EXPERT ANALYSIS The Impact of Cross-Border Cartel Enforcement Challenges Confronting the United States on the Americas

Transcription

1 Westlaw Journal ANTITRUST Litigation News and Analysis Legislation Regulation Expert Commentary VOLUME 23, ISSUE 5 / SEPTEMBER 2015 EXPERT ANALYSIS The Impact of Cross-Border Cartel Enforcement Challenges Confronting the United States on the Americas By Kirby Behre, Esq., and Lauren Briggerman, Esq. Miller & Chevalier As cartel investigations become increasingly global, competition authorities around the world face a common challenge: how to effectively prosecute foreign actors whose criminal conduct affects their soil. The United States, the world s leading cartel enforcer, is losing the battle to prosecute foreign individuals because it has limited ability to pursue them abroad. As emerging countries in the Americas and elsewhere seek to build up their cartel enforcement laws, they should arm themselves with the legal and practical tools the United States lacks to reach wrongdoers abroad. In recent years, the Americas have increasingly voiced their commitment to cracking down on cartel conduct by adopting new competition laws or strengthening existing ones. The strength of those laws, and whether those countries exercise them to their fullest extent, has not always matched the rhetoric. Canada has long been active in international cartel enforcement, but it has taken a backseat to the United States and secured fewer corporate fines and guilty pleas. Brazil has shown signs of becoming more active on enforcement in Latin America since its adoption of stronger laws in While these changes are significant, Brazil continues to be reactive rather than proactive in its investigations. It is also hampered by inefficient procedures that drag proceedings on for years. For the rest of Latin America, antitrust cartel enforcement is not yet a reality. Most of these countries have at most a skeletal program in place, and some have no competition laws at all. Few have initiated cartel investigations with implications beyond their own borders. The increasingly global nature of cartel investigations poses a true test of American countries cartel enforcement capabilities. These complex, international investigations require countries to bridge the gap of disparate competition laws to collect evidence across borders and bring individuals abroad to justice. As Canada, Brazil and other countries in the Americas take part in future international cartel investigations, they should note the significant challenges facing the world s most established cartel enforcer: the United States. Although U.S. antitrust laws have broad extraterritorial reach, practical constraints limit the United States ability to gather evidence abroad. The United States also faces diplomatic challenges in extraditing individuals charged with antitrust violations, thus limiting its ability to prosecute foreign cartel conduct. As the Americas become more engaged in international cartel investigations, these countries will face similar challenges if they too seek extraterritorial application of their laws.

2 WESTLAW JOURNAL ANTITRUST CARTEL ENFORCEMENT IN THE AMERICAS United States: Increasing challenges The United States has long played a leadership role in cartel enforcement. United States law criminalizes cartel conduct of both companies and individuals, and it imposes steep penalties violations. Companies may be fined up to $100 million, or twice the gain or loss realized by the conspiracy. Individuals face up to 10 years in prison and a $1 million fine. The U.S. Department of Justice has increased its focus on international cartels, and it has coordinated efforts with the European Union and other jurisdictions to investigate cartel activity in the air cargo, freight forwarding and auto parts industries. The collaboration involves coordinated dawn raids and information-sharing through mutual assistance agreements. In 2014 the DOJ extracted $1.3 billion in corporate criminal fines. Most were related to international cartel investigations of the auto parts industry and Libor interest rate manipulation schemes. Libor refers to the London Interbank Offered Rate, a common benchmark used to make adjustments to rates for loans. The increasingly global nature of cartel investigations poses a true test of American countries cartel enforcement capabilities. Notwithstanding the DOJ s success in securing significant corporate fines, it has faced growing challenges in pursuing the increasing number of prosecution targets who reside beyond United States jurisdiction. In 2014, only 12 individuals were sentenced to jail time for their involvement in international cartel conduct, which is down from 28 in The DOJ also has dozens of outstanding indictments against foreign nationals in the auto parts investigation, but it has little ability to enforce them. As explained more fully below, the United States faces legal and practical hurdles in gaining testimony and other evidence abroad as investigations become increasingly cross-border. Canada: A secondary player Canada has a long history of international cartel enforcement, and it is an important U.S. ally in antitrust investigations. However, Canada s competition bureau typically has played a secondary role in most of the major international cartel investigations of the past decade. In fact, it generally becomes involved in international cartel enforcement efforts only after companies under investigation in the United States come forward to seek leniency with the Canadian Competition Bureau. Canada criminalizes cartel conduct for companies and individuals. Both may be subject to a criminal fine of up to CA$25 million ($20 million) per count, and individuals face up to 14 years in prison. Despite its stringent potential penalties, Canada rarely imposes maximum punish-ment for companies or their executives. For example, it has not charged or secured guilty pleas from any individuals involved in the international auto parts investigation, even though its competition laws arguably have broad extraterritorial reach. The number of corporate fines levied and their amounts also lag well behind the United States. Canada has imposed fines of CA$56 million on seven auto parts manufacturers. By comparison, the United States has secured $2.5 billion from 35 companies. Similarly, in the air cargo investigation, Canada levied fines against nine companies, totaling CA$25 million, whereas the United States fined 22 companies more than $1.8 billion. None of the fines Canada imposed in the auto parts or air cargo investigations came close to approaching the country s maximum penalty. 2 SEPTEMBER 2015 n VOLUME 23 n ISSUE Thomson Reuters

