Editor: Please tell our readers about your practice area.
Sullivan: Jim and I focus primarily on cartels. We are part of a group that covers a full range of antitrust issues ranging from advising clients how to structure their business operations, to handling merger due diligence and antirust clearance, to undertaking internal investigations and responding to government investigations, to defending or prosecuting private antitrust lawsuits.
Some of the government investigations may be civil investigations being pursued by the Federal Trade Commission, the Department of Justice or state attorneys general. We also handle civil litigation in cartel cases, representing both defendants and plaintiffs. In criminal investigations, which are all handled by the Department of Justice, we represent corporate and individual clients. We also handle appeals, and often call on our King & Spalding colleague Paul Clement, the former Solicitor General of the United States, and his appellate group. Hence, our team can provide a client with a complete array of antitrust capabilities.
Editor: What is the relationship between curbing cartels and FCPA violations?
Griffin: Sometimes these two violations can go hand in hand. For instance, there might be a cartel that is allocating projects among the cartel members, while at the same time bribing public or private procurement officials to ensure that the winning bidder, which the cartel has designated, actually is awarded the project.
Editor: How do violations come to light?
Sullivan: Tips received by a company are an important source. An individual may call the company hotline, or an email review may result in a suspicious circumstance coming to the attention of one of the attorneys or the company's compliance officer. Suddenly the company has what may be a variety of violations. It may not know initially what violations it has, so it calls in outside counsel to assist in gathering and assessing the facts necessary to evaluate the situation. As Jim just said, it's conceivable that payments to foreign officials could be a facilitating device in pursuit of a cartel's goals. Violations may also be picked up in connection with routine audits by the internal auditors or the outside accountants.
This also may lead to bringing in outside counsel to conduct an investigation. Such investigations are likely to become joint in the sense that the auditors work with outside counsel and in-house counsel. They may find, for example, payments to a foreign official, which initially might appear to be an FCPA violation, but really are payments on behalf of the cartel to facilitate achieving the outcome wished by the cartel.
Griffin: Of course, Sarbanes-Oxley and the Antitrust Division's Corporate Leniency Policy have changed the landscape regarding how a company handles evidence of a violation if it is discovered. Sarbanes-Oxley put affirmative obligations on various functions within the company to report certain accounting and other violations and the Division's leniency policy encourages self-reporting by providing the first company to report a criminal antitrust violation amnesty from prosecution for the company and its cooperating executives. If the antitrust conduct also involves an FCPA violation, that aspect must be worked out with prosecutors in the Criminal Division Fraud Section. Often that requires the company to enter a separate deferred prosecution agreement, which generally includes the payment of penalties and the adoption of more stringent compliance policies and independent government-approved oversight for some period of time. In addition, the recently adopted Dodd-Frank Wall Street Reform and Consumer Protection Act increases the possibility that the government will find out about corporate criminal conduct by sweetening the bounty for potential whistleblowers. This increased likelihood that the government will find out about the conduct anyway, further incentivizes a company to self-report.
Editor: To what extent does the DOJ help U.S. companies that are the victims of cartels?
Sullivan: The reality is that DOJ can perform the service of being a "good guy" because through its enforcement, it uncovers either the antitrust violations or the FCPA violations of other companies. This may level the playing field in a competitive marketplace and allow companies to compete on the merits of their products and services.
Also, if you are a victim of the conduct and you're paying higher prices, the DOJ's prosecution of the violations will allow you to receive up to treble damages.
Editor: If you're representing a possible violator, what are the potential criminal charges?
Griffin: On the antitrust side, the main charge would be engaging in a conspiracy to fix prices, allocate markets or rig bids. The penalties there are quite substantial. The statutory maximum corporate fine is $100 million, but that can be, and often is, increased by the alternative fine statute, which can increase the maximum fine to twice the gain by the cartel or twice the losses inflicted by the cartel.
Individuals are also subject to criminal prosecution, and the statutory maximum penalty is a million-dollar fine. More importantly, the statutory maximum jail time is 10 years.
Sullivan: A successful prosecution also will trigger class actions and treble damage actions. Today's economy is much more international in scope than 20 years ago, and damages received by companies injured by an international cartel can include treble damages on a joint and several basis calculated on the entire revenues of the alleged cartel. Damages in such cases can, and often do, range into the hundreds of millions of dollars.
Griffin: As I mentioned earlier, the statutory maximum corporate fine is $100 million. Prior to 2004, it was $10 million. If you look at the 75 companies that have paid an antitrust fine of $10 million or more, the vast majority are headquartered or located outside the United States; and 16 foreign-located companies have paid fines of $100 million or more. The trigger for jurisdiction over cartel conduct that occurs outside the United States is whether it had or was intended to have an impact on U.S. commerce.
