Category Archives: Competition

FORMER PRESIDENT AND VICE PRESIDENT OF DIAMOND ELECTRIC AGREE TO PLEAD GUILTY TO PARTICIPATING IN AUTO PARTS PRICE-FIXING CONSPIRACY

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WASHINGTON — The former president and vice president of Osaka,  Japan-based Diamond Electric Mfg. Co. Ltd. have agreed to plead guilty for  their participation in a global conspiracy to fix prices of ignition coils  installed in cars sold in the United States and elsewhere, the Department of Justice  announced today.  Ignition coils are part  of a car’s fuel ignition system and release electric energy suddenly to ignite  a fuel mixture.

Separate  felony charges were filed today in U.S. District Court for the Eastern District  of Michigan in Detroit against Shigehiko Ikenaga and Tatsuo Ikenaga.  According to court documents, from at least as  early as July 2003 until at least February 2010, the former executives participated  in a conspiracy to rig bids for, and to fix, stabilize and maintain the prices  of ignition coils sold to automotive manufacturers for installation in vehicles  manufactured in the United States and elsewhere.  The automotive manufacturers included Ford  Motor Co., Toyota Motor Corp. and Fuji Heavy Industries Ltd. – more commonly  known by its brand name, Subaru – and certain of their subsidiaries.

Shigehiko  Ikenaga, president of Diamond Electric during the relevant period, agreed to  serve 16 months in a U.S. prison.  Tatsuo  Ikenaga, Diamond Electric’s managing director, and then vice president  beginning in 2008, agreed to serve 13 months in a U.S. prison.  Tatsuo Ikenaga also simultaneously served as president  of Diamond Electric’s U.S. subsidiary during the relevant period.  Additionally, the former executives have each  agreed to pay a $5,000 criminal fine and to cooperate with the department’s  ongoing investigation.  Each of the  Ikenaga’s plea agreements is subject to court approval.  On Sept. 10, 2013, Diamond Electric pleaded  guilty for its involvement in the conspiracy and was fined $19 million.

“The two former executives charged  today once again demonstrate the Antitrust Division’s vigorous commitment to  hold individuals accountable for engaging in anticompetitive conduct,” said  Brent Snyder, Deputy Assistant Attorney General for the Antitrust Division’s  criminal enforcement program.  “The division’s  ongoing investigation has resulted in more than two dozen executives serving  prison time for their participation in illegal, auto parts conspiracies.”

Diamond  Electric is a manufacturer of ignition coils and was engaged in the sale of  ignition coils in the United States and elsewhere. According to the charges, the  Diamond Electric executives and their co-conspirators carried out the  conspiracy by, among other things, agreeing during meetings and communications  to coordinate bids submitted to automobile manufacturers.

Each  executive is charged with price fixing and bid rigging in violation of the  Sherman Act, which carries a maximum penalty of 10 years in prison and a $1  million criminal fine 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.

Including  today’s charges, 28 individuals and 24 companies have been charged in the  government’s ongoing investigation into price fixing and bid rigging in the  auto parts industry.

Today’s charges  arose from an ongoing federal antitrust investigation into price fixing, bid  rigging and other anticompetitive conduct in the automotive parts industry,  which is being conducted by each of the Antitrust Division’s criminal  enforcement sections and the FBI.  Today’s pleas are the result of the National  Criminal Enforcement Section with the assistance of the Detroit Field Office of  the FBI.  Anyone with information on  price fixing, bid rigging and other anticompetitive conduct related to other  products in the automotive parts 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 Detroit Field Office of the FBI at 313-965-2323.

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THREE FORMER RABOBANK TRADERS CHARGED WITH MANIPULATING YEN LIBOR

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WASHINGTON — Two former Coöperatieve Centrale  Raiffeisen-Boerenleenbank B.A. (Rabobank) Japanese Yen derivatives traders and  the trader responsible for setting Rabobank’s Yen London InterBank Offered Rate  (LIBOR) were charged as part of the ongoing criminal investigation into the  manipulation of LIBOR.

