The Antitrust Division’s First Successful Extradition Against Non-US Citizens for Antitrust Offenses: the Dawn of a New Era in International Cartel Enforcement Against Foreign Nationals?

May 1, 2014

In what the Antitrust Division of the US Department of Justice (the Division) recently announced as the “first of its kind extradition on an antitrust charge,”[1] Romano Pisciotti, an Italian national who was allegedly at the center of the global conspiracy to fix prices in the marine hose market, was taken into custody upon his arrival in Miami, Florida from Germany.  It is not clear if this victory for the Division is an outlier or the beginning of a trend, but it has caught the attention of the antitrust defense bar.  Pisciotti’s arrest raises the question of what a more aggressive approach toward extradition for criminal antitrust offenses would mean for international companies and their non-US executives caught in the crosshairs of a criminal antitrust investigation in the United States.   

Background: The Marine Hose Investigation

Marine hose is a flexible rubber hose used to transfer oil between tankers and oil storage facilities.  The investigation into price-fixing in the marine hose market was initiated sometime around 2006, after Yokohama Rubber, a participant in the price-fixing conspiracy, submitted its amnesty application to the Antitrust Division.  According to the various information and indictments filed in connection with the investigation, the companies involved engaged in a global conspiracy to allocate portions of the marine hose market among themselves using a price list, and agreed not to compete for business by either not submitting bids or submitting intentionally high bids for orders belonging to other companies.  DOJ alleges that the conspiracy lasted from 1986 through 2007.        

To date, five companies have pleaded guilty for their involvement in the conspiracy, including Parker ITR SrL of Italy, Bridgestone Corporation of Japan, Manuli SPa of Italy, Trelleborg of France, and Dunlop Marine and Oil Ltd. of the United Kingdom.  In addition to these five companies, nine individuals have pleaded guilty for their involvement in the conspiracy.  Three individuals declined to plead guilty and were indicted.  Two of the three (two sales managers from Manuli), proceeded to trial and were acquitted by a jury in the US District Court for the Southern District of Florida.[2]

Pisciotti’s Extradition

In addition to the three indictments mentioned above, Pisciotti, a former executive with Parker ITR Srl, was indicted, under seal, in August 2010 for his involvement in the marine hose conspiracy.  Pisciotti is charged with violating the Sherman Act, and could be sentenced to a maximum of 10years in prison and $1 million in fines, or up to twice the amount gained by the conspirators or lost by the victims as result of the conspiracy.  DOJ alleges that as the head of Parker ITR’s marine hose division from 1985 through 2006, Pisciotti coordinated with other marine hose companies to allocate bids and share information about bidding opportunities.     

Having avoided US jurisdiction since his indictment, Pisciotti was arrested in June 2013 in Germany, while on a layover at the Frankfurt airport on his return to Italy from Nigeria.  Because Germany also has individual criminal liability for cartel violations, and because Pisciotti was not a German citizen, the German government agreed, pursuant to its 1978 extradition treaty with the United States, to extradite Pisciotti to the United States.   After months of fighting his extradition to the United States in German courts, Pisciotti was flown from Frankfurt to Miami, and appeared in court in the US District Court for the Southern District of Florida on April 4. 

Two weeks after his initial appearance in Miami, Pisciotti pleaded guilty to one count of conspiracy and sentenced to two years imprisonment (with credit for the nine months he was held in German custody pending his extradition challenge).  He also received a criminal fine of $50,000.    

Pisciotti’s extradition was the first obtained by the Division for a criminal violation of the Sherman Act, but it is not the first time the Division has obtained an extradition of a foreign national to face criminal charges arising from one of its investigations.  In March 2010, the Division gained the extradition of Ian Norris after a seven-year battle at all levels of the British judiciary. , Norris, a retired Morgan Crucible executive residing in the United Kingdom, was wanted in connection with the Division’s investigation of price-fixing in the carbon products industry. 