Editor: Does this trigger involvement by the international offices of King & Spalding?
Sullivan: Our international offices are very important in helping us represent companies, and an important aspect is the investigative work. Because of privacy laws in Europe, it's very difficult to manage an investigation that involves operations located in Europe solely in the U.S., because a lot of the necessary documentary evidence cannot be transferred to the United States without complying with certain privacy requirements, which can be cumbersome and certainly slow the process. The firm's international offices facilitate our ability to review and analyze that evidence without removing it from the European locations. We also are actively recruiting from the European Bar and soon expect to have substantial competition law expertise on the ground in Europe.
Editor: What leniency tools does the DOJ use?
Griffin: The Antitrust Division's corporate leniency policy puts great emphasis on self-reporting. It applies in situations that involve multiple corporate entities agreeing to fix prices or divide markets and sets out a transparent and predictable set of requirements for companies considering self-reporting. It's unique in that it provides a government agreement not to prosecute the company, so there will be no prosecution, no fine and no guilty plea. The policy also provides unique non-prosecution protection for corporate executives who agree to cooperate with the Division's investigation.
In addition, there has been a statute in place since 2004 that provides relief in civil cases from treble damages and joint and several liability for the amnesty applicant. It is quite beneficial because they are always subject to suit by the victims of the crime, even though it's not prosecuted by the government. But now, if amnesty applicants cooperate with the government and the victims in their litigation, they will be relieved of treble damages and joint and several liability. Liability will be limited to the damages caused by its sales.
In recent years, the Division has gone a little further by using an "amnesty plus" program. Let's say you are not the first to come forward in a particular investigation, but you are cooperating to reduce your fine on product A. As a result of your internal investigation, you subsequently discover that you were also fixing prices for product B. If you self-report the violation with respect to product B, you are eligible for amnesty, and in addition, the Division will lower the fine even further for product A.
To further incentivize companies to broaden the scope of their internal investigations, the staffs at the Division will ask all cooperating executives if they have been involved with other products or are responsible for other areas of the company. If they are, the staff will ask if they are aware of any illegal conduct or antitrust conduct in those situations, making it difficult for a company to limit its internal inquiry solely to the product under investigation or to decide not to self-report any additional illegal conduct it does discover.
Another program is called "penalty plus," in which a company pays an increased fine if it had the opportunity to self-report a violation it uncovered during its internal investigation, but failed to do so.
Editor: What happens to companies that don't self-report?
Sullivan: Let me give you an example. I had a situation where a company was served with a search warrant. The FBI showed up at two of its key executives' offices and took documents from them. We sat down with the senior management team and told them that if there is a problem and you are in fact involved in an illegal cartel, you need to let us know now because I can do two things: facilitate getting good-quality counsel for the individuals who may be involved and save the company fines in the range of a $100 million.
If you don't tell me now, I can guarantee that some of the people sitting in this room will go to jail, and that it's going to cost the company at least $100 million. The company officers involved in the conduct chose not to tell me.
Seven months later, the Justice Department filed a criminal information that laid out the conspiracy. Within two weeks, the chairman and CEO as well as the president of the client had resigned. The company paid a criminal fine to the United States of $110 million, it paid a fine to the European Commission of over $100 million and it spent another $150 million to resolve civil cases, and several of the company's former executives went to prison. The only reason the company got off so cheaply was because we worked to resolve those matters as quickly and as efficiently as possible, recognizing that otherwise, the company was going to go out of business. If the company had come forward earlier, it would have been a lot less expensive for it, and those individuals who went to jail may not have gone to jail or for as long.
Editor: Can you tell us about your participation in the Vitamins Antitrust Investigation and Litigation, the largest cartel action in antitrust history?
Sullivan: We actually were on different sides of that investigation. Jim was then the number two person in charge of criminal enforcement in the Antitrust Division, and he later became the person in charge. I defended one of the companies involved in the Vitamins case and was fortunate that my client was one of the few companies not charged criminally. We were able to successfully obtain summary judgment on a number of key issues for our client in the civil litigation, which facilitated the company's successful litigation in the European Commission and up to the European Court of Justice to get its fine reduced.
Jim got well over a billion dollars in criminal fines from the defendants, and a number of executives served time in U.S. prisons. It was the first case where a foreign individual went to jail in the United States. That investigation involved an amnesty applicant that was not prosecuted and whose executives did not go to jail. The next two companies that accepted responsibility and pled guilty paid fines of $500 million and $225 million. It shows how significant amnesty is.
Published November 2, 2010.