Acting Assistant Attorney General Mythili Raman of the  Justice Department’s Criminal Division, Deputy Assistant Attorney General Brent  Snyder of the Justice Department’s Antitrust Division and Assistant Director in  Charge Valerie Parlave of the FBI’s Washington Field Office made the  announcement.

Earlier today, a U.S. Magistrate  Judge sitting in the Southern District of New York signed a criminal complaint  charging Paul Robson of the United Kingdom, Paul Thompson of Australia, and Tetsuya  Motomura of Japan with conspiracy to commit wire fraud and bank fraud as well  as substantive counts of wire fraud.  All  are former employees of Rabobank, which on Oct. 29, 2013, entered into a  deferred prosecution agreement with the Department of Justice as part of the  department’s LIBOR investigation and agreed to pay a $325 million penalty.  Each defendant faces up to 30 years in prison  for each count upon conviction.

“Today, less than three months  after Rabobank admitted its involvement in the manipulation of LIBOR, we have charged  three of its senior traders with participating in this global fraud scheme,”  said Acting Assistant Attorney General Raman.  “As alleged, these three  traders – working from Japan, Singapore and the U.K. – deliberately submitted  what they called ‘obscenely high’ or ‘silly low’ LIBOR rates in order to  benefit their own trading positions.  The illegal  manipulation of this cornerstone benchmark rate undermines the integrity  of the markets; it harms those who are relying on what they expect to be an  honest benchmark; and it has ripple effects that extend far beyond the trading  at issue here.  The Justice Department has now charged eight individuals  and reached resolutions with four multi-national banks as part of our ongoing  and industry-wide LIBOR probe and, alongside our law enforcement and regulatory  partners both here and abroad, we remain committed to continuing to root out  this misconduct.”

“The  conspirators charged today conspired to rig the interest rates used by  derivative products throughout the financial industry to benefit their own  trading books,” said Deputy Assistant Attorney General Snyder. “Today’s charges  demonstrate the department’s commitment to hold individuals accountable for  schemes that undermine the integrity of markets that rely on competition to  flourish.”

“Manipulation  of benchmark rates that are routinely referenced by financial products around  the world erodes the integrity of our financial markets,” said Assistant  Director in Charge Parlave.  “The charges  against these individuals represent another step in our ongoing efforts to find  and stop those who hide behind complex corporate and securities fraud schemes.  I commend the Special Agents, forensic  accountants and analysts as well as the prosecutors for the significant time  and resources they committed to investigating this case.”

According to the complaint,  LIBOR is an average interest rate, calculated based on submissions from leading  banks around the world, reflecting the rates those banks believe they would be  charged if borrowing from other banks.   LIBOR is published by the British Bankers’ Association (BBA), a trade  association based in London.  At the time  relevant to the criminal complaint, LIBOR was calculated for 10 currencies at  15 borrowing periods, known as maturities, ranging from overnight to one  year.  The published LIBOR “fix” for Yen  LIBOR at a specific maturity is the result of a calculation based upon  submissions from a panel of 16 banks, including Rabobank.

LIBOR serves as the primary  benchmark for short-term interest rates globally and is used as a reference  rate for many interest rate contracts, mortgages, credit cards, student loans  and other consumer lending products.  The  Bank of International Settlements estimated that as of the second half of 2009,  outstanding interest rate contracts were valued at approximately $450 trillion.

According to allegations in the complaint,  all three defendants traded in derivative products that referenced Yen  LIBOR.  Robson worked  as a senior trader at Rabobank’s Money Markets and Short Term Forwards desk in  London; Thompson was Rabobank’s head of Money Market and Derivatives Trading  Northeast Asia and worked in Singapore; and Motomura was a senior trader at  Rabobank’s Tokyo desk who supervised money market and derivative traders employed  at Rabobank’s Tokyo desk.  In addition to  trading derivative products that referenced Yen LIBOR, Robson also served as  Rabobank’s primary submitter of Yen LIBOR to the BBA.

