White Collar Litigation and Investigations Newsletter: Enhanced Sentencing for Criminal Antitrust Defendants: U.S. v. VandeBrake

by Pepper Hamilton LLP
Contact

[author: Jeremy D. Frey]

The Eighth Circuit’s recent decision in U.S. v. VandeBrake, 2012 U.S. App. LEXIS 8584 (8th Cir. 2012), which affirmed the sentence of Steven VandeBrake, provides prosecutors new support for seeking enhanced sentences in criminal antitrust cases.

VandeBrake was a criminal price-fixing and bid-rigging case brought under the Sherman Act. U.S. v. VandeBrake, 717 F. Supp. 2d 961 (N.D. Iowa 2011). Steven VandeBrake pled guilty and faced a sentence under the U.S. Sentencing Guidelines (Guidelines) of 21 to 27 months. The trial court about doubled VandeBrake’s sentence to 48 months. The upward variance in sentence was based on the court’s policy disagreement with the Guidelines and the defendant’s lack of remorse.

The trial court examined Guideline Section 2R1.1, which applies to Sherman Act offenses. Finding that the Sherman Act was intended to provide protection against the threat of harm to the "central nervous system of the economy," the court held that the harm caused by price fixing and bid rigging was at least as great, if not greater than, the harm caused by comparable conduct violating the fraud statutes. "[F]raud schemes target only discreet segments of the general population while antitrust violations go the heart of our economic free enterprise system ...." Id. at 1003.

The court compared Guideline Section 2B1.1, applicable to fraud and theft cases, with Section 2R1.1. Though Section 2R1.1 has a higher base offense level (12) than Section 2B1.1 (level 6 or 7), sentencing level increases for antitrust violations turn on the affected amount of commerce involved, while fraud guideline increases are based on the amount of actual or intended "fraud loss." As a result, the offense level for antitrust violations increases less rapidly than for fraud violations "in part because on the average the level of markup from an antitrust violation may tend to decline with the volume of commerce involved." Since VandeBrake’s crimes did not involve a declining markup due to volume, the court found no basis for the sentencing range to increase less rapidly than the offense level for fraud violations. Id. at 1005.

The court also complained that unlike the fraud guideline, Section 2R1.1 did not take account of relevant conduct under Section 1B1.3 nor was there any enhanced punishment for VandeBrake’s multiple conspiracies. In calculating the amount of the upward variance, the court used the higher base offense level of Section 2R1.1, while increasing the sentence by reference to the fraud loss table in Section 2B1.1. Along the way, the court controversially wondered if the antitrust guideline, and comparatively lower sentences for antitrust offenses, were not the result of an "explicit and/or implicit bias" favoring antitrust defendants who historically "were almost exclusively wealthy, white, Anglo-Saxon, protestant males who were politically well-connected." Id. at 1003. In justifying its sentence, the trial court closely tied its justification for an upward variance to the particular facts of VandeBrake’s crimes.

On appeal, VandeBrake centrally argued that his sentence was substantively unreasonable as the "longest sentence ever imposed in an antitrust case." 2012 U.S. App. LEXIS 8584 *19. The Eighth Circuit rejected the appeal and upheld the trial court’s variance based on its policy disagreement with Section 2R1.1. The Appeals Court found that the district court provided cogent reasons for comparing Section 2R1.1 to Section 2B1.1, and that the sentencing judge had "tied its policy disagreement to the specific facts involved in VandeBrake’s case." Id. at *18. One of the judges wrote to disavow the trial court’s references to the characteristics of antitrust defendants. A dissenting judge complained that the trial court simply created its own enhanced version of Section 2B1.1 for antitrust offenses, and impermissibly replaced Section 2R1.1 based on invalid reasons for its policy disagreement.

The sentence and opinions in VandeBrake will surely be used by prosecutors to support claims for enhanced punishment for antitrust defendants. Expect to see VandeBrake cited by the government in future antitrust criminal cases as grounds for sentences at the upper end of Section 2R1.1’s range, and less frequently for upward variances from Section 2R1.1. In such cases, defense counsel should be prepared to argue that the VandeBrake trial court’s view that Sherman Act offenses are the same as fraud crimes requires closer consideration.

In VandeBrake, the trial court explicitly regarded the defendants’ price fixing and bid rigging as forms of fraud, theft and even robbery.1 Robbery involves unlawful taking by use or threatened use of force or violence. Referring to a Sherman Act offense as akin to robbery is over the top. Theft is an unlawful taking without consent, and fraud requires a misstatement or omission of material fact. These elements of theft and fraud are absent in a pure Sherman Act violation.2

Fraud, theft and robbery are malum in se offenses, while a Sherman Act crime is malum prohibitum. The quality of a Sherman Act defendant’s venality is of a different and lesser nature; though the number is increasing, many countries around the world do not regard price fixing or bid rigging even as criminal offenses. Further, the fairness claims of fraud and Sherman Act victims are also different. A Sherman Act victim’s consent to engage in the purchase or sale of goods or services in a manipulated market still implies a willing buyer or seller at the manipulated price. A fraud victim’s consent to pay an inflated price is wholly eliminated by the material misrepresentation.

Though there are similarities between fraud and Sherman Act violations, there are also important differences for sentencing purposes. As a result, VandeBrake should not auger a recalibration of antitrust sentences under the Guidelines. In the past, upward variances in criminal antitrust cases have been rare indeed. After VandeBrake, they will continue to be rare, but perhaps less so.

Endnotes

1 "The defendants (sic) tools of their trade were not dark clothing worn in midnight burglaries facilitated by pry bars and screw drivers. Instead, in ordinary business attire and in the glare of broad daylight, they used the ordinary communication tools of modern commerce and business, cell phones, BlackBerries, and e-mail to rob their victims. Unlike the neighborhood thief who values high-end TVs, computers, jewelry, and furs, the defendants specialized in cold hard cash." 717 F. Supp. 2d at 966.

2 Of course, a Sherman Act case can also involve fraud as a result of such things as false legal compliance certifications in bid submissions, in which case Section 2B1.1 would apply to the fraud conviction.

 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Pepper Hamilton LLP | Attorney Advertising

Written by:

Pepper Hamilton LLP
Contact
more
less

Pepper Hamilton LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!