Antitrust Division 2014 Criminal Enforcement Update
The Antitrust Division’s vigorous criminal enforcement efforts continued in the past year. The Division obtained significant fines and prison sentences, including the longest sentence involving a Sherman Act violation and other criminal activity, and won jury trial victories relating to its Superfund fraud and real estate foreclosure auctions investigations. The Division also obtained a conviction against the first defendant charged in its investigation of an ocean shipping cartel. And it achieved additional convictions in its investigations of bid rigging involving airline charter services and a number of cartels involving auto parts.
In total, the Division filed 50 criminal cases and obtained just over $1 billion in criminal fines in fiscal year 2013. In these cases, the Division charged 21 corporations and 34 individuals and courts imposed 28 prison terms with an average sentence of just over two years per defendant.
The Division also established a second criminal office in Washington, D.C. Its initial focus will be investigating real estate foreclosure auction bid rigging in the southeastern United States, and over time it will expand to include a full portfolio of matters.
More Than $1 Billion in Criminal Fines in 2013 and More Than $4 Billion in 5 Years
The FY 2013 $1.02 billion criminal fine total is one of the highest ever obtained by the Division and the third time since 2009 that the Division exceeded the $1 billion fine mark. Since 2009, the Division has obtained more than $4 billion in criminal fines. The average annual criminal fine total of $847 million in this period compares with the Division’s average annual direct appropriation of about $85.5 million. Since January 2009, the Division has filed 339 criminal cases, a more than 60 percent increase over the prior five-year period.
Criminal fines the Antitrust Division obtains do not go to the Division, but rather are contributed to the Crime Victim’s Fund, helping those victimized by crimes throughout our country.
Record Sentence Part of Trend Toward More Frequent Imprisonment, Longer Sentences
The Division continued its pursuit of culpable individuals—holding them accountable is the most effective way to deter and punish cartel activity. This year, in connection with its coastal shipping investigation, the Division obtained a five-year prison sentence, the longest ever for a Sherman Act violation. And in the Division’s investigation of kickbacks at Environmental Protection Agency Superfund sites, a defendant was sentenced to 14 years in prison for antitrust violations, fraud, and other criminal activity.
Individuals prosecuted by the Division are being sent to prison with increasing frequency and for longer periods of time. During FY 2013, 68 percent of the individuals sentenced in Division cases received prison time. The Division now is sending nearly twice as many defendants to prison as it did in the 1990s, with those defendants serving longer terms. In FY 2013, the average prison sentence for Division defendants was 25 months, more than three times the average of eight months in the 1990s.
Ten foreign nationals were sentenced to imprisonment during FY 2013, with an average sentence of 15 months. The Division remains committed to ensuring that culpable foreign nationals, just like U.S. 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.
Criminal Trial Success
The Division secured two significant criminal trial wins in the past year.
Real Estate Foreclosure Auctions Cartel
On March 11, 2014, following a four-week trial, an Eastern District of California jury convicted two real estate investors of conspiring to rig bids at public real estate foreclosure auctions in San Joaquin County, California. One of the defendants also was convicted of obstruction of justice for destroying evidence related to the crimes. The jury could not reach a verdict on a count of conspiracy to commit mail fraud against these two defendants. The jury found a third defendant, an auctioneer, not guilty.
The convicted investors and their co-conspirators agreed to suppress and restrain competition by rigging bids to obtain selected properties offered at public auctions. Evidence showed that after the conspirators’ designated bidder bought a property at a public auction, they often 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. This was money that otherwise would have gone to pay off mortgages and, in some cases, the defaulting homeowners. The bid-rigging conspiracy lasted from at least September 2008 until at least October 2009. To date, 46 individuals either have pled guilty or agreed to plead guilty in connection with the real estate foreclosure auctions investigation in northern California.
