Antitrust Extradition

The Marine Hose Cartel extradition comes from a background as recent as the prior decade, and arguably as recent as five years ago, of foreign nationals having no material concern for extradition to the United States for an antitrust offense. At the dawn of the new millennium, the Antitrust Division was stating that “[t]he Division's general policy ' not to enter into plea agreements that require the Division to recommend a 'no-jail' sentence for the individual defendant,” but noting that “in cases involving cooperating foreign nationals over whom we have no reasonable means of obtaining personal jurisdiction, the Division may make exceptions to this policy.” Gary Spratling, Deputy Assistant Attorney General, Antitrust Division, “Negotiating the Waters of International Cartel Prosecutions” at 12 (March 1999). The Antitrust Division made many exceptions to the “no jail” agreement with foreign nationals during that period, as the DOJ commonly had “no reasonable means of obtaining personal jurisdiction” of an antitrust defendant who decided to remain outside of the U.S. borders.

The DOJ could not reasonably expect to assert jurisdiction over a foreign national that would permit extradition primarily due to the absence of other countries with criminal penalties for antitrust violations. Arguably, no other country at this time had a statute providing a criminal penalty to individuals for an antitrust violation ' with some exceptions, including Canada, the Netherlands, and Germany, though those statutes then provided misdemeanor penalties of less than a year. Without “dual criminality” of an antitrust violation in both the United States and the country whose assistance was required for extradition, the Justice Department had no “reasonable means of obtaining personal jurisdiction” of the U.S. defendant.

The apocryphal story is still occasionally related in the antitrust legal community of the Japanese officer of a company involved in the animal feeds cartel investigations of the mid-1990s who, after being indicted in the United States, framed a copy of the indictment and hung it on his office wall as if it were a commendation. That Japanese citizen remains a fugitive with no material possibility of extradition to the United States.

An antitrust defendant who was a foreign national has historically had the practical strategic alternative of simply avoiding the United States' borders to avoid prosecution. The foreign national faced the potentially substantial inconvenience of being placed on an INTERPOL “Red Notice,” which could mean delay and questioning at each border of a country participating in the Red Notice program, which are many. And the foreign national faced the more economically substantial impediment, for a person who wanted to continue in an international business career that involved travel to the United States for success and promotion, of having to avoid U.S. borders.

With the importance of the United States market to many businesses, and the importance of physical presence in the United States for career prosperity, many foreign nationals willingly agree to come to the United States and pay a substantial fine for the opportunity to return to the country in the future. The lure of U.S. economic opportunities is so great for some international business careers that, even after DOJ initiated a policy of “some jail time for at least one individual” of companies that entered plea agreements, foreign nationals over whom DOJ likely could not obtain extradition voluntarily appeared in the United States for sentencing that included a period of incarceration, which is currently averaging over 12 months for foreign defendants.

The Antitrust Division's recognition of the importance of continued travel to the United States for convicted antitrust violators who desired continuing careers in international business led to a 1996 Memorandum of Understanding between the Antitrust Division and DOJ's Immigration and Naturalization Service (INS) (now Immigration and Customs Enforcement), under which INS permitted individuals who pleaded guilty to antitrust violations to reenter the United States. Standard immigration regulations and policy would permanently prohibit a convicted felon's reentry. The Antitrust Division's agreement with INS is the only such agreement with any other DOJ Division or agency, and only felons convicted of antitrust violations as part of a plea agreement receive this immigration benefit.

A comparison of sentencing in a cartel investigation of the mid-1990s in the same offshore petroleum industries involved in the Marine Hose Cartel illustrates the dramatic change in international cartel enforcement against foreign individuals today. According to a 1997 Information the Antitrust Division filed against HeereMac, a Dutch company that provided marine crane services for construction of offshore oil production platforms, Heere- Mac rigged bids with competitors (the Marine Construction Cartel). HeereMac and related companies agreed to a fine of $65 million, then the second highest corporate fine for an antitrust violation. A Dutch officer of HeereMac appeared in the United States to plead guilty and pay a fine of $100,000, but there was to be no period of incarceration. Such a lenient plea agreement would not be available from the Antitrust Division today under the “some jail time for at least one individual” policy the Division asserts today. One officer of a competitor ' coincidentally also an Italian citizen as is the defendant extradited for the Marine Hose Cartel ' was charged, refused to appear in a U.S. court, and remains a fugitive.