Robson, Thompson and Motomura  each entered into derivatives contracts containing Yen LIBOR as a price  component.  The  profit and loss that flowed from those contracts was directly affected by the  relevant Yen LIBOR on certain dates.  If  the relevant Yen LIBOR moved in the direction favorable to the defendants’  positions, Rabobank and the defendants benefitted at the expense of the  counterparties.   When LIBOR moved in the opposite direction, the defendants and  Rabobank stood to lose money to their counterparties.

The complaint alleges that from about May 2006 to at least  January 2011, Robson, Thompson, Motomura and others agreed to make false and  fraudulent Yen LIBOR submissions for the benefit of their trading positions.  According to the allegations, sometimes  Robson submitted rates at a specific level requested by a co-defendant and  consistent with the co-defendant’s trading positions.  Other times, Robson made a higher or lower  Yen LIBOR submission consistent with the direction requested by a co-defendant  and consistent with the co-defendant’s trading positions.  On those occasions, Robson’s manipulated Yen  LIBOR submissions were to the detriment of, among others, Rabobank’s  counterparties to derivative contracts.

In addition to allegedly manipulating Rabobank’s Yen LIBOR  submissions, Robson, on occasion and on behalf of one or more co-defendants,  coordinated his Yen LIBOR submission with the trader responsible for making Yen  LIBOR submissions at another Yen LIBOR panel bank.  At times, Robson allegedly submitted Yen  LIBOR at a level requested by the other trader, and, at other times, that trader  submitted Yen LIBOR at a level requested by Robson.

As alleged  in the complaint, Thompson, Motomura and another Rabobank trader described in  the complaint as Trader-R made requests of Robson for Yen LIBOR submissions  through electronic chats and email exchanges.   For example, on May 19, 2006, after Thompson informed Robson that his  net exposure for his 3-month fixes was 125 billion Yen, he requested by email  that Robson “sneak your 3m libor down a cheeky 1 or 2 bp” because “it will make  a bit of diff for me.”  On or about May  19, 2006, Robson responded: “No prob mate I mark it low.”

On Sept. 21, 2007, Trader-R  asked Robson by email, “where do you think today’s libors are?  If you can I would like 1mth higher  today.”  Robson responded, “bookies  reckon .85,” to which Trader-R replied, “I have some fixings in 1mth so would  appreciate if you can put it higher mate.”   Robson answered, “no prob mate let me know your level.”  After Trader-R asked for “0.90% for 1mth,”  Robson confirmed, “sure no prob[ ] I’ll probably get a few phone calls but no  worries mate… there’s bigger crooks in the market than us guys!”

As another example, on Aug. 4,  2008, in a Bloomberg chat, Motomura asked Robson, “Please set today’s 6mth  LIBOR at 0.96 I have chunky fixing.”  To this, Robson responded, “no  worries mate.”
The complaint alleges that  Robson accommodated the requests of his co-defendants.  For example, on Sept. 21, 2007, after Robson  received a request from Trader-R for a high 1 month Yen LIBOR, Rabobank  submitted a 1-month Yen LIBOR rate of 0.90, which was 7 basis points higher  than the previous day and 5 basis points above where Robson said that “bookies”  predicted it, and which moved Rabobank’s submission from the middle to the  highest of the panel.

According  to court documents, the defendants were also aware that they were making false  or fraudulent Yen LIBOR submissions.  For  example, on May 10, 2006, Robson admitted in an email that “it must be pretty  embarrasing to set such a low libor.  I  was very embarrased to set my 6 mth – but wanted to help thomo [Thompson].  tomorrow it will be more like 33 from  me.”  At times, Robson referred to the  submissions that he submitted on behalf of his co-defendants as “ridiculously  high” and “obscenely high,” and acknowledged that his submissions would be so  out of line with the other Yen LIBOR panel banks that he might receive a phone  call about them from the BBA or Thomson Reuters.

A criminal complaint is a formal  accusation of criminal conduct, not evidence.   A defendant is presumed innocent unless and until convicted.