3 WESTLAW JOURNAL ANTITRUST Brazil: A reactive enforcer In 2012, Brazil implemented a new competition law that was aimed, in part, at strengthening and streamlining cartel enforcement. The new law consolidated disparate competition agencies into a single authority called the Administrative Council for Economic Defense, known as CADE. It further called for boosting CADE staff. In addition, Brazil modified its fines policy for companies and their executives and revised its leniency policy to clarify that leaders of a given cartel may qualify for leniency. Brazil has since implemented regulations that encourage companies to settle early on by setting predetermined fine reductions depending on when the party comes forward. In return, the government requires companies to admit involvement in the conduct and cooperate in the ongoing investigation. Since the law was implemented, Brazil has increased its international cartel enforcement efforts, albeit with limited success. For example, it has imposed fines in several international investigations over the past three years, including the air cargo and marine hose investigations. However, the fines are notably less than those imposed in leading jurisdictions. For example, Brazil ultimately netted only million real ($74.5 million), in the air cargo investigation compared with $1.8 billion by the United States and 799 million euros ($1.1 billion). The CADE has also entered into settlement agreements with companies involved in the international freight forwarding, TFT/LCD and DRAM investigations, likely because of the new incentivized settlement program. Despite this progress, Brazil continues to be reactive rather than proactive. For example, the CADE announced July 2 that it was initiating an investigation into whether banks have manipulated foreign exchange rates affecting the Brazilian real. This announcement came a month after five major banks agreed to pay both the United States and United Kingdom $5.6 billion to settle claims that they had manipulated foreign exchange markets in the so-called forex investigation, which has been ongoing in the United States and other jurisdictions for at least two years. The Justice Department has faced growing challenges in prosecuting the increasing number of individuals who reside beyond United States jurisdiction. Brazil did not launch a formal investigation into the auto parts industry until 2014, despite the fact that the global investigation began in February 2010 with coordinated dawn raids conducted by the United States, the European Union and Japan. Since then, it has opened administrative proceedings related to only seven auto parts, with the most recent proceeding against auto parts makers Takata Corp. and Autoliv announced in July. Brazil s prosecution of international cartels is also hampered by its cumbersome legal process and long delays. The freight-forwarding investigation is a prime example of the red tape that bogs down Brazil s ability to timely and effectively resolve investigations. Brazil issued a technical note, or complaint, in 2009, naming dozens of companies and individuals as defendants in its ongoing freight-forwarding investigation. However, the administrative proceeding remained at a standstill for more than four years, as Brazil was required to serve the complaint on all of the defendants before moving forward. Brazilian law does not allow the competition authority to sever successfully served defendants and proceed with the case in phases. As a result, the large corporate defendants who accepted service early on were forced to wait until Brazil served every individual international defendant before responding to the allegations. Six years after it began, the freight-forwarding proceeding is still in its infancy and it is likely to continue for years. Brazil only recently concluded its marine hose investigation, which was launched in 2007 following dawn raids and arrests by the United States, the European Union and the United Kingdom. While Brazil has made significant progress in improving the efficiency of cartel enforcement, it has a way to go before it can be considered a global leader Thomson Reuters SEPTEMBER 2015 n VOLUME 23 n ISSUE 5 3

4 WESTLAW JOURNAL ANTITRUST Other Latin American countries Cartel enforcement in the remainder of Latin America is nascent at best. Guatemala has no competition law, and many other Latin American competition authorities are still in their infancy. Countries that have begun to test their cartel laws such as Chile, Colombia, Peru and Uruguay have done so largely on the domestic front. Colombia has signaled its interest in promoting international cooperation by signing mutual assistance agreements with the United States and other Latin American countries. Mexico is the only country in the Americas other than Brazil that coordinates with international enforcers on global cartel investigations. In 2014, Mexico followed other jurisdictions in imposing significant fines against manufacturers of refrigerator compressors equivalent to $17 million. Mexico also demonstrated its commitment to cartel enforcement by adopting new legislation to make cartel conduct a criminal offense and increase its competition authority s investigative authority. KEY CHALLENGES Uncertainty of extraterritorial reach Brazil has increased its international cartel enforcement effort, albeit with limited success. Its prosecution of international cartels is hampered by its cumbersome legal process and long delays. The United States antitrust laws have a broad extraterritorial reach. The Sherman Act, which criminalizes cartel conduct, provides that [e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. 1 Under the Foreign Trade Antitrust Improvements Act, any conduct that has a direct, substantial, and reasonably foreseeable effect on United States commerce and that gives rise to a claim under [Section 1 of the Sherman Act] falls within the prosecutorial jurisdiction of the DOJ. 2 The precise meaning of the FTAIA s cryptic language and the conduct that it reaches are, not surprisingly, unclear. Of particular concern to antitrust practitioners and their clients is how to determine what constitutes a direct impact on United States commerce. The 9th U.S. Circuit Court of Appeals held in United States v. Hsiung that an effect is direct only if it follows as an immediate consequence of the defendant s activity. 3 Under that narrow view, the United States ability to prosecute foreign cartel conduct is quite limited. In fact, the DOJ has argued that the 9th Circuit s definition may cripple the United States antitrust enforcement abilities. 4 The DOJ has instead advocated for a more flexible, proximatecause standard. 5 A decision from the 7th U.S. Circuit Court of Appeals provided the government s sought-after flexibility. In Motorola Mobility LLC v. AU Optronics Corp., 6 the 7th Circuit applied a proximatecause standard, holding that an effect on United States commerce is indirect and therefore beyond United States jurisdiction only if the foreign price-fixing filters through many layers and finally causes a few ripples in the United States. 7 Under Motorola Mobility, the narrow definition of indirect effect gives the DOJ more power to investigate and prosecute overseas cartel conduct. In fact, the court expressly preserved the government s ability to prosecute such conduct even if the conduct does not provide grounds for a civil suit. 8 The U.S. Supreme Court recently declined to hear appeals in Hsiung and Motorola, thus preserving the current state of uncertainty regarding the scope of the DOJ s ability to prosecute overseas cartel conduct. 4 SEPTEMBER 2015 n VOLUME 23 n ISSUE Thomson Reuters

