The Antitrust Division of the United States Department of Justice (DOJ) has become increasingly aggressive in its criminal enforcement in recent years. In its current investigation of the auto-parts industry, for example, the DOJ is predicted to net the largest criminal fines and jail sentences of any investigation in history. To date, seven companies and ten individuals have been charged, with more than $785 million in fines collected and seven individuals agreeing to go to jail. Yazaki Corporation, one of the seven companies involved in the case, agreed to pay $470 million for its role in the alleged auto-parts conspiracy. This is the second largest fine obtained for an antitrust criminal violation. Four executives of Yazaki also agreed to serve jail sentences ranging from 15 months to two years. Notably, a two-year sentence is the longest term of imprisonment ever imposed on a foreign national who voluntarily submits to the United States for an antitrust violation.
The DOJ also recently made headlines for its investigation of the TFT-LCD industry. In that investigation, the DOJ has charged eight companies and received over $890 million in fines as of the date of this alert. It also has charged 22 executives, with 12 of them receiving jail sentences. And the DOJ is not just seeking fines and sentences from large, multinational companies doing substantial business in the United States. In the last month alone, the DOJ entered into a plea agreement with TRW Deutschland Holding GmbH, a German-based subsidiary of TRW Automotive Holdings Corp., under which TRW agreed to pay a $5.1 million fine for conspiring to fix the prices of auto parts sold to two German automobile manufactures.
With the DOJ's increased criminal enforcement in mind, it may be a good time to refresh your understanding of the DOJ's criminal enforcement policies and practices. While there are certainly plenty of resources for staying up to speed on DOJ policies generally, there are several aspects of criminal antitrust practice that these resources may not address, particularly as related to the DOJ's criminal enforcement program. This alert outlines a "top ten" list of issues that antitrust defendants and their counsel should (but may not) know regarding the DOJ's criminal enforcement practice.
10. The Statute of Limitations Is Five Years, Sort of
The statute of limitations for criminal antitrust violations in the United States is five years, but there are several ways in which the DOJ may extend (toll) this statute of limitations period. One often-forgotten way is through discovery requests of foreign-located materials under Mutual Legal Assistance Treaties (MLATs). When the DOJ requests discovery of foreign located materials via the MLAT process, it tolls the statute of limitations period, and the DOJ may (and sometimes does) submit these requests in confidence, i.e., without informing the companies or individuals about whom the requests are being made. Because of this, it is important that companies and individuals under investigation know when and how to ask the DOJ whether such requests have been made.
9. The DOJ's Antitrust Division Does Not Control Where Individuals Go to Prison
The Bureau of Prisons has complete authority over where defendants will serve time, not the DOJ's Antitrust Division or the sentencing court. The sentencing court, at the request of the DOJ and the individual defendants, may recommend where to place an individual, but ultimately the Bureau of Prisons has the final say. If there is no availability in a minimum-security prison, the Bureau of Prisons may (and has) assigned individuals to maximum-security prisons. This could be an unpleasant surprise for many antitrust defendants, particularly foreign nationals who are not familiar with the United States. It is important for individual counsel to be mindful of this in negotiating any plea agreement with the DOJ.
8. Individuals May Be Able to Serve in Their Home Countries
Many countries have prison transfer treaties with the United States, and the DOJ may not object to an individual defendant's prison transfer request in some cases. The Office of Enforcement Operations (OEO) is responsible for this application process. Note that even when the application is expedited, it may take at least four months to process. If an individual is interested in pursuing this option with the DOJ, counsel should raise the topic early in plea negotiations.
7. Extradition Is More Than a Possibility (in Certain Cases)
With the increasing criminalization of antitrust offenses around the world, it is likely that the number of extradition requests also will increase. The DOJ has made it known that it will seek to extradite individuals for antitrust violations as well as for violations of other laws committed in connection with an antitrust violation, as in the case of Ian Norris from the United Kingdom.1 We suspect that extradition will occur next from Australia and Japan, although it is certainly possible for extradition to take place from any country where dual criminality and an extradition treaty with the United States exist. Indeed, the recent auto-parts investigation appears to provide a good opportunity for the DOJ to test the extradition process given the large number of foreign nationals being carved out of plea deals.