However, the ultimate basis for Norris’s extradition was two counts of obstructing justice (one for tampering with witnesses and the other for destroying documents).  Previously, the Division had been unable to extradite Norris for criminal violations of the Sherman Act because the extradition treaty between the United States and the United Kingdom requires that the subject offense for which extradition is being sought is also a crime in the United Kingdom (i.e., the “dual criminality” principle). At the time of Norris’s alleged cartel-related conduct, the United Kingdom had not yet enacted Section 188 of the Enterprise Act of 2002, which criminalized price-fixing under UK law.  Norris ultimately was convicted by a jury in Philadelphia and sentenced to 18 months in prison.

What Pisciotti’s Extradition Means (and Doesn’t Mean)

While Pisciotti may not have been the first foreign national successfully extradited to face criminal charges brought by the Division, his extradition for an antitrust offense is certainly a milestone in the Division’s historical efforts to hold foreign nationals accountable for criminal violations of US antitrust law.  Pisciotti’s extradition comes in the wake of recent messages from the Division that it intended to tighten enforcement in this area.  The Division touted in its 2014 Spring Update, released last February, that it “remains committed to ensuring that culpable foreign nationals, just like US co-conspirators, serve prison sentences for violating the US antitrust laws and to using all appropriate tools to find and arrest or extradite international fugitives.”[3]  Similarly, Scott Hammond, then-Deputy Assistant Attorney General of the Division’s Criminal Enforcement program, stated in connection with the indictment of two Japanese nationals arising from the auto parts investigation:  “The Antitrust Division is working with competition enforcers abroad to ensure that there are no safe harbors for executives who engage in international cartel crimes.”[4]  With the recent indictment of three Japanese executives from Bridgestone alleging bid-rigging in the anti-vibration auto parts market, one must assume that the Division will be stepping up its efforts to extradite individuals from Japan in particular, a country that criminalized certain forms of cartel conduct in 2006, and increased the maximum penalty for criminal antitrust violations to five years in 2009.[5] 

However, it is also important to highlight the unique circumstances underlying the Pisciotti indictment Pisciotti was not extradited from Italy, and could not have been since Italy is among the majority of countries that do not treat bid-rigging as a crime.  Moreover, Germany, in granting the United States’ extradition request, did so only because the subject was not a German citizen, as the German Constitution generally forbids the extradition of its own nationals to any country outside Europe, where the European Convention on Human Rights applies.

Yet, the antitrust defense bar cannot ignore the Division’s decision to expend the significant resources necessary to extradite Pisciotti.  To the extent that the Pisciotti extradition is the beginning of a new, more aggressive approach by the Division toward the extradition of foreign nationals it believes have violated US antitrust law, there are a number of potential implications companies. Individuals and their counsel should consider as they interact with the Division.

Heightened Risk of Non-US International Travel.  Foreign nationals who forego negotiating a plea and who are subsequently indicted as a consequence may no longer take solace in simply avoiding entry into the United States.  Even where their resident countries do not establish dual criminality, the Pisciotti extradition demonstrates that the Division is ready and willing to move beyond “border watch” lists, which monitor individuals’ entry into and exit from the United States, to using Interpol “Red Notices” to secure the extradition of foreign nationals, who may not be subject to extradition from their home country when they travel to another country.  Sales executives operating in international markets who find themselves, as many do, traveling to different countries for customer visits and other business reasons may do so at significantly more peril than before.  This is particularly the case if the visiting country, like Germany, offers less protection from extradition to foreign visitors than to its own citizens. 

More Cooperation from Foreign Nationals.  Foreign nationals at risk of prosecution for antitrust crimes often opt not to cooperate and remain in their country of residence indefinitely, under the assumption that extradition is extremely unlikely.  A new mindset at the Antitrust Division will make avoiding US jurisdiction a less viable option, and ultimately incentivize such individuals to cooperate in US investigations.  We could see not only more frequent cooperation, but also a greater degree of cooperation, including the staging of telephone calls and the wearing of recording devices during discussions with co-conspirators, as the Antitrust Division begins to follow other law enforcement agencies in using more sophisticated means of gathering evidence.

