Antitrust and Unfair Competition Law

Competition: Spring 2017, Vol 26, No. 1


The Golden State Institute was honored to have Renata Hesse, Acting Assistant Attorney General of the Antitrust Division of the United States Department of Justice speak about criminal antitrust enforcement during the Obama Administration. Following her remarks, she was joined by several of her colleagues from the Division for a panel discussion. The panel included Brent Snyder, Deputy Assistant Attorney General for Criminal Enforcement, Kate Patchen, Chief of the San Francisco Office and Matthew Lunder, Counsel to the Director of Criminal Enforcement. The discussion was moderated by Niall Lynch, Partner in the San Francisco office of Latham & Watkins LLP.

Remarks by Renata Hesse

Good afternoon. It’s been my honor to serve as Principal Deputy Assistant Attorney General for the past four years, and twice during that time as Acting Assistant Attorney General. Recently I’ve spoken about our civil enforcement program, its work here at home and with our international partners and about the importance of our cooperative relationships with state and federal enforcers. I’m grateful for this opportunity to talk to you today about the division’s criminal program.

The statistics from the past eight years are undeniably impressive, and we are justifiably proud of them. But conviction tallies and fine amounts alone are an inadequate accounting of our accomplishments. The measure of success for any criminal-enforcement program is not merely the number of cases it successfully prosecutes, but also the breadth of critical industries it touches in various sectors of the economy, and the impact on American consumers. It’s been my privilege to both watch and participate in the development of the division’s criminal program, and I have come to deeply appreciate the sound policy objectives and appropriate exercises of prosecutorial discretion that sustain it.

Throughout the Obama Administration, the division added steadily to its established record of successful prosecutions in significant sectors of the domestic and global economies. Some cases are big and well publicized. Others are small and relatively unknown. But all demonstrate our prosecutors’ commitment to finding, stopping, punishing and deterring antitrust crimes. We consciously forged an integrated antitrust-enforcement regime, through our relationships with other agencies and within the division itself—across civil and criminal sections. And we’ve demonstrated for the defense bar and business community, in cases I’ll touch on briefly today, our positions with respect to important aspects of criminal enforcement—like compliance and corporate probation, our carve-out practice, the requirements of leniency and how we evaluate the relative culpabilities of both corporate and individual subjects.

As for what we can measure in numbers, in recent years we’ve obtained the largest fines in the division’s history. The auto parts cases now total nearly $2.9 billion in criminal fines, surpassing the international cartel investigation before it—the air transportation investigation totaled $1.8 billion. And last year we announced over $2.5 billion in criminal fines and penalties from corporate offenders in a single investigation in the financial-services sector. At the same time, we continue to hold individuals accountable for the crimes imputed to their corporate employers, asking for sentences that reflect their seriousness and send a powerful deterrent message. During the past eight years we obtained well over 300 individual convictions while maintaining a 23-month average prison sentence.

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Much has been said about the Yates Memo, and there’s no need for me to repeat here its admonitions about corporate cooperation and individual accountability. Most of you knew the division was committed to this even before the department emphasized the policy and revised the U.S. Attorney’s Manual. It’s no secret that we believe the most effective deterrent to antitrust felonies is prison time for those who commit them. But this does not mean that for us the Deputy Attorney General’s directive was a redundancy. It was an opportunity to reflect on our practice, and to refine how we assess cases against individuals. It informed how we talk about them within the division, and publicly. We asked: What more can we do to align our practices and policies with the department’s priorities?

Our real-estate foreclosure-auction cases exemplify individual accountability—we’ve prosecuted those who would profit from the misfortunes of others, people who suffered foreclosures during a national financial crisis. To date we’ve obtained convictions against 70 individuals in California, four are on trial this week and 14 more indicted individuals await trial. In Georgia, in addition to one company conviction, we obtained another 20 individual convictions, and two more await trial there. In Alabama and North Carolina, we’ve obtained 12 and two individual convictions, respectively, in addition to two company convictions in Alabama.

This investigation is not an exception. If we look at our corporate and individual convictions across all investigations, in the past four years alone we have obtained convictions against 118 individuals and held accountable a corresponding 78 corporate offenders. And looking back across the past eight years, the ratio of individual to corporate convictions is more than two to one—353 individual to 150 corporate convictions.