5 WESTLAW JOURNAL ANTITRUST Barriers to evidence-gathering Regardless of how the FTAIA s direct requirement is interpreted, the Sherman Act undoubtedly reaches foreign cartel conduct. The DOJ s ongoing auto parts cartel probe, for instance, has almost exclusively targeted Japanese corporations and Japanese nationals based on actions taken in Japan. Many of the DOJ s other major investigations, such as air cargo, TFT/LCD panels and freight-forwarding, likewise focused on foreign cartel conduct. The DOJ s investigations thus often require law enforcement to gather evidence located in other countries. When focusing on the Americas, the government s need to collect evidence abroad imposes practical limitations on its ability to investigate and prosecute foreign cartel conduct. To facilitate cross-border cartel investigations, enforcement authorities in the United States have sought international cooperation. In certain parts of the Americas, the United States has successfully done so. The United States and Canada, for example, have long collaborated on antitrust investigations and prosecutions through bilateral antitrust cooperation agreements and a mutual legal assistance treaty. As a result, the United States and Canadian authorities have conducted coordinated raids, executed searches on behalf of each other and generally worked together towards more effective antitrust enforcement. The United States cooperation with antitrust enforcement authorities elsewhere is more limited. Other than Canada, the United States has executed bilateral antitrust cooperation agreements with only four American countries Brazil, Chile, Colombia and Mexico. Among those four, only Brazil is an active cartel enforcer. Furthermore, these four bilateral cooperation agreements are largely toothless, mandating very little in the way of actual cooperation. Cartel enforcement in much of Latin America is nascent at best. In addition to the four agreements, the United States has signed bilateral mutual legal assistance treaties, or MLATs, with 19 American nations. It is also party to the Inter-American Convention on Mutual Legal Assistance, which has been ratified by 13 additional American states. Under an MLAT, the United States can ask the designated central authority of the treaty partner for assistance in gathering evidence in a criminal investigation, including searches and seizures, subpoenas for documents or testimony, and witness interviews. In the United States, the statute of limitations for a crime can be tolled while the request is pending. Although these treaties promote general cooperation by providing mechanisms for cross-border evidence gathering in criminal cases, their impact on antitrust investigations in the Americas is limited. A handful of American countries still have not executed an MLAT with the United States, and over half of the 19 existing bilateral MLATs are with small island nations that are unlikely to be involved in international cartel enforcement. Even if an active cartel enforcer, like Brazil, does have an MLAT with the United States, such treaties often contain exceptions under which foreign authorities are not required to act, including when the conduct at issue would not violate the criminal laws of the foreign jurisdiction. Furthermore, the process of requesting assistance under an MLAT can be slow and cumbersome. International cooperation in cartel investigations is even more difficult without an MLAT. Without such treaties, requests for assistance must be made through letters rogatory, which are essentially requests from a United States court to a foreign court seeking international judicial assistance. Even when such requests can be issued, they must comply with numerous procedural requirements that vary by jurisdiction. Because letters rogatory are based predominately on the international legal principles of comity and reciprocity, compliance with them falls within the discretion of the receiving court. Consequently, obtaining assistance through a letter rogatory is time-consuming and unpredictable Thomson Reuters SEPTEMBER 2015 n VOLUME 23 n ISSUE 5 5

6 WESTLAW JOURNAL ANTITRUST In short, although the Sherman Act has a broad extraterritorial reach in theory, in practice the United States ability to investigate cartel conduct occurring abroad is much more limited. Roadblocks to extradition Equally limited is the United States ability to prosecute foreign cartelists. Even if the DOJ is able to investigate foreign cartel conduct and bring charges against individuals living abroad, those individuals may choose not to voluntarily submit to U.S. jurisdiction. In those cases, the DOJ s ability to successfully prosecute the individuals will hinge on the willingness of foreign officials to extradite them. That willingness is hardly guaranteed. The DOJ has acknowledged that it faces an uphill battle in extraditing foreign nationals on antitrust charges. 9 The DOJ has had limited success in extraditing individuals in antitrust cases. In November 2014, the agency extradited a Canadian national, John Bennett, in a case involving alleged anticompetitive conduct. Bennett, however, was extradited on fraud charges rather than on antitrust charges. In fact, the Antitrust Division has secured only one extradition on pure antitrust charges, and the unusual facts of that case provide little precedential value. Romano Pisciotti, an Italian national, was indicted under seal in the DOJ s investigation into price-fixing in the marine hose industry. The DOJ was unable to extradite Pisciotti from his home country because Italy did not criminalize cartel conduct at the time. The agency was only able to secure Pisciotti s extradition when, some three years later, he travelled to Germany and was detained pursuant to an Interpol Red Notice. Before the Pisciotti extradition, the DOJ had failed to secure the indictment of British national Ian Norris from the United Kingdom solely on price-fixing charges stemming from the department s air cargo investigation. The U.K. ultimately extradited Norris on obstruction-of-justice charges. The DOJ also appears to be losing the battle to prosecute foreign executives who refuse to plead guilty in the auto parts investigation. While almost all criminal defendants charged with a crime plead guilty, barely more than half charged in the auto parts probe have done so. Of the 55 individuals who have been charged in that investigation, 25 all foreign nationals have been indicted because they refused to plead guilty. Only two of these executives have voluntarily submitted to United States jurisdiction and appeared in a United States courtroom. The DOJ has yet to extradite any of the others. The DOJ is likely to have similar difficulty extraditing individuals from American countries. Although the United States has executed extradition treaties with 34 American nations, including active antitrust enforcers like Canada and Brazil, many of those treaties contain significant limitations. Some do not provide for extradition in antitrust cases. Others contain exceptions under which foreign authorities are not required to act, including when the conduct at issue would not constitute a criminal offense under the laws of the foreign jurisdiction, when the statute of limitations has run in either country, and when the individual sought is a citizen of the country from which he would be extradited. Many Latin American countries have historically refused to extradite their own nationals. Some, including Brazil, are constitutionally prohibited from doing so. Even if an individual could be extradited from an American country for cartel conduct, securing that extradition still requires diplomatic negotiations and formal proceedings in the extraditing country. The process may be costly and time-consuming, and success is far from guaranteed. 6 SEPTEMBER 2015 n VOLUME 23 n ISSUE Thomson Reuters

