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Division Update Spring 2011

Criminal Program

Criminal enforcement continues to be a top priority of the Antitrust Division. Companies participating in cartels paid hefty fines and corporate executives who participate in cartels again faced significant jail sentences this year. During FY 2010, the Division filed 60 cases against 63 individuals and 21 companies.

During the last year, the Division prosecuted price fixing, bid rigging, market and customer allocation, and other fraudulent, anticompetitive schemes in markets, including municipal bonds, compressors, real estate foreclosure auctions, air transportation services, liquid crystal display (LCD), color display tubes, power generation, ready-mix concrete, packaged ice, and environmental services.

Trial debriefing in the National Criminal Enforcement Section. (L-R) Mary Strimel, William Martin, Lisa Phelan, Jason Jones, Nancy Jacquish, Matthew Lunder, Katie Hellings, Jessica Lefort, Nancy McMillen, Richard Hellings, Katherine Schlech, and Kenneth Gaul.

Trial debriefing in the National Criminal Enforcement Section. (L-R) Mary Strimel, William Martin, Lisa Phelan, Jason Jones, Nancy Jacquish, Matthew Lunder, Katie Hellings, Jessica Lefort, Nancy McMillen, Richard Hellings, Katherine Schlech, and Kenneth Gaul.

Financial Fraud

The Antitrust Division is an active member of the Financial Fraud Enforcement Task Force, established by President Obama to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The Division’s municipal bonds and real estate foreclosure auction investigations are examples of the Division’s efforts to investigate and prosecute financial crimes and vigorously prosecute those who seek to subvert competition in financial markets.

In addition to its criminal enforcement efforts, the Antitrust Division has continued to commit resources to assist Federal, state, and local agencies in protecting American Recovery and Reinvestment Act (ARRA) funds from fraudulent activity. In its role as co-chair of the Task Force’s Recovery Act, Procurement, and Grant Fraud Working Group, the Antitrust Division has conducted training on antitrust awareness and collusion detection for more than 25,000 individuals in 20 Federal agencies, 36 states, and two U.S. territories receiving ARRA funds.

Municipal Bonds

The Division’s ongoing municipal bonds investigation reflects the Division’s ability to uncover and address antitrust violations in complex markets and the Division’s versatility in working with other Federal and state agencies. The wide-ranging investigation has so far resulted in nine guilty pleas and pending charges against nine other individuals and one broker.

In December, Bank of America agreed to pay a total of $137.3 million in restitution and disgorgement to state and Federal agencies for its participation in a conspiracy to rig bids in the municipal bond derivatives market and as a condition of its admission into the Department of Justice’s Antitrust Corporate Leniency Program. As a part of this global resolution, Bank of America entered into agreements with the U.S. Securities and Exchange Commission, Internal Revenue Service, Office of the Comptroller of the Currency, and State Attorneys General, and also agreed with the Federal Reserve Board to address certain remedial measures.

Press Releases

March 30, 2011

Former Employee of Charlotte, North Carolina-Based Bank Pleads Guilty for His Role in Falsifying Bank Records Involving Proceeds of Municipal Bonds

December 9, 2010

Three Former Financial Services Executives Indicted for Fraudulent Conduct Affecting Contracts Related to Municipal Bonds

December 7, 2010

Bank of America Agrees to Pay $137.3 Million in Restitution to Federal and State Agencies as a Condition of the Justice Department’s Antitrust Corporate Leniency Program

December 2, 2010

Former Employee of a Financial Institution Subsidiary Arrested on Criminal Complaint for Role in Fraud Scheme Involving Municipal Bonds

November 30, 2010

Former Employee of a Financial Institution Subsidiary Pleads Guilty for Role in Bid-Rigging and Fraud Conspiracies Involving Municipal Bonds

Real Estate Foreclosure

The Division’s ongoing efforts to investigate bid rigging and fraud at real estate auctions in California have thus far resulted in four guilty pleas. The pleading individuals admitted to conspiring with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County, California. After the conspirators’ designated bidder bought a property at a public auction, they would hold a second, private auction at which each participating conspirator would bid the amount above the public auction price he or she was willing to pay. The conspirator who bid the highest amount at the end of the private auction won the property. The difference between the price at the public auction and that at the second auction was the group’s illicit profit, and it was divided among the conspirators in payoffs.

The Division is investigating this type of anticompetitive conduct at real estate foreclosure auctions in California and is committed to investigating and prosecuting similar conduct if detected in other parts of the country.