The criminal program’s reach extends outside the United States, and foreign-national fugitives feel its sting, too. Over the past eight years, 56 foreign defendants living abroad were sentenced to serve time in U.S. prisons for their crimes, compared to 34 during the prior 10 years. Just two weeks ago, another fugitive—the third in the past two years—was extradited to the United States on charges brought by division prosecutors. An Interpol red notice allowed Bulgarian authorities to apprehend and deliver him here to face the charges against him. He was immediately arraigned and remanded to the custody of U.S. Marshals, where he awaits trial.

Our record shows our success in major industrial sectors that impact the domestic and global economies, and hit everyday consumers in the pocketbook—like the real-estate and auto-parts cases I just mentioned. But think about a sector like shipping, and all it includes—how it adds to the cost of almost every product we buy. Throughout the last decade we’ve discovered and prosecuted conspiracies involving air freight, freight forwarding and international and domestic ocean shipping. Air and water shipping impact overland shipping logistics, and our presence is felt there, too. In our current international ocean-shipping investigation, four corporate offenders have pleaded guilty and together will pay nearly $235 million in criminal fines. Antitrust prosecutors charged eight individuals and have to date obtained convictions against four of them. The rest remain fugitives susceptible to some version of the Bulgarian fate that befell the defendant I just mentioned.

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We’ve made our mark in the electronic-components industry, a sector critical to our information technology, and so to our economy and its connection to the world’s. In the Liquid Crystal Displays (LCDs) investigation, at the trial of AU Optronics here in San Francisco—I know many of you are familiar with it—we proved to the jury the overcharge justifying a $500 million fine. Two senior executives were each sentenced to 36 months in prison and another to 24 months. And now our prosecutors are investigating a long-running conspiracy to fix the prices of capacitors, a small electronic component with myriad uses. Like LCDs, they are ubiquitous in our devices—desktop and laptop computers, flat-screen televisions, game systems and digital cameras. They are also critical to car-engine and airbag systems, home appliances and office equipment. Yet another product integral to the daily lives of consumers at home and around the world. Five corporate defendants have now pleaded or agreed to plead guilty and will together pay over $34 million in criminal fines. And just yesterday, a grand jury indicted five more individuals in this ongoing investigation, bringing the total to six.

But as I said, the division’s accomplishments comprise more than just successful prosecutions in critical economic sectors. Looking closer, at the details of specific resolutions, we see our prosecutors’ commitment to fairness in their pursuit of just outcomes. Like considering the sanctions that other jurisdictions might levy in evaluating the fairness of our own. In a recent auto-parts case, we worked closely with our friends at the Competition Bureau in Canada—the conspiracy affected both our nations. Although the Bureau could have brought charges, it decided to forgo them, and we based the corporate fine on commerce that affected both the United States and Canada. The investigation culminated in a guilty plea and sanctions that appropriately addressed the criminal conduct affecting us both. A reasonable and common-sense resolution furthered a basic principle of criminal justice: no offender should escape the fair consequences of its crimes.

We applied the same principle when confronting ability-to-pay claims. We want defendants with legitimate claims to make them. Our objective is to protect the economy; to punish and deter corporate offenders, yes, but not to put competitors out of business and their employees—many of whom have nothing to do with their employers’ crimes—out of work. But we are appropriately skeptical of ability-to-pay claims, and carefully scrutinize them with the help of outside experts, because it would be unfair for an offender who can pay to avoid this consequence. Until recently, we had not given a corporate offender with a fine reduced because of inability to pay any further reduction—for cooperation or otherwise. But if a company in financial distress faces the same fine, regardless of whether it cooperates, it has no incentive to incur the additional cost of cooperating. So we now consider additional sentencing credit for companies that demonstrate inability to pay, but nevertheless provide valuable cooperation. To earn credit for cooperating, any pleader must provide assistance that adds value to our investigation. And if it has value, it does whether an ability-to-pay claim reduces a fine or not. This is fair. And it reinforces the incentive structure we maintain. We can distinguish spurious ability-to-pay claims from legitimate ones while incentivizing cooperation. Three companies with fines reduced for inability to pay recently received additional sentencing credit for cooperation.

Compliance and remediation have become more central to our corporate resolutions and sentencings. In the AU Optronics case we used a corporate monitor for the first time—where even after conviction at trial the company refused to acknowledge its wrongdoing. More corporate sentences have included probation, especially where our and the sentencing court’s confidence is low that a defendant is committed to rehabilitating itself with appropriate compliance measures. We remain unwilling to credit compliance programs that failed to detect or deter the antitrust crimes for which we prosecute a corporate defendant. The sentencing guidelines do not allow credit for nominal or ineffective programs, and if we’re prosecuting your client, you’ll have a difficult time arguing that its compliance program was neither.