7 WESTLAW JOURNAL ANTITRUST CONCLUSION As emerging countries in the Americas and throughout the world seek to build their cartel enforcement capabilities, they are likely to face many of the same practical and legal constraints that limit the United States ability to investigate and prosecute cartel conduct abroad. These countries should take heed of hurdles the United States has increasingly faced in cross-border investigations. NOTES 1 15 U.S.C See id. at 6a. 3 United States v. Hsiung, 758 F.3d 1074, 1094 (9th Cir. 2014). 4 See Brief for United States and the Federal Trade Commission as Amici Curiae Supporting Neither Party at 6, Motorola Mobility LLC v. AU Optronics Corp., No (7th Cir. Sept. 5, 2014). 5 See id. at Motorola Mobility LLC v. AU Optronics Corp., 775 F.3d 816 (7th Cir. 2015), cert. denied, No , 2015 WL (June 15, 2015). 7 Id. at 819 (quoting Minn-Chem Inc. v. Agrium Inc., 683 F.3d 845, 860 (7th Cir. 2012); accord Lotes Co. Ltd. v. Hon Hai Precision Indus. Co. Ltd. et al., 753 F.3d 395, 410 (2d Cir. 2014) (requiring a reasonably proximate causal nexus )). 8 Id. at Memorandum of Understanding Between the Antitrust Division, U.S. Department of Justice and the Immigration and Naturalization Service, U.S. Department of Justice (Mar. 15, 1996), gov/atr/public/criminal/9951.pdf. Kirby D. Behre (L) is a member of the litigation department at Miller & Chevalier in Washington. Behre is a former federal prosecutor and has represented companies and individuals in complex business litigation, government and internal investigations, criminal prosecutions, and regulatory matters worldwide. Lauren E. Briggerman (R), counsel at the firm, focuses her practice on civil and criminal matters, including government and internal investigations, white-collar criminal defense, global antitrust and competition, and complex commercial litigation Thomson Reuters. This publication was created to provide you with accurate and authoritative information concerning the subject matter covered, however it may not necessarily have been prepared by persons licensed to practice law in a particular jurisdiction. The publisher is not engaged in rendering legal or other professional advice, and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you should seek the services of a competent attorney or other professional. For subscription information, please visit www. West.Thomson.com Thomson Reuters SEPTEMBER 2015 n VOLUME 23 n ISSUE 5 7

8 Portfolio Media. Inc. 860 Broadway, 6th Floor New York, NY Phone: Fax: DOJ Is Losing The Battle To Prosecute Foreign Executives Law360, New York (March 03, 2015, 10:40 AM ET) -- The U.S. Department of Justice appears to be losing the battle to prosecute foreign executives who refuse to plead guilty. Statistics from the DOJ's ongoing, five-year-long investigation into cartel conduct in the auto parts industry reveal that foreign executives are far less likely to agree to plead guilty than United States-based executives, and that those foreign executives who are indicted almost uniformly refuse to submit to United States jurisdiction.[1] The DOJ has yet to extradite a single executive in the auto parts investigation who refuses to voluntarily enter the United States to face charges. As a result, foreign executives from certain countries particularly in Asia who refuse to plead guilty may be beyond the reach of United States prosecutors. While almost all criminal defendants charged with a crime plead guilty, barely more than half of the individuals charged in the auto Lauren Briggerman parts probe have done so. Of the 52 individuals who have been charged in that investigation, 24 all foreign nationals have been indicted because they refused to plead guilty.[2] Only one of these executives has voluntarily submitted to United States jurisdiction and appeared in a United States courtroom.[3] There is little wonder why: The United States government has limited ability to reach foreign nationals who refuse to plead guilty. The DOJ has secured only one extradition in history exclusively on antitrust charges. It is, therefore, unlikely that the department will succeed in extraditing many let alone all of the foreign executives indicted in the auto parts investigation. The DOJ's inability to reach foreign executives reflects a growing trend across other international corporate criminal investigations. As white collar investigations expand across the globe, the number of individual defendants located abroad has risen. Depending on the country involved, the government may not have the tools necessary to hold those individuals accountable for corporate misconduct. Therefore, the DOJ's goal of prosecuting individuals may not be fully attainable. DOJ's Track Record Is Not Matching Its Rhetoric In recent years, the DOJ has focused heavily on prosecuting individuals for corporate wrongdoing. In fact, "[t]he prosecution of individuals including corporate executives for white collar crimes is at the very

9 top of the Criminal Division's priority list."[4] Senior DOJ Criminal Division officials have repeatedly stated that the DOJ intends to pursue, and seek jail time for, individuals who engage in corporate white collar crime. DOJ Criminal Division Chief Leslie Caldwell has lauded "[the division's] record of success in these prosecutions" and touted those successes as a means "to show rather than just tell corporate executives that if they participate in [white collar crime], they will personally risk the very real prospect of going to prison."[5] The DOJ's Antitrust Division has echoed these statements. Criminal Enforcement Section Chief Brent Snyder recently highlighted the division's "vigorous commitment to hold[ing] individuals accountable for engaging in anticompetitive conduct."[6] Antitrust Division Chief Bill Baer has praised the division's "outstanding results in holding... individuals accountable for their wrongdoing" and underscored its "commit[ment] to continuing these efforts and to build on the division's past successes."[7] As corporate criminal investigations expand across the globe, the DOJ's focus on prosecuting individuals has likewise extended beyond United States borders. The Antitrust Division, for instance, has reiterated that it "remains committed to ensuring that culpable foreign nationals, just like United States co-conspirators, serve prison sentences for violating the U.S. antitrust laws and to using all appropriate tools to find and arrest or extradite international fugitives."[8] Despite the department's commitment, however, the DOJ may increasingly struggle to match its rhetoric to results. As the DOJ's auto parts cartel investigation demonstrates, the DOJ's goal of prosecuting foreign nationals is becoming elusive. Foreign Executives Increasingly Are Refusing to Plead Guilty and Are Choosing to Ignore Charges In February 2010, a multicountry investigation into price-fixing and bid-rigging in the auto parts industry began with coordinated raids in the United States, European Union and Japan. The investigation has since expanded to at least 10 countries and has covered dozens of auto parts. There can be little question that the DOJ has succeeded in closing cases against companies: It has secured guilty pleas from 33 companies and netted $2.4 billion in corporate fines. With individuals, however, the results have been decidedly less successful: Of the 52 individuals the DOJ has charged, 24, or more than 45 percent, were indicted because they refused to plead guilty. Of those 24 cases, 22 remain open with no resolution on the horizon because the defendants have not only refused to plead guilty and serve time in a United States prison, but have refused to even come to the United States for an initial appearance in court.[9] These statistics contrast sharply with the national norm. The vast majority of criminal defendants choose to plead guilty rather than force the government to prove its case at trial. According to the United States Sentencing Commission s most recent Sourcebook for Federal Sentencing, 97 percent of all cases brought against individual defendants in 2013 resulted in guilty pleas.[10] The statistics from the auto parts investigation paint a much different picture. The DOJ has touted the number of indictments secured from grand juries as evidence of its success in prosecuting individuals. But indicting a foreign executive through a one-sided grand jury process that does not include the defendant, counsel, or the right to cross-examine witnesses, and securing a conviction at trial against that executive are not the same. Nowhere is that distinction more evident than in the auto parts investigation, where indicted foreign executives have almost unanimously chosen to ignore charges and remain abroad, beyond the reach of United States jurisdiction. Rather than plead guilty and serve the