Less Leverage in Plea Negotiations.  Counsel for foreign nationals have historically enjoyed significant leverage in securing for their clients relatively generous plea deals involving no or at least short terms of imprisonment in exchange for relinquishing their “fugitive” status and submitting to US jurisdiction.  If the Pisciotti extradition serves to embolden the Division to seek extradition more often and more aggressively in the future, this bargaining chip could decrease significantly in value.  Moreover, in an enforcement environment in which foreign nationals have a significant risk of extradition and prosecution, prosecutors can more credibly incentivize clients to consent to extradition[6]  with a downward adjustment under FSG 3E1.1 (Acceptance of Responsibility),    and possibly penalize non-cooperation with an upward adjustment under FSG 3C1.1 (Obstructing or Impeding the Administration of Justice), as a threat against avoiding arrest or arraignment by remaining out of US jurisdiction.[7] 

Carve-Out Considerations.  Part and parcel of all plea negotiations between a cooperating company and the Division is the issue of how many individuals will be excluded, or “carved-out” from the release in the plea agreement.  Although the identity and number of carve-outs are (at least in principle), a function of the merits as to each individual (e.g., the nature of the individual’s conduct, level of supervisory authority, etc.), how many carve-outs (and, in turn, which individuals are carved-out), in the plea agreement is inevitably subject to at least some degree of negotiation.  To the extent that companies adopt the strategy of making the “carve-in” of foreign nationals less of a priority during plea negotiations in order to conserve negotiating capital, under the assumption that getting them carved-in is not necessary, a more aggressive approach toward extradition on the part of the Division could very well change that strategy.   

Conclusion

Only time will tell whether the Pisciotti extradition does in fact represent a harbinger for a more determined approach toward extradition by the Antitrust Division, or whether it is much ado about nothing.  In the meantime, international companies and their executives residing abroad (and their counsel), would do well to assume, out of an abundance of caution and until future developments prove otherwise, that the enforcement of federal antitrust laws against foreign nationals is becoming a top priority of the Antitrust Division, and to consider carefully the potential impact the aggressive use of extradition could have on defense strategy during a criminal antitrust investigation.   


[1] US Department of Justice Press Release, First Extra Extradition on Antitrust Charge, April 4, 2014.

[2] The third indicted individual, Uwe Bangert, a former executive of Dunlop Marine & Oil, remains at large as a fugitive.

[3] US Department of Justice, Antitrust Division, Division Update February 2014, at  http://www.justice.gov/atr/public/division-update/2014/criminal-program.html (last visited April 30, 2014).

[4] US Department of Justice Press Release, “Two Fujikura Ltd. Executives Indicted For Roles In Fixing Prices For Automobile Parts Sold to Subaru to be Installed in US Cars,” Sept. 19, 2013.

[5] Japan’s extradition treaty with the United States permits extradition only when the offense in question is punishable by imprisonment for three years or more.  However, given that the elements of criminal antitrust and conspiracy in Japan vary somewhat from those in the United States, and that the alleged marine hose conspiracy covers conduct well beyond the Japanese five-year limitations period, the extent to which Japan will ultimately cooperate with any effort by the United States to extradite these three individuals remains unclear.  

[6] See, e.g., United States v. Garrido-Santana, 360 F.3d 565, 578 (6th Cir. 2004) (upholding 3C1.1 enhancement to defendant’s sentence based on defendant’s failure to appear at his arraignment prior to extradition); accord United States v. Garcia, 41 Fed. Appx. 643, 643-44 (4th Cir. 2002) (finding no error in district court’s refusal to award upward adjustment under 3E1.1 where defendant fled jurisdiction and fought extradition). 

[7] As Pisciotti’s plea agreement has not yet been released to the public, it is unclear what (if any) adjustments were applied in his sentencing.