The Marine Hose Cartel extradition was preceded by one earlier extradition effected by the Antitrust Division, though that extradition was not based on an antitrust violation. In 2004, the Antitrust Division sought the extradition of a British citizen on an indictment for an antitrust count and multiple counts of obstruction of justice. Initially, the British trial court and the British Supreme Court ordered the extradition on the antitrust count. The House of Lords, however, reversed the lower courts and concluded that the extradition could not occur for the antitrust violation, as the UK did not have a criminal antitrust statute at the time the claimed offense was committed. The House of Lords permitted extradition on the obstruction of justice counts. The UK now has a criminal antitrust penalty for individuals, so this result would likely be different in future extradition requests.

The New Reality

With this year's extradition based solely on an antitrust indictment, a new reality exists for foreigners charged with antitrust offenses in the United States. Part of that reality is that there are “fewer safe havens for foreign antitrust defendants,” as multiple Antitrust Division personnel have asserted recently.

The list of those “fewer safe havens” existing as of this publication's date is brief, as the United States has extradition treaties with most countries. Russia, the People's Republic of China and the United Arab Emirates are the most notable exceptions. While numerous extradition treaties exist, most require “dual criminality,” in which the alleged offense is a violation of the criminal laws of the requesting country and the country to which the extradition request is made. Criminal penalties for individuals remain relatively rare, globally. Among the United States' most active trade partner nations, the UK, Germany, Canada, Israel, Ireland, South Korea, Australia, Japan, Brazil, Greece and Russia have criminalized antitrust violations by individuals. Importantly, numerous countries do not permit extradition of their own citizens. Assessment of the possibility of extradition for an antitrust offense requires: 1) dual criminality in the United States' extradition treaties with other countries, and 2) the ability of the country to extradite its citizens. With these requirements, only the UK, Ireland, and Canada present any material possibility of assistance in extradition of their own citizens. Numerous other countries may assist in the extradition of citizens of other citizens that come within the country to which the United States makes an extradition request. Germany assisted in the extradition of an Italian citizen in the Marine Hose Cartel, and South Korea, Australia, Japan, and Brazil appear willing to consider extradition requests from the United States for antitrust defendants who come within the jurisdiction of those countries.

Conclusion

In light of the Marine Hose Cartel case, informed counseling for foreign antitrust defendants requires substantially more review, on a country-by-country basis, than was required as recently as last year. Extradition will for the foreseeable future continue to be the exception rather than the rule. Obstacles remain for extradition to the United States of non-U.S. citizens charged with antitrust violations who do not voluntarily appear to contest or accept an indictment. As of the date of this publication, dozens of non-U.S. citizens indicted for U.S. antitrust violations remain beyond reasonable expectation of extradition, whether because of legal obstacles or Antitrust Division resource restraints. For citizens of most countries, the defendant who chooses not to appear in a U.S. court to accept or dispute antitrust charges will not be forced to appear, though this now cannot be guaranteed for citizens of the countries listed above, or potentially for citizens of other countries passing through those jurisdictions.

David Laing, a member of this newsletter's Board of Editors, is a partner in Crowell & Moring LLP's Antitrust Practice Group in the Washington office. He is a former Trial Attorney with the Antitrust Division of the U.S. Department of Justice.

In April 2014, the U.S. Department of Justice (DOJ) completed extradition of the first defendant of an antitrust violation in the 124-year history of the Sherman Act of 1890. The extradition involved an Italian national extradited after his arrest in Germany in June 2013. The charge for which the Italian citizen was extradited was a single-count felony indictment alleging a violation of Section 1 of the Sherman Act, 15 U.S.C. ' 1. The charge was related to a group of rubber manufacturers that had agreed on prices to be charged for flexible hose used to transfer oil between production platforms, oil tankers, and storage facilities (the Marine Hose Cartel), the standard description of a competitor's agreement that DOJ would routinely charge as a criminal violation of Section 1. The DOJ stated in a press release announcing the completed extradition that this “first of its kind extradition on an antitrust charge ' marks a significant step forward in our ongoing efforts to work with our international antitrust colleagues to ensure that those who subvert U.S. law are brought to justice.”