10 year-and-a-day to 16-month custodial sentence that has become the standard, these executives all of whom are Japanese have gambled on the low likelihood of the United States government dragging them into a United States court. And for good reason. DOJ Has Limited Options to Prosecute Foreign Executives Abroad As more and more indicted foreign nationals rebuff the United States legal system, the DOJ has limited tools for pursuing them abroad. It is highly unlikely that the DOJ will succeed in hauling many of the foreign executives into the United States for prosecution. First, the government must overcome the hurdle of successfully serving process upon these individual defendants abroad, which is no easy task. Federal Rule of Criminal Procedure 4 requires the government to personally serve a criminal summons for an individual defendant,[11] but United States prosecutors and law enforcement cannot serve a criminal summons on foreign soil without permission from a foreign country.[12] One method of requesting assistance is through a mutual legal assistance treaty. Numerous foreign countries, however, have not signed MLATs with the United States. Even if a foreign country, such as Japan, does have an MLAT with the United States, it often contains exceptions under which foreign authorities are not required to act, including when the conduct at issue would not constitute a criminal offense under the laws of the foreign jurisdiction. Furthermore, the process of requesting assistance under an MLAT can be slow and cumbersome. Successfully serving individual defendants abroad is even more difficult without an MLAT. In the absence of such treaties, requests for assistance must be made through letters rogatory, which are essentially requests from a United States court to a foreign court seeking international judicial assistance. Such requests must comply with numerous procedural requirements, which vary by jurisdiction. In addition, because letters rogatory are not governed by treaty or other negotiated instruments, but are instead based on the international legal principles of comity and reciprocity, compliance with them falls within the discretion of the receiving court. Consequently, obtaining assistance through a letter rogatory is time-consuming and unpredictable.[13] Second, even if a defendant is successfully served abroad, he may choose not to voluntarily submit to United States jurisdiction. In those cases, the DOJ's ability to successfully prosecute the individuals will hinge on the willingness of foreign officials to extradite them. That willingness is hardly guaranteed. The DOJ has acknowledged that it faces an uphill battle in extraditing foreign nationals on antitrust charges.[14] In fact, the Antitrust Division has secured only one extradition in the division's history, and the unusual facts of that case provide little precedential value. Romano Pisciotti, an Italian national, was indicted under seal in the DOJ's investigation into price-fixing in the marine hose industry. Pisciotti refused to travel to the United States to face charges. The DOJ was unable to secure Pisciotti's extradition from his home country because Italy did not criminalize cartel conduct at the time. As a result, DOJ was forced to rely on Interpol member countries to respond to a "Red Notice" requiring them to detain Pisciotti if he crossed their borders. It took the DOJ more than three years from Pisciotti's indictment under seal to the time of his arrest in Germany before he was extradited to the United States for prosecution. Before the Pisciotti extradition, the DOJ failed to secure the indictment of British national Ian Norris from the United Kingdom solely on price-fixing charges stemming from the department's air cargo investigation. The U.K. ultimately extradited Norris, but on obstruction of justice, rather than antitrust, charges.

11 While the United States does have a bilateral extradition treaty with Japan, Japan has never before extradited an individual to the United States solely on criminal antitrust charges. It is unlikely that Japan would do so now. Japanese officials have publicly criticized United States efforts to target cartel conduct abroad,[15] and have urged United States courts to limit the reach of United States antitrust laws and instead defer to Japan's own internal enforcement mechanism.[16] Furthermore, Japan may not view the underlying conduct as serious enough to warrant extradition. The Japan Fair Trade Commission, Japan's antitrust authority, will only prosecute individuals criminally for "[v]icious and serious cases which are considered to have wide spread [sic] influence on people s livings."[17] In light of this policy, the JFTC generally has pursued individuals for antitrust violations through administrative, rather than criminal, charges. Absent Japan's agreement to extradite, the DOJ has little control over whether the nearly two dozen Japanese executives currently under indictment will face prosecution in the United States. The Pisciotti case is a cautionary tale that the DOJ's only option may be to cross its fingers that these individuals travel outside of Japan and are swept up by Interpol. Otherwise, their outstanding indictments may, on the whole, be toothless. DOJ's Prosecutorial Limitations Reflect a Growing Trend in Other International Corporate Criminal Investigations The DOJ's inability to reach Japanese executives indicted in connection with the auto parts cartel investigation appears to reflect a growing trend in corporate criminal investigations. In the modern, globalized world, criminal activity increasingly crosses international boundaries. The DOJ has consequently sought to expand the extraterritorial reach of United States criminal laws. In Foreign Corrupt Practices Act, fraud and other white collar cases, the department has increasingly focused its attention on foreign actors whose criminal activity affects the United States. The same obstacles that have frustrated the DOJ's prosecution of nearly two dozen Japanese nationals in the auto parts cartel investigation appear to hamper the department's efforts to prosecute foreign citizens in other international corporate criminal investigations. In FCPA cases, for example, more and more foreign nationals are refusing to submit to United States jurisdiction and are instead forcing the DOJ to extradite them. The department currently has indictments outstanding against 26 foreign nationals who have refused to plead guilty.[18] The vast majority of those defendants have chosen to remain abroad, outside United States jurisdictional reach. And of those defendants who have refused to consent to United States jurisdiction, not one has been extradited. In fact, at least five are known to have successfully avoided extradition.[19] Clearly, prosecuting foreign nationals in FCPA cases remains fraught with difficulty and is far from guaranteed. Given the importance of extradition to the DOJ's stated policy of prosecuting foreign nationals for cartel conduct, the department may be looking for a test case that can help reverse its current track record. Some commentators suggest that the DOJ's next attempt will come as part of the department's ongoing auto parts cartel probe and will involve a Japanese executive charged with both antitrust violations and obstruction of justice.[20] But to guarantee extradition, the DOJ may need a case that garners more international support. We project that the government may seek extradition in connection with the Libor interest-setting investigation, an investigation spearheaded by both the Antitrust and Criminal Divisions in connection with authorities in Europe and Asia. The Libor investigation touches all countries because, at its core, it symbolizes the collapse of the global economy that occurred in Therefore, it may represent the best

