Transcript Law Seminars International The Corporate Leniency Policy

Law Seminars International
The Corporate Leniency Policy and
the 2004 Antitrust Criminal
Enhancement and Reform Act:
evaluating the race for leniency
Daniel Sasse of Crowell & Moring LLP
September 7, 2006
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Overview
I. Amnesty 101 – an overview
II. Start the Race or Circle the Wagons
III. the 2004 Antitrust Criminal
Enhancement and Reform Act
IV. Resources
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I. Amnesty 101
DOJ’s Corporate Leniency Program
• First one in the door receives a free pass
from criminal prosecution, no jail or fine.
• Benefits only available to first in.
• Amnesty is automatic if there is no preexisting investigation, no prosecutorial
discretion.
• Alternative amnesty available if
investigation is underway.
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I. Amnesty 101
Automatic Amnesty – Part A Amnesty
“Part A” amnesty or automatic amnesty will be granted if
before an investigation is begun, six requirements are met:
1. DOJ is not already aware of cartel from another source
2. The corporation, upon its discovery of the illegal activity being
reported, took prompt and effective action to terminate its part in
the activity. (prompt termination not reporting)
3. The corporation reports the wrongdoing with candor and
completeness and provides full, continuing and complete
cooperation to the Division throughout the investigation.
4. The confession of wrongdoing is truly a corporate act.
5. Where possible, the corporation makes restitution to injured
parties.
6. The corporation did not coerce another party to participate in the
illegal activity and clearly was not the leader in, or the originator
of, the activity.
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I. Amnesty 101
Alternative Amnesty – Part B Amnesty
If an investigation has begun, or if corporation had a leadership role,
Alternative or “Part B” Amnesty may be available if seven criteria
are met:
1. Corporation is first to come forward and qualify for leniency
2. DOJ does not yet have evidence that is likely to result in a sustainable
conviction
3. Company upon discovery of conduct “took prompt and effective action
to terminate its part in the activity” (prompt termination not reporting)
4. Report with candor and completeness and provides full, continuing and
complete cooperation to the Division throughout the investigation
5. Confession truly a corporate act
6. Where possible the corporation makes restitution to customers
7. The Division determines that granting leniency would not be unfair to
others, considering the nature of the illegal activity, the confessing
corporation's role in it, and when the corporation comes forward (burden
low if no investigation has begun).
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I. Amnesty 101
Individual Amnesty
•Directors, officers, and employees of a
corporation qualifying for automatic amnesty,
who come forward and cooperate, also receive
automatic amnesty.
•After an investigation begins employees
given serious consideration for lenient
treatment in exchange for their full
cooperation.
•Individual Amnesty also available separate
from corporate immunity.
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I. Amnesty 101
Clarifications from DOJ
1. Confidentiality: policy is to keep all information
and identity of applicant confidential.
2. Disclosure to Foreign Authorities: despite
bilateral cooperation agreements, DOJ will not
disclose to foreign agencies absent amnesty
applicant permission.
3. Leader or Originator: the language states the
leader or originator, co-leaders will qualify under
A6 and the more discretionary B7.
4. Termination of Activity: Does not require
disclosure, just termination. DOJ may request
continued involvement.
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I. Amnesty 101
Clarifications from DOJ
5. Expanding Scope of Conspiracy: Due to the need for
speed, companies often have not finished internal
investigations when applying for amnesty. If company or
individual discovers conspiracy was broader, but is
cooperating with DOJ amnesty will be expanded, usually
with addendum to amnesty letter.
6. Model Amnesty Letter:
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•
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Publicly available, insures transparency and predictability.
States application will not waive a-c privilege.
Former Employees: Technically not covered under policy, but
included in model letter and counsel can negotiate inclusion.
Letter is conditional requiring completion of agreement and
cooperation with DOJ.
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I. Amnesty 101
Additional Incentives
Amnesty Plus Results when a company negotiating a plea agreement
seeks to obtain lenient treatment by offering to disclose a second,
unrelated conspiracy.
