Following up on our initial DOJ extradition victory post last week, here is a more in-depth look at the recent developments in worldwide criminal antitrust cases, and notably their overlap with parallel corruption / fraud / FCPA investigations. Paul Hastings and Nortons Inc. – jointly covering North America, Europe, Asia, and Africa – have extensive experience handling the defense of competition-law and FCPA-based investigations into multi-national corporations and individual executives. The piece below was written by Jeremy Evans, partner in Paul Hastings’ D.C. office, and AAT editor Andreas Stargard, in Brussels.
The long-arm of the U.S. government and its increasing willingness to pursue foreign nationals for alleged violations of U.S. law was further in evidence last Friday when the Antitrust Division of the U.S. Justice Department announced (press release here) that it had extradited Romano Pisciotti, an Italian national, from Germany to the U.S. on a charge filed more than 3½ years ago that he participated in a price-fixing cartel involving the sale of marine hose.
Pisciotti is the first foreign national to be extradited to the U.S. purely for an antitrust charge, although he joins a large number of foreign nationals in recent years to have been charged criminally by the Division in cartel cases, many of whom have agreed to plea deals requiring them to serve time in U.S. prisons. The Antitrust Division is not alone in its pursuit of foreign nationals; the Fraud Division of the Justice Department has also pursued extraditions of foreign nationals for violations of the Foreign Corrupt Practices Act (“FCPA”) in recent years. Indeed, Pisciotti follows his countryman Flavio Ricotti, who, in 2010, also was arrested in Germany and extradited to the U.S. following his indictment on an FCPA charge. It is clear that in both antitrust cartel and FCPA investigations, the U.S. government is growing ever-confident in its power and ability to bring uncooperative foreign executives to the U.S. to face criminal charges in the U.S., even for conduct that occurred outside the U.S.
The Marine Hose Investigation
Pisciotti’s extradition is the latest chapter in the long-running marine hose cartel investigation. In May 2007, the Antitrust Division arrested eight foreign nationals traveling on business in the U.S. and charged them for their roles in an antitrust conspiracy involving the sale of marine hose used to transport oil. The Division’s investigation was part of a multi-national law enforcement effort that included the European Commission and the U.K.’s Office of Fair Trading and much of the conduct at issue was alleged to have happened overseas. In the years that followed, the Antitrust Division secured over $54 million in fines from five companies, and nine individuals served jail time arising from their alleged involvement in the cartel. Two of these dispositions are worth particular note. The first involved the separate plea agreements by Bridgestone Corporation and Misao Hioki, a Japanese executive, each of which agreed to plead guilty to both an antitrust charge for involvement in the alleged conspiracy, as well as an FCPA charge relating to corrupt payments to government officials in various Latin American countries. These appear to be the only instances in which either a company or an executive has pled to both antitrust and FCPA charges arising from the same investigation. The second involved three British executives arrested in the U.S. at the onset of the investigation. Under a unique arrangement, the three were charged and sentenced by authorities in both the U.S. and the U.K., but the U.S. plea deals permitted them to return to the U.K. where they served their prison sentences concurrently.
Prior to Pisciotti’s extradition, the last criminal disposition involving an executive in the marine hose investigation occurred in 2009. But, what was not publicly known until recently is that the Antitrust Division had secured a sealed indictment of Pisciotti in August 2010 alleging that he rigged bids, fixed prices, and allocated markets in the sale of marine hose. It was this indictment that led to Pisciotti’s arrest in Germany last June and the subsequent extradition proceedings. The Division likely followed the same procedure that it did with Ricotti in the earlier FCPA case, using Pisciotti’s sealed indictment to obtain an Interpol red notice, effectively an international arrest warrant. Under the principle of reciprocal or dual criminality, countries often will only extradite individuals to the U.S. if an extradition treaty exists between the two countries that requires a person’s conduct to be a crime in both countries. Bid rigging is a criminal offense in Germany, thus ensnaring Pisciotti transiting through Germany on business travel and leading to his arrest in a country prepared to extradite him. Pisciotti was flown to Miami on Thursday and arraigned in federal court the following day. He now faces charges that could result in a maximum of 10 years in prison and $1 million in criminal fines.
The U.S. Government and the Ever-Shrinking World
Bill Baer, the assistant attorney general of the Antitrust Division, heralded Pisciotti’s “first of its kind extradition” as a “significant step” in the Division’s cooperation efforts with foreign antitrust enforcers. And, while it marks a new frontier for the Division, it can also be viewed as merely the latest example of the aggressive approach taken by the U.S. government in recent years toward foreign executives in international cartel and bribery cases. A little over a decade ago, the Division agreed to permit foreign executives in cartel cases to plead guilty and serve prison sentences of just a few months. But the more recent plea deals announced in seemingly ever-expanding auto parts cartel cases have seen well over twenty foreign executives face up to two years in jail.
Our experience in these and other cases also teaches that the Antitrust Division will routinely seek U.S. prison terms for conduct that occurred not merely partially or largely outside the U.S., but indeed was wholly undertaken on foreign soil. The example of Pisciotti’s extradition powerfully reaffirms that executives now must worry about the possibility of being extradited to the U.S. if they refuse to cooperate with the Antitrust Division and plead guilty in a cartel investigation, even in situations where the conduct at issue occurred exclusively or mostly overseas. This is in part because an increasing number of countries have criminalized antitrust conduct, or are in the process of doing so, meaning that there are now more jurisdictions than ever willing to extradite an executive for cartel offenses, either at home or when traveling abroad, even in situations where a sealed indictment may leave the executive ignorant of any potential risk.
These same government tactics exist in bribery and FCPA cases. Flavio Ricotti and Ousama Naaman are but two examples of foreign nationals who were extradited to the U.S. in the last five years to face FCPA charges, each apprehended overseas after the U.S. government obtained an indictment in federal court, and each charged based on conduct outside of the U.S. It appears that the U.S. government will continue to take an aggressive enforcement approach toward uncooperative executives, further highlighting the concern for senior foreign executives and their companies caught up in cartel and FCPA investigations.