March 11, 2014
Two Real Estate Investors Convicted for Roles in Bid-Rigging Conspiracy in San Joaquin County, Calif. Real Estate Foreclosure Auctions
Superfund Kickback Scheme
On September 30, 2013, following a two-week trial, a jury in New Jersey returned guilty verdicts on 10 counts charged in the indictment against a former project manager for a prime contractor, for his central role in conspiracies that spanned seven years and involved kickbacks in excess of $1.5 million at two Environmental Protection Agency Superfund sites. The defendant was convicted of engaging in separate conspiracies with three subcontractors at two New Jersey Superfund sites—Federal Creosote in Manville, N.J., and Diamond Alkali in Newark, N.J. He also was convicted of engaging in an international money laundering scheme, major fraud against the United States, accepting illegal kickbacks, committing two tax violations, and obstruction of justice. The defendant was acquitted on two counts involving certain fraud and kickback charges. As part of the conspiracies, he and co-conspirators at his former company accepted kickbacks from subcontractors in exchange for the award of subcontracts at Federal Creosote. He also provided co-conspirators with their competitors’ bid prices, which allowed them to submit higher bid prices and still be awarded the subcontracts. On March 3, 2014, the defendant was sentenced to 14 years in prison and to pay a $50,000 fine. The court will order restitution at a later date.
To date, more than $6 million in criminal fines and restitution have been imposed in the course of this investigation, and six individuals have been sentenced to serve more than 24 years in total prison time.
March 3, 2014
Former Project Manager Sentenced to Serve Time in Prison for Role in Bid Rigging and Other Fraudulent Schemes Involving Two EPA Superfund Sites in New Jersey
September 30, 2013
Former Project Manager Convicted for Role in Conspiracy Schemes Involving Two EPA Superfund Sites in New Jersey
Ongoing Investigations Continue to Produce Results
The Division’s ongoing automobile parts investigation has yielded unprecedented results. On September 26, 2013, the Division undertook the largest simultaneous enforcement action in its history, bringing charges against nine companies, which agreed to the imposition of a total of more than $740 million in fines, and two individuals. Recently, the investigation also yielded the fourth-largest criminal antitrust fine ever imposed—a $425 million fine against Bridgestone Corporation.
Companies and parts charged on September 26, 2013. Click the image to view a larger version.
To date, the investigation has resulted in charges against 26 companies and 29 individuals and more than $2 billion in criminal fines for participation in conspiracies to fix prices of and rig bids on automobile parts, including safety systems such as seat belts, air bags, steering wheels, and antilock brake systems, and critical parts such as antivibration rubber, instrument panel clusters, starter motors, and wire harnesses. Twenty-three of the individuals have pleaded guilty or agreed to plead guilty and have agreed to serve prison sentences ranging from a year and a day to two years. The Division continues to cooperate on this investigation with its counterparts in Japan, South Korea, the EC, and Canada, among others.
View auto parts investigation press releases and case filings.
Financial Fraud: Real Estate Foreclosure and Tax Liens Auctions; LIBOR; and Municipal Bonds
As of March 2014, due to the Division’s efforts, 90 defendants have pleaded guilty to real estate foreclosure and tax liens conspiracies across the United States that suppress and restrain competition in ways that harm our communities and already financially distressed homeowners.
The Division has partnered with the FBI to combat a pattern of collusive schemes among real estate speculators aimed at eliminating competition at real estate foreclosure auctions. Instead of competitively bidding at public auctions for foreclosed properties, groups of real estate speculators work together to keep public auction prices artificially low by paying each other to refrain from bidding or holding unofficial “knockoff” auctions among themselves. The Division has taken recent action against real estate investors who purchased rigged properties in Alameda, Contra Costa, San Francisco, and San Mateo Counties, California, as well as Mobile, Alabama, and Atlanta, Georgia. As described above, the Division recently secured convictions at trial against two real estate investors for conspiring to rig bids at real estate foreclosure auctions in San Joaquin County, California.
View real estate foreclosure auctions investigation press releases and case filings.
Similar collusive conduct also has been detected among bidders for public tax liens, and eleven individuals and three companies have pleaded guilty as part of an ongoing investigation into bid rigging and fraud related to such auctions in New Jersey. Additionally, four individuals and two entities were indicted on November 19, 2013.
View municipal tax lien auctions investigation press releases and case filings.
The Division is investigating this type of anticompetitive conduct at auctions in multiple states. Through its work combating bid rigging and collusion at public auctions, the Antitrust Division has been a major contributor to the efforts of the Financial Fraud Enforcement Task Force (FFETF) to investigate and prosecute financial crimes.