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Receive full Amnesty in Second Cartel.
“Plus” an additional, higher discount for cooperation in first investigation.
Penalty Plus DOJ now takes the position that if a company fails to take
advantage of an Amnesty Plus opportunity DOJ will seek an increased
penalty. DOJ requests court consider the company's conduct as an
aggravating sentencing factor and will pursue a fine or jail sentence at or
above the upper end of the Guidelines range.
The Omnibus Question Participants in the program (or grand jury
witnesses) asked to disclose whether they are aware of any other cartel
activity with respect to other products in this or any other industry.
Participants faced with full disclosure or risk losing benefits of amnesty.
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II. Start the Race or Circle the Wagons
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II. The Race
1.
2.
3.
4.
5.
6.
Do you run the race?
Can you win the race?
What are the risks of doing nothing?
Look to other Jurisdictions?
Civil Litigation
What other skeletons are in the closet?
Customer Strategy
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II. The Race
Can you win the race?
It is not surprising that the Antitrust Division would
promote competition, and the greatest reward goes to
the one who wins the amnesty race.
– 10 minutes can make the difference
– US, Canada, Japan, Australia allow applicants
to put down “markers” even if investigation is
not complete.
– There may still be benefits in being second.
– 2004 Reform Act increases pressure to be first.
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II. The Race
Can you win the race?
The key question in considering whether you can win
the race is assessing how you learned about the illicit
activity and who else is aware of it?
– Does anyone outside of the company know?
– Does anyone outside of the cartel know?
– Does the DOJ know about the cartel?
– Do any employees have criminal exposure and
what is preventing them from seeking amnesty?
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II. The Race
Risks of Doing Nothing – will I get caught?
• With two amnesty applications a month, do you trust
your fellow conspirators? DOJ has repeatedly stated
the amnesty program is its most effective tool in
combating cartels, but it is not the only tool in the
arsenal.
• Investigative Tools of the DOJ include:
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informants
consensual monitoring
audio and video tape recordings
search warrants
International cooperation agreements
new: wire tapping
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II. The Race
Risks of Doing Nothing – what if I get caught?
Without a doubt the
single biggest
consideration is the risk
of jail time in the U.S.
and to a much lesser
extent other jurisdictions.
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II. The Race
Risks of Doing Nothing – what if I get caught?
DOJ has made international cartels a priority.
DOJ has stepped up fines and jail sentences.
• Since the beginning of 1997 $3 billion in fines.
• $500 million fine in vitamins of single defendant
highest ever criminal fine.
• 100 years of criminal sentences
• 107 individual defendants with jail terms
• 40 individuals with sentences longer than a year
• 90 foreign individuals subject to criminal prosecution
• 50 plus grand juries currently impaneled.
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II. The Race
Risks of Doing Nothing – what if I get caught?
2004 Antitrust Criminal Penalty Enhancement
Act has increased the risk of doing nothing.
1. It increased the maximum jail term for
individuals from 3 years to 10 years.
2. It increased the maximum criminal fines for
companies from $10 to $100 million.
3. It increased the maximum fine for
individuals from $350,000 to $1 million.
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II. The Race
Consideration of other jurisdictions
• DOJ policy statement is to maintain confidentiality
and will not share with foreign agencies, despite
cooperation agreements.
• Still must consider disclosure in all relevant
jurisdictions with direct sales.
– You may have to or choose to disclose publicly
– DOJ will progress with investigation of others and that
information will not remain confidential
• List of aggressive jurisdictions is growing. At a
minimum, Canada, EU, U.K., Australia, and Japan
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II. The Race
Civil Litigation
• Largely a US phenomenon.
• Despite the passage of European Commission
Regulation 1/2003, the publication of the European
Commission’s recent Green Paper on Damages
Actions for Breach of the EC Antitrust Rules, and
repeated encouragement from Commissioner Kroes
still very little private enforcement outside of the US.
• US Courts also appear less willing to extend
jurisdiction to wholly foreign purchases, for foreign
purchases (addressed in the Empagran discussion).
