Category Archives: Important Legal Filings

Panasonic Executive Indicted for Role in Fixing Prices on Automobile Parts Sold to Toyota to Be Installed in U.S. Cars

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A Detroit federal grand jury returned an indictment against a Panasonic Automotive Systems Corporation executive for his role in an international conspiracy to fix prices of switches and steering angle sensors sold to Toyota 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 that Shinichi Kotani, a Japanese national, participated in a conspiracy to suppress and eliminate competition in the automotive parts industry by agreeing to rig bids for, and to fix, stabilize, and maintain the prices of, switches and steering angle sensors sold to Toyota Motor Corporation and Toyota Motor Engineering & Manufacturing North America Inc. for installation in vehicles manufactured and sold in the United States and elsewhere.   Kotani is the Director of Global Automotive Marketing and Sales at Panasonic.

Panasonic is an Osaka, Japan-based manufacturer of automotive parts, including steering wheel switches, turn switches, wiper switches, combination switches, and steering angle sensors  .  Panasonic pleaded guilty in August 2013, to its role in the conspiracy and was sentenced to pay a $45.8 million criminal fine.

The indictment alleges, among other things, that from at least as early as January 2004 until at least February 2010, Kotani and his co-conspirators attended meetings to reach collusive agreements to rig bids, allocate the supply and fix the prices of switches and steering angle sensors sold to Toyota.  The indictment alleges that Kotani and his co-conspirators had further communications to monitor and enforce the collusive agreement.

“The Antitrust Division remains vigilant in its ongoing efforts to hold executives accountable when they engage in anticompetitive conduct that harms American consumers,” said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program.  “As a result of the Antitrust Division’s ongoing investigation into bid rigging and price fixing in the auto parts industry, 19 executives have been charged.”

“I am proud of the hard work done by the FBI agents and the Department of Justice attorneys who worked on this case,” said John Robert Shoup, Acting Special Agent in Charge, FBI Detroit Division.  “The global resources of the FBI are always ready to respond when these complex financial conspiracies threaten our national economy.”

Kotani is 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 Kotani, 11 companies and 19 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 jail 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.

Two Fujikura Ltd. Executives Indicted for Roles in Fixing Prices on Automobile Parts Sold to Subaru to Be Installed in U.S. Cars

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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

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9/18/2013 Business Week: AMR-US Airways Unions Meet U.S. Official on Merger Suit

http://www.businessweek.com/news/2013-09-18/amr-us-airways-unions-meet-u-dot-s-dot-antitrust-chief-on-merger-suit

UBS Securities Japan Co. Ltd Sentenced for Long-running Manipulation of Libor

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UBS Securities Japan Co. Ltd. (UBS Securities Japan), an investment bank, financial advisory securities firm and wholly-owned subsidiary of UBS AG, was sentenced today for its role in manipulating the London Interbank Offered Rate (LIBOR), a leading benchmark used in financial products and transactions around the world, the Justice Department announced.

UBS Securities Japan was sentenced by U.S. District Judge Robert N. Chatigny in the District of Connecticut.  UBS Securities Japan pleaded guilty on Dec. 19, 2012, to one count of engaging in a scheme to defraud counterparties to interest rate derivative trades by secretly manipulating LIBOR benchmark interest rates.  UBS Securities Japan signed a plea agreement with the government in which it admitted its criminal conduct and agreed to pay a $100 million fine, which the court accepted in imposing sentence.  In addition, UBS AG, the Zurich-based parent company of UBS Securities Japan, entered into a non-prosecution agreement (NPA) with the government requiring UBS AG to pay an additional $400 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 NPA reflects UBS AG’s substantial cooperation in discovering and disclosing LIBOR misconduct within the financial institution and recognizes the significant remedial measures undertaken by new management to enhance internal controls.

Together with approximately $1 billion in regulatory penalties and disgorgement – $700 million as a result of a Commodity Futures Trading Commission (CFTC) action; $259.2 million as a result of a U.K. Financial Conduct Authority (FCA) action; and $64.3 million as a result of a Swiss Financial Market Supervisory Authority (FINMA) action – the Justice Department’s criminal penalties bring the total amount of the resolution to more than $1.5 billion.

“This action, and the resulting sentence, prove that no individual or firm is above the law – no matter what,” said Attorney General Eric Holder.  “The Department of Justice will continue to stand vigilant against corporations or individuals who threaten the integrity of our financial markets, undermine the stability of our economy, or jeopardize the well-being of our citizens.  And, when supported by the facts and the law, we will never hesitate to use every tool and authority available to us to hold accountable those who illegally take advantage of others for their own financial gain.”