In the LIBOR (London InterBank Offered Rate)/Euribor investigation, the Division, in conjunction with the Criminal Division, obtained a conviction against Rabobank, which agreed to pay $325 million in criminal penalties. The Division also filed criminal complaints against three former brokers and five former traders for their roles in manipulating LIBOR and/or Euribor benchmark interest rates. In all, the Division has obtained $475 million in criminal fines and penalties in this ongoing investigation, and the total global criminal and regulatory fines, penalties, and disgorgement obtained by enforcement authorities is over $3.7 billion. The broader investigation relating to LIBOR and other benchmark rates has required, and has greatly benefited from, a diligent and wide-ranging cooperative effort among various enforcement agencies both in the United States and abroad. The FBI, Securities and Exchange Commission, Commodity Futures Trading Commission, U.K. Financial Conduct Authority and Serious Fraud Office, Japanese Ministry of Justice, Japan Financial Services Agency, Swiss Financial Market Supervisory Authority, Dutch Public Prosecution Service, and Dutch Central Bank all have played major roles in the LIBOR investigation.
View LIBOR investigation press releases and case filings.
The Division, in concert with other federal agencies, continues to obtain convictions in criminal conspiracies involving bid rigging in the municipal bond investments market. The schemes under investigation involve unlawful agreements to manipulate the bidding process on municipal investment and related contracts—financial instruments that were used to invest the proceeds of, or manage the risks associated with, bond issuances by municipalities and other public entities. The bonds these crimes affect support critical municipal infrastructure, like roads, schools, and other projects.
View municipal bonds investigation press releases and case filings.
Most recently, the Division has taken action against former UBS and Bank of America executives. To date the Division’s ongoing investigation has resulted in criminal charges against 20 former executives of various financial services companies and one corporation. Seventeen of the 20 executives charged have pleaded guilty or were convicted at trial. In addition, financial institutions have agreed to pay a combined total of nearly $750 million in restitution, penalties, and disgorgement to federal and state agencies for their roles in the conduct.
Airline Charter Services
On February 24, 2014, the Division obtained the fifth guilty plea to arise out of its ongoing investigation into fraud and anticompetitive conduct in the airline charter services industry. A former employee of Aviation Fuel International, Inc. (AFI) pleaded guilty to a felony charge filed in Kansas City, Missouri. The charge against him stemmed from the investigation into kickback payments by AFI and its employees to the former vice president of ground operations for Ryan International Airlines. The defendant worked for AFI from June 2007 to March 2008, and during that time Ryan’s vice president received kickback payments from AFI on aviation fuel, services, and equipment sold by AFI to Ryan. AFI’s owner and operator pleaded guilty on March 6, 2014, bringing the total number of guilty pleas to six.
Four of the six individuals who have pleaded guilty have been ordered to serve sentences ranging from 16 to 87 months in prison and to pay more than $580,000 in restitution.
September 12, 2013
Former Airline Executive Sentenced to Prison for Schemes to Defraud Illinois-Based Ryan International Airlines
August 14, 2013
Florida Airline Fuel Supply Company and Its Owner Indicted for Role in Scheme to Defraud Illinois-Based Ryan International Airlines
July 22, 2013
Former Owner of Two Florida Airline Fuel Supply Companies Charged for Role in Scheme to Defraud Illinois-Based Ryan International Airlines
On February 27, 2014, the Division brought the first charges in its investigation of a conspiracy involving ocean shipping services. Compañía Sud Americana de Vapores S.A. (CSAV), a Chilean corporation, was the first company charged in the conspiracy to suppress and eliminate competition by allocating customers and routes, rigging bids, and fixing prices for the sale of international ocean shipping services for roll-on, roll-off cargo. This is noncontainerized cargo that can be rolled onto and off an ocean-going vessel and includes new and used cars and trucks, as well as construction, mining, and agricultural equipment. CSAV has agreed to pay an $8.9 million criminal fine.
February 27, 2014
South American Company Agrees to Plead Guilty to Price Fixing on Ocean Shipping Services for Cars and Trucks