The investigation is being  conducted by special agents, forensic accountants, and intelligence analysts in  the FBI’s Washington Field Office.  The  prosecution is being handled by Trial Attorneys Carol L. Sipperly, Brian Young  and Alexander H. Berlin of the Criminal Division’s Fraud Section, and Trial  Attorneys Ludovic C. Ghesquiere and Michael T. Koenig of the Antitrust  Division.  Former Deputy Chief Glenn Leon  and Senior Counsel Rebecca Rohr of the Criminal Division’s Fraud Section, along  with Assistant Chief Elizabeth Prewitt and Trial Attorneys Eric Schleef and  Richard Powers of the Antitrust Division, have also provided valuable  assistance.  The Criminal Division’s  Office of International Affairs has provided assistance in this matter as well.

The broader investigation  relating to LIBOR and other benchmark rates has required, and has greatly  benefited from, a diligent and wide-ranging cooperative effort among various  enforcement agencies both in the United States and abroad.  The Justice Department acknowledges and  expresses its deep appreciation for this assistance.  In particular, the Commodity Futures Trading  Commission’s Division of Enforcement referred this matter to the department  and, along with the U.K. Financial Conduct Authority, has played a major role  in the LIBOR investigation.  The department  has worked closely with the Dutch Public Prosecution Service and the Dutch  Central Bank in the investigation of Rabobank.   Various agencies and enforcement authorities from other nations are also  participating in different aspects of the broader investigation relating to  LIBOR and other benchmark rates, and the department is grateful for their  cooperation and assistance.  In  particular, the Securities and Exchange Commission has played a significant  role in the LIBOR series of investigations, and the department expresses its  appreciation to the United Kingdom’s Serious Fraud Office for its assistance  and ongoing cooperation.

This prosecution is  part of efforts underway by President Barack Obama’s Financial Fraud  Enforcement Task Force.  President Obama established the interagency  Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and  proactive effort to investigate and prosecute financial crimes.  The task  force includes representatives from a broad range of federal agencies,  regulatory authorities, inspectors general and state and local law enforcement  who, working together, bring to bear a powerful array of criminal and civil  enforcement resources.  The task force is working to improve efforts  across the federal executive branch, and with state and local partners, to  investigate and prosecute significant financial crimes, ensure just and  effective punishment for those who perpetrate financial crimes, combat  discrimination in the lending and financial markets and recover proceeds for  victims of financial crimes.  For more  information about the task force visit: www.stopfraud.gov.

Plaintiffs Win a Round in Sixth Circuit Milk Case: No Need to Show Relevant Geographic Market or Antitrust Injury to Avoid Pre-Trial Dismissal

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In reversing the decision of the district court, the Sixth Circuit held that the court should have considered the possibility that the fact nature of the restraint was sufficiently clear that a “quick look” analysis would have shown that the conduct had obvious, adverse anticompetitive consequences and that a detailed market analysis was not necessary. Even though the alleged conduct was not illegal per se, the allegations in the complaint were sufficient to shift the burden to the defendant to produce evidence of some of the procompetitive benefits of the alleged conduct.
Second, the circuit court found that the trial court’s exclusion of an expert economist’s testimony in dismissing the monopolization counts in respect to his opinion on geographic market was error.  In reaching his conclusion, the expert relied on the “hypothetical monopolist” construct to assess whether the territory alleged constituted a relevant geographic market.  While the district court ruled this approach was not  that this construct required speculation about a buyer’s likely reaction to a price increase, and was not, therefore, based upon actual evidence — and, hence, was unreliable.  The Sixth Circuit, however, viewed the approach as consistent with Supreme Court authority as well as with the DOJ and FTC merger guidelines for determining a relevant market. While defendants contended that the market was much smaller, the circuit court held that that issue should be left to the jury to decide:In re Southeastern Milk Antitrust Litigation

RBS Securities Japan Ltd Sentenced for Manipulation of Yen Libor

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RBS Securities Japan Limited, a wholly owned subsidiary of The Royal Bank of Scotland plc (RBS) that engages in investment banking operations with its principal place of business in Tokyo, Japan, was sentenced today for its role in manipulating the Japanese Yen London Interbank Offered Rate (LIBOR), a leading benchmark used in financial products and transactions around the world.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, Deputy Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office made the announcement.
RBS Securities Japan was sentenced by U.S. District Judge Michael P. Shea in the District of Connecticut.    RBS Securities Japan pleaded guilty on April 12, 2013, to one count of wire fraud for its role in manipulating Yen LIBOR benchmark interest rates.    RBS Securities Japan signed a plea agreement with the government in which it admitted its criminal conduct and agreed to pay a $50 million fine, which the court accepted in imposing sentence.    In addition, RBS plc, the Edinburgh, Scotland-based parent company of RBS Securities Japan, entered into a deferred prosecution agreement (DPA) with the government requiring RBS plc to pay an additional $100 million penalty, to admit and accept responsibility for its misconduct as set forth in an extensive statement of facts and to continue cooperating with the Justice Department in its ongoing investigation.    The DPA reflects RBS plc’s cooperation in disclosing LIBOR misconduct within the financial institution and recognizes the significant remedial measures undertaken by new management to enhance internal controls.
Together with approximately $462 million in regulatory penalties and disgorgement – $325 million as a result of a Commodity Futures Trading Commission (CFTC) action and approximately $137 million as a result of a U.K. Financial Conduct Authority (FCA) action – the Justice Department’s criminal penalties bring the total amount of the resolution with RBS and RBS Securities Japan to approximately $612 million.
“Today’s sentencing of RBS is an important reminder of the significant consequences facing banks that deliberately manipulate financial benchmark rates, and it represents one of the numerous enforcement actions taken by the Justice Department in our ongoing LIBOR investigation” said Acting Assistant Attorney General Raman. “As a result of the department’s investigation, we have charged five individuals and secured admissions of criminal wrongdoing by four major financial institutions.  Our enforcement actions have had a lasting impact on the global banking system, and we intend to continue to vigorously investigate and prosecute the manipulation of this cornerstone benchmark rate.”
“By colluding to manipulate the Yen LIBOR benchmark interest rate, RBS Securities Japan reaped higher profits for itself at the expense of unknowing counterparties, and in the process undermined the integrity of a major benchmark rate used in financial transactions throughout the world,” said Deputy Assistant Attorney General Snyder.  “Today’s sentence, in conjunction with the department’s agreement with parent company RBS, demonstrates the Antitrust Division’s commitment to prosecuting these types of far-reaching and sophisticated conspiracies.”
“The manipulation of LIBOR impacts financial products the world over, and erodes the integrity of the financial markets,” said Assistant Director in Charge Parlave.    “Without a level playing field in our financial marketplace, banks and investors do not have a threshold to which they can measure their hard work.    I commend the Special Agents, forensic accountants and analysts, as well as the prosecutors, for the significant time and resources they committed to investigating this case.”
According to court documents, LIBOR is an average interest rate, calculated based upon submissions from leading banks around the world, reflecting the rates those banks believe they would be charged if borrowing from other banks.    LIBOR serves as the primary benchmark for short-term interest rates globally, and is used as a reference rate for many interest rate contracts, mortgages, credit cards, student loans and other consumer lending products.    The Bank of International Settlements estimated that as of the second half of 2009, outstanding interest rate contracts were valued at approximately $450 trillion.
LIBOR is published by the British Bankers’ Association (BBA), a trade association based in London.    At the time relevant to the conduct in the criminal information, LIBOR was calculated for 10 currencies at 15 borrowing periods, known as maturities, ranging from overnight to one year.    The LIBOR for a given currency at a specific maturity is the result of a calculation based upon submissions from a panel of banks for that currency (the Contributor Panel) selected by the BBA.
According to the plea agreement, at various times from at least 2006 through 2010, certain RBS Securities Japan Yen derivatives traders engaged in efforts to move LIBOR in a direction favorable to their trading positions, defrauding RBS counterparties who were unaware of the manipulation affecting financial products referencing Yen LIBOR.    The scheme included efforts to manipulate more than one hundred Yen LIBOR submissions in a manner favorable to RBS Securities Japan’s trading positions.    Certain RBS Securities Japan Yen derivatives traders, including a manager, engaged in this conduct in order to benefit their trading positions and thereby increase their profits and decrease their losses.
The prosecution of RBS Securities Japan is being handled by Deputy Chief Patrick Stokes and Trial Attorney Gary Winters of the Criminal Division’s Fraud Section, and New York Office Assistant Chief Elizabeth Prewitt and Trial Attorneys Eric Schleef and Richard Powers of the Antitrust Division.    Deputy Chiefs Daniel Braun and William Stellmach and Trial Attorney Alex Berlin of the Criminal Division’s Fraud Section, Trial Attorneys Daniel Tracer and Kristina Srica of the Antitrust Division, Jeremy Verlinda of the Antitrust Division’s Economic Analysis Group, Assistant U.S. Attorneys Eric Glover and Liam Brennan of the U.S. Attorney’s Office for the District of Connecticut, and the Criminal Division’s Office of International Affairs have also provided valuable assistance in this matter.    The investigation is being conducted by special agents, forensic accountants and intelligence analysts of the FBI’s Washington Field Office.
The investigation leading to these cases has required, and has greatly benefited from, a diligent and wide-ranging cooperative effort among various enforcement agencies both in the United States and abroad.    The Justice Department acknowledges and expresses its deep appreciation for this assistance.    In particular, the CFTC’s Division of Enforcement referred this matter to the department and, along with the FCA, has played a major role in the investigation.    Various agencies and enforcement authorities from other nations are also participating in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the department is grateful for their cooperation and assistance.   In particular, the Securities and Exchange Commission has played a significant role in the LIBOR investigation, and the department expresses its appreciation to the United Kingdom’s Serious Fraud Office for its assistance and ongoing cooperation.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force.    President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.    The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.    The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.   For more information about the task force visit: www.stopfraud.gov .

Three Northern California Real Estate Investors Agree To Plead Guilty To Bid Rigging at Housing Foreclosure Auctions: Investigation Has Yielded 43 Plea Agreements to Date WASHINGTON —

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Three Northern California real estate investors have agreed to plead guilty for their roles in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced. Felony charges were filed today in U.S. District Court for the Northern District of California in Oakland against Rudolph Silva of Concord, Calif., Thomas Bishop of Pleasant Hill, Calif., and Leslie Gee of Danville, Calif. Including Silva, Bishop and Gee, a total of 43 individuals have pleaded guilty or agreed to plead guilty as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California. According to court documents, Silva, Bishop and Gee conspired with others, for various lengths of time between January 2008 and January 2011, not to bid against one another, and instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in Contra Costa County, Calif. Silva, Bishop and Gee were also charged with conspiring to use the mail to carry out a scheme to fraudulently acquire title to selected Contra Costa 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 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. The private auctions often took place at or near the courthouse steps where the public auctions were held. Additional charges were filed against Gee for his involvement in similar conduct in Alameda County, Calif., from as early as April 2009 until about November 2009. “Today’s plea agreements are the latest step in the Antitrust Division’s efforts to hold accountable investors for their fraudulent and collusive activities at real estate foreclosure auctions,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division will continue to prosecute individuals who participated in illegal conspiracies and harmed 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 Alameda and Contra Costa 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 FBI and our partners have an obligation to investigate and pursue those who disrupt a free and fair marketplace,” said FBI Special Agent in Charge David J. Johnson of the San Francisco Field Office. “We will continue to educate the public on the criminality of bid rigging at real estate foreclosure auctions.” 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 the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than $1 million. A count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud. Today’s charges are the latest filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa and Alameda counties, Calif. These investigations are being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Office. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-436-6660, or call the FBI tip line at 415-553-7400. 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 is 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.

Eastern California Real Estate Investor Pleads Guilty to Bid Rigging and Fraud at Public Real Estate Foreclosure Auctions

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Eastern California Real Estate Investor Pleads Guilty to Bid Rigging and Fraud at Public Real Estate Foreclosure Auctions

Investigation Has Resulted in 11 Guilty Pleas to Date

WASHINGTON — An Eastern California real estate  investor pleaded guilty today to conspiring to rig bids and commit mail fraud  at public real estate foreclosure auctions in Eastern California, the  Department of Justice announced.

Anthony B. Joachim of Stockton,  Calif., entered his guilty plea in U.S. District Court for the Eastern District  of California in Sacramento.  Joachim was originally indicted by a federal  grand jury in Sacramento on Dec. 7, 2011, along with three other investors –  Andrew B. Katakis, Donald M. Parker and Wiley C. Chandler – and one auctioneer  – W. Theodore Longley. All five individuals were charged with conspiring with  other unnamed co-conspirators to rig bids and commit mail fraud when purchasing  selected properties at public real estate foreclosure auctions in San Joaquin  County, Calif.  The indictment was superseded on May 8, 2013, to include  an obstruction of justice charge against Katakis.  Chandler pleaded guilty  on Feb. 24, 2012, and trial is scheduled to begin against the remaining  individuals on Jan. 28, 2014.

According  to court documents, Joachim conspired with others not to bid against one  another and to instead designate a winning bidder to obtain selected properties  at public real estate foreclosure auctions in San Joaquin County.  Joachim  was also charged with conspiring to use the mail to carry out a scheme to  fraudulently acquire title to selected San Joaquin County properties sold at  public auctions, to make and receive payoffs and to divert money to  co-conspirators that would have otherwise gone to mortgage holders 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.  The private auctions often took place at or near the  courthouse steps where the public auctions were held.  According to  Joachim’s plea agreement, he participated in the conspiracies between about  April 2009 until about October 2009.

“Today’s  plea is the 11th in the Antitrust Division’s ongoing investigation  of bid rigging and fraud involving real estate foreclosure auctions in the  Eastern District of California,” said Bill Baer, Assistant Attorney General in  charge of the Department of Justice’s Antitrust Division.  “The division  has uncovered similar schemes across the country and continues to prosecute  those who profit by undermining competition at real estate foreclosure  auctions.”

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 San Joaquin 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.

“My office will continue to fight  real estate fraud in all its forms, including bringing to justice those who  would subvert public foreclosure auctions for their own personal gain,” said United States Attorney Benjamin B.  Wagner of the Eastern District of California.

Joachim pleaded guilty to bid  rigging, a violation of the Sherman Act, which carries a maximum penalty of 10  years in prison and a $1 million fine.  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.  Joachim also pleaded guilty to conspiracy to commit mail  fraud, which carries a maximum sentence of 30 years in prison and a $1 million  fine.                 The guilty plea entered today is  the latest in the department’s ongoing federal antitrust investigation of fraud  and bidding irregularities in certain real estate auctions in San Joaquin  County.  The investigation is being conducted by the Antitrust Division’s  San Francisco office, the U.S. Attorney’s Office for the Eastern District of  California, the FBI’s Sacramento Division and the San Joaquin County District  Attorney’s Office.  Anyone with information concerning bid rigging or  fraud related to real estate foreclosure auctions should contact the Antitrust  Division’s San Francisco office at 415-436-6660, visit www.justice.gov/atr/contact/newcase.htm,  contact the U.S. Attorney’s Office for the Eastern District of California at  916-554-2700 or contact the FBI’s Sacramento Division at 916-481-9110.

Today’s  action was 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 is 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.

GeyerGorey partner Allen Grunes quoted by Reuters: Ireland’s Ardagh in talks with FTC to settle glass bottle merger challenge

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GeyerGorey partner Allen Grunes quoted by Reuters:  Ireland’s Ardagh in talks with FTC to settle glass bottle merger challenge

In Search of Effective Ethics & Compliance Programs; By Professor Maurice Stucke, GeyerGorey LLP

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Maurice E. Stucke

University of Tennessee College of Law
December 10, 2013


Abstract: 