The single event of the extradition is not by itself a watershed event. Rather, it is an indication of developments in global antitrust enforcement, and most notably in international cooperation in global antitrust enforcement. Attorneys need to understand this extradition in order to provide informed advice to clients involved in the myriad multinational cartels now under investigation, and potential investigations in the not too distant future ' particularly counsel for individual defendants in these multinational cartel investigations. This article summarizes the development of U.S. criminal antitrust enforcement that culminated in this extradition.

The Prior Reality

The Marine Hose Cartel extradition comes from a background as recent as the prior decade, and arguably as recent as five years ago, of foreign nationals having no material concern for extradition to the United States for an antitrust offense. At the dawn of the new millennium, the Antitrust Division was stating that “[t]he Division's general policy ' not to enter into plea agreements that require the Division to recommend a 'no-jail' sentence for the individual defendant,” but noting that “in cases involving cooperating foreign nationals over whom we have no reasonable means of obtaining personal jurisdiction, the Division may make exceptions to this policy.” Gary Spratling, Deputy Assistant Attorney General, Antitrust Division, “Negotiating the Waters of International Cartel Prosecutions” at 12 (March 1999). The Antitrust Division made many exceptions to the “no jail” agreement with foreign nationals during that period, as the DOJ commonly had “no reasonable means of obtaining personal jurisdiction” of an antitrust defendant who decided to remain outside of the U.S. borders.

The DOJ could not reasonably expect to assert jurisdiction over a foreign national that would permit extradition primarily due to the absence of other countries with criminal penalties for antitrust violations. Arguably, no other country at this time had a statute providing a criminal penalty to individuals for an antitrust violation ' with some exceptions, including Canada, the Netherlands, and Germany, though those statutes then provided misdemeanor penalties of less than a year. Without “dual criminality” of an antitrust violation in both the United States and the country whose assistance was required for extradition, the Justice Department had no “reasonable means of obtaining personal jurisdiction” of the U.S. defendant.

The apocryphal story is still occasionally related in the antitrust legal community of the Japanese officer of a company involved in the animal feeds cartel investigations of the mid-1990s who, after being indicted in the United States, framed a copy of the indictment and hung it on his office wall as if it were a commendation. That Japanese citizen remains a fugitive with no material possibility of extradition to the United States.

An antitrust defendant who was a foreign national has historically had the practical strategic alternative of simply avoiding the United States' borders to avoid prosecution. The foreign national faced the potentially substantial inconvenience of being placed on an INTERPOL “Red Notice,” which could mean delay and questioning at each border of a country participating in the Red Notice program, which are many. And the foreign national faced the more economically substantial impediment, for a person who wanted to continue in an international business career that involved travel to the United States for success and promotion, of having to avoid U.S. borders.

With the importance of the United States market to many businesses, and the importance of physical presence in the United States for career prosperity, many foreign nationals willingly agree to come to the United States and pay a substantial fine for the opportunity to return to the country in the future. The lure of U.S. economic opportunities is so great for some international business careers that, even after DOJ initiated a policy of “some jail time for at least one individual” of companies that entered plea agreements, foreign nationals over whom DOJ likely could not obtain extradition voluntarily appeared in the United States for sentencing that included a period of incarceration, which is currently averaging over 12 months for foreign defendants.

The Antitrust Division's recognition of the importance of continued travel to the United States for convicted antitrust violators who desired continuing careers in international business led to a 1996 Memorandum of Understanding between the Antitrust Division and DOJ's Immigration and Naturalization Service (INS) (now Immigration and Customs Enforcement), under which INS permitted individuals who pleaded guilty to antitrust violations to reenter the United States. Standard immigration regulations and policy would permanently prohibit a convicted felon's reentry. The Antitrust Division's agreement with INS is the only such agreement with any other DOJ Division or agency, and only felons convicted of antitrust violations as part of a plea agreement receive this immigration benefit.