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But the news in this area is not all bad. We recognize, and have credited, extraordinary forward-looking efforts to change corporate culture, where senior executives demonstrate that compliance is a top corporate priority, and companies implement structural safeguards—like requiring anyone promoted to a management position to have first served as a compliance officer for a designated period of time. Efforts like these not only weigh against a sentence including probation, but in exceptional cases can also qualify for a modest reduction to a criminal fine.

Two weeks ago today, we announced our decision to consistently initiate criminal investigations from the outset where we find credible allegations that employers have agreed among themselves on employee compensation, or to not solicit or hire each others’ employees. This is not entirely new—we’ve investigated employer collusion criminally before. We’ve also investigated it civilly, like the agreements among technology companies not to poach employees, which resulted in civil consent decrees. But colluding to fix wages is no different than colluding to suppress the prices of auto parts or homes sold at auction. Naked wage-fixing or no-poach agreements eliminate competition in the same irredeemable way as per se unlawful price-fixing and customer-allocation agreements do. So we will approach them the same way, using our professional judgment, and considering all the factors that ordinarily weigh on our discretion as criminal prosecutors.

This thoughtful engagement with our work informs the choices we make every day. I’ve had the privilege of observing and engaging in these exercises of professional judgment from a close vantage point—confronting the interesting and sometimes difficult questions that our investigations and prosecutions present. We are not without guidance. There are statutes, policies, rules of procedure and professional conduct designed to point us in the right direction or sometimes to at least remind us of what we cannot do.

But every decision comes down to a moment of judgment made in the course of events. And there are many critical moments in every matter, when we make choices from among options. We decide which principles apply, and consider various interpretations of their proper applications. If there were not these moments of decision, if the applicable rules were obvious and pointed us to the one and only right answer each and every time, there would be no room for error. And there would be no need for professional judgment and prosecutorial discretion.

Professional judgment is about seeing more than one possibility, and then choosing the best option from among them. Put simply, prosecutorial discretion is about knowing, all things considered, what is most important and doing what is right. And throughout my time as a Principal Deputy Assistant Attorney General, and now Acting Assistant Attorney General, the one thing I am most confident of is that we’ve always tried to choose the best option, and do what is right for American consumers. Did we always make the best decision? That’s for others to decide. Did we always try to choose the course that benefitted consumers the most—to do what was right? Yes.

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This process requires thought, and frankly, humility. Each investigation, negotiated resolution and trial, is a unique opportunity to ask whether our choices led to outcomes that serve the principles it is our duty to defend. And the answers in this investigation inform our judgment in the next. So we learn from our mistakes, ponder the consequences of roads not taken and wonder about alternative strategies yet to be employed. Our successes too are opportunities to reflect on what we did right, and what we can do better.

We also learn quickly in unfamiliar contexts while applying the same principles of justice to conspiracies operating in new markets, where offenders use complex technologies to commit their crimes. We prosecuted a conspiracy to fix the prices of posters sold online—the antitrust laws reach even crimes committed using algorithms in cyberspace. Our financial-services cases present an ongoing challenge—one we welcome—to extend our criminal enforcement into the most complex markets, to think about how the Sherman Act applies to new scenarios and to test innovative investigative techniques and analyses for gathering, understanding and evaluating evidence.

We’ve obtained corporate and individual convictions in cutting-edge investigations. In the online-posters investigation, a grand jury indicted one corporate conspirator and one individual, and another individual pleaded guilty. In heir location services—another unique market where we found antitrust offenses—one heir-finding firm, its owner and another individual pleaded guilty. A grand jury indicted another firm and its co-owner. Convictions in the financial-services sector represent an increasingly significant portion of the division’s record. In the LIBOR investigation: six corporate and seven individual convictions, two of these after trial. In tax liens: three corporate convictions and 13 individual convictions, including one after trial. And we prosecuted 20 individuals in the munibonds investigation and obtained 17 convictions—in addition to one corporate conviction—three of them after trials. Accountability in the financial-services cases over the past eight years amounts to a total of over 15 years in prison for 11 individual offenders, and, not counting the extraordinary fines in the foreign-exchange matter, a total of $1.3 billion in corporate fines and penalties.

We have also redoubled our efforts to protect the integrity of our investigations— civil and criminal. Two weeks ago, prosecutors filed obstruction-of-justice charges against a former executive of a motor-coach-operating company. He concealed evidence and tried to destroy documents during the course of a civil merger investigation, and gave false and misleading statements during litigation. Obstruction crimes like this make headlines, publicizing the consequences of trying to corrupt the merger-review process. Prosecuting them criminally protects the integrity of our civil investigations, and we continue to pursue them with as much vigor as ever. And this is just one example of a civil investigation leading to a criminal prosecution. Price-fixing prosecutions, too, can begin with evidence referred from civil attorneys.

