Under Delrahim, DOJ wary about filing criminal antitrust charges, indictments

02 Apr 2020 12:40 pm

Over the past 18 months, the Justice Department has announced only three new criminal cases, only one of which involved corporate charges — against several South Korean oil refiners for rigging bids on contracts with the Department of Defense. During that same time period, senior officials in the DOJ’s antitrust division have also nixed a number of proposed indictments and charges in several other cases, MLex has learned.

The vetoes may indicate that the antitrust division under Assistant Attorney General Makan Delrahim and his new head of criminal enforcement, Richard Powers, are taking a more cautious approach to criminal antitrust cases after a string of recent losses. Some defense lawyers have also suggested that the killed cases result from an influx of new prosecutors on the criminal antitrust side who have less experience developing cases.

Since 2014, the Justice Department has been investigating allegations that generic pharmaceutical companies fixed prices on a number of generic drugs. The first charges in that case came in December 2016, when two executives from Heritage Pharmaceuticals agreed to plead guilty to fixing prices on a commonly used antibiotic and a diabetes drug. Since then, the investigation has appeared dormant.

Prosecutors working on that case, however, are understood to have proposed indictments last spring. The antitrust division’s front office — which includes Delrahim, Powers and other senior officials who help lead the agency’s litigation and civil efforts — declined to approve the indictments, it is understood.

At the time, the agency had recently lost a price-fixing trial in Ohio federal court against a Japanese car parts company and its US subsidiary. Concerned about a potential repeat, senior officials declined to sign off on the indictments and sent the case back for further investigation.

In February, several companies who had received subpoenas from the Justice Department related to alleged saline price-fixing disclosed in securities filings that the probe had been closed.

In another case out of the antitrust division’s New York office, criminal prosecutors since 2016 had been investigating potential bid-rigging among advertising agencies. Major advertising companies, including Interpublic Group, Omnicom, Publicis, WPP and MDC Partners, acknowledged receiving subpoenas as part of the probe.

The investigation is understood to have focused on bidding practices for post-production work on video advertisements. Prosecutors leading the probe in New York are understood to have started plea agreement negotiations with some of the companies and individuals involved when the antitrust division’s front office decided to close the case.

Before the advertising companies were told that the investigation was closed, prosecutors in the antitrust division’s New York office lost a high-profile trial against three former traders accused of rigging foreign exchange rates. That case ended in an acquittal on Oct. 26.

The five advertising companies disclosed in securities filings on Nov. 13 and 14 that the Justice Department had closed the case without charges.

In another case, antitrust lawyers reviewing a proposed merger between IMG College and Learfield, the Nos. 1 and 2 providers of college sports marketing, found potentially illegal coordination between the two companies.

Antitrust division prosecutors in San Francisco are understood to have opened a grand jury investigation into the conduct, which involved the companies coordinating to offer joint bids for multimedia rights management to colleges and universities. Even after dissolving the joint venture, the companies allegedly would enforce non-competes on which could bid for various schools.

Some time late last year, the antitrust division’s leadership decided the case should proceed as a civil antitrust case rather than a criminal bid-rigging probe and the grand jury was closed.

In February, the Justice Department announced a civil settlement with the companies in which the new company — Learfield IMG — agreed not to form any joint ventures without prior approval from the DOJ for the next seven years. Neither company admitted a violation as part of the settlement.

It isn’t unusual for the Justice Department to close a criminal investigation if it doesn’t find evidence of anticompetitive conduct, but that decision is generally made earlier in the probe, not at the point when staff are recommending charges. For example, the DOJ issued subpoenas in February 2018 to manufacturers of methylene diphenyl diisocyanate, or MDI, including BASF and Covestro. The companies were informed in December that the agency was closing that probe.

The pattern of closures may indicated that Delrahim and Powers are taking a more cautious approach to criminal cases in the wake of the car parts and forex trial losses.

Some longtime criminal antitrust defense attorneys also suggested the string of closures could be a result of the relative inexperience of many of the antitrust division’s criminal staff. In 2013, the antitrust division closed four of its so-called field offices in Atlanta, Cleveland, Dallas and Philadelphia. Those offices primarily focused on criminal work. Staff in those offices were offered positions in the remaining criminal units located in San Francisco, Chicago, New York and Washington DC.

But over the past five years, the number of senior criminal antitrust prosecutors has continued to dwindle through retirements or individuals moving to private practice. After a recent round of retirements in December, only the chief of the New York antitrust office, Jeffrey Martino, has held that position for more than a year.

As more senior criminal prosecutors have left, the division has hired a raft of new attorneys for the criminal program who don’t have the same experience building and investigating cartel cases.

-- Additional reporting by Joshua Sisco in San Francisco.

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