A comparison of sentencing in a cartel investigation of the mid-1990s in the same offshore petroleum industries involved in the Marine Hose Cartel illustrates the dramatic change in international cartel enforcement against foreign individuals today. According to a 1997 Information the Antitrust Division filed against HeereMac, a Dutch company that provided marine crane services for construction of offshore oil production platforms, Heere- Mac rigged bids with competitors (the Marine Construction Cartel). HeereMac and related companies agreed to a fine of $65 million, then the second highest corporate fine for an antitrust violation. A Dutch officer of HeereMac appeared in the United States to plead guilty and pay a fine of $100,000, but there was to be no period of incarceration. Such a lenient plea agreement would not be available from the Antitrust Division today under the “some jail time for at least one individual” policy the Division asserts today. One officer of a competitor ' coincidentally also an Italian citizen as is the defendant extradited for the Marine Hose Cartel ' was charged, refused to appear in a U.S. court, and remains a fugitive.

The Marine Hose Cartel extradition was preceded by one earlier extradition effected by the Antitrust Division, though that extradition was not based on an antitrust violation. In 2004, the Antitrust Division sought the extradition of a British citizen on an indictment for an antitrust count and multiple counts of obstruction of justice. Initially, the British trial court and the British Supreme Court ordered the extradition on the antitrust count. The House of Lords, however, reversed the lower courts and concluded that the extradition could not occur for the antitrust violation, as the UK did not have a criminal antitrust statute at the time the claimed offense was committed. The House of Lords permitted extradition on the obstruction of justice counts. The UK now has a criminal antitrust penalty for individuals, so this result would likely be different in future extradition requests.

The New Reality

With this year's extradition based solely on an antitrust indictment, a new reality exists for foreigners charged with antitrust offenses in the United States. Part of that reality is that there are “fewer safe havens for foreign antitrust defendants,” as multiple Antitrust Division personnel have asserted recently.

The list of those “fewer safe havens” existing as of this publication's date is brief, as the United States has extradition treaties with most countries. Russia, the People's Republic of China and the United Arab Emirates are the most notable exceptions. While numerous extradition treaties exist, most require “dual criminality,” in which the alleged offense is a violation of the criminal laws of the requesting country and the country to which the extradition request is made. Criminal penalties for individuals remain relatively rare, globally. Among the United States' most active trade partner nations, the UK, Germany, Canada, Israel, Ireland, South Korea, Australia, Japan, Brazil, Greece and Russia have criminalized antitrust violations by individuals. Importantly, numerous countries do not permit extradition of their own citizens. Assessment of the possibility of extradition for an antitrust offense requires: 1) dual criminality in the United States' extradition treaties with other countries, and 2) the ability of the country to extradite its citizens. With these requirements, only the UK, Ireland, and Canada present any material possibility of assistance in extradition of their own citizens. Numerous other countries may assist in the extradition of citizens of other citizens that come within the country to which the United States makes an extradition request. Germany assisted in the extradition of an Italian citizen in the Marine Hose Cartel, and South Korea, Australia, Japan, and Brazil appear willing to consider extradition requests from the United States for antitrust defendants who come within the jurisdiction of those countries.

Conclusion

In light of the Marine Hose Cartel case, informed counseling for foreign antitrust defendants requires substantially more review, on a country-by-country basis, than was required as recently as last year. Extradition will for the foreseeable future continue to be the exception rather than the rule. Obstacles remain for extradition to the United States of non-U.S. citizens charged with antitrust violations who do not voluntarily appear to contest or accept an indictment. As of the date of this publication, dozens of non-U.S. citizens indicted for U.S. antitrust violations remain beyond reasonable expectation of extradition, whether because of legal obstacles or Antitrust Division resource restraints. For citizens of most countries, the defendant who chooses not to appear in a U.S. court to accept or dispute antitrust charges will not be forced to appear, though this now cannot be guaranteed for citizens of the countries listed above, or potentially for citizens of other countries passing through those jurisdictions.

David Laing, a member of this newsletter's Board of Editors, is a partner in Crowell & Moring LLP's Antitrust Practice Group in the Washington office. He is a former Trial Attorney with the Antitrust Division of the U.S. Department of Justice.