12 next case for the DOJ to seek extradition so that it can reaffirm its commitment to prosecuting individuals abroad. Until then, the DOJ's success in prosecuting foreign nationals abroad remains uncertain. By Kirby D. Behre, Lauren E. Briggerman, and Michael Anderson, Miller & Chevalier Chtd. Kirby Behre is a member in Miller & Chevalier's Washington, D.C., office and a former federal prosecutor. Lauren Briggerman is a counsel and Michael Anderson is a senior associate in the firm's Washington office. The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice. [1] This article tracks the number of public indictments and does not account for indictments under seal, which are not publicly available. [2] For a complete list of individuals charged in DOJ's ongoing auto parts investigation, please visit: on. [3] According to a motion to dismiss an arrest warrant filed by the United States in January 2015, a second executive is willing to travel to the United States to plead guilty. See United States v. Toyokuni, No. 2:14-cr GCS-PJK, D.E. 7 (E.D. Mich. Jan. 14, 2015). However, the docket sheet for Mr. Toyokuni's case does not indicate that he has travelled to the United States or appeared in a United States courtroom. [4] Department of Justice, Remarks by Principal Deputy Assistant Attorney General for the Criminal Division Marshall L. Miller at the Global Investigation Review Program (Sept. 17, 2014), available at (last visited Feb. 13, 2015). [5] Department of Justice, Assistant Attorney General Leslie R. Caldwell Speaks at American Conference Institute's 31st International Conference on the Foreign Corrupt Practices Act (Nov. 19, 2014), available at (last visited Feb. 10, 2015). [6] Department of Justice, Bridgestone Corp. Executive Agrees to Plead Guilty for Fixing Prices and Rigging Bids on Auto Parts Installed in U.S. Cars, available at (last visited Feb. 20, 2015) (quoting Snyder). [7] Department of Justice, Statement of Assistant Attorney General Bill Baer on Changes to Antitrust Division's Carve-Out Practice Regarding Corporate Plea Agreements (Apr. 12, 2013), available at (last visited Feb. 10, 2015). [8] Department of Justice, Antitrust Division, Division Update Spring 2014, Criminal Program, available at (last visited Feb. 10, 2015).

13 [9] As explained above, one individual pled guilty after being indicted, and another is willing to travel to the United States to plead guilty to an indictment. [10] U.S. Sentencing Commission, 2013 Sourcebook of Federal Sentencing Statistics at Fig. C, available at (last visited Feb. 10, 2015). [11] Fed. R. Crim. P. 4(c)(3)(B). [12] See Restatement (Third) of Foreign Relations Law 432(2) & cmt. b (1987); Charles Doyle, Extraterritorial Application of American Criminal Law, Congressional Research Service, at 2, 22 (Feb. 15, 2012), available at (last visited Feb. 11, 2015). [13] See Doyle, supra note 12, at 24. [14] Memorandum of Understanding between the Antitrust Division, United Sates Department of Justice and the Immigration and Naturalization Service, United States Department of Justice (Mar. 15, 1996), available at (last visited Feb. 13, 2015). [15] See Yoshiya Usami, Why Did They Cross the Pacific? Extradition: A Real Threat to Cartelists? at 3 (The American Antitrust Institute Working Paper No , Mar. 20, 2014) (citing comments from a former commissioner of the Japan Fair Trade Commission), available at (last visited Feb. 10, 2015). [16] See Tiffany Robertson, Antitrust Enforcement Set for Record Year of Fines in WeComply Compliance Blog (Aug. 25, 2014), available at (last visited Feb. 10, 2015). [17] Usami, supra note 15, at 9 (citing Japan Fair Trade Commission press release). [18] The 28 exclude foreign nationals who are also United States residents. [19] See Ashby Jones, "Extradition Is Hurdle in FCPA Prosecutions," Wall Street Journal (Oct. 2, 2012), available at (last visited Feb. 11, 2015); Samuel Rubenfeld, "UK Privy Council Quashes Kozeny Extradition to US," Wall Street Journal (Mar. 29, 2012) (discussing DOJ's inability to secure the extradition of Viktor Kozeny), available at (last visited Feb. 11, 2015). DOJ is known to have successfully extradited at least seven foreign nationals charged with FCPA-related violations. At least two others initially fought extradition before voluntarily submitting to United States jurisdiction. [20] See, e.g., Jennifer Driscoll-Chippendale, What Does the First-Ever Extradition on an Antitrust Charge Mean for the Auto Parts Investigation? in Antitrust Law Blog (Apr. 8, 2014), available at (last visited Feb. 11, 2015). All Content , Portfolio Media, Inc.

