Cartels Beware: The Antitrust Division Prepares for Trial and Continues Criminal Investigations in Key Markets

Antitrust Division Spring Update 2019

Over the past year, the Antitrust Division has continued its vigorous enforcement of the criminal antitrust laws and saw significant progress in a number of long-running criminal investigations, including United States v. Kemp & Associates, bid rigging at foreclosure auctions, and fuel supply to U.S. military bases in Korea, which are discussed in other articles. Additionally, the Division reached milestones in its investigations into online markets, freight forwarding, packaged seafood, electrolytic capacitors, and the financial services industry.

There is more to come. The Division is preparing for trial in six matters and had 91 pending grand jury investigations at the close of FY 2018.

Online Markets

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As American consumers purchase more online, the Division has continued its focus on collusion in online markets. For example, in 2015, a grand jury indicted Daniel Aston, a citizen of the UK, for using algorithm software to fix prices for posters sold online. Aston was arrested in Spain in May 2018. After five months in Spanish custody, Aston agreed to submit to U.S. jurisdiction and plead guilty.

The Division’s investigation into collusion in the online customized promotional products industry has resulted in charges against five companies and six individuals. In January 2019, Netbrands Media Corporation, and two of its executives, agreed to plead guilty to conspiring to fix prices for customized promotional products. The conspiracy not only corrupted online markets, but was carried out online using social media platforms and encrypted messaging applications, such as Facebook, Skype, and Whatsapp. That same month, a grand jury indicted Taiwan-based G Nova Corporation and its CEO for conspiring to fix prices for insulated beverage containers.

Our focus on online markets also intersected with our investigation of bid rigging at foreclosure auctions. In November 2018, on the eve of trial, Avi Stern became the third defendant to plead guilty to rigging bids during online foreclosure auctions in Palm Beach County, Florida in a conspiracy that affected the sale of $25 million of foreclosed homes.

Freight Forwarding

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In June 2018, the FBI arrested Jason Handal and Roberto Dip on charges that they conspired to fix prices for international freight forwarding services. A Miami judge agreed with our prosecutors at a contested detention hearing and ordered Dip detained until trial. In late November, Dip and Handal pleaded guilty.

Electrolytic Capacitors

Capacitors

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The Division’s investigation into a conspiracy to fix prices and rig bids for electrolytic capacitors—a ubiquitous component of consumer electronics—has led to charges against eight companies and ten individuals. All charged companies have pleaded guilty. Most recently, in October 2018, Nippon Chemi-Con was sentenced to pay a $60 million criminal fine, the largest fine imposed in the conspiracy, along with a five-year term of probation. Altogether, the eight corporations have been fined over $150 million for their participation in the capacitors conspiracy. Two executives have pleaded guilty and were each sentenced to serve a prison term of a year and a day.

Packaged Seafood

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The Division’s investigation into price fixing in the packaged seafood market has led to charges against four executives and two companies. Three executives and two companies have pleaded guilty to participating in a conspiracy to fix prices for packaged seafood sold in the U.S. The fourth executive, Christopher Lischewski, the President and Chief Executive Officer of Bumble Bee Foods, was indicted in May 2018. Division prosecutors are preparing for trial against him, which is scheduled for November 2019.

The second company, StarKist Co., agreed to plead guilty for its role in the conspiracy in October 2018. It faces a criminal fine of up to $100 million. StarKist’s sentencing hearing is currently scheduled for May 2019.

Financial Services Industry

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The Division also continued its investigation and prosecution of collusion regarding manipulation of benchmark interest rates and foreign exchange rates. In May 2018, a grand jury sitting in the Southern District of New York charged Akshay Aiyer, a former JP Morgan foreign exchange currency trader, with conspiring to fix prices of the Central and Eastern European, Middle Eastern, and African currencies. His trial is currently scheduled for October 2019.

Most recently, after a month-long trial that ended in October 2018, prosecutors from the Antitrust Division and the Criminal Division secured convictions of former Deutsche Bank traders Matthew Connolly and Gavin Black for their role in a scheme to manipulate the London Interbank Offered Rate.

Upcoming Trials

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In addition to trials against Kemp and Mannix, discussed elsewhere, and Lischewski and Aiyer, as noted above, the Division is also preparing for three other trials. Trial against a real estate company, a realtor, and his accountant indicted for a long-running conspiracy to defraud companies, including financial institutions, in connection with foreclosed properties is scheduled for May 2019 in the District of Minnesota. The Division has an early 2020 trial date in the Eastern District of California against a roofing company owner and former facilities manager who were indicted for conspiring to defraud the United States by diverting government funds intended to rebuild and repair the Sierra Army Depot. Finally, prosecutors are also preparing for trial in the Eastern District of California against a real estate investor indicted for bid rigging at foreclosure auctions.

Updated March 26, 2019

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