“Through its guilty plea and sentence, UBS has been held to account for deliberately manipulating LIBOR, one of the cornerstone interest rates in our global financial system,” said Acting Assistant Attorney General Mythili Raman of the Criminal Division.  “The $1.5 billion global resolution against UBS – of which this guilty plea and sentence are a critical element – is just one of several actions we have taken against financial firms throughout the world that sought to illegally influence LIBOR.  As we continue our active and ongoing investigation of the manipulation of LIBOR, our prosecutors and agents will continue to tenaciously follow the evidence wherever it leads.  Neither UBS, nor the individual UBS defendants we have charged in connection with this sophisticated scheme, nor any other bank or individual, is above the law.”

According to documents filed in these cases, 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 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.

LIBOR, published by the British Bankers’ Association (BBA), a trade association based in London, is 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.

Beginning in September 2006, UBS Securities Japan and a senior trader employed in the Tokyo office of UBS Securities Japan orchestrated a sustained, wide-ranging and systematic scheme to move Yen LIBOR in a direction favorable to the trader’s trading positions, defrauding UBS’s counterparties and harming others with financial products referencing Yen LIBOR who were unaware of the manipulation.  Between November 2006 and August 2009, the senior trader or a colleague of the senior trader endeavored to manipulate Yen LIBOR on at least 335 of the 738 trading days in that period, and during some periods on almost a daily basis.  Because of the large size of the senior trader’s positions, even slight moves of a fraction of a percent in Yen LIBOR could generate large profits.  For example, the senior trader once estimated that a 0.01 percent movement in the final Yen LIBOR fixing on a specific date could result in a $2 million profit for UBS.

According to the charging documents, UBS Securities Japan and the senior trader employed three strategies to execute the scheme: causing UBS to make false and misleading Yen LIBOR submissions to the BBA; causing cash brokerage firms, which purported to provide market information regarding LIBOR to panel banks, to disseminate false and misleading information about short-term interest rates for Yen, which those banks could and did rely upon in formulating their own LIBOR submissions to the BBA; and communicating with interest rate derivatives traders employed at three other Yen LIBOR panel banks in an effort to cause them to make false and misleading Yen LIBOR submissions to the BBA.

In entering into the NPA with UBS AG, the Justice Department considered information from UBS and from regulatory agencies in Switzerland and Japan demonstrating that in the last two years UBS has made important and positive changes in its management, compliance and training to ensure adherence to the law.  The Department received favorable reports from the FINMA and the Japan Financial Services Authority (JFSA) describing, respectively, progress that UBS has made in its approach to compliance and enforcement and UBS Securities Japan’s effective implementation of the remedial measures the JFSA imposed based on findings relating to the attempted manipulation of Yen benchmarks.

The investigation was conducted by the FBI’s Washington Field Office.  The prosecution is being handled by Deputy Chiefs Daniel Braun and William Stellmach and Trial Attorneys Thomas B.W. Hall and Sandra L. Moser, along with former Trial Attorney Luke Marsh, of the Criminal Division’s Fraud Section.  Assistant U.S. Attorneys Eric Glover and Liam Brennan of the U.S. Attorney’s Office for the District of Connecticut have provided valuable assistance.  The Criminal Division’s Office of International Affairs also provided assistance in this matter.

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.  The SEC has also played a significant role in the LIBOR series of investigations and, among other efforts, has made an invaluable contribution to the investigation relating to UBS.  The Department of Justice also wishes to acknowledge and thank FINMA, the Japanese Ministry of Justice, and the JFSA.  Various agencies and enforcement authorities from other nations also have participated in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the Department is grateful for their cooperation and assistance.

FORMER ALABAMA REAL ESTATE INVESTOR PLEADS GUILTY TO MAKING FALSE STATEMENT IN CONNECTION WITH REAL ESTATE FORECLOSURE AUCTION INVESTIGATION

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WASHINGTON — A former investor in the Alabama real estate foreclosure auctions  industry pleaded guilty today to one count of making false statements, the  Department of Justice announced.

Ali Forouzan, of Mobile, Ala., pleaded guilty in the U.S. District  Court for the Southern District of Alabama in Mobile to making materially false  and fictitious statements to a Special Agent of the FBI and a Department of  Justice Antitrust Division prosecutor.   The false statements were in regard to his knowledge of, and  participation in, bid rigging and other fraudulent schemes in the Alabama real  estate foreclosure auction industry.

