Executives Beware: The Long-Arm of the U.S. Government Strikes Again

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.

Jeremy P. Evans Andeas Stargard

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.

(Full PDF of article )

Ian Norris, then-CEO of Morgan Crucible, sentenced to serve 18 months in federal U.S. prison

Ian Norris, then-CEO of Morgan Crucible, sentenced to serve 18 months in federal U.S. prison

Source: BSO / via CBS Miami

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

AAG Bill Baer

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.

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Price-fixers beware: U.S. DOJ scores first-ever pure antitrust-based extradition from E.U.

From DOJ: First-Ever Pure Antitrust Extradition

In what may well affect African and other international price-fixers going forward, the spectre of U.S. extradition for criminal antitrust charges has been reinforced by the recent successful DOJ extradition request in the “Marine Hose” cartel.  An Italian national was extradited from Germany to face bid-rigging charges.

Ian Norris, then-CEO of Morgan Crucible, sentenced to serve 18 months in federal U.S. prison

Ian Norris, then-CEO of Morgan Crucible, sentenced to serve 18 months in federal U.S. prison

“First-ever”?! Some readers may recall the carbon products cartel and a certain Mr. Ian Norris, the then-Morgan Crucible chief executive, who had been extradited from the U.K. to the United States back in 2010.  Yet, that seven-year long procedure was based not a pure antitrust charge — rather, he was extradited on a technicality, if you will, namely the “obstruction of justice” charge, given the lack of reciprocal or dual criminality of the underlying price-fixing offense in the two countries at the time the competition offense had been committed in the early 1990s.  Norris’ 1 1/2 year prison sentence ended in November 2011.

The Marine Hose cartel extradition is different: In this case, the DOJ succeeded, for the first time ever, in securing an extradition solely on a competition-law offense being charged.

Source: BSO / via CBS Miami

What follows is the DOJ press release text (with added links):

WASHINGTON — Romano Pisciotti, an Italian national, was extradited from Germany on a charge of participating in a conspiracy to suppress and eliminate competition by rigging bids, fixing prices and allocating market shares for sales of marine hose sold in the United States and elsewhere, the Department of Justice announced today. This marks the first successfully litigated extradition on an antitrust charge.

Pisciotti, a former executive with Parker ITR Srl, a marine hose manufacturer headquartered in Veniano, Italy, was arrested in Germany on June 17, 2013. He arrived in the Southern District of Florida, in Miami, yesterday and is scheduled to make his initial appearance today in the U.S. District Court for the Southern District of Florida in Ft. Lauderdale, at 11:00 a.m. EDT.

“This first of its kind extradition on an antitrust charge allows the department to bring an alleged price fixer to the United States to face charges of participating in a worldwide conspiracy,” said Assistant Attorney General Bill Baer in charge of the Department of Justice’s Antitrust Division. “This marks a significant step forward in our ongoing efforts to work with our international antitrust colleagues to ensure that those who seek to subvert U.S. law are brought to justice.”

Marine hose is a flexible rubber hose used to transfer oil between tankers and storage facilities. During the conspiracy, the cartel affected prices for hundreds of millions of dollars in sales of marine hose and related products sold worldwide.

According to a one-count felony indictment filed under seal on Aug. 26, 2010, and ordered unsealed on Aug. 5, 2013, in U.S. District Court in the Southern District of Florida, Pisciotti carried out the conspiracy by agreeing during meetings, conversations and communications to allocate shares of the marine hose market among the conspirators; use a price list for marine hose in order to implement the conspiracy; and not compete for customers with other marine hose sellers either by not submitting prices or bids or by submitting intentionally high prices or bids, all in accordance with the agreements reached among the conspiring companies. As part of the conspiracy, Pisciotti and his conspirators provided information received from customers in the United States and elsewhere about upcoming marine hose jobs to a co-conspirator who served as the coordinator of the conspiracy. That coordinator acted as a clearinghouse for bidding information that was shared among the conspirators, and was paid by the manufacturers for coordinating the conspiracy. The department said the conspiracy began at least as early as 1999 and continued until at least May 2007. Pisciotti was charged with joining and participating in the conspiracy from at least as early as 1999 until at least November 2006.

Pisciotti is charged with violating the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million criminal fine for individuals. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

As a result of the department’s ongoing marine hose investigation, five companies, including Parker ITR; Bridgestone Corp. of Japan; Manuli SPa of Italy’s Florida subsidiary; Trelleborg of France; and Dunlop Marine and Oil Ltd, of the United Kingdom, and nine individuals have pleaded guilty.

The investigation is being conducted by the Antitrust Division’s Washington Criminal I Section, the Defense Criminal Investigative Service (DCIS) of the Department of Defense’s Office of Inspector General, the U.S. Navy Criminal Investigative Service and the Federal Bureau of Investigation. The U.S. Marshals Service and other law enforcement agencies from multiple foreign jurisdictions are also investigating or assisting in the ongoing matter. The Criminal Division’s Office of International Affairs provided assistance.