No More 'Free Pass' for Foreign Citizens

When a US company settles a criminal antitrust case by pleading guilty, the Justice Department (DOJ) now usually requires that at least one executive receive a prison sentence. But what about foreign companies? In the past, DOJ often prosecuted foreign companies, but not foreign executives. Prosecution of foreign executives raised questions of diplomacy, since the United States until recently was the only nation that made antitrust violations a crime. Then there was the practical problem of how to arrest a foreign citizen overseas. Besides, the Bureau of Prisons (BOP) policy was to deport non-violent, non-US citizens instead of housing them at US taxpayers' expense, and the Immigration and Naturalization Service (INS) barred foreign felons from the country.

The practical result of these collective DOJ policies was that a foreign citizen could conspire in price fixing that harmed the U.S. economy without risk of imprisonment. This began to change in 1994 when a Canadian who participated in a North American price fixing conspiracy went to jail in the US. Rumor has it that the BOP at first refused to admit the Canadian when he turned himself in at the United States Prison at Lewisburg, PA, so he spent his first night of “incarceration” at a local Holiday Inn, for which he received credit in his sentence.

Foreign Citizens Now Accountable

In the past decade, the Antitrust Division has prosecuted citizens of at least 16 foreign countries. More than one-third of the individuals investigated and prosecuted for antitrust violations since 2001 have been foreign nationals. Approximately 80% agreed to conviction and fines, but not prison sentences. The average fine imposed on foreign nationals over the last decade, excluding one exceptional $10 million fine, has been approximately $275,000. Often, the company reimburses the foreign executive and keeps him or her on the job ' unlike the prevailing corporate employment policy in the States. For most foreign executives, a fine paid by the employer is less than a slap on the wrist.

But foreign nationals are now going to jail for US antitrust violations in meaningful numbers. Since 1995, more than 20 have pled guilty and come to the United States to serve prison sentences, including citizens of France, Germany, Japan, The Netherlands, Norway, Sweden, Switzerland, and the United Kingdom.

Voluntary Surrender

All foreign citizens who have appeared in a US court to accept a financial penalty or prison sentence have appeared voluntarily. No extradition for a US antitrust violation has ever occurred. Indeed, several countries' laws ' most notably Japan, the UK, and Germany ' have at various times in the past 30 years expressly prohibited extradition of its citizens to the United States for antitrust violations. Even in the absence of such blocking statutes, extradition for an antitrust violation was virtually impossible for lack of “dual criminality.” The offense for which extradition is requested must also be a crime in the requested country, and no other country made antitrust a crime. That has begun to change, as a number of countries with close diplomatic relations with the United States, including Canada and the UK, have enacted statutes making individuals criminally liability for violation of these countries' competition laws.

Why do foreign nationals voluntarily appear in the United States to pay financial penalties or, more remarkably, serve a prison sentence, when extradition is unheard of? Defense counsel needs to know some answers when advising foreigners who are under investigation for antitrust violations.

First, the risk of extradition is growing. The UK states in the legislative history of its 2003 criminal antitrust statute that one purpose was to permit extradition to countries where antitrust offenses are criminal ' which is primarily the United States. Numerous other countries, notably Australia, France, Germany, and the European Union (which was enlarged to 25 countries as of May 1, 2004) have made statutory or policy changes demonstrating a new receptivity to US requests for extradition of individuals charged with antitrust offenses in the United States. In 2001, Interpol agreed to place individuals indicted in the United States for antitrust violations on its “Red Notice” list, which is essentially an international “wanted poster.” It can no longer be assumed that a non-US citizen indicted for an antitrust offense is safe from arrest as long as he or she stays outside North America.

Second, DOJ can and often does charge antitrust offenses as other crimes for which extradition is recognized by foreign nations. Most commonly, antitrust violations, which are contained in Title 15 of the United States Code regarding “Commerce and Trade,” are charged as mail fraud, wire fraud, or conspiracy violations contained in Title 18, “Crimes and Criminal Procedure.” All federal circuit courts of appeal have agreed that any time mail or a telephone is used in connection with an antitrust violation, such as sending invoices of price-fixed goods or calling a customer to provide a quote, the conduct can also be charged as mail or wire fraud. Foreign countries often enthusiastically support extradition requests by the United States for fraud crimes, particularly if the price-fixed goods or services are sold to the federal government, for which separate violations can be charged for conspiracy to defraud the United States. Though the conduct is eventually charged as an antitrust violation, DOJ can request extradition based on alleged violations of traditional criminal statues, for which “dual criminality” exists in the foreign country.

The most important reason why foreign citizens voluntarily surrender to US jurisdiction is to guarantee their continued access to the US market and economy. Normally, a convicted felon is forever excluded from entry. But in 1996, the INS (which is now “ICE”  ' Immigration and Customs Enforcement) entered into a Memorandum of Understanding with the Antitrust Division to allow, at the Antitrust Division's request, the entry into the United States of foreign citizens convicted of US antitrust violations. No other DOJ Division has such an agreement. This Immigration Memorandum of Understanding provides a significant negotiating term in antitrust plea bargains with foreign citizens, allowing prosecutors to offer continued access to the US market in return for a guilty plea and a negotiated sentence. For many foreign businesspeople, not being able to conduct business in the United States would effectively end their professional careers ' a worse fate than spending a few months in a minimum-security federal prison.

Still, a foreign citizen has much more bargaining power than US citizens, over whom DOJ can easily exercise jurisdiction ' a difference clearly seen in the relative sentences negotiated. US citizens are currently receiving jail sentences averaging 21 months. The average for foreign citizens convicted of US antitrust violations is 4 months.

The trend in prosecution of foreign citizens is seen in numerous examples. In the vitamins cartel investigation, which resulted in a corporate fine of $500 million for Hoffman-LaRoche – the largest criminal fine ever imposed in the United States ' German and Swiss executives agreed to sentences of 3.5 to 5 months and fines of $75,000 to $350,000. All of the foreign individuals' pleas agreements contained a reference to the Immigration Memorandum of Understanding and an agreement by the United States not to remove or exclude the individual from the United States. Several of the foreign nationals retained their positions at their employers; some, such as the former Director of Worldwide Marketing for Hoffman-LaRoche, became an officer of a US company.

Not all foreign nationals are submitting to US jurisdiction for claimed antitrust violations. In the recent vitamins cartel investigation, in which foreign defendants from Germany and Switzerland pled guilty to individual fines of up to $10 million and prison sentences of up to 6 months, one Japanese national proudly framed his indictment and hung it in his office, where he continues to work.

Conclusion

All attorneys counseling foreign businesspeople should be aware of their increased criminal exposure for antitrust violations. The possibility of extradition to the United States, or of voluntary surrender to avoid permanent exclusion from the States, must now be seriously considered in any defense strategy.

When a US company settles a criminal antitrust case by pleading guilty, the Justice Department (DOJ) now usually requires that at least one executive receive a prison sentence. But what about foreign companies? In the past, DOJ often prosecuted foreign companies, but not foreign executives. Prosecution of foreign executives raised questions of diplomacy, since the United States until recently was the only nation that made antitrust violations a crime. Then there was the practical problem of how to arrest a foreign citizen overseas. Besides, the Bureau of Prisons (BOP) policy was to deport non-violent, non-US citizens instead of housing them at US taxpayers' expense, and the Immigration and Naturalization Service (INS) barred foreign felons from the country.

The practical result of these collective DOJ policies was that a foreign citizen could conspire in price fixing that harmed the U.S. economy without risk of imprisonment. This began to change in 1994 when a Canadian who participated in a North American price fixing conspiracy went to jail in the US. Rumor has it that the BOP at first refused to admit the Canadian when he turned himself in at the United States Prison at Lewisburg, PA, so he spent his first night of “incarceration” at a local Holiday Inn, for which he received credit in his sentence.

Foreign Citizens Now Accountable

In the past decade, the Antitrust Division has prosecuted citizens of at least 16 foreign countries. More than one-third of the individuals investigated and prosecuted for antitrust violations since 2001 have been foreign nationals. Approximately 80% agreed to conviction and fines, but not prison sentences. The average fine imposed on foreign nationals over the last decade, excluding one exceptional $10 million fine, has been approximately $275,000. Often, the company reimburses the foreign executive and keeps him or her on the job ' unlike the prevailing corporate employment policy in the States. For most foreign executives, a fine paid by the employer is less than a slap on the wrist.

But foreign nationals are now going to jail for US antitrust violations in meaningful numbers. Since 1995, more than 20 have pled guilty and come to the United States to serve prison sentences, including citizens of France, Germany, Japan, The Netherlands, Norway, Sweden, Switzerland, and the United Kingdom.

Voluntary Surrender

All foreign citizens who have appeared in a US court to accept a financial penalty or prison sentence have appeared voluntarily. No extradition for a US antitrust violation has ever occurred. Indeed, several countries' laws ' most notably Japan, the UK, and Germany ' have at various times in the past 30 years expressly prohibited extradition of its citizens to the United States for antitrust violations. Even in the absence of such blocking statutes, extradition for an antitrust violation was virtually impossible for lack of “dual criminality.” The offense for which extradition is requested must also be a crime in the requested country, and no other country made antitrust a crime. That has begun to change, as a number of countries with close diplomatic relations with the United States, including Canada and the UK, have enacted statutes making individuals criminally liability for violation of these countries' competition laws.

Why do foreign nationals voluntarily appear in the United States to pay financial penalties or, more remarkably, serve a prison sentence, when extradition is unheard of? Defense counsel needs to know some answers when advising foreigners who are under investigation for antitrust violations.

First, the risk of extradition is growing. The UK states in the legislative history of its 2003 criminal antitrust statute that one purpose was to permit extradition to countries where antitrust offenses are criminal ' which is primarily the United States. Numerous other countries, notably Australia, France, Germany, and the European Union (which was enlarged to 25 countries as of May 1, 2004) have made statutory or policy changes demonstrating a new receptivity to US requests for extradition of individuals charged with antitrust offenses in the United States. In 2001, Interpol agreed to place individuals indicted in the United States for antitrust violations on its “Red Notice” list, which is essentially an international “wanted poster.” It can no longer be assumed that a non-US citizen indicted for an antitrust offense is safe from arrest as long as he or she stays outside North America.

Second, DOJ can and often does charge antitrust offenses as other crimes for which extradition is recognized by foreign nations. Most commonly, antitrust violations, which are contained in Title 15 of the United States Code regarding “Commerce and Trade,” are charged as mail fraud, wire fraud, or conspiracy violations contained in Title 18, “Crimes and Criminal Procedure.” All federal circuit courts of appeal have agreed that any time mail or a telephone is used in connection with an antitrust violation, such as sending invoices of price-fixed goods or calling a customer to provide a quote, the conduct can also be charged as mail or wire fraud. Foreign countries often enthusiastically support extradition requests by the United States for fraud crimes, particularly if the price-fixed goods or services are sold to the federal government, for which separate violations can be charged for conspiracy to defraud the United States. Though the conduct is eventually charged as an antitrust violation, DOJ can request extradition based on alleged violations of traditional criminal statues, for which “dual criminality” exists in the foreign country.

The most important reason why foreign citizens voluntarily surrender to US jurisdiction is to guarantee their continued access to the US market and economy. Normally, a convicted felon is forever excluded from entry. But in 1996, the INS (which is now “ICE”  ' Immigration and Customs Enforcement) entered into a Memorandum of Understanding with the Antitrust Division to allow, at the Antitrust Division's request, the entry into the United States of foreign citizens convicted of US antitrust violations. No other DOJ Division has such an agreement. This Immigration Memorandum of Understanding provides a significant negotiating term in antitrust plea bargains with foreign citizens, allowing prosecutors to offer continued access to the US market in return for a guilty plea and a negotiated sentence. For many foreign businesspeople, not being able to conduct business in the United States would effectively end their professional careers ' a worse fate than spending a few months in a minimum-security federal prison.

Still, a foreign citizen has much more bargaining power than US citizens, over whom DOJ can easily exercise jurisdiction ' a difference clearly seen in the relative sentences negotiated. US citizens are currently receiving jail sentences averaging 21 months. The average for foreign citizens convicted of US antitrust violations is 4 months.

The trend in prosecution of foreign citizens is seen in numerous examples. In the vitamins cartel investigation, which resulted in a corporate fine of $500 million for Hoffman-LaRoche – the largest criminal fine ever imposed in the United States ' German and Swiss executives agreed to sentences of 3.5 to 5 months and fines of $75,000 to $350,000. All of the foreign individuals' pleas agreements contained a reference to the Immigration Memorandum of Understanding and an agreement by the United States not to remove or exclude the individual from the United States. Several of the foreign nationals retained their positions at their employers; some, such as the former Director of Worldwide Marketing for Hoffman-LaRoche, became an officer of a US company.

Not all foreign nationals are submitting to US jurisdiction for claimed antitrust violations. In the recent vitamins cartel investigation, in which foreign defendants from Germany and Switzerland pled guilty to individual fines of up to $10 million and prison sentences of up to 6 months, one Japanese national proudly framed his indictment and hung it in his office, where he continues to work.

Conclusion

All attorneys counseling foreign businesspeople should be aware of their increased criminal exposure for antitrust violations. The possibility of extradition to the United States, or of voluntary surrender to avoid permanent exclusion from the States, must now be seriously considered in any defense strategy.