14 China s Most Wanted Fugitive Nears Deportation From US The Diplomat Page 1 of 3 10/15/2015 China s Most Wanted Fugitive Nears Deportation From US The U.S. is close to sending ex- Chinese official Yang Xiuzhu back to China to face trial. By Shannon Tiezzi June 12, 2015 China s most wanted economic fugitive appeared in a U.S. immigration court on Tuesday, bringing her one step closer to repatriation and trial in China. Yang Xiuzhu, the former vice mayor of Wenzhou city in Zhejiang Province, is accused of accepting 253 million RMB ($41 million) in bribes. She fled China in 2003, soon after authorities began investigating her. In May 2014, Yang was detained in the Netherlands, which was preparing to send her back to China. Yang managed to escape Image Credit: China flag and gavel image via Shutterstock and tried to make her way to the United States. She was detained again, this time by U.S. immigration officers, in June 2014, reportedly while trying to enter the U.S. from Canada using a fake passport. Chinese media reports say Chinese law enforcement tipped off U.S. officers about Yang s travel plans. U.S. Immigration and Customs Enforcement (ICE) has accused Yang of violating the terms of the Visa Waiver Program and asked an immigration court to deport her to China. Yang s first deportation hearing took place on Tuesday in New York City. Hong Lei, spokesperson for China s Foreign Ministry, urged the United States to repatriate Yang so that she can be subject to legal punishment.

15 China s Most Wanted Fugitive Nears Deportation From US The Diplomat Page 2 of 3 10/15/2015 In July 2014, China began a concerted campaign to hunt down and repatriate suspected economic criminals who had fled to other countries. Dubbed Operation Fox Hunt, the initiative sought to compensate for the fact that China does not have extradition treaties with many of the developed Western nations including the United States, which is the top destination for Chinese fugitives, according to a Chinese official. Earlier this year, as part of its newly-dubbed Sky Net campaign, the Chinese government released a list of its top 100 most wanted economic fugitives. Of the 100, 36 are suspected to be living in the United States, including Yang, who appears first on the list. That s a problem for China, given that only two economic fugitives have been successfully repatriated from the United States to China in the past ten years. Yang s case illustrates the difficulties China faces in repatriating fugitives from the United States. The U.S. government is well aware the she is a criminal suspect in China. As a foreign law enforcement fugitive, Yang is an ICE enforcement priority, an ICE spokesman for the New York Field Office said in a statement. But Yang has reportedly applied for asylum in the United States, a common tactic by those facing extradition to China. Such asylum claims generally say that the subject is facing political persecution or other unjust treatment should he or she be returned to China. The asylum argument hearkens back to the reason the United States does not have an extradition treaty with China human rights concerns about due process (including the use of torture to extract confessions and politically-motivated legal cases). In 2004, the U.S. only agreed to extradite former Chinese bank official Yu Zhendong to China after receiving promises that Yu would not be tortured or executed and that s after Yu had been convicted of fraud in a U.S. court. That doesn t mean Yang is guaranteed to win her asylum bid a similar ploy failed in the Netherlands. But it will make her repatriation a drawn-out legal affair. A Xinhua article spoke of Chinese suspects in the West using complex regulations on extradition and jurisdiction to their advantage and called for more international cooperation on corruption cases. Xinhua was mostly upbeat, however: Despite cross-border coordination difficulties, the [possible] deportation from the U.S. of the woman who tops China s 100 most wanted list speaks volumes of the success of international collaboration on eradicating corruption. Yang is not the only Chinese fugitive facing legal action in the United States. Qiao Jianjun, who comes in at number three on China s most wanted list, entered the United States in 2011 along with his former wife, Zhao Shilian. Zhao has since been detained on charges of lying on her visa application with an intent to launder money. Qiao, though indicted on the same charges, escaped arrest and his whereabouts are unknown. Qiu Gengmin, another name from China s 100 most wanted list, is facing trial in the United States for money laundering. His lawyer told the New York Times that Qiu is being persecuted by the Chinese government for leading a pro-democracy movement. He is seeking political asylum.

16 China s Most Wanted Fugitive Nears Deportation From US The Diplomat Page 3 of 3 10/15/2015 Two other wanted suspects, He Yejun and his wife Huang Hong, both accused of misusing public funds in China, were discovered to be living in Florida after a civil suit accused He (who now goes by the name Chen Wei) of taking $50 million from a joint business venture.

17 Mutual cooperation between the United States and the Chinese law enforce... Page 1 of 1 10/15/2015 Embassy of the United States MUTUAL COOPERATION BETWEEN THE UNITED STATES AND THE CHINESE LAW ENFORCEMENT RESULT IN THE DISMANTLING OF AN INTERNATIONAL WEAPONS TRAFFICKING RING. Tweet TRANSLATION: 中文 Mutual cooperation between the United States and the Chinese law enforcement result in the dismantling of an international weapons trafficking ring BEIJING The United States Department of Homeland Security, Homeland Security Investigations is conducting a long term criminal investigation of an international weapons smuggling operation with the close cooperation of the Chinese Ministry of Public Security. Mutual cooperation between Homeland Security Investigations Attaché Beijing and the Ministry of Public Security (MPS) facilitated investigators from Homeland Security Investigations, Special Agent in Charge New York, the Bureau of Alcohol, Tobacco, Firearms and Explosives and an Assistant U.S. Attorney from the Eastern District of New York to travel from New York to Shanghai China to coordinate the investigation with the Shanghai Public Security Bureau, examined the seized weapons and were allowed unprecedented access to investigative information. This level of cooperation between American law enforcement officials and authorities inside Mainland China is a sign of optimism and could lead to even greater law enforcement cooperation in the future. The United States and China are committed to stemming the flow of illegal firearms into Mainland China and to prosecute those responsible. This investigation resulted in the arrest of numerous individuals and seizure of a large quantity of weapons and ammunition in the United States and Mainland China. This investigation represents Chinese-U.S. cooperation at its finest. We will continue to work with our foreign law enforcement partners and fight against transnational crimes.