Press Releases

February 4, 2011

California Real Estate Executive Pleads Guilty to Bid Rigging at Public Foreclosure Auctions

April 16, 2010

California Real Estate Executive Pleads Guilty to Bid Rigging

Criminal Fines

The Division obtained $555 million in criminal fines during FY 2010—the fifth highest year in Division history.

Total Criminal Antitrust Fines

Before 1994, the largest corporate fine ever imposed for a single Sherman Act count was $6 million. However, today Sherman Act violations have yielded 81 criminal fines of $10 million or more, including 18 fines of $100 million or more.

The Division’s investigations of the air transportation and liquid crystal display (LCD) industries accounted for the majority of FY 2010 criminal fines. In addition, the Division’s investigation of price fixing in the worldwide refrigerant compressors market resulted in more than $140 million in criminal fines.

Compressors

In September 2010, Panasonic Corporation and a Whirlpool Corporation subsidiary, Embraco North America Inc., were charged and agreed to plead guilty and to pay a total of $140.9 million in criminal fines for their role in an international conspiracy to fix the prices of refrigerant compressors, which are used in refrigerators and freezers in homes and businesses. Embraco was sentenced to pay a $91.8 million criminal fine and Panasonic was sentenced to pay a $49.1 million criminal fine.

Press Release

September 30, 2010

Panasonic Corp. and Whirlpool Corp. Subsidiary Agree to Plead Guilty for Role in Price-Fixing Conspiracy Involving Refrigerant Compressors

Air Transportation

The air transportation investigation revealed that cargo and passenger airlines located in the United States and around the world were fixing prices for cargo and passenger services paid by American businesses and consumers. To date, criminal fines of more than $1.8 billion have been imposed and 21 companies and 19 individuals have been charged in the Division’s investigation of price-fixing conspiracies in the air transportation industry. The $1.8 billion in fines is the most ever imposed in a U.S. antitrust investigation and reflects the breadth and harm of the crimes detected. The following corporate fines were obtained during the last year:

Press Releases

November 30, 2010

Singapore Airlines Cargo PTE Ltd. Agrees to Plead Guilty to Price Fixing on Air Cargo Shipments

November 16, 2010

Former Executives from Two Japanese Airlines Indicted in Conspiracy to Fix Rates on Air Cargo Shipments

November 1, 2010

All Nippon Airways Co. Ltd. Agrees to Plead Guilty to Price Fixing on Air Cargo and Air Passenger Services

October 28, 2010

Four Former Airline Executive Indicted in Conspiracy to Fix Fuel Surcharges on Air Cargo Shipments to South and Central America

Cargolux Airline Executives Indicted in Conspiracy to Fix Surcharge Rates on Air Cargo Shipments

September 27, 2010

China Airlines Ltd. Agrees to Plead Guilty to Price Fixing on Air Cargo Shipments

September 21, 2010

Martinair Airline Executive Indicted in Conspiracy to Fix Surcharge Rates on Air Cargo Shipments

September 2, 2010

Polar Air Cargo LLC Agrees to Plead Guilty to Price Fixing on Air Cargo Shipments

July 30, 2010

Northwest Airlines LLC Agrees to Plead Guilty for Fixing Prices on Air Cargo Shipments

Liquid Crystal Display

The Division’s investigation into price fixing of thin film transistor-liquid crystal display (LCD) panels uncovered price-fixing conspiracies that harmed countless American consumers who use computers, cell phones, and other household electronics containing LCD panels every day. The conspiracies are among the largest and most far-reaching the Antitrust Division has ever detected—the worldwide market for LCD panels in 2006 was approximately $70 billion. The LCD investigation has to date resulted in criminal fines of more than $890 million to be paid by the seven LCD manufacturers who have pleaded guilty, including the following cases filed during FY 2010:

In addition, 22 executives have been charged in the LCD investigation.

Press Releases

January 13, 2011

Taiwan Hannstar Executive Indicted for Role in LCD Price-Fixing Conspiracy

October 27, 2010

Former Hannstar Executive Agrees to Plead Guilty and Serve Jail Time for Participating in Global LCD Price-Fixing Conspiracy

October 14, 2010

Ninth Taiwan Executive Indicted for Participating in Global LCD Price-Fixing Conspiracy

August 4, 2010

Fourth Chi Mei Executive Agrees to Plead Guilty and Serve Jail Time for Participating in Global LCD Price-Fixing Conspiracy

July 28, 2010

Third Chi Mei Executive Agrees to Plead Guilty and Serve Jail Time for Participating in Global LCD Price-Fixing Conspiracy

June 29, 2010

Taiwan LCD Producer Agrees to Plead Guilty and Pay $30 Million Fine for Participating in LCD Price-Fixing Conspiracy