Department policy requires all components to cooperate with one another and maximize remedies for the United States. We’ve made this a top priority, not only in our coordination with other agencies conducting investigations parallel to ours, but also within the division. Antitrust attorneys on both the civil and criminal sides of the house appropriately communicate across civil and criminal investigations when necessary. As a result, civil attorneys can be even more vigilant about finding and referring to prosecutors evidence of possible crimes discovered during civil investigations. Not because they care about this more than before, but because they know what to do—and what not to do—with such evidence when they find it. The risks inherent to cross-proceedings coordination are tempered in light of reliable internal procedures allowing our attorneys to readily consult about referring evidence.

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Our leniency policy remains the criminal program’s single-most powerful case generator, and continues to serve as an example to our partners around the globe as they develop and improve their own. We learn in this context, too, in an ongoing conversation that requires us to think about the justifications for our choices. We’ve noted that in type B corporate leniency scenarios, those employees of the applicant who admit to their criminal conduct and cooperate are usually included in the corporate leniency agreement. But we’ve also thought about how Deputy Attorney General Yates’ directive might apply here, too, with respect to some culpable individuals, when the policy allows for more discretion with respect to granting them leniency.

Some suggest that the costs of applying for leniency are becoming too high, especially for multinational corporations that touch the economies of several nations, many of whom have leniency programs of their own. If potential applicants become any less sure about the fate of their people, the argument goes, potential applicants will become more reserved about self-reporting the results of their internal investigations. But the costs of applying are only one side of the scale. The risks of not applying—of waiting—are on the other. And the prospect of individual sanctions is a high risk to run here in the United States, as it will be in other jurisdictions now considering them for their own competition laws.

Like all good prosecutors, ours observe ethical standards. And we should not overlook the most immediate one, if not the most important, in the professional life of every prosecutor—an evidentiary threshold of American criminal law. We must prove our cases beyond a reasonable doubt. And not to just anyone. Not to each other, or to someone at the division asked to approve a recommendation to prosecute—but to a trial jury. This most basic constraint on our prosecutors’ discretion informs every judgment they make during even the earliest stages of an investigation—whether conducting a voluntary interview, contemplating execution of a search warrant or evaluating evidence obtained with a grand jury subpoena. It applies to each and every case, whether the defendant is in the United States likely to put us to our proof, or beyond our borders, hoping against red notice, border watches and extradition. We prosecute because we have evidence, and are prepared to seek indictment and a trial on the merits. As of today we have 15 criminal cases headed for trial across the country over the coming months. And this is in addition to the 26 criminal cases we’ve already tried during the past eight years.

The criminal program’s success is the result of the careful judgment, vigilance and hard work of its prosecutors. Their accomplishments over the past eight years are significant developments in the division’s recent history. I have every confidence that the Antitrust Division will continue honing its criminal practice to always better serve traditional principles of criminal justice. Our successes are hallmarks of the thoughtful exercise of discretion we strive to realize in every criminal prosecution we bring. And when our judgment is sound, we feel that we have done it right. We remind ourselves that every judgment we make is a wielding of the government’s power, and that this power ultimately belongs to the people—to those it is the duty of every prosecutor, antitrust or otherwise, to protect. This is the touchstone of our prosecutors’ discretion. And I am proud to be alongside them as they do their part to safeguard the domestic and global economies, and to ensure that the benefits of fair competition inure to us all.

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Panel Discussion

MR. LYNCH: Thank you, Renata, that was very informative, provocative, and interesting comments. And we want to get into some of these issues in more detail with Renata and the rest of her criminal antitrust enforcement team at the Antitrust Division. Let me kick it off with Renata. You listed very impressive criminal enforcement statistics in your speech, and they are impressive. Not to be a critic, but would like to highlight one wrinkle, and that is, in the most recent fiscal year, ending September 2016, the Antitrust Division obtained less than $400 million in criminal fines. I can’t believe I am saying that. In the days working with the Antitrust Division in the 1990s, that figure would have been spectacular, but as you raise the bar higher you are judged differently. But this is the smallest fine total since 2005 and dramatically lower than the billion dollar fine totals in the previous four fiscal years. What, if anything, accounts for this drop-off in the amount of criminal fines?