18 Chinese anti-corruption crackdown undergoes major shift Global Investigations Revie... Page 1 of 4 Global Investigations Review Anti-bribery & corruption ( Chinese anti-corruption crackdown undergoes major shift By Rahul Rose on Wednesday, 21 October 2015 Credit: Daderot on Wikimedia Commons By targeting state-controlled industry regulators, China s main anti-corruption watchdog has shown the government s anti-corruption purge is not a cynical attempt to remove political opponents from power, but a genuine attempt to reform the country s economy, say lawyers. On 18 October, the Central Commission for Discipline and Inspection (CCDI), an investigatory agency that looks at corruption within the government, published details of inspections ( of a number of Chinese industries, including defence, media and aviation. The reports criticised regulators and non-commercial government agencies. According to the South China Morning Post, the reports accused senior officials at the Civil Aviation Administration ( (CAA), the regulator for the airline industry, of receiving large bribes from airlines to alter flight routes and schedules. 10/23/2015

19 Chinese anti-corruption crackdown undergoes major shift Global Investigations Revie... Page 2 of 4 According to Reuters, the CCDI also said it is investigating three officials ( at China s economic planning agency, the National Development and Reform Commission, for serious violations of discipline a term used by the Chinese government to refer to corruption. The three accused of discipline violations are the leader of the commission s social development unit, Wang Wei, his deputy, Ren Wei, and a researcher in the life quality section of the agency, Zhou Heyu. Lawyers told GIR that the CCDI s clampdown on government authorities, such as the aviation regulator and the economic planner, represents a significant change in the government s anticorruption drive, which was first introduced in President Xi Jinping s corruption crackdown has traditionally targeted individual state-owned enterprises [SOEs], but this latest round of inspections marks a major shift towards increased scrutiny of state agencies, said Mimi Yang at Ropes & Gray in Shanghai. Why this change of focus? By targeting state agencies, rather than political enemies and SOEs, the government can dispel some of the cynicism around the anti-graft drive. Melvin Sng at Linklaters in Hong Kong said there is a lingering suspicion in the Chinese media and among members of the public that the government s anti-corruption drive is primarily an attempt to purge Xi Jinping s political enemies from power. Sng said: However, by going after regulators and state agencies, the government is showing that the corruption crackdown is not just a way to purge political opponents and businessmen from power. Rather, it s a genuine attempt to reform China s economy. This shows the real and bona fide intentions behind Xi Jinping s drive. GIR understands that unlike high-ranking officials of the Communist Party or senior executives at large SOEs, regulators in China are less likely to pose a threat to Xi Jinping s power. The government has previously investigated a number of top officials in both politics and SOEs for corruption. In April, the Chinese government placed Sinopec s former general manager Wang Tianpu under investigation for corruption. In October, the government also placed the governor of Fujian province, Su Shulin, who formerly led Sinopec, under investigation for corruption. In one of the most significant corruption cases since Xi Jinping began the crackdown, former security chief Zhou Yongkang was sentenced to life in prison after a secret trial in May /23/2015

20 Chinese anti-corruption crackdown undergoes major shift Global Investigations Revie... Page 3 of 4 Sng said China s corruption purge has gone through three broad phases. He said in the first phase the government focused on prominent political figures, such as Bo Xilai, a former member of the Chinese Communist Party Politburo, while later the anti-corruption crackdown targeted large SOEs, such as Sinopec, the country s state-owned energy company. Sng said it seems the government has now turned its focus to regulators, such as the CAA. Despite a new focus on state agencies, the CCDI did also name a number of SOEs in its recent inspection reports. The watchdog accused senior staff at aerospace and defence business Aviation Industry Corporation of China of accepting bribes from supply companies. The CCDI also found evidence of bribery at China Eastern Airlines, the parent company of passenger carrier Air China. Sam Williamson at Quinn Emanuel Urquhart & Sullivan in Hong Kong said this latest round of inspections were remarkable because the significant publicity they received. The Chinese government has previously carried out inspections that appeared to focus on particular industries for example, oil but never on this scale and in this very public way with summaries of the inspection reports published online, Williamson said. However, not all lawyers that GIR spoke to saw the latest inspections as a major shift. Kareena Teh at Dechert in Hong Kong said they are consistent with guidance issued by China s Supreme People s Court and Supreme People s Procuratorate in December 2012, which emphasised the importance of tackling corruption that might harm public interest and endanger peoples safety. The CCDI's latest crackdown has focused on a number of industries, such as aviation, where public safety and welfare are paramount, Teh said. This round of inspections is not new or a shift, rather it is a continuation of the anti-graft policy first laid down at the end of 2012, she added. Sign-up for the Global Investigations Review Briefing Receive the latest investigations news headlines via for free. Sign-up for the briefing ( 10/23/2015

21 Chinese anti-corruption crackdown undergoes major shift Global Investigations Revie... Page 4 of 4 Copyright Law Business Research ( Company Number: VAT: GB /23/2015

22 China Vitamin C Price-Fixing Verdict Scrutinized by Court - Bloomberg Business Page 1 of 4 China Vitamin C Price-Fixing Verdict Scrutinized by Court Christie Smythe January 29, :00 AM EST Updated on January 29, :46 PM EST A U.S. price-fixing verdict against Chinese makers of a common dietary supplement faced scrutiny by an appeals court as a judge expressed doubt whether companies regulated by China s government should be subject to American competition law. China s Ministry of Commerce made the first appearance by any government agency from that country before a U.S. court in 2006, arguing in support of two Chinese vitamin C makers that a Brooklyn, New York, jury eventually found liable for violating American antitrust law. The companies, whose products are used in everything from energy drinks to livestock feed, were ordered to pay $147.8 million. Hebei Welcome Pharmaceutical Co. and its state-owned parent, North China Pharmaceutical Group Corp., were required by law to coordinate export prices and volumes, the ministry said in a filing to the U.S. Court of Appeals in Manhattan, which on Thursday heard the Chinese companies request to throw out the verdict. Appeals judges questioned a lawyer for U.S. vitamin C buyers, William Isaacson, about how the lower court came to discount the ministry s assertion that the vitamin makers were following their country s regulations. It creates a problem if we all start doing that to each other, Judge Peter Hall said, referring to courts abroad and respect for other governments statements about their laws. Conflicting antitrust regulations may be better handled by treaty, Hall said. Deeply Troubled Earlier, the ministry sent a diplomatic note to the U.S. State Department saying it was deeply troubled by the case. 10/23/2015