1. John W. McReynolds Assistant Chief, New York Field Office Antitrust Division, U.S. Department of Justice Judicial Training Program Moscow, Russia July 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

2. 2 Program Topics U.S. Cartel Settlements & Penalties U.S. Leniency Program

3. 3 U.S. Cartel Settlements and Penalties

4. 4 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

5. 5 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

6. 6 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

7. 7 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?

8. 8 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

9. 9 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

10. 10 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

11. 11 U.S. Cartel Penalties

12. 12 U.S. Cartel Penalties

13. 13 U.S. Cartel Penalties

14. 14 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)

15. 15 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

16. 16 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

17. 17 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

18. 18 U.S. Cartel Penalties

19. 19 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

20. 20 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

21. 21 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 )

22. 22 U.S. Leniency Program: The Benefits of Leniency Most effective investigative tool Amnesty applicants are best source of evidence Case generator

23. 23 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

24. 24 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.

25. 25 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 criminal antitrust investigation has already begun).

26. 26 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

27. 27 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

28. 28 U.S. Leniency Program: Confidentiality Policy Division will treat as confidential the identity of leniency applicants and any information obtained from the applicant.

29. 29 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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