Category Archives: Cartel Capers by Robert E. Connolly

Connolly Cartel Capers Goes International!

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Cartel Capers Goes International!

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Antitrust enforcement, or competition law as it is known elsewhere, is international in scope. Cartels (“the supreme evil of antitrust”) are the top priority of all the major enforcement agencies worldwide. While I occasionally comment on enforcement actions in other countries, I’ve always wondered what the leading practioneers in those countries thought. So, I asked them! And, the idea grew to post occasional comments on Cartel Capers from experienced cartel defense attorneys from around the globe. As you can see below, it is my good fortune to know some pretty accomplished international colleagues. Today, I am posting short bios, and soon (as soon as I can figure out the software) I will have a drop down tab as a home for their bios and their insights.

Disclaimer: We have all worked on and continue to work on major international cartel matters.   Ethics and good judgment limit us from commenting on cases we are working on and prevent us from disclosing non-pubic/sensitive information. The information posted is not intended to be legal advice. We are not offering legal opinions, just our personal insights on major cartel developments. But, let me introduce my friends. I am sure you will be anxious to read their take on important cartel practice and procedure developments in the jurisdictions where they practice.  Guest posts will begin appearing in the near future.

Brazil: Mauro Grinberg

Mauro Grinberg is a partner at Grinberg Cordovil. He is one of the leading competition lawyers in Brazil with an incredible range of experience. Mr. Grinberg is a former Commissioner of CADE, the Brazilian antitrust agency; Former Attorney of the National Treasury of Brazil; Founder, Former Head and presently member of the Board of IBRAC (the main Brazilian antitrust think tank); Member of IBA (Antitrust Committee) and of ABA (Section of Antitrust Law); and author of many articles and frequent speaker on antitrust issues.

Canada: James Musgrove

James Musgrove is the Co-Chair, Competition and Antitrust Practice of the Canadian law firm, McMillan. Mr. Musgrove is recognized as a leading competition lawyer by various organizations, including Chamber Global, GCR, Lexpert, Best Lawyers and Who’s Who Legal, amongst others. He is active in national and international antitrust organizations, is Past Chair of the Canadian Bar Association National Competition Law Section, and currently serves on Council of the American Bar Association Section on Antitrust Law.   In 2014 he won the GCR award for Behavioural Matter of the Year – Americas for his successful defence of MasterCard, and was recently named Advertising and Marketing Lawyer of the Year—Toronto—by Best Lawyers’.

China:  Jingwen Zhu

Jingwen Zhu leads DLA Piper’s Asia competition practice. She is experienced in advising Chinese and international clients on multi-jurisdictional merger notifications, antitrust investigations, private antitrust litigations, antitrust counseling and compliance. She also has experience in state owned monopolies, privatisation of infrastructure and subsequent sector regulation, especially in cases concerning essential facilities.

Ms. Zhu is qualified as a lawyer in the People’s Republic of China. Ms. Zhu speaks Chinese (Cantonese), Chinese (Mandarin), English and German.

European Union: Dr. Markus Röhrig

Markus Röhrig is a partner at the European law firm Hengeler Mueller. Hengeler Mueller is a partnership of lawyers with offices in Berlin, Düsseldorf, Frankfurt, Munich, Brussels and London.   Mr. Röhrig joined Hengeler Mueller in 2004 and has been a partner since 2009. He is based in the Brussels office.

Mr. Röhrig has received his legal education at the University of Cologne and Georgetown University. He is admitted to the German and the New York bars. Mr. Röhrig specialises in German and European competition law. Mr. Röhrig frequently advises clients with respect to European and German cartel investigations, behavioral issues (abuse of dominance) and merger control cases.   Recently, he has been involved in major international cartel cases that are being pursued by the European Commission, the US Department of Justice and the Japanese JFTC in the automotive and other sectors.

India:    Avinash B. Amarnath

Avinash Amarnath is an associate at ‘Vinod Dhall and TT&A’ in New Delhi, India. Prior to his current position, Mr. Amarnath was an associate at the competition team in Amarchand & Mangaldas & Suresh A Shroff & Co. He has advised clients across various sectors such as automobiles, financial services, pharmaceuticals, steel, private equity, petrochemicals and electronic lab equipment on Indian competition law. Mr. Amarnath has written numerous articles on the Competition Commission of India and competition law in India. Mr. Amarnath is a graduate of Kings College London with an LLM in Competition Law.