6. Being "Carved Out" Does Not Mean Indictment
More executives are being carved out of plea deals than ever before, including executives not at the core of the alleged conspiracy. For example, the DOJ is carving out individuals who have a relatively low-level position in the organization (and alleged conspiracy) for not cooperating with the investigation, individuals who were not candid in DOJ interviews, and former employees who simply cannot be located. Being carved out does not automatically lead to indictment, however. In fact, a significant percentage of carve-outs in recent investigations never were indicted.
5. Showing Up May Mean Packing Up
If the DOJ indicts a foreign national, the individual runs a significant risk when traveling or even when showing up for the arraignment because the DOJ takes the position that foreign national defendants must surrender passports pre-trial. The DOJ's reason is often that it will not be able to obtain discovery from the defendant if he or she leaves the country prior to trial, but it also protects the DOJ against the risk the defendant will flee and not return for trial.
4. Fines Can Total Up to Twice the Gain or Loss of the Entire Conspiracy
The DOJ uses the United States Sentencing Guidelines as the framework for calculating a company's fine in antitrust cases. In a plea situation, the agreed-upon fine can reach well over the $100 million statutory maximum, as demonstrated in several past investigations. Many companies agree to this, in part because they do not want to risk being sentenced to pay fines under the alternative fine statute, which allows fines up to twice the gain or loss of the alleged conspiracy. In calculating the fines, the DOJ will look to the gain or loss of the conspiracy as a whole, not just that of the defendant company on trial. In plea negotiations, on the other hand, the DOJ typically looks to the gain received by the defendant only (i.e., the defendant's revenues affected by the conspiracy or "volume of commerce" attributed to the defendant).
3. Is "Inability to Pay" Here to Stay?
In negotiating a plea and sentencing, a company may avoid paying the recommended fine (or get it reduced or deferred) if the company is not able to pay because of a weakened financial condition. Indeed, there have been numerous "inability to pay" claims in recent investigations. There are several potential reasons for this (e.g., increases in criminal fines sought by the DOJ, increased enforcement activity across jurisdictions leading to multiple fines for companies, and the recent global recession). Whatever the reasons, the DOJ now has a wealth of experience evaluating a company's financial ability to pay (it's worth noting that the DOJ uses a financial expert, Dale Zuehls, to conduct the analysis). If a company finds itself in an "inability to pay" situation, therefore, it should make sure that its counsel is experienced in making these cases to the DOJ.
2. Role in the Offensive—What Goes Up, Doesn't Go Down
The DOJ routinely looks to increase a defendant's jail sentence based on the individual's role in the alleged conspiracy. It does this by employing the "aggravating role provision" of the United States Sentencing Guidelines. A review of recent prosecutions revealed that the aggravating role provision increased the Guidelines' sentencing range by as much as 80 percent for some individuals. Yet, the DOJ has never decreased a defendant's jail sentence based on the individual playing a lesser role in the offense, despite the Guideline's advising that prosecutors do just that (i.e., use the Guidelines' "mitigating role provision"). As the DOJ seeks to carve out more individuals in plea agreements, the opportunity may arise for it to reconsider its position and use the "mitigating role provision" to decrease an individual's sentence.2
1. Grand Jury Subpoenas Can Require Productions of Documents Located Overseas
The DOJ's instruction to grand jury subpoenas often will state that the production of documents located outside the United States is voluntary. Companies should be mindful that while this has been DOJ policy for some time, it is still only a policy—not a legal requirement—and the DOJ could change it at any time. If the DOJ does change its policy to require documents located outside the United States, there still may be legal arguments for preventing access to those documents, stemming primarily from blocking statutes and privacy laws of other jurisdictions.