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II. The Race
Civil Litigation
The risk of US litigation, however, can be substantial and can
overshadow the combined criminal fines from all global
agencies. Companies must consider:
– Mere reports of an investigation or dawn raid will trigger US lawsuits
– Plaintiffs’ bar recognizes that pleas are negotiated and civil suits may
expand, years, products, and regions of cartel.
– Oral presentations and carefully limiting application
– Companies inevitably face protracted and multi-tracked litigations
• Direct class actions in federal court
• Indirect class actions brought under Illinois Brick repealer statutes
• Follow-on or opt-out litigation, usually from large customers who choose
to proceed separately from the class actions
• State Attorneys General may also bring parens patriae actions to recover
on behalf of their citizens for indirect purchaser damages.
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II. The Race
Other skeletons in your closet
Companies must also consider the web or any
other conspiracies and the snowball effect of
the disclosures that will be required by:
– Amnesty Plus,
– Penalty Plus, and
– The Omnibus Question
Similarly, one must consider how disclosures
by other cartels members, even in other
jurisdictions, will impact your company.
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II. The Race
Customer Strategy
You must assume that your key customers will learn of
the illegal activity.
• Will you have to make public disclosures and do you have a
public relations team in place?
• Does the illicit activity affect a large range of customers or a
finite number with an existing relationship?
• Do you sit back and wait or do you approach your own
customers?
• Do you have to consider approaching your competitors
customers even if you didn’t sell to them?
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III. 2004 Antitrust Criminal Penalty
Enhancement and Reform Act
The Act is designed to both support criminal
prosecution and to encourage participation in
the Amnesty Program. The Act:
• Increases The Risk of Not Seeking Amnesty
• Increases The Reward of Receiving Amnesty
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III. 2004 ACPERA
Carrot and a Stick
Criminal Penalties Are Increased
• Maximum jail sentence increased from 3 to 10 years
• Maximum individual fine increased $350,000 to $1 million
• Maximum corporate fine increased from $10 million to
$100 million
The Rewards For Cooperation Are Increased for
Amnesty Applicant
• Damages are de-trebled
• Joint and several liability eliminated
• Five year sunset provision (2009) for amnesty inducements
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III. 2004 ACPERA
Protection for Amnesty Applicants
The Act limits civil plaintiffs to single (de-trebled)
damages in claims against amnesty applicants for the
following types of claims:
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conduct alleged to violate Sherman Act section 1 or 3
or any similar state law
applies to parens patriae suits
does not de-treble damages suffered by State entities
does not de-treble damages brought by federal government
under the False Claims Act
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III. 2004 ACPERA Cooperation Requirements for Applicants
In order to received reduced liability, the amnesty
applicant must cooperate with plaintiffs in the followon civil litigation.
Does the Act require amnesty applicants to
cooperate with the civil litigants? The defense bar
has taken the position that amnesty applicants can
forfeit the de-trebling and joint-and-several liability
protections and refuse to cooperate. The plaintiffs bar
has argued that such refusal should revoke the
applicants amnesty with the DOJ and subject the
company to prosecution, arguing that the Act in
essence made cooperation mandatory.
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III. 2004 ACPERA Cooperation Requirements for Applicants
The court in which the civil litigation is pending must
determine whether the applicant has provided
“satisfactory cooperation” with respect to the
following:
• Whether applicant provided plaintiffs a full account of all
known facts.
• Whether applicant furnished all documents.
• Whether applicant used best efforts to secure and facilitate
cooperation from current and former employees for
interviews, depos, and court proceedings.
• The timeliness of the applicant’s cooperation is also
relevant, including whether DOJ or a state issued
compulsory process prior to the cooperation or whether
private plaintiffs had initiated an action.
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III. 2004 ACPERA New Issues for Consideration
1.
2.
3.
4.
5.
Retroactivity
Judicial Application
Do you have to cooperate
When does the obligation begin
Increased importance of amnesty letter even
if no prosecution
6. New Customer Strategy
7. The Shifting Dynamic of who will settle.
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