Tuesday, August 16, 2011

The Symbiotic Relationship: Criminal Antitrust and FCPA Enforcement

Some may wonder why I regularly report on the Justice Department’s criminal antitrust record and trends. For white collar practitioners, the FCPA and criminal antitrust prosecutions regularly lead to opportunities to represent companies and/or officers. Apart from that, there are important reasons to monitor the Justice Department’s criminal antitrust investigations and prosecutions.

First, a criminal antitrust investigation of cartel activity in a specific industry can be a precursor to an FCPA investigation in the same or closely-related markets. Second, when a company in an antitrust criminal investigation seeks leniency by cooperating, you can rest assured that all of the officers and employees will be asked about knowledge of potential bribes paid by the company or competitors.

The Justice Department has worked out the coordination and information sharing kinks between the Fraud Section and the Antitrust Division to ensure that prosecutors share information and access to cooperating witnesses. This is a dangerous development for companies which may be involved in cartel behavior or bribery. Frequently, those officers or managers who are involved in (or have information about) cartel activity involving price fixing, territorial allocations, or other concerted activity, also have knowledge of (or involvement in) illegal payments to foreign government officials. It does not take a rocket scientist to figure this out – wrongdoers do not usually limit their operations based on sections of the federal criminal code; rather, those corporate wrongdoers will seek economic advantages through any available schemes where the benefits outweigh the risks.

The Justice Department prosecutors understand the inter-relationship of these issues. Cooperating witnesses are regularly asked to provide specific information about cartel activity and bribery. White collar practitioners representing cooperating witness know that a client with information in both areas will achieve a better result by offering assistance in two separate matters.

Companies involved in corporate leniency applications before the Antitrust Division often include FCPA disclosures in their applications – some small but some more significant, resulting in separate prosecutions and settlements. The Justice Department’s improved coordination and information sharing efforts have been evident in the freight-forwarding cartel investigation which ultimately branched out into the FCPA industry sweep culminating in the “Panalpina” record-setting FCPA investigation and prosecution of the industry and its customers.

The Antitrust Division’s investigations in other industries such as automobile part suppliers, submarine cables, video displays, are likely to lead to related bribery investigations and prosecutions. Conversely, FCPA inquiries in the pharmaceutical and medical device, telecommunciations, and military supply industries is likely to lead to related antitrust investigations and prosecutions.

White collar practitioners need to watch these developments and corporate disclosures closely. While everyone points to the dramatic impact that the SEC’s whistleblower program will have on FCPA enforcement, the cooperation between the Antitrust Division and the Fraud Section already has had a huge impact on FCPA enforcement and may be a more significant factor in the Justice Department’s aggressive FCPA enforcement program.

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