According to the charge, in February 2012, Forouzan was interviewed, with  counsel present, about the fraudulent schemes under investigation.  Forouzan was aware of the nature of the  investigation and knew that it was material for the FBI and the Antitrust  Division to obtain his full knowledge of such unlawful acts as bid-rigging  agreements and other fraudulent schemes relating to real estate foreclosure  auctions; unlawful payoffs that he and others made and received in furtherance  of such schemes; and secret, second auctions in which Forouzan and others  participated.  However, Forouzan willfully  and knowingly provided false and fictitious information during his interview.

“The Antitrust Division views attempts to compromise the integrity of its  investigations as a serious offense,” said Bill Baer, Assistant Attorney  General in charge of the Department of Justice’s Antitrust Division.  “Today’s filing should send a clear signal  that the Antitrust Division is committed to prosecuting vigorously attempts to  cover-up illegal, anticompetitive conduct.”

“The success of this investigation exemplifies  the FBI’s continued commitment to fight fraud in the real estate industry and  serves to deter those who wish to illegally profit from fraud schemes,” said  Stephen E. Richardson, FBI Special Agent in Charge of the Mobile Field  Office.  Special Agent in Charge  Richardson praised the perseverance of agents and prosecutors in this complex  investigation.

Including Forouzan, to date, nine individuals and two companies have  pleaded guilty as a result of the department’s ongoing investigation into the  Alabama real estate foreclosure auction industry.

Forouzan faces a maximum penalty of five years in prison, three  years of supervised release and a $250,000 fine.

The charge against the defendant  arose from an ongoing investigation into bid rigging and other fraudulent  schemes in the Alabama real estate foreclosure auctions industry.  Anyone with information concerning bid rigging  or fraud related to public real estate foreclosure auctions should call  404-331-7116 or visit www.justice.gov/atr/contact/newcase.htm.

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

“No Show” Doctor Sentenced to 151 Months in Prison in Connection with $77 Million Medicare Fraud Scheme

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Gustave Drivas, M.D., 58, of Staten Island, N.Y., was sentenced to serve 151 months in prison for his role as a “no show” doctor in a $77 million Medicare fraud scheme.  The State of New York revoked Dr. Drivas’s medical license earlier this year.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Loretta E. Lynch of the Eastern District of New York, Assistant Director in Charge George Venizelos of the FBI’s New York Field Office and Special Agent in Charge Thomas O’Donnell of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) made the announcement.

Drivas was convicted by a jury on April 8, 2013, of health care fraud conspiracy and health care fraud after a seven-week trial.  He was acquitted of kickback conspiracy.  Including Drivas, 13 individuals have been convicted of participating in the massive fraud scheme, either through guilty pleas or trial convictions.  In addition to the prison term, U.S. District Judge Nina Gershon of the Eastern District of New York sentenced Drivas to three years of supervised release with a concurrent exclusion from Medicare, Medicaid and all Federal health programs, ordered him to forfeit $511,000 and ordered him to pay restitution in the amount of $50.9 million.

The evidence at trial showed that Drivas knowingly authorized his co-conspirators at a Brooklyn medical clinic to use his Medicare billing number to charge Medicare for more than $20 million in medical procedures and services that were never performed.  In return, he received more than $500,000 for his role in the scheme.  According to court documents, from 2005 to 2010, Drivas was the medical director of or a rendering physician at a clinic in Brooklyn that billed Medicare under three corporate names: Bay Medical Care PC, SVS Wellcare Medical PLLC and SZS Medical Care PLLC (collectively “Bay Medical clinic”).  The evidence established that Drivas was a “no show” doctor, who almost never visited the clinic except to pick up his check.  The evidence also showed that the clinic paid cash kickbacks to Medicare beneficiaries and used the beneficiaries’ names to bill Medicare for more than $77 million in services that were medically unnecessary and never provided.

The government’s investigation included the use of a court-ordered audio/video recording device hidden in a room at the clinic in which the conspirators paid cash kickbacks to corrupt Medicare beneficiaries.  The conspirators were recorded paying approximately $500,000 in cash kickbacks during a period of approximately six weeks from April to June 2010.  This room was marked “PRIVATE” and featured a Soviet-era poster of a woman with a finger to her lips and the words “Don’t Gossip” in Russian.  The purpose of the kickbacks was to induce the beneficiaries to receive unnecessary medical services or to stay silent when services not provided to the patients were billed to Medicare.

To generate the large amounts of cash needed to pay the patients, Drivas’s business partners and co-conspirators recruited a network of external money launderers who cashed checks for the clinic.  Clinic owners wrote clinic checks payable to various shell companies controlled by the money launderers.  These checks did not represent payment for any legitimate service at or for the Bay Medical clinic, but rather were written to launder the clinic’s fraudulently obtained health care proceeds.  The money launderers cashed these checks and provided the cash back to the clinic.  Clinic employees used the cash to pay illegal cash kickbacks to the Bay Medical clinic’s purported patients.

This case was investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York.  The case is being prosecuted by Trial Attorney Sarah M. Hall of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys William C. Campos and Shannon C. Jones of the Eastern District of New York.

The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.  Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Mastermind of $11 Million Detroit Medicare Fraud Scheme Sentenced to 50 Months in Prison

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Muhammad Shahab, the mastermind of an almost $11 million Medicare fraud scheme in Detroit, was sentenced today to 50 months in prison.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade, Special Agent in Charge Robert D. Foley III of the FBI’s Detroit Field Office and Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Chicago Regional Office made the announcement.

Shahab, 53, was sentenced by U.S. District Judge Denise Page Hood in the Eastern District of Michigan.  In addition to his prison term, Shahab was sentenced to three years of supervised release and was ordered to pay more than $10.8 million in restitution, jointly and severally with his co-defendants.    Shahab pleaded guilty to one count of health care fraud in February 2010.  According to information contained in plea documents, Shahab helped finance and establish two Detroit-area home health agencies, Patient Choice Home Healthcare Inc. (Patient Choice) and All American Home Care Inc. (All American).  Shahab admitted that while operating or being associated with both home health agencies, he and his co-conspirators billed Medicare for home health visits that never occurred.         Shahab admitted that he and his co-conspirators recruited and paid cash kickbacks and other inducements to Medicare beneficiaries in exchange for the beneficiaries’ Medicare numbers and signatures on documents falsely indicating that they had visited Patient Choice and All American for the purpose of receiving physical or occupational therapy.  Shahab admitted that a large number of the beneficiaries were neither homebound nor in need of any physical therapy services.       Shahab also admitted to securing physician referrals for medically unnecessary home health services through the payment of kickbacks to physicians or individuals associated with physicians.  Shahab employed several physical therapists and physical therapy assistants to sign medical documentation needed to begin billing for home health care services, including initial payments and payments for each visit to a Medicare beneficiary.  Shahab acknowledged that he knew the physical therapists and physical therapy assistants were not actually conducting a large majority of the visits or treating a large majority of the patients, and confessed to billing and receiving payment from Medicare for services not rendered or medically unnecessary services.         Between approximately August 2007 and October 2009, Shahab and his co-conspirators at Patient Choice and All American submitted approximately $10.8 million in claims to the Medicare program for physical and occupational therapy services that were never rendered or were medically unnecessary.    This case was investigated by the FBI, HHS-OIG and the Internal Revenue Service and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.  This case was prosecuted by Deputy Chief Gejaa Gobena, Assistant Chief Catherine Dick and Trial Attorney Niall O’Donnell of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion.  In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Former Airline Executive Sentenced to Prison for Schemes to Defraud Illinois-Based Ryan International Airlines

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A former executive of Ryan International Airlines, a charter airline company located in Rockford, Ill., was sentenced today to serve 87 months in prison and to pay restitution for participating in kickback schemes to defraud Ryan, the Department of Justice announced.

Wayne E. Kepple, the former vice president of ground operations for Ryan, was sentenced to serve 87 months in prison and to pay $529,998 in restitution.  On Nov. 4, 2011, Kepple pleaded guilty in U.S. District Court in West Palm Beach, Fla., to three counts of conspiracy to commit wire fraud and honest services fraud and three counts of wire fraud.  The charges against Kepple stem from a kickback scheme involving Robert A. Riddell, the former owner and operator of an airline security and ground service company, as well as separate kickback schemes involving David A. Chaisson, the former owner and operator of an Indiana flight management services company, James E. Murphy, the former owner and operator of a Florida aviation fuel supply company, and others.

Ryan provided air passenger and cargo services for corporations, private individuals and the U.S. government – including the U.S. Department of Defense and the U.S. Department of Homeland Security.

“Today’s sentence should serve as a stiff deterrent to executives who might be tempted to solicit a kickback from their supplies in exchange for their honest services,” said Bill Baer, Assistant Attorney General in charge of the Antitrust Division. “The Antitrust Division is committed to ensuring that contracts are won based on competition and not collusion.”

According to court documents, Kepple was in charge of contracting with providers of goods and services on behalf of Ryan and approving the invoices submitted by the providers to Ryan for payment. From October 2005 through at least August 2009, Kepple participated in three separate conspiracies in which he received kickback payments of more than $520,000 from Riddell, Murphy, Chaisson and others in exchange for Kepple awarding them Ryan airline services and fuel contracts.  According to court documents, the payments from Chaisson and Riddell included the proceeds of fabricated invoices submitted by their companies to Ryan.

As a result of the ongoing investigation, four individuals, including Kepple, have pleaded guilty and been sentenced to prison.  On Oct. 28, 2011, Murphy was sentenced to serve 23 months in prison and to pay $42,500 in restitution and Chaisson was sentenced to serve 16 months in prison and to pay $50,742 in restitution.  On Jan. 27, 2012, Riddell was sentenced to serve 24 months in prison and to pay $131,540 in restitution. Kepple’s 87-month sentence reflects his central role in multiple kickback schemes.

On Aug. 13, 2013, a fifth individual, Sean E. Wagner, and his company, Aviation Fuel International Inc. (AFI), a Florida-based airline fuel supply company, were indicted for participating in a conspiracy to defraud Ryan by making kickback payments to Kepple in exchange for awarding business to AFI.  That case is ongoing.

The investigation is being conducted by the Antitrust Division’s National Criminal Enforcement Section and the U.S. Department of Defense’s Office of Inspector General with assistance from the U.S. Attorney’s Office for the Southern District of Florida.  Anyone with information concerning anticompetitive conduct in the airline charter services industry is urged to call the Antitrust Division’s National Criminal Enforcement Section at 202-307-6694 or visit

GeyerGorey LLP’s Allen Grunes quoted in Washington Post: “AMR, US Airways Attack U.S. Merger Suit as Bad for Consumers.”

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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).

G.S. ELECTECH INC. EXECUTIVE INDICTED FOR ROLE IN BID RIGGING AND PRICE FIXING ON AUTOMOBILE PARTS INSTALLED IN U.S. CARS

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WASHINGTON — A federal grand jury in Covington, Ky., has returned an indictment against G.S. Electech Inc. executive, Shingo Okuda for his role in an international conspiracy to fix prices and rig bids of auto parts used on antilock brake systems installed in U.S. cars, the Department of Justice announced today. Today’s charge is the first to be filed in Kentucky in the department’s ongoing investigation into anticompetitive conduct in the automotive parts industry.

The indictment, filed today in the U.S. District Court for the Eastern District of Kentucky, charges Okuda, a Japanese national, with engaging in a conspiracy to rig bids for, and to fix, stabilize, and maintain the prices of speed sensor wire assemblies, which are installed in automobiles with an antilock brake system (ABS), sold to Toyota Motor Corp. and Toyota Motor Engineering and Manufacturing North America Inc. (collectively Toyota) in the United States and elsewhere.

G.S. Electech Inc. manufactures, assembles and sells a variety of automotive electrical parts, including speed sensor wire assemblies. The speed sensor wire assemblies connect a sensor on each wheel to the ABS to instruct it when to engage.

According to the charge, Okuda and his co–conspirators carried out the conspiracy by, among other things, agreeing during meetings and discussions to coordinate bids and fix prices of automotive parts submitted to Toyota. According to the charge, Okuda’s involvement in the conspiracy lasted from at least as early as January 2003 until at least February 2010.

“Today’s indictment marks the 16th executive to be charged in the Antitrust Division’s continuing investigation of price fixing in the auto parts industry,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s criminal enforcement program. “Holding individuals accountable for their actions is the surest way to deter executives from choosing to collude rather than to compete for business.”

“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.”

Okuda is charged with price fixing in violation of the Sherman Act, which carries a maximum sentence for individuals of 10 years in prison and a criminal fine of $1 million. 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 Okuda, 11 companies and 16 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 jail 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.

In May 2012, G.S. Electech Inc. pleaded guilty and was sentenced to pay a $2.75 million criminal fine for its role in the conspiracy related to speed sensor wire assemblies.

Today’s charge is 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. 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 FBI’s Detroit Field Office at 313-965-2323.