June 10, 2010

Largest Taiwanese LCD Producer, Houston-Based Subsidiary, and Six Executives Indicted for Participating in LCD Price-Fixing Conspiracy

April 30, 2010

Chi Mei Executive Agrees to Plead Guilty and Serve Jail Time for Participating in Global LCD Price-Fixing Conspiracy

December 9, 2009

Taiwan LCD Producer Agrees to Plead Guilty and Pay $220 Million Fine for Participating in LCD Price-Fixing Conspiracy

Individual Accountability

The Division’s long-standing belief is that holding culpable individuals accountable by seeking jail sentences is the most effective way to deter and punish cartel activity. The Division’s enforcement statistics continue to demonstrate that individuals prosecuted by the Division are being sent to jail with increasing frequency and for longer periods of time.

Recently, an Iowa ready-mix concrete executive was sentenced to serve 48 months in prison for his participation in conspiracies to fix prices and rig bids for ready-mix concrete sold in Iowa, and his co-conspirator was sentenced to serve a year and a day in prison. In a detailed 108-page opinion, the court stated that: “The defendants, although dressed in the attire of hard working businessmen, were nothing more than common thieves, and serial ones at that. Like a neighborhood thief, they stole from friends, acquaintances, businesses, and local governments.”

The 48-month prison sentence tied the record for the longest jail sentence ever imposed on a defendant solely convicted of violating the antitrust laws. In discussing the disparity between the defendant’s 48-month sentence and other recent sentences imposed for Sherman Act violations, the court noted, “the disparity is entirely warranted in order to reflect the seriousness that Sherman Act violations pose to the well-being of the nation.”

In FY 2010, the Division secured a total of 26,046 prison days on all defendants convicted of antitrust violations—the second most in Division history. The past four years have been the highest in Division history.

Incarceration Trend: Total Prison Days Sentenced

In FY 2010, the average prison sentence for defendants sentenced in Division matters was 30 months, the second longest in Division history. This is almost four times the average of eight months in the 1990s.

Incarceration Trend: Average Prison Sentence in Months

Since 2000, the Division has seen a steady increase in the percentage of defendants sentenced to prison. In the past two years, nearly 8 in 10 defendants went to prison. In the 1990s, only 37 percent of Division defendants went to prison. The percentage of Division defendants sentenced to jail in a single year reached a high of 87 percent in 2007, and remained high during FY 2010 at 78 percent.

Percentage of Defendants Sentenced to Prison

Foreign Executives Facing Longer Jail Sentences

Since May 1999, 49 foreign defendants have served, or are currently serving, sentences in U.S. prisons for violating the Sherman Antitrust Act or obstructing a Federal antitrust investigation. The “no-jail” sentencing recommendations that were once available to qualifying foreign nationals in the 1990s are no longer an option. Culpable foreign nationals, just like U.S. co-conspirators, are expected to serve jail sentences in order to resolve their criminal culpability.

During FY 2010, foreign nationals in international cartel cases faced average prison sentences of 10 months, which is more than three times longer than the average sentence from 2000 through 2005.

Average Prison Months Imposed on Foreign Defendants in International Cartel Cases

The Division’s policy of placing indicted international fugitives on a “Red Notice” list maintained by INTERPOL, and seeking to extradite any apprehended fugitive defendant, has raised the stakes for foreign executives who hope to avoid prosecution by remaining outside of the United States.

Ian Norris

In 2004, a Federal Grand Jury indicted Ian P. Norris, the former CEO of U.K. corporation The Morgan Crucible Company, on one count of fixing prices of carbon brushes and other carbon products, one count of conspiring to obstruct justice, and two counts of obstructing justice in connection with the Division’s investigation of price fixing in the carbon products industry. Norris, a citizen of the United Kingdom, was extradited to the United States in March 2010 to face trial on the three obstruction charges. On July 27, 2010, a Federal jury in Philadelphia returned a guilty verdict on the conspiracy to obstruct justice count and not guilty verdicts on the witness tampering count and the count of corruptly persuading others to destroy or conceal documents. On Dec. 10, 2010, Norris was sentenced to serve 18 months in prison for his role in a conspiracy to obstruct a Federal Grand Jury investigation into price fixing of carbon brushes and other carbon products.

Press Releases

December 10, 2010

Former CEO of the Morgan Crucible Co. Sentenced to Serve 18 Months in Prison for Role in Conspiracy to Obstruct Justice

July 27, 2010

Former CEO of the Morgan Crucible Co. Found Guilty of Conspiracy to Obstruct Justice

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