Connolly Cartel Capers: Compliance is in the Air

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Yesterday I had the good fortune to attend the 8th Annual Georgetown University Law Center Global Antitrust Enforcement Symposium. I was invited to attend by Bates White, a leading economic consulting firm. Bates White is a sponsor of the program. The agenda covered all areas of antitrust enforcement including merger enforcement, abuse of dominance and IP and high-tech issues. But in keeping with the theme of this blog, I’d like to comment on the star of the program—Cartel Enforcement—”the supreme evil of antitrust.”

Bill Baer, Assistant Attorney General for the Antitrust Division was the keynote speaker. Baer focused his remarks completely on cartel enforcement. A copy of his speech is availablehere.

Compliance was in the air. Both Baer, and another Antitrust Division leader, Brent Snyder, Deputy Assistant Attorney General for Criminal Enforcement, emphasized the need for corporations to have strong and effective compliance programs. Baer pointed out that the average jail term for an individual convicted of price fixing or bid rigging is now at 25 months.   And, courts have fined corporations as much as $1.4 billion in a single year. Baer emphasized, “effective compliance programs minimize the chance that companies will conspire to fix prices. And they maximize the chance for a company guilty of price fixing to find out about the conspiracy early enough to qualify for corporate leniency or otherwise cooperate with our investigation.”  

What Baer did not say, that may disappoint many corporate counsel, is that the Antitrust Division would change its policy of not giving credit to corporate defendants for having an antitrust compliance program. In the view of the Antitrust Division, the cases they prosecute involve senior executives of a company—executives in the plural. In these situations, the company has a failed compliance program according to the guidelines set out in the United States Sentencing Guidelines. The Division considers its leniency policy the benefit for those companies whose compliance efforts fall short in preventing a violation, but are able to detect the violation as a result of an effective compliance program. Leniency provides a complete pass for the first company to self-report and cooperating executives can also gain immunity through cooperation.

There may have been a slight shift, however, in the Antitrust Division’s policy regarding compliance programs. The Division has been criticized for never giving credit to a convicted company for a compliance program because, by definition, the program has failed. In his remarks yesterday, Baer said “It is unlikely that a corporate defendant’s pre-existing compliance and ethics program will be considered effective enough to warrant a slap on the wrist when it failed to prevent the company from violating the antitrust laws.” “It is unlikely” is a step (a very small one) from never.

Brent Snyder was on a panel “Cartel Enforcement and Policy” and echoed the remarks regarding the importance of ethics and compliance programs. A day earlier, Snyder had given a talk to the International Chamber of Commerce and US Council of International Business (here). He empathized that international companies have to worry not only about prosecution by the USDOJ, but enforcement agencies world-wide, many of which have adopted US–styled leniency programs. Snyder remarked: “The existence of a compliance program almost never allows the company to avoid criminal antitrust charges. Why? Because a truly effective compliance program would have prevented the crime in the first place or resulted in its early detection. This has been the Division’s position for at least the last twenty years, and it isn’t likely to change.” (my emphasis).

In another interesting comment is his speech, Snyder said “In addition, we are actively considering ways in which we can credit companies that proactively adopt or strengthen compliance programs after coming under investigation. Although we have not finalized our thinking in this area, any crediting of compliance will require a company to demonstrate that its program or improvements are more than just a facade.” The speeches Division officials give are carefully thought out and vetted so this is a serious remark. One thing Snyder could be alluding to is that a defendant company in this position will not face the burden of being put on probation and having an external court appointed compliance monitor imposed. The Division has sought external motors only in rare cases but it may be considering seeking that remedy more often. Companies with a strong compliance program would be spared this additional penalty.

****CLICK HERE FOR THE REST OF THE STORY****

Robert Connolly Presenting at SCCE Compliance and Ethics Conference today

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I’m pleased to announce my role as an Antitrust Ambassador for Emtrain — a leading provider of modern ethics & compliance training. I will be partnering with my friend Jared Bona, The Antitrust Attorney, to create an engaging antitrust compliance program for Emtrain.

Jarod and I are joining a distinguished team of experienced practitioners, including Mike Koehler (FCPA), Sally March (Corporate Compliance & Ethics), Chris MacDonald (Business Ethics), and Timothy Crudo (Governance and Insider Trading).

Here’s a recent thought leadership clip I created with the Emtrain team in San Francisco. Click here to watch the video and please let me know what you think.

Speaking to a camera was much different than speaking to a jury, and in some ways more difficult.  Fortunately, with the benefit of multiple takes, I was able to avoid reversible error.

