrition; he joins an Antitrust Division that has fewer raw materials in the investigations pipeline. Still we have caucused Antitrust Division attorneys who are staying with the agency and there is reason for optimism. As word filters back that Antitrust Division attorneys who severed or retired were dealt with fairly and considerately, active concerns will dissipate and we believe Baer can drive a newly structured criminal program to fire on all cylinders by the end of this fiscal year. There could be reinvigorated activity as a rumored new section formed in Washington D.C. (staffed by detailees and transferring attorneys) and offices in San Francisco, Chicago (currently slated for one additional expat prosecutor) and New York receive transferring prosecutors and lateral hires to stem attrition, and we expect to see vibrant competition by attorneys for investigations. Most notably, the rumored new section in Washington D.C., that will be comprised of expats from some of the closed field offices, will see the National Criminal Enforcement Section (NCES) as its main competition and we expect fierce competition to develop creative strategies for generating new cases.