MS. HESSE: I guess I’ll start by saying part of what I was trying to do was to reset a little bit how we think about success, because I think that’s an important thing to do, and that’s just not an excuse because our fine tallies were lower this year. And I really do believe that where we are prosecuting, and the number of individuals we are prosecuting, and the number of other investigations we have open, which right now is around 100, is really a more important measure of what we are doing and how successful we are.

But I think the boring explanation for this is that all of our investigations kind of have a trend line, and we are at the tail end of some of our biggest investigations. And so we are now at the point where we are indicting holdouts that we may never actually see come here because they are fugitives and individuals. So we are coming to the tail end of some of the larger investigations, including auto parts, and we are at the beginning of some other investigations.

So I expect as those other investigations start to pick up, that we’ll see the trend line moving up again. I don’t know how high it will move up again. And, as I said, I am not sure I really care, because the important thing is where we are prosecuting. And in particular, one of these investigations is an incredibly important part of the economy that matters a lot to consumers, so we’ll hopefully have more news in that area. I think fundamentally the explanation is that we are at the tail end of some and the beginning of others.

MR. LYNCH: So defense counsel don’t need to worry?

MS. HESSE: Yeah, there’s still plenty of work.

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MR. LYNCH: My next question is for Kate.

Kate, you are based in San Francisco, and as you know, the Northern District of California has the most cartel multi-district litigation cases of any district in this country, and I would imagine three-quarters to two-thirds of the people in this room have worked on various MDLs in the Northern District that probably resulted from investigations in your office.

But given the interest in the overlap between civil and criminal antitrust cases, how does follow-on civil litigation help or complicate your efforts to investigate cartel conduct, and to what extent has civil litigation helped the DOJ to obtain discovery that is located outside the U.S. and beyond the reach of your subpoena power?

MS. PATCHEN: Thanks. Before I begin with what you said, I need to give the disclaimer that the views expressed in my presentation today are my own and not necessarily those of the Department of Justice.

To answer the first part of your question, civil litigation is important. It’s important for victims of antitrust violations to seek treble damages as a remedy for harm done by conspiracies, so it plays an important role in the system.

However, occasionally we have a conflict between the rules of civil discovery and our ongoing grand jury investigations, and at times those discovery requests interfere with the government’s ability to investigate and prosecute cartel cases. An example would be when a civil litigant attempts to use civil discovery to identify grand jury witnesses or witnesses providing information to the Department of Justice.

Also discovery can be used in order to uncover communications between the civil litigants and the government, which would reveal or expose the scope of a grand jury’s investigation. In those cases, we often intervene, as many of you know, in the civil litigation for a limited stay of discovery and always attempt a stipulation with the parties and advance those stays. And the purpose of that is, of course, to protect the integrity of the grand jury investigation and protect the government’s ability to do its job.

Separate and apart from protecting the grand jury investigation, as trial attorneys, we also have a concern that civil litigation may result in additional impeachment evidence against our trial witnesses. This may happen if materials are used or witnesses are deposed early on in the civil investigation before all available discovery and evidence has been gathered and reviewed. So we are also mindful of that type of interference as well.

I think the second part of your question is to what extent civil litigation helps the DOJ obtain discovery from abroad. By way of background, I should talk a little bit about the LCD investigation. During the LCD investigation, the government served grand jury subpoenas on the civil litigants for documents in the United States that had come into the United States for purposes of civil discovery. The recipients of those subpoenas moved to quash the grand jury subpoenas, and the issue ultimately went all the way up to the Ninth Circuit on appeal.

On appeal, the Ninth Circuit applied a simple rule that the grand jury subpoenas trump civil protective orders for the documents. As a result, the government was able to get those documents and use them in the prosecution of AUO and its executives. So in that sense, because the civil defendants brought documents into the country in response to the civil litigation, the DOJ was able to obtain and use those documents. Some of those documents were used at trial but it is difficult to know how much the jury relied on them in reaching its verdict.

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Certainly, whenever or however a document arrives in the United States, it can be helpful for a criminal investigation. For that reason, we would want to subpoena it and can use our grand jury subpoenas to gain that evidence and to use it at trial.

MR. LYNCH: Thank you very much, Kate. That’s very interesting, and obviously something for any defense counsel to be concerned about. Documents located outside the United States, which are initially outside the reach of a grand jury subpoena, may ultimately end up in the United States through civil discovery.

Going back to you, Renata, I have another follow-up question. It relates to something you referred to in your speech about the new guidelines for HR professionals. What was the motivation for your recent guidance to HR professionals and what does this mean for future enforcement? And further, a few years ago, the DOJ brought no-poaