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Nine Automobile Parts Manufacturers and Two Executives Agree to Plead Guilty to Fixing Prices on Automobile Parts Sold to U.S. Car Manufacturers and Installed in U.S. Cars Companies Agree to Pay a Total of More Than $740 Million in Criminal Fines
Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Thursday, September 26, 2013
Nine Automobile Parts Manufacturers and Two Executives Agree to Plead Guilty to Fixing Prices on Automobile Parts Sold to U.S. Car Manufacturers and Installed in U.S. Cars
Companies Agree to Pay a Total of More Than $740 Million in Criminal Fines
Nine Japan-based companies and two executives have agreed to plead guilty and to pay a total of more than $740 million in criminal fines for their roles in separate conspiracies to fix the prices of more than 30 different products sold to U.S. car manufacturers and installed in cars sold in the United States and elsewhere, the Department of Justice announced today. The department said that price-fixed automobile parts were sold to Chrysler, Ford and General Motors, as well as to the U.S. subsidiaries of Honda, Mazda, Mitsubishi, Nissan, Toyota and Fuji Heavy Industries–more commonly known by its brand name, Subaru.
“These international price-fixing conspiracies affected more than $5 billion in automobile parts sold to U.S. car manufacturers, and more than 25 million cars purchased by American consumers were affected by the illegal conduct,” said Attorney General Eric Holder. “The Department of Justice will continue to crack down on cartel behavior that causes American consumers and businesses to pay higher prices for the products and services they rely upon in their everyday lives.”
“Some of the price-fixing conspiracies lasted for a decade or longer, and many car models were fitted with multiple parts that were fixed by the auto parts suppliers,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s criminal enforcement program. “The Antitrust Division has worked hand in hand with its international competition colleagues who have provided invaluable assistance to the Justice Department in breaking up these worldwide price-fixing cartels.”
“Today’s charges should send a message to companies who believe they don’t need to follow the rules,” said Ronald Hosko, Assistant Director of the FBI’s Criminal Division. “If you violate the laws of this country, the FBI will investigate and put a stop to the threat you pose to our commercial system. The integrity of our markets is a part of the foundation of a free society.”
Including those announced today, 20 companies and 21 executives have been charged in the Antitrust Division’s ongoing investigation into price fixing and bid rigging in the auto parts industry. All 20 companies have either pleaded guilty or have agreed to plead guilty and have agreed to pay more than $1.6 billion in criminal fines. Seventeen of the 21 executives have been sentenced to serve time in U.S. prisons or have entered into plea agreements calling for significant prison sentences.
Each of the companies and executives charged today has agreed to cooperate with the department’s ongoing antitrust investigation. The plea agreements are subject to court approval. The companies’ and executives’ agreed-upon fines and sentences are:
• Hitachi Automotive Systems Ltd. to pay a $195 million criminal fine;
• Jtekt Corporation to pay a $103.27 million criminal fine;
• Mitsuba Corporation to pay a $135 million criminal fine;
• Mitsubishi Electric Corporation (MELCO) to pay a $190 million criminal fine;
• Mitsubishi Heavy Industries Ltd. to pay a $14.5 million criminal fine;
• NSK Ltd. to pay a $68.2 million criminal fine;
• T.RAD Co. Ltd. to pay a $13.75 criminal fine;
• Valeo Japan Co. Ltd. to pay a $13.6 million criminal fine;
• Yamashita Rubber Co. Ltd. to pay a $11 million criminal fine;
• Tetsuya Kunida, a Japanese citizen and former executive of a U.S. subsidiary of a Japan-based automotive anti-vibration rubber products supplier to serve 12 months and one day in a U.S. prison, and to pay a $20,000 criminal fine; and
• Gary Walker, a U.S. citizen and former executive of a U.S. subsidiary of a Japan-based automotive products supplier to serve 14 months in a U.S. prison, and to pay a $20,000 criminal fine.
MELCO and Hitachi conspired with each other and other co-conspirator firms not charged today on sales of certain auto parts, including starter motors, alternators, and ignition coils, the department said. Mitsuba and Mitsubishi Electric conspired together and with other co-conspirators not charged today on certain sales of starter motors. Each of the other companies charged today colluded with other unnamed co-conspirators.
Generally, the companies, executives and co-conspirators engaged in the various price-fixing schemes by attending meetings and communicating by telephone in the United States and Japan to reach collusive agreements to rig bids, set prices and allocate the supply of auto parts sold to the car manufacturers. They took measures to keep their conduct secret by using code names and meeting in remote locations. Those charged also had further communications to monitor and enforce the collusive agreements.
The multiple conspiracies also harmed U.S. automobile plants in 14 states: Alabama; California; Georgia; Illinois; Indiana; Kansas; Kentucky; Michigan; Mississippi; Missouri; Ohio; Tennessee; Texas and Wisconsin, the department said.
The department has coordinated its 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.
The following charges were filed today in U.S. District Court for the Eastern District of Michigan in Detroit:
Hitachi Automotive Systems Ltd.
According to a one-count felony charge, Hitachi and co-conspirators engaged in a conspiracy, by agreeing during meetings and conversations, to rig bids for, and to fix, stabilize and maintain the prices of auto parts it sold to Ford, General Motors, Honda, Nissan and Toyota, in the United States and elsewhere. The affected auto parts include starter motors, alternators, air flow meters, valve timing control devices, fuel injection systems, electronic throttle bodies, ignition coils, inverters and motor generators. According to the charge, Hitachi and its co-conspirators carried out the conspiracy from at least as early as January 2000 until at least February 2010.
Hitachi manufactures and sells auto parts to automobile manufacturers throughout the world. The affected auto parts perform an array of functions in automobile engines, from regulating air and fuel flow to starting the engine to controlling the timing of engine valves.
Mitsuba Corporation
According to a two-count felony charge, Mitsuba and co-conspirators engaged in a conspiracy, by agreeing during meetings and conversations, to rig bids for, and to fix, stabilize and maintain the prices of windshield washer systems and components, windshield wiper systems and components, starter motors, power window motors, and fan motors it sold to Chrysler, Honda, Subaru, Nissan and Toyota in the United States and elsewhere. According to the charge, Mitsuba and its co-conspirators carried out the conspiracy from January 2000 until February 2010. Mitsuba also agreed to plead guilty to one count of obstruction of justice, because of the company’s efforts to destroy evidence ordered by a high-level U.S.-based executive after learning of the U.S. investigation of collusion in the auto parts industry.
Mitsuba manufactures and sells numerous automotive parts to automobile manufacturers throughout the world. The affected auto parts perform an array of functions in automobiles. Windshield washer and wiper systems include a number of components and are designed to clear water or snow from vehicle windows. Starter motors are small electric motors used in starting internal combustion engines. Power window motors are small electric motors used to raise and lower vehicle windows. Fan motors are small electric motors used to turn radiator cooling fans.
Mitsubishi Electric Corporation (MELCO)
According to a one-count felony charge, MELCO and co-conspirators engaged in a conspiracy, by agreeing during meetings and conversations, to rig bids for, and to fix, stabilize and maintain the prices of automotive parts, including starter motors, alternators and ignition coils, it sold to Chrysler, Ford, General Motors, Honda, Fuji Heavy Industries Ltd. (Subaru), Nissan, and certain of their subsidiaries in the United States and elsewhere. According to the charge, MELCO and its co-conspirators carried out the conspiracy from at least as early as January 2000 until at least February 2010.
MELCO manufactures and sells automotive parts, including starter motors, alternators, and ignition coils. Starter motors are small electric motors used in starting internal combustion engines. Alternators generate an electric current while the engine is in operation. Ignition coils are part of the fuel ignition system and release electric energy suddenly to ignite a fuel mixture.
Mitsubishi Heavy Industries Ltd.
According to a one-count felony charge, Mitsubishi Heavy Industries Ltd. (MHI) and co-conspirators engaged in a conspiracy, by agreeing during meetings and conversations, to rig bids for, and to fix, stabilize and maintain the prices of compressors and condensers it sold to General Motors and Mitsubishi Motors North America in the United States and elsewhere. According to the charge, MHI and its co-conspirators carried out the conspiracy from at least as early as January 2001 until at least February 2010.
MHI manufactures and sells compressors and condensers. A compressor produces and circulates highly pressurized refrigerant gas throughout the car air conditioning system. A condenser cools the engine by condensing the refrigerant gas into liquid and releasing heat.
T.RAD Co. Ltd.
According to a one-count felony charge, T.RAD Co. Ltd. and co-conspirators engaged in a conspiracy, by agreeing during meetings and conversations, to rig bids for, and to fix, stabilize and maintain the prices of radiators it sold to Toyota and Honda and the prices of automatic transmission fluid warmers (ATF warmers) sold to Toyota in the United States and elsewhere. According to the charge, T.RAD and its co-conspirators carried out the conspiracy from November 2002 until February 2010.
T.RAD manufactures and sells heat exchangers, including radiators and ATF Warmers. Radiators are devices located in the engine compartment of a vehicle that cool the engine. ATF warmers are devices located in the engine compartment of a vehicle that warm the automatic transmission fluid.
Valeo Japan Co. Ltd.
According to a one-count felony charge, Valeo Japan Co. Ltd. and co-conspirators engaged in a conspiracy, by agreeing during meetings and conversations, to allocate the supply of, rig bids for, and to fix, stabilize and maintain the prices of air conditioning systems it sold to Nissan North America Inc., Suzuki Motor Corporation and Subaru, in the United States and elsewhere. According to the charge, Valeo and its co-conspirators carried out the conspiracy from April 2006 until February 2010.
Valeo was engaged in the manufacture and sale of automotive air conditioning systems, which are systems that cool the interior environment of a vehicle. Air conditioning systems, whether sold together or separately, are defined as automotive compressors, condensers, HVAC units (typically consisting of a blower motor, actuators, flaps, evaporator, heater core, and filter embedded in a plastic housing), control panels, sensors and associated hoses and pipes.
Gary Walker
According to a one-count felony charge, Gary Walker, a U.S. citizen and former executive of a U.S. subsidiary of a Japan-based automotive products supplier, engaged in a conspiracy to rig bids for, and to fix, stabilize and maintain the prices of seatbelts sold to Honda, Mazda, Nissan, Subaru and Toyota in the United States and elsewhere. According to the charge, Walker and his co-conspirators carried out the conspiracy from at least Jan. 1, 2003 until at least February 2010.
The following charges were filed today in U.S. District Court for the Southern District of Ohio in Cincinnati:
Jtekt Corporation
According to a two-count felony charge, Jtekt and co-conspirators engaged in a conspiracy, by agreeing during meetings and conversations, to allocate markets, to rig bids for, and to fix, stabilize and maintain the prices of bearings it sold to Toyota and electric powered steering assemblies it sold to Nissan, in the United States and elsewhere. According to the charge, Jtekt and its co-conspirators carried out the bearings conspiracy from 2000 until July 2011 and the steering assemblies conspiracy from 2005 until October 2011.
Jtekt manufactures and sells bearings and steering assemblies. Bearings are widely used in industry in numerous applications for many products. Bearings reduce friction and help components to roll smoothly past on another. Electric powered steering assemblies provide electric power to help the driver more easily steer the automobile. Electric powered steering assemblies link the steering wheel to the tires, and include the column, intermediate shaft and electronic control unit, among other parts, but do not include the steering wheel or tires.
NSK Ltd.
According to a one-count felony charge, NSK and co-conspirators engaged in a conspiracy, by agreeing during meetings and conversations, to allocate markets, to rig bids for, and to fix, stabilize and maintain the prices of bearings it sold to Toyota, in the United States and elsewhere. NSK manufactures and sells bearings. According to the charge, NSK and its co-conspirators carried out the conspiracy from 2000 until July 2011.
The following charges were filed today in U.S. District Court for the Northern District of Ohio in Toledo:
Yamashita Rubber Co. Ltd.
According to a one-count felony charge, Yamashita Rubber Co. Ltd. and co-conspirators engaged in a conspiracy, by agreeing during meetings and conversations, to rig bids for, and to fix, raise, and maintain the prices of automotive anti-vibration rubber products it sold in the United States and elsewhere to Honda Motor Co. Ltd., American Honda Motor Company Inc. and Suzuki Motor Corporation. According to the charge, Yamashita Rubber Co. and its co-conspirators carried out the conspiracy from at least April 2003 until May 2012.
Automotive anti-vibration rubber products are comprised primarily of rubber and metal, and are installed in automobiles to reduce engine and road vibration.
Tetsuya Kunida
According to a one-count felony charge, Tetsuya Kunida, a former executive of a U.S. subsidiary of a Japan-based automotive anti-vibration rubber products supplier, engaged in a conspiracy, by agreeing during meetings and conversations, to rig bids for, and to fix, raise, and maintain the prices of automotive anti-vibration rubber products. The conspiracy affected sales of automotive anti-vibration rubber products to Toyota Motor Corporation and other automakers in the United States and elsewhere. ccording to the charge, Kunida and his co-conspirators carried out the conspiracy from at least November 2001 until May 2012.
DENSO Corporation, Nippon Seiki Ltd., Tokai Rika Co. Ltd., Furukawa Electric Co. Ltd, Yazaki Corp., G.S. Electech Inc., Fujikura Ltd., Autoliv Inc., TRW Deutschland Holding GmbH, Diamond Electric Mfg. Co. Ltd., and Panasonic Corporation have already pleaded guilty. Fifteen individuals have been sentenced to pay criminal fines and to serve prison sentences ranging from a year and a day to two years each.
The companies and individuals are charged with price fixing in violation of the Sherman Act, which carries maximum penalties of a $100 million criminal fine for corporations and a $1 million criminal fine and 10 years in prison for individuals. 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. Additionally, Mitsuba was also charged with obstruction of justice, which carries a maximum penalty of a $500,000 criminal fine.
The charges are the result of 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 charges were brought by the Antitrust Division’s Chicago Office, New York Office, the National Criminal Enforcement Section, and the FBI’s Cincinnati, Cleveland, Detroit, New York and Washington Field Offices, with the assistance of the FBI headquarters’ International Corruption Unit.
ICAP Brokers Face Felony Charges for Alleged Long-Running Manipulation of LIBOR Interest Rates
Two former derivatives brokers and a former cash broker employed by London-based brokerage firm ICAP were charged as part of the ongoing criminal investigation into the manipulation of the London Interbank Offered Rate (LIBOR), the Justice Department announced today.
Darrell Read, who resides in New Zealand, and Daniel Wilkinson and Colin Goodman, both of England, were charged with conspiracy to commit wire fraud and two counts of wire fraud in a criminal complaint unsealed in Manhattan federal court earlier today. They each face a maximum penalty of 30 years in prison for each count upon conviction.
“By allegedly participating in a scheme to manipulate benchmark interest rates for financial gain, these defendants undermined the integrity of the global markets,” said Attorney General Eric Holder. “They were supposed to be honest brokers, but instead, they put their own financial interests ahead of that larger responsibility. And as a result, transactions and financial products around the world were compromised, because they were tied to a rate that was distorted due to the brokers’ dishonesty. These charges underscore the Justice Department’s determination to hold accountable all those whose conduct threatens the integrity of our financial markets.”
“These three men are accused of repeatedly and deliberately spreading false information to banks and investors around the world in order to fraudulently move the market and help their client fleece his counterparties,” said Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division. “Our criminal investigation of the manipulation of LIBOR by some of the largest banks in the world has led us from New York to London, to Tokyo, and other financial hubs around the globe. These important charges are just the latest law-enforcement action in the Criminal Division and Antitrust Division’s global LIBOR investigation, and reflect the Department’s continued dedication to detecting, and prosecuting, financial fraudsters who affect U.S. markets, whether they work at a bank, or a brokerage, and whether they carry out their fraud from a desk in the United States, or abroad.”
“The complaint unsealed today charges Colin Goodman, Daniel Wilkinson and Darrell Read for conspiring to manipulate benchmark interest rates that determined the profitability of their client’s trades,” said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. “In exchange for bigger bonus checks, the three defendants undermined financial markets around the world by compromising the integrity of globally used interest rate benchmarks. The Department continues to demonstrate its commitment to protecting the interest of American citizens in free and fair financial markets.”
“Corporate and securities fraud involving the manipulation of these rates causes a worldwide impact on trading positions and erodes the integrity of the market and confidence in Wall Street,” said Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office. “Unraveling such complex financial schemes is difficult and time consuming. Today’s charges are the result of the hard work of the FBI special agents and forensic accountants who dedicated significant time and resources to investigating this case.”
According to the criminal 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 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.
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 estimated at approximately $450 trillion.
According to allegations in the criminal complaint filed in this case, between July 2006 and September 2010, Wilkinson was a desk director employed in the London office of ICAP, where he supervised a group of derivatives brokers – including Read – specializing in Yen-based financial products. Generally, the desk’s clients were derivatives traders at large financial institutions, and the transactions brokered by Wilkinson, Read and others on the desk essentially consisted of bets between traders on the direction in which Yen LIBOR would move. Between July 2006 and September 2009, the desk’s largest client was a senior trader at UBS (UBS Trader) in Tokyo, to whom Read spoke almost daily. Because of the large size of the client’s trading positions, even slight moves of a fraction of a percent in Yen LIBOR could generate large profits. For example, UBS Trader once told Read that a 0.01 percent – or one basis point – movement in the final Yen LIBOR fixing on a specific date could result in $3 million profit for his trading positions. A significant part of both Read’s and Wilkinson’s compensation was tied to the brokerage fees generated by UBS Trader and paid to ICAP.
Goodman was a cash broker at ICAP’s London office during the relevant time period. In addition to brokering cash transactions, Goodman distributed a daily email to individuals outside of ICAP, including derivatives traders at several large banks as well as those responsible for providing the BBA with LIBOR submissions at certain banks. Goodman’s email contained what was termed his “SUGGESTED LIBORS,” purported predictions of where Yen LIBOR ultimately would fix each day across eight specified borrowing periods. Read and Wilkinson, along with Goodman himself, often referred to Goodman as “lord libor.”
The complaint alleges that Read, Wilkinson and Goodman, together with UBS Trader, executed a sustained and systematic scheme to move Yen LIBOR in a direction favorable to UBS Trader’s trading positions.
According to the criminal complaint, the primary strategy employed by Read, Wilkinson and Goodman to execute the scheme was to use Goodman’s “SUGGESTED LIBORS” email to disseminate misinformation to Yen LIBOR panel banks in hopes that the banks would rely on the misinformation when making their own respective Yen LIBOR submissions to the BBA for inclusion in the published fix. Rather than providing good faith predictions as to where Yen LIBOR would fix, Goodman instead often used his daily email to set forth predictions which benefitted UBS Trader’s trading positions.
Beginning in or about June 2007, Goodman was paid a bonus through the desk Wilkinson supervised, allegedly intended, at least in part, to reward Goodman for his role in their effort to influence and manipulate the published Yen LIBOR fix.
As a second strategy, Read and Wilkinson allegedly further agreed to contact interest rate derivatives traders and submitters employed at Yen LIBOR panel banks in an effort to cause them to make false and misleading submissions to the BBA at UBS Trader’s behest.
As alleged in the charging document, Read, Wilkinson, Goodman, UBS Trader, and other co-conspirators often executed their scheme through electronic chats and email exchanges. For example, on June 28, 2007, in an email message, Read told Wilkinson: “DAN THIS IS GETTING SERIOUS [UBS TRADER] IS NOT HAPPY WITH THE WAY THINGS ARE PROGRESSING . . . CAN YOU PLEASE GET HOLD OF COLIN AND GET HIM TO SEND OUT 6 MOS LIBOR AT 0.865 AND TO GET HIS BANKS SETTING IT HIGH. THIS IS VERY IMPORTANT BECA– — USE [UBS TRADER] IS QUESTIONING MY (AND OUR) WORTH.”
The complaint alleges that the defendants were aware of the effects that Goodman’s false and fraudulent “SUGGESTED LIBORS” had on submissions by Yen LIBOR panel banks. For example, on Nov. 20, 2008, Read asked UBS Trader, “you have a really big fix tonight I believe? if Colin sends out 6m at a more realistic level than 1.10 [%] i reckon [the two panel banks] will parrot him, it might mean 6m coming down a bit.” On the following day, Nov. 21, 2008, Goodman moved his suggestion for 6-month Yen LIBOR down by nine basis points. The two other banks mirrored Goodman’s suggestion, moving their 6-month Yen LIBOR submissions down by nine basis points.
According to allegations in the complaint, Read counseled UBS Trader how to most effectively manipulate Yen LIBOR. For example, UBS Trader told Read in a July 22, 2009, electronic chat that “11th aug is the big date…i still have lots of 6m fixings till the 10th.” Read responded to UBS Trader, “if you drop [UBS’s] 6m dramatically on the 11th mate, it will look v fishy… . I’d be v careful how you play it, there might be cause for a drop as you cross into a new month but a couple of weeks in might get people questioning you.” UBS Trader replied, “don’t worry will stagger the drops…ie 5bp then 5bp,” and Read told UBS Trader, “ok mate, don’t want you getting into [expletive].” UBS Trader again assured Read that UBS and two additional panel banks would stagger their drops in coordination, and Read concluded, “great the plan is hatched and sounds sensible.”
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 of the FBI’s Washington Field Office. The prosecution is being handled by Deputy Chief William Stellmach and Trial Attorney Sandra L. Moser of the Criminal Division’s Fraud Section and Trial Attorneys Eric Schleef and Kristina Srica of the Antitrust Division. Trial Attorneys Alexander Berlin and Thomas B.W. Hall, Law Clerk Andrew Tyler, and Paralegal Specialist Kevin Sitarski of the Criminal Division’s Fraud Section, along with Assistant Chief Elizabeth Prewitt and Trial Attorney Richard Powers of the Antitrust Division, and former Trial Attorney Luke Marsh 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 investigation. The Securities and Exchange Commission has also provided valuable assistance for which the Department is grateful. The Department also expresses its appreciation to the United Kingdom’s Serious Fraud Office for its assistance and ongoing cooperation. Various agencies and enforcement authorities from other nations are also participating in different aspects of the broader investigation, and the Department is grateful for their cooperation and assistance as well.
Finally, the Department acknowledges ICAP’s continuing cooperation in the Department’s ongoing investigation.
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.
Two Fujikura Ltd. Executives Indicted for Roles in Fixing Prices on Automobile Parts Sold to Subaru to Be Installed in U.S. Cars
A federal grand jury in Detroit returned an indictment against two Fujikura Ltd. executives for their roles in an international conspiracy to fix prices of auto parts used in automotive wire harnesses sold to Subaru and installed in U.S. cars, the Department of Justice announced today.
The indictment, filed today in U.S. District Court for the Eastern District of Michigan, in Detroit, charges Ryoji Fukudome and Toshihiko Nagashima, both Japanese nationals, with participating in a conspiracy to fix prices of automotive wire harnesses sold to Fuji Heavy Industries–an automaker more commonly known by its brand name, Subaru–for installation in automobiles sold in the United States and elsewhere.
Fukudome was employed by Fujikura as general manager of the Automotive Global Marketing Department from April 2001 to April 2006 and Nagashima was employed by Fujikura as manager of the Fujikura Wire Harness Center in Ohta, Japan, from July 1994 to April 2006, and as general manager of the Automotive Global Marketing Department from April 2006 to April 2009.
Fujikura is a Toyko-based manufacturer of automotive wire harnesses. Automotive wire harnesses are automotive electrical distribution systems used to direct and control electronic components, wiring and circuit boards. Fujikura pleaded guilty to its role in the conspiracy in June 2012, and was sentenced to pay a $20 million criminal fine.
The indictment alleges, among other things, that from at least as early as September 2005 until at least February 2010, Fukudome, Nagashima and their co-conspirators attended meetings in Japan to reach collusive agreements to rig bids and allocate the supply of automotive wire harnesses sold to Subaru. The indictment alleges that Fukudome, Nagashima and their co-conspirators had further communications to monitor and enforce the collusive agreements.
“International cartels targeting U.S. businesses and consumers pose a serious threat to our competitive market place,” said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. “The Antitrust Division is working closely with competition enforcers abroad to ensure that there are no safe harbors for executives who engage in international cartel crimes.” “Those who engage in price fixing, bid rigging and other fraudulent schemes harm the automotive industry by driving up costs for vehicle makers and buyers,” said John Robert Shoup, Acting Special Agent in Charge, FBI Detroit Division. “The FBI is committed to pursuing and prosecuting these individuals for their crimes.”
Fukudome and Nagashima are charged with price fixing 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 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 Fukudome and Nagashima, 11 companies and 18 executives have been charged in the Justice Department’s ongoing investigation into the automotive parts industry. To date, more than $874 million in criminal fines have been imposed and 14 individuals have been sentenced to pay criminal fines and to serve prison sentences ranging from a year and a day to two years each. One other executive has agreed to serve time in prison and is scheduled to be sentenced on Sept. 25, 2013.
The charges are the result of 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 charges were brought by the Antitrust Division’s National Criminal Enforcement Section and the FBI’s Detroit Field Office, with the assistance of the FBI headquarters’ International Corruption Unit.
9/18/2013 Business Week: AMR-US Airways Unions Meet U.S. Official on Merger Suit
9/18/2013 Business Week: AMR-US Airways Unions Meet U.S. Official on Merger Suit
GeyerGorey LLP’s Allen Grunes quoted in Washington Post: “AMR, US Airways Attack U.S. Merger Suit as Bad for Consumers.”
AMR, US Airways Attack U.S. Merger Suit as Bad for Consumers
David McLaughlin and Sara Forden
Sep 11, 2013 11:52 am ET
Sept. 11 (Bloomberg) — American Airlines and US Airways Group Inc. defended their proposed merger against a U.S. antitrust lawsuit, saying the combination would generate more than $500 million a year in benefits to consumers.
The combined airline will create an effective competitor to Delta Air Lines Inc. and United Continental Holdings Inc., the airlines said in filings yesterday in federal court in Washington arguing that the U.S. effort to stop the deal should be denied.
“It is the complaint — by interposing the heavy hand of federal and state regulation — which will lessen competition by precluding the market from creating new and competitive flight options for passengers,” Tempe, Arizona-based US Airways said.
The U.S. Justice Department, joined by seven states and the District of Columbia, are suing American parent AMR Corp. and US Airways to block the merger, arguing the tie-up would reduce competition and hurt consumers. U.S. District Judge Colleen Kollar-Kotelly has scheduled the case to go to trial beginning Nov. 25.
The U.S. and the attorneys general argue the proposed merger, by reducing the number of legacy carriers from four to three, would increase the likelihood of coordinated behavior among the airlines, leading to higher fares and fees and diminished service. American and US Airways can compete effectively on their own, the government has said.
Service Cuts
The main issue in the case is whether the merger would lead to cuts in service and increases in domestic fares, said Allen Grunes, a lawyer with GeyerGorey LLP in Washington who formerly worked in the Justice Department’s antitrust division.
“The American and U.S. Airways answers paint a picture of the merger as some kind of silver bullet that will miraculously transform the two companies into the greatest thing since sliced bread,” he said. “That’s more than a little optimistic, and it’s going to be tough for them to prove it.”
The merger, which would create the world’s largest airline, forms the basis for American’s plan to exit bankruptcy protection and pay creditors. Fort Worth, Texas-based AMR filed for bankruptcy in November 2011 and reached the merger agreement with US Airways in February.
“We believe this merger would result in consumers paying more for airfares and receiving less service,” Gina Talamona, a spokeswoman for the Justice Department’s antitrust division, said in an e-mail. “The department’s lawsuit seeks to maintain competition in the airline industry.”
More Competition
American said in its court filing that the deal with US Airways would create a more competitive airline industry that would give passengers more choices.
The U.S. complaint “concocts an imaginary narrative where airlines tacitly collude and where prices are higher than in the past, but the real facts are just the opposite,” American said.
US Airways said the U.S. complaint improperly focuses on maintaining the number of legacy carriers, “those airlines that, prior to 1978, endured the well-documented failure of federal regulation of routes and fares.” Those carriers are by most relevant measures the least financially successful companies in the industry, US Airways said.
Low-Cost Competition
The U.S. ignores the effect on the airline industry of low- cost carriers including Southwest Airlines Co. and JetBlue Airways Corp., according to the filing. The success of those airlines is the “most meaningful competitive development” in the industry since deregulation, US Airways said.
During the past 12 years, American lost $10.3 billion and US Airways lost $3.4 billion, according to the filing by US Airways. US Airways has been in bankruptcy twice in that period.
“Blocking the merger will not sharpen competition — it will prolong this cycle of crisis to the detriment of passengers, the employees of American and US Airways, and the communities the airlines serve,” US Airways said.
The case is U.S. v. US Airways Group Inc., 13-cv-01236, U.S. District Court, District of Columbia (Washington).
Southwest Seen Overlooked as U.S. Seeks to Block AMR Deal
“If the Justice Department defines Southwest and JetBlue out of the market, they’ve got to have good documentary and economic evidence to support that allegation,” said Grunes, the former Justice Department lawyer. Baer, the U.S. antitrust chief, “would not allow it to be in the complaint otherwise.”
Southwest Seen Overlooked as U.S. Seeks to Block AMR Deal
By Mary Schlangenstein
August 23, 2013 12:01 AM EDT
Law 360: DOJ’s Airline Merger Challenge Recalls AT&T Fight
DOJ’s Airline Merger Challenge Recalls AT&T Fight
GeyerGorey LLP Issues Updated Representative Matters List; Experience is Wide and Deep
Representative Matters
Our attorneys have led and participated in some of the highest profile matters in the past decade, both while in the government and in private practice. We have been involved in the most significant criminal cartel cases, the most important mergers, the most notable civil antitrust investigations, the largest procurement fraud cases, and game-changing antitrust cases that reached the United States Supreme Court. Our collective experience stands as a testament to our work ethic, our drive for excellence, and the trust and responsibility we have been given by our clients and the government.
International Cartels:
- Led investigation and prosecution of marine contractors engaged in conspiracy to suppress and eliminate competition to install deep sea oil platforms
- Led investigation and prosecution of international freight forwarders engaged in conspiracy to fix prices on international air cargo shipments
- Led investigation and prosecution of household-goods moving contractors engaged in conspiracy to fix prices for international moving services provided to Department of Defense
- Investigation and prosecution of graphite electrodes manufacturers
- Investigation and prosecution of ocean shipping companies
- Investigation and prosecution of a FTSE 250 engineering company that resulted in the indictment, extradition and conviction of its former chief executive
- Defended foreign construction company in investigation and prosecution of alleged billion-dollar bid rigging scheme, in related qui tam litigation, and in other related matters
- Defended foreign vitamin manufacturers in investigations and prosecutions of alleged international price-fixing agreements
- Defended foreign specialty chemical manufacturers in investigations and prosecutions of alleged international price-fixing agreements
- Defended U.S.-based executive of foreign company in criminal and civil litigation related to his alleged role in an international cartel to fix prices in the marine supply industry
- Defended foreign executive of foreign company in criminal and civil litigation related to his alleged role in the conspiracy to fix air cargo rates around the world
- Defended international freight forwarder in criminal litigation related to its alleged role in an international conspiracy to rig bids on U.S. military shipping contracts
- Investigation and subsequent prosecution of foreign vitamin manufacturers for price fixing conspiracy
Domestic Price Fixing and Bid Rigging:
- Defended electrical products manufacturer in first felony prosecution under the Sherman Act and in civil treble damage litigation
- Represented a class of nurses in litigation against a hospital association and a number of Arizona hospitals
- Represented the State of Ohio against a number of dairies for allegedly rigging bids of school milk
- Investigation and prosecution of highway paving contractors in multiple districts for bid rigging
- Investigation and prosecution of military insignia providers supplying the Army Air Force Exchange System with over 4,000 items of insignia
- Represented metal drum manufacturer in prosecution for price fixing
- Investigation of polypropylene bag manufacturers and that resulted in the prosecution of a manufacturer for Buy American Act violations and conspiracy to defraud
- Investigation and prosecution of nearly 40 cases against paving contractors for conspiring to rig bids in connection with federal and state highway and airport contracts
- Investigation and prosecution of an auction rigging conspiracy involving auto parts to by the Department of Defense at Defense Reutilization Marketing Offices (DRMO)
- Investigation and prosecution of multiple electrical construction contractors for conspiring to rig bids for major power wiring contracts associated with steel mills and waste water treatment plants
- Investigation and prosecution of multiple wholesale grocery companies and bid managers for rigging bids to school districts, hospitals and jails in southern Texas
- Investigation and prosecution of multiple dairies for rigging bids for school milk sold to districts in Louisiana
- Investigation and prosecution of crawfish processors for fixing prices paid to crawfish farmers and fishermen
- Investigation and prosecution of bribery conspiracy involving the reconstruction of the New Orleans levee system after Hurricane Katrina
- Investigation and prosecution of fire protective services company and its president
- Investigation and prosecution of an Iraq-based general construction bid rigging scheme
- Investigation and prosecution of conspiracy to solicit kickback scheme involving security services on a US Agency for International Development contract
- Investigation and prosecution of fuel theft from an overseas United States military facility
- Investigation and prosecution of a Europe-based scheme to defraud the Iraqi government by facilitating the fraudulent claim for payment of armored vehicles that were never delivered
- Represented individual accused of defrauding government defense agency out of hundreds of thousands of dollars of grant money
- Represented company accused of defrauding government by failing to supply vitamin-enriched food products with the proper level of enrichment
- Represented large computer software company in internal investigation of improper influence on government contracting process
General Criminal:
- Defended CEO and three closely-held companies in a multi-state racketeering and tax fraud prosecution
- Investigation and prosecution of multiple labor racketeering cases ranging from prosecutions of United Mine Worker Union officials for theft of union funds used to pay for the murder of a political opponent of the union president to the prosecution of two Boston-based racketeers for actions associated with their travel to California in connection with a union organizing effort at a San Rafael newspaper
- Investigation and prosecution of the mayor of a New Jersey town for taking bribes in connection with the permitting of a tank farm at the terminus point of a major Gulf Coast to East Coast pipeline
- Investigation and prosecution of the most prolific serial bank robber in United States history
- Investigation and prosecution of the murder for hire of a government witness and one of the largest cocaine importation conspiracies East of the Mississippi River
- Investigation and prosecution of numerous gun, drug and false identity cases
- Investigation and prosecution of multiple obstructions of justice, contempt, false statement, witness tampering and perjury cases arising out of grand jury investigations
- Investigation and prosecution of bank fraud cases
- Represented individuals before the District of Columbia Court of Appeals in appeals from criminal convictions (more than a dozen cases)
- Defended individual in intelligence community in investigation by DCIS for alleged violations of public corruption statutes (18 U.S.C §§ 207 & 208)
- Defended individual in criminal investigation by Inspector General of NASA
- Defended individual in federal bribery investigation
- Defended government contractor in investigation by the Inspector General of the Department of Agriculture
- Defended several regional hospitals in various unrelated federal investigations of allegedly fraudulent billing practices, Stark violations
- Represented hospital CEO in investigation of alleged Stark violations
- Represented pathology laboratory in healthcare fraud investigation
- Represented national healthcare company in investigation of allegedly criminal off-label marketing
- Represented various individuals in applications for presidential pardons
Mergers and Acquisitions:
- Represented Warner Music in connection with the proposed acquisition of EMI by Universal Music
- Represented DISH Network in opposition to the proposed acquisition of T-Mobile by AT&T
- Represented Merck in connection with its acquisition of Schering Plough
- Represented Simon Properties in connection with its acquisition of Prime Outlets
- Obtained antitrust clearance in the acquisition of Liquid Container by Graham Packaging
- Obtained consent decree against nuclear engineering firm which had acquired another firm with the same engineering specialty
- Represented major home healthcare provider in acquisition valued in excess of $500 million
- Represented pathology laboratory in merger valued in excess of $100 million
- Represented foreign mining company in acquisition of US coal mines valued over $1 billion
- Represented hospital management company in acquisition valued in excess of $500 million
- Represented individual in several acquisitions of stock each valued in excess of $100 million
- Represented major over-the-counter pharmaceutical company in four different acquisitions over several years whose values ranged from over $100 million to over $500 million
- Represented national restaurant chain in acquisition valued at about $1 billion
- Represented regional hospital chain in acquisition of a hospital valued above $50 million
- Represented hospital valued in excess of $100 million in sale to state hospital system
Civil Antitrust Matters:.
- Defended large telecommunications provider in three week trial for alleged exclusionary conduct directed towards telecom services resellers.
- Represented large telecommunications provider as plaintiff in case alleging monopolization of market for telecom switch software.
- Represented leading music copyright licensing organization in a decade-long investigation by the Department of Justice
- Led the investigation of Ticketmaster at the Department of Justice
- Led major, successful prosecution by United States Department of Justice of conspiracy among twenty-four leading market-makers in NASDAQ stocks, including Goldman, Sachs & Co. and J. P. Morgan Securities, Inc. who had conspired to maintain spreads between buying and selling prices of NASDAQ stocks
- Defended large telecommunications provider in multi-year litigation brought by competitive telecom carrier alleging monopolization of market for high speed data services
- Led successful investigation and prosecution of Salomon Bros Inc. and two hedge funds, Caxton Corporation and Steinhardt Partners, LP, to limit the supply of two-year Treasury notes to the “repo,” or “repurchase agreement,” market
- Successfully brought the Reagan Administrations ‘s first challenge to a merger (brewing industry)
- Successfully represented the United States in a litigated matter challenging field of use restrictions in patent licensing agreement in specialty chemicals
- Successfully represented the United States in challenge to professional rules of conduct limiting competition among accountants in Texas
- Successfully represented the United States in challenge to acquisition by Texaco, Inc. of an independent oil refining company
- Represented high-tech electronic service provider with respect to antitrust issues in a bet-the-company patent infringement case
- Represented sporting goods manufacturer in vacating a consent decree
- Represented leading music copyright pool in civil antitrust investigation leading to vacating of an earlier consent decree and modification of another consent decree
- Represented hospital CEO in litigation arising from denial of physician staff privileges
Antitrust Compliance Counseling:
- Advised large telecommunications provider on its price and product bundling
- Advised large telecom provider in connection with a joint venture of three carriers to entire the mobile payments market with mobile phones
- Advised major manufacturer of household appliances on antitrust compliance
- Advised major manufacturer of high-end kitchen appliances on antitrust compliance
- Advised major manufacturer of over-the-counter pharmaceutical on antitrust compliance
- Advised regional airport on state action doctrine and compliance with antitrust laws
- Advised national trade association on antitrust compliance and Noerr-Pennington doctrine
- Advised international shipping company on compliance regarding competition, fraud, and foreign corrupt practices
- Advised African government on contracting and anti-fraud and anti-corruption best practices
Other Civil Litigation:
- Represented Haiti in multinational investigation and litigation leading to the recovery of money stolen by its former president Jean-Claude Duvalier
- Represented developers in multiple appeals involving alleged illegal cooperative conversion terms
- Defended law firm in $10 million professional malpractice action
- Defended various healthcare providers in numerous different federal investigations of alleged fraud, related qui tam cases, and related whistleblower termination actions
- Defended CMS contractor in qui tam case
- Represented regional Medicare Advantage organization in suit against the U.S. Government
- Defended book distributor and publisher in defamation case
- Defended author in defamation case
- Represented gaming company in civil rights action relating to state gaming regulations
- Defended copyright and trademark owner in intellectual property litigation
- Defended local retailer of gray market goods in trademark infringement litigation
- Represented major multinational corporation in suit seeking refund of local corporate franchise tax
- Represented government contractor in appeal of denial of security clearance
- Defended employers in cases alleging violation of wage-and-hour statute
- Represented developers in multiple appeals involving alleged illegal cooperative conversion terms
- Defended employer in case alleging employment discrimination
- Defended employer in case alleging sexual harassment
- Defended employers in cases alleging unlawful discharge
Experience by Industry:
- Air Cargo
- Aircraft Parts (Domestic)
- Airlines
- Airport Contracts
- Automobile Dealers (Domestic)
- Airlines
- Asset Forfeiture
- Auction Rigging (Multiple Industries)
- Banking (International)
- Baked Goods (Domestic)
- Baking Soda
- Book Publishing
- Bridge Construction
- Carbon Products
- Caustic Soda
- Cell Towers (Domestic)
- Chemicals (Multiple Products, Domestic and International)
- Clothing and Textiles (Multiple Products, Domestic and International)
- Computer Software
- Construction (Domestic and International)
- Copyright and Trademark
- Dairy Products
- Deep sea Oil Platforms
- Democratization Programs
- Electrical Products
- Embassy Construction
- Engineering
- Export-Import Bank Clients (Multiple Industries, International)
- Food Service Contracts (Multiple Industries, Domestic and International)
- Financial Institutions (Domestic and International)
- Fire Protection Services
- Freight Forwarding (Domestic and International)
- Fuel Supply (Domestic and International)
- General Construction (Multiple Industries, Domestic and International)
- Government Contracts (Multiple Industries, Domestic and International)
- Graphite Electrodes
- Highway Construction
- Hospitals
- Housing Foreclosure Auctions (Domestic)
- Information Technology (Multiple Industries, Domestic and International)
- Industrial Gases (Domestic and Multiple Products)
- LIBOR
- Marine Contractors
- Medical Products (Multiple Products, Domestic and International)
- Metal Drums
- Military Insignia (International)
- Military Moving and Storage
- Mining and Related Products (Multiple Industries, Domestic)
- Motor Vehicles (Domestic)
- Municipal Bonds (Multiple Industries, Domestic and International)
- Nursing
- Ocean Shipping (International)
- Oilfield Supplies
- Pharmaceuticals (Multiple Products, Domestic and International)
- Polypropylene bags
- Rock Salt
- Seafood
- Security Contracts
- School District Contracts (Multiple Industries)
- Soda Ash
- Shipping (Multiple Industries, Domestic and International)
- Slag Removal
- Telecommunications
- Tobacco
- Translation Services
- Trucking
- US Agency for International Development Contractors and Grant Recipients
- Vitamins
- Warzone
- Waste Hauling
- Wholesale Groceries
- Wireless
- World Bank Contractors and Grant Recipients (International)
- Vitamins
Experience by Subject Matter:
- Antitrust (Civil and Criminal)
- Auction Rigging
- Bank Robberies (Domestic)
- Bank Fraud
- Bid-Rigging
- Bribery
- Buy American Act Violations
- Capital Crimes
- Cartels (Multiple Products, Domestic and International)
- Cash Smuggling (International, multiple procurements by multiple governments)
- Civil Merger and Non-Merger Cases (Multiple Products, Multiple Industries Domestic and International)
- Civil Rights Actions
- Competition Advocacy
- Contempt
- Contracting Fraud
- Corporate Defense (Multiple Industries, Domestic and International)
- Criminal Conspiracies
- Defamation
- Disaster Fraud
- Drug Cartels and Trafficking
- Embezzlement
- Employment Law
- False Claims
- False Statements
- Federal Trade Commission Matters
- Firearms and Weapons Offenses (Domestic and International)
- Foreign Corrupt Practices Act (FCPA) (Multiple Industries)
- Forgery
- Fuel Theft
- Grant Fraud (Multiple Industries, Multiple Agencies, Domestic and International)
- Hart-Scott-Rodino Pre-Merger Notification
- Health Care Fraud (Compliance, Organizational Defense, Whistleblowers)
- Kickbacks
- Identity Theft
- Intellectual Property
- Mail Fraud
- Market Allocation
- Mergers and Acquisitions
- Money Laundering (Multiple Industries, Domestic and International)
- Monopolies (Multiple Industries, Domestic and International)
- Murder for Hire
- Non-governmental Organizations (International)
- Obstruction of Justice
- Overseas Contingency Operations
- Perjury
- Presidential Pardons
- Price Fixing
- Procurement Fraud (Multiple Industries, Domestic and International)
- Professional Malpractice Defense
- Public Corruption
- Qui Tam Matters
- Racketeering
- Securities Fraud
- Stark Violations
- Tax Fraud (International, Domestic and State)
- Territorial Allocation
- Webb-Pomerene Organizations (International)
- Weapons Offenses (Domestic and International)
- Whistleblowers (Multiple Industries, Domestic and International)
- Wire Fraud
- Witness Tampering
“My take is this deal is dead” states Allen Grunes in Bloomberg: “AMR-US Airways Antitrust Suit Seen as Difficult to Settle”
From Bloomberg:
The challenge brought by the U.S. Justice Department can be compared with its lawsuit seeking to block AT&T Inc. (T)’s proposed takeover of T-Mobile USA Inc. in 2011, said Allen Grunes, an antitrust lawyer with GeyerGorey LLP. AT&T eventually dropped its bid for T-Mobile. “My take is that the deal is dead,” Grunes said. “Based on the complaint, this merger doesn’t look like it can be fixed with divestitures or slot sales.”
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AMR-US Airways Antitrust Suit Seen as Difficult to Settle