John W. McReynoldsAssistant Chief, New York Field Office

Antitrust Division, U.S. Department of Justice

Judicial Training ProgramMoscow, RussiaJuly 8-9, 2010

To be used for training purposes only. The views expressed in this presentation are not necessarily those of the United States Department of Justice

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Program Topics

• U.S. Cartel Settlements & Penalties• U.S. Leniency Program

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U.S. Cartel Settlements and Penalties

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U.S. System of Negotiated Plea Agreements

Benefits of Plea Agreement to the Division include:

• Obtain cooperation

• Expedite and advance investigations

• Resolve cartel cases quickly without the need for litigation

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U.S. System of Negotiated Plea Agreements

Benefits of Plea Agreement to the Defendant include:

• A degree of certainty about the sentence

• Rewards for early cooperation

• Final and definitive resolution of the matter

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U.S. System of Negotiated Plea Agreements

Plea Agreement Basics:

• Defendant must admit to participation in the charged conduct

• Defendant must waive certain rights (e.g., right to be charged by Indictment; right to plead not guilty)

• Defendant must agree to cooperate fully

• Plea Agreement is disclosed in open court

• Plea Agreement must be in writing

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U.S. System of Negotiated Plea Agreements

Key Issues in plea negotiations in cartel cases:

1. Who will have to plead guilty?

2. What violations will be charged?

3. What will be the scope of the antitrust charge?

4. What cooperation will the defendant provide?

5. What will be the sentencing recommendation of the parties?

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U.S. CARTEL MAXIMUM PENALTIES

Corporation: • $100 million fine

Individual: • $1 million fine and 10 years in prison

Alternative Maximum Fine per 18 U.S.C. § 3571(d): Twice the pecuniary gain from the crime or twice the pecuniary loss to the victims of the crime, whichever is greater

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U.S. Cartel Penalties

• Sentencing goals: punishment and deterrence; incentives for corporations

• Fines against corporate defendants based on seriousness of offense & culpability of organization

• Jail is the most effective deterrent and

punishment for individuals

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U.S. Cartel Penalties

Antitrust Division’s Record of Deterrence

• Jail sentences – record highs

in incarceration rates

• Over $ 1 billion in corporate fines imposed

in fiscal year 2009

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U.S. Cartel Penalties

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U.S. Cartel Penalties

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U.S. Cartel Penalties

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U.S. Cartel Penalties

Sentences for antitrust offenses• DOJ prosecutors recommend sentences based on

United States Sentencing Guidelines

• Sentencing Guidelines are advisory, not mandatory, but court must still consider them

– United States v. Booker, 543 U.S. 220 (2005)

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U.S. Cartel Penalties

Factors considered for sentencing include

For Individuals and Corporations:

• Offense of conviction

• Defendant’s volume of affected commerce (antitrust)

• Defendant’s criminal history

• Defendant’s role in the offense

• Any obstruction of justice, including perjury

• Defendant’s cooperation – “substantial assistance” may reduce sentence

• Defendant’s acceptance of responsibility

Also for Corporations:

• Size of the organization

• Involvement of high-level personnel in the offense

• Compliance and ethics program

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U.S. Cartel Penalties – Example: Individual

Assume:

1. Corporation had sales of $300 million of affected product

during the duration of the conspiracy

2. Agreement was to rig bids

3. Defendant was an organizer that involved 5 or more participants (aggravating role)

4. Defendant destroyed documents (obstruction of justice)

5. Defendant pleaded guilty before trial

6. Defendant had no prior convictions

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U.S. Cartel Penalties – Example: Individual

1. Base offense level - antitrust: 12

2. Bid-rigging: + 1

3. Volume of commerce

> $250 million, < $500 million +10

4. Organizer, > 5 participants + 4

5. Obstruction + 2

6. Acceptance of responsibility - 3

7. No criminal history ____

TOTAL 26

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U.S. Cartel Penalties

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U.S. Cartel Penalties – Example: Corporation

Assume:

1. Corporation had sales of $300 million of affected product

during the duration of the conspiracy

2. Corporation had 1,000 employees

3. High level executive participated in the cartel

4. Corporation accepts responsibility by pleading guilty prior to the start of a trial

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U.S. Cartel Penalties – Example: Corporation

1. Base fine: 20% of $300 million, or $60 million

2. Culpability score

(1) start with 5 points

(2) add 4 points, more than 1,000 employees and high level executive participated

(3) subtract 2 points, acceptance of responsibility

Total = 7, Minimum multiplier is 1.4, Maximum multiplier is 2.8

Minimum fine = $60 million x 1.4 = $84 million

Maximum fine = $60 million x 2.8 = $168 million

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U.S. Leniency Program: Basics

• Leniency means full immunity

• Leniency is only available to first company to qualify

• Leniency is only available for horizontal hard core conduct (e.g., price-fixing, bid-rigging, customer/market allocation)

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U.S. Leniency Program: The Benefits of Leniency

• Most effective investigative tool

• Amnesty applicants are best source of evidence

• Case generator

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U.S. Leniency Program: Incentives for Cartel Participants

• Company avoids criminal fine

• Cooperating directors, officers, employees avoid fine and jail

• Detrebling of civil damages

The catch: Only first to qualify gets it

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1993 Revision of Antitrust Division’s Leniency Program

1. Leniency is automatic before an investigation has begun as long as the applicant meets all criteria.

2. Alternative leniency is available even after an investigation has begun if certain criteria are met.

3. All cooperating Directors, Officers, and Employees of qualifying corporation also receive leniency.

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Corporate Leniency Policy

Two types of corporate leniency are available:

1. Part “A” Leniency: Granted before a criminal antitrust investigation has begun.

2. Part “B” Leniency: Available if an applicant cannot meet all requirements of Part “A”leniency (e.g., the applicant reports the activity after a criminalantitrust investigation has already begun).

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Corporate Leniency: Key Conditions

• Policy requires applicant not be “the leader in, or originator of” the illegal activity.

• The corporation, upon its discovery of the illegal activity being reported took “prompt and effective action to terminate its part in the activity.”

• Obligation to cooperate throughout investigation

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U.S. Leniency Program: Leniency Steps

1. Applicant seeks leniency by approaching Division

2. Division confirms leniency is available

3. “Marker” given to secure place at front of line

4. Applicant “perfects” marker. Conditional leniency is granted and conditional leniency letter provided to applicant.

5. Investigation and prosecution of co-conspirators continues

6. Final leniency granted

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U.S. Leniency Program: Confidentiality Policy

• Division will treat as confidential the identity of leniency applicants and any information obtained from the applicant.

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U.S. Leniency Program: Lessons Learned

Leniency programs will only be effective to combat cartels if:

• Program is inclusive rather than exclusive

• Predictable and transparent enforcement policies

• Incentives to report– Coverage for related corporate entities/individuals– Confidentiality

• Leniency Policy is known to public– Antitrust Division website– Presentations to private bar

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