The U.S. Sentencing Commission’s Organizational Guidelines for over twenty years have offered firms a significant financial incentive to develop an ethical organizational culture. Nonetheless, corporate crime persists. Too many ethics programs remain ineffective.As this Article explores, the Guidelines’ current approach is not working. The evidence, including sentencing data over the past twenty years, reveals that few firms have effective ethics and compliance programs. Nor is there much hope that the Guidelines’ incentive will induce companies, after the economic crisis, to become more ethical.The problem is not attributable to several assumptions underlying the Guidelines. The empirical research, while still developing, suggests that compliance efforts can be effective, and that effective compliance is attainable. Instead, this Article explores how the Guidelines’ extrinsic, incentive-based approach to compliance does not cure, and likely contributes to, the problem.

 

 

How the FTC’s Hertz Antitrust Fix Went Flat – Professor Maurice Stucke; WSJ.com

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How the FTC’s Hertz Antitrust Fix Went Flat
Wall Street Journal
December 8, 2013

Maurice Stucke, a University of Tennessee professor and lawyer with GeyerGorey LLP, said the latest Advantage bankruptcy ought to prompt some soul-searching by the FTC and the Justice Department.

If merger settlements “are going to be business as usual, the agencies need to spend more time examining how their remedies work out over the long haul,” he said. “You would think there could be more safeguards to prevent this from happening.”

FORMER SEA STAR LINE PRESIDENT SENTENCED TO SERVE FIVE YEARS IN PRISON FOR ROLE IN PRICE-FIXING CONSPIRACY INVOLVING COASTAL FREIGHT SERVICES BETWEEN THE CONTINENTAL UNITED STATES AND PUERTO RICO

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WASHINGTON — The former president  of Sea Star Line LLC, a Jacksonville, Fla.-based water freight carrier, was  sentenced to serve five years in prison and to pay a $25,000 criminal fine for  his participation in a conspiracy to fix rates and surcharges for freight  transported by water between the continental United States and Puerto Rico, the  Department of Justice announced today.

Frank Peake was  sentenced today by Judge Daniel R. Dominguez in U.S. District Court for the  District of Puerto Rico in San Juan.  Peake’s  two-week trial took place in January 2013.

“The sentence  imposed today reflects the serious harm these conspirators inflicted on  American consumers, both in the continental United States and in Puerto Rico,” said  Bill Baer, Assistant Attorney General in charge of Department of Justice’s  Antitrust Division.  “The Antitrust  Division will continue to vigorously prosecute executives who collude to fix  prices at the expense of consumers.”

According to court documents and evidence presented at  trial, Peake and his co-conspirators  conspired through meetings and other communications in the continental United  States and Puerto Rico to fix, stabilize and maintain rates and surcharges for  Puerto Rico freight services, to allocate customers of Puerto Rico freight  services between and among the conspirators and to rig bids submitted to  customers of Puerto Rico freight services.   Peake was involved in the conspiracy from at least late 2005 until at  least April 2008.

As a result of the  ongoing investigation, the three largest water freight carriers serving routes  between the continental United States and Puerto Rico, including Peake’s former  employer Sea Star, have pleaded guilty and been ordered to pay more than $46  million in criminal fines for their roles in the conspiracy.  Sea Star pleaded guilty on Dec. 20, 2011, and  was sentenced by Judge Dominguez to pay a $14.2 million criminal fine.  Sea Star transports a variety of cargo  shipments, such as heavy equipment, perishable food items, medicines and  consumer goods, on scheduled ocean voyages between the continental United States  and Puerto Rico.

Peake and five  other individuals have been ordered to serve prison sentences ranging from  seven months to five years.  Additionally,  Thomas Farmer, the former vice president of price and yield management of  Crowley Liner Services, was indicted in March 2013 for  his role in the conspiracy and is scheduled to go to trial in May 2014.

This case is part of an ongoing investigation being conducted by the  Antitrust Division’s National Criminal Enforcement Section and the Defense Criminal  Investigative Service.  Anyone with  information concerning price fixing or other anticompetitive conduct in the  coastal water freight transportation industry is urged to call the Antitrust  Division’s National Criminal Enforcement Section at 202-307-6694.