Also, by happy coincidence, I am a speaking at the SCCE Compliance Conference in Chicago on September 15, 2015 on a panel titled “Global Antitrust Compliance and Risk—Creating an Effective Program.”

Emtrain has an information booth at the conference and I’ll be there hoping to talk some competition law (or football) to any willing partners. If you are at the conference, please stop by and say hello at booth #96.  I’m looking forward to meeting you.

The 2014 Compliance & Ethics Institute conference is at the Hyatt Regency Chicago, September 14-17, 2014.

Connolly Cartel Capers: China Fines Auto Parts Makers over $200 Million; Batman and Robin to Open Separate Probe

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Last week, China’s National Development and Reform Commission (NDRC) imposed its first fines in the worldwide auto parts investigation. Eight Japanese auto parts companies and four Japanese bearing makers were fined a cumulative total of just over $200 million. In a related development, Batman and Robin announced that they have directed Alfred to determine whether the Batmobile contains any of the price-rigged parts.

OK, maybe that is a little far-fetched, but the point is that cartel enforcement has clearly become a worldwide event. With China pulling up a seat at the table, the risks have never been higher for would be cartelists. “This sends a warning to companies engaging in global price-fixing that they should beware of China,” said Chen Danzhou, a lecturer specializing in anti-monopoly law at the University of International Business and Economics in Beijing. “The government is getting more aggressive as it tries to make a structural adjustment to the market.” (Bloomberg)   China had also recently fined 6 companies from South Korea and Taiwan $56 million for participation in the LCD panel cartel.

The Antitrust Division coordinated the auto parts investigation with the Japanese Fair Trade Commission, the European Commission, Canadian Competition Bureau, Korean Fair Trade Commission, Mexican Federal Economic Competition Commission and Australian Competition and Consumer Commission. What this usually means, at a minimum, is that the agencies coordinate timing of search warrants, dawn raids, inspections or wherever term is used to pay an unscheduled visit on businesses (and in some cases executives’ homes) to seize paper and electronic documents. The coordination minimizes the ability of subjects to clean house before the guests arrive. China did not participate it the auto parts coordination kickoff, but followed on as other nations brought cases.   But, China is thought to have cooperated with the DOJ, European Union Japanese, Korean and Taiwan Fair Trade Commission, (JFTC, KFTC, TFTC, respectively) in launching the recent investigation of the global capacitors industry.

Click here, for the rest of the story

Connolly’s Cartel Capers: The Unusual Hi-Tech Hiring Collusion Case

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The Unusual Hi-Tech Hiring Collusion Case: Judge Rejects Proposed Settlement; DOJ Brought Civil “Per Se” Cases

 by Robert Connolly

Last Friday Judge Lucy H. Koh issued an unusual ruling in a somewhat unusual case.  The ruling was unusual in that the court rejected a proposed settlement in the hi-tech wage collusion class action case.  Judge Koh denied a request to preliminarily approve a $324.5 million deal to end the antitrust class action against Google Inc., Apple Inc., Intel Corp. and Adobe Systems Inc.  The suit alleged the companies agreed to not compete for each others’ high-tech employees such as software engineers and computer scientists. The court found the proposed settlement too low and indicated it should be at least $55 million more.  The civil case followed a similar suit by the Antitrust Division charging a per se violation for agreeing not to compete, but the Division’s case was brought as a civil action.

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Connolly’s Cartel Capers: A Look at Other Significant Submissions to the Sentencing Commission on Possible Reforms to the Antitrust Guidelines (2R1.1)

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A Look at Other Significant Submissions to the Sentencing Commission on Possible Reforms to the Antitrust Guidelines (2R1.1)

 by Robert Connolly

I’ve posted recently on my concerns with the Antitrust Sentencing Guidelines (2R1.1) as they relate to individual defendants (here).  Other submissions have been made to the Commission by people/institutions with great insight and influence in the cartel arena.  I’ve summarized a few of these below.

Click Here For the “Rest of the Story” (hat tip to Paul Harvey)

CCC’s: Current Status of the Antitrust Division’s Real Estate Foreclosure Auction Bid Rigging Cases and Some Suggestions Moving Forward

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Current Status of the Antitrust Division’s Real Estate Foreclosure Auction Bid Rigging Cases and Some Suggestions Moving Forward

by Robert Connolly

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.

