Executives Beware: Trends In Criminal Cartel Enforcement

Keywords: cartel enforcement, antitrust,

After racking up record corporate criminal fines in three of the last four years, one might think that the Antitrust Division of the Department of Justice ("DOJ") had made a strategic decision to focus more of its enforcement efforts on corporations and somewhat fewer resources on corporate executives. That would be wrong. Although DOJ's efforts to prosecute individuals may not always receive the same sort of publicity that its high-dollar corporate prosecutions and settlements do, the fact is that corporate executives never have been more squarely in DOJ's crosshairs than they are today.

DOJ's intense focus on individual executives, especially foreign nationals, is a relatively recent phenomenon. Although the United States has treated cartel activity as a crime for more than a century, it is only in the last 20 years that enforcement against individuals has been stepped up in a significant way. Price-fixing and bid-rigging were misdemeanors until 1974.1 Even after the United States made cartels felonious, business executives could still often secure no-jail-time deals. For business executives—especially foreign business executives, who generally faced little or no risk of extradition—the prospect of serving significant prison time for cartel offenses must have seemed remote.

For several years now, however, DOJ has been steadily escalating the pressure it places on executives. In the 1990s, as part of its leniency programs, DOJ adopted a series of carrots and sticks to convince foreign companies and their executives to plead guilty and to agree to serve prison time.2 In that same era, DOJ abolished "no jail time" plea agreements for foreign executives.3 DOJ also embarked on a remarkably successful global lobbying effort to convince other nations to criminalize cartel conduct.

As a result of these efforts, business executives who participate in cartels face greater prosecution risks today than ever before. Consider the facts:

In April of 2014, DOJ secured its first-ever extradition of an individual based solely on antitrust charges, which comes on the heels of its first-ever success in convicting foreign executives at trial for antitrust violations.4 At the end of 2013, DOJ convinced a federal judge to impose a five-year prison sentence, the longest ever in an antitrust case, against the former president of a shipping company. Since January 20, 2009, DOJ has prosecuted 372 individuals. At least 65% of these individuals were US citizens. 102 individuals were prosecuted in DOJ's real estate foreclosure investigations—all of whom were US citizens. Of the remaining 270 individuals, more than 50% were US citizens.5 In the ongoing investigation of the auto parts industry, DOJ has filed charges against 49 executives—a surprisingly large number when compared to DOJ's other recent international cartel investigations. In the cartel enforcement world, 2014 may be best remembered for the more than $1 billion in corporate criminal fines DOJ secured. That is a lot of money, no doubt. But in the long run, we may look back at 2014 as sort of a tipping point: the year that DOJ proved not only its intent to pursue individual executives who engaged in cartel conduct, but also its ability to do so effectively on a global basis.

First Extradition Solely for Antitrust Charges

In April 2014, DOJ announced that Germany had agreed to extradite Romano Pisciotti, an Italian citizen, to face US antitrust charges.6 Pisciotti is the first person ever to have been extradited to the US based solely on antitrust charges.

Pisciotti was an Italian-based executive at Parker ITR Srl ("Parker"). In 2010, Parker pled guilty to price fixing in the marine hose industry between 1999 and May 2007.7 (Four other companies and nine individuals also pled guilty to price fixing in that industry.)

In Parker's plea agreement, DOJ "carved out" Pisciotti (i.e., retained the right to prosecute him), who ran Parker's marine hose business from 1985 to 2006. Six months later, DOJ secured an indictment against Pisciotti, alleging that he participated in a global price-fixing conspiracy among manufacturers of marine hoses. Notably, DOJ filed the indictment under seal, presumably because Pisciotti refused to travel to the United States to face the charges.

DOJ then set out to try to secure Pisciotti's presence in the United States. Because Italy did not criminalize cartel conduct until after the events at issue in the case...