On June 6, 2014, the government filed a notice of appeal from the court’s acquittal order regarding the obstruction count. In view of that appeal, the court ordered, “all proceedings in this action are hereby stayed pending receipt of an order of remand from the Court of Appeals.” The government asked the trial court to lift the stay explaining: “If all proceedings in this Court remain stayed pending resolution of the government’s appeal, Katakis and Parker face a long wait for a ruling on their new trial motions and, depending on those rulings, for a new trial or sentencing Lifting the stay also avoids unnecessary delays in the sentencings of the other defendants in this case, none of whom were charged with obstruction. Some of them pleaded guilty long before trial and have cooperated with the government for years.”  Individuals who have pleaded guilty so far, beginning in 2011, are cooperating in the ongoing investigation and the Division has requested successfully that their sentencing be delayed until after their cooperation has been substantially complete. Accordingly, there have been no sentencings yet, and with this recent development, it appears sentencing could be delayed into at least 2015.

The Division to date has charged approximately 60 individuals in its California real estate foreclosure auction cases. (A similar far-reaching real estate auction collusion investigation is taking place in the Atlanta region) …*   *   *   *

For the Rest of the Story, Please Click Here

Connolly’s Cartel Capers: Whatever Happened to…Mark Whitacre?

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by Robert Connolly

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.  

Whitacre got involved in the lysine cartel because of tunnel vision focus on short-term profit driven by the lure of stock options and other financial benefits and trappings of life at the top. His wife, who noticed the changes in Whitacre and his material focus, became the impetus for him to turn himself in to the FBI. For two years Whitacre reported to work as a loyal executive of ADM, all the while equipped with recording devices to “get the goods” on his superiors and co-workers. By his account, after two years of this double life he made some extraordinarily bad decisions to try secure his financial future.  He embezzled almost $10 million from ADM and was caught. He compounded this mistake by turning down what his lawyer called the “deal of a lifetime” and a possible 6 month sentence, which was supported by FBI agents with whom he had worked. He ended up serving 8 years and 8 months in federal prison. Upon his release, however, he has been able to resume a successful career as the CEO of a biotech company fueled by an entirely new set of principles. Whitacre has his own web page, Website of Mark Whitacre http://www.markwhitacre.com/career.html. This web site contains, among other things, interviews of FBI agents who handled Whitacre during his two years of undercover activity. To read more about the actual workings of the lysine cartel, see: “The Fly On The Wall Has Been Bugged– Catching An International Cartel In The Act,” speech by  Scott D. Hammond, Deputy Assistant Attorney General for Criminal Enforcement, Antitrust Division, May 15, 2001. http://www.justice.gov/atr/public/speeches/8280.pdf. Copies of the lysine tapes and transcripts are available at no charge by mailing or faxing (202/616-4529) your request to the United States Department of Justice, Antitrust Division, Freedom of Information Act Unit, Liberty Square Building, 450 Fifth Street, NW, Suite 3200, Washington, 20530
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For the rest of the story, please click here

Connolly’s Cartel Capers: Reform the Antitrust Sentencing Guidelines for Individuals

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The Need to Reform the Antitrust Sentencing Guidelines for Individuals (continued)

by Robert Connolly

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. The guidelines have been advisory since the decision in United States v.Booker.   To date, in antitrust cases, courts sentencing a defendant under the current guidelines have (I believe) always departed downward from the government’s sentencing guidelines recommendations—at least after conviction at trial.   Courts have rejected the guidelines and instead focused on the factors set forth in 18 U.S.C. Section 3553 (Imposition of Sentence)(Factors to be Considered in Sentencing.) This statute directs the court to impose a “sentence sufficient, but not greater than necessary.” In determining the sentence, the court is directed to consider various factors including “the nature and circumstances of the offense and the history and characteristics of the defendant.” The sentence should “reflect the seriousness of the offense,” and “afford adequate deterrence.” Applying these factors, courts have found departure from the antitrust sentencing guidelines warranted.

[Continued Read More…]

Connolly’s Cartel Capers: Consciousness of Innocence (continued)

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Consciousness of Innocence (continued)
 by Robert Connolly

On July 8, 2014 Rengan Rajaratnam was acquitted by a federal jury of participation in an insider trading conspiracy. The verdict was the government’s first trial loss in a wide-ranging probe that has led to 85 convictions of traders, analysts, lawyers and executives, with most sentenced to prison. Raj Rajaratnam, the defendant’s older brother, is currently serving an 11 year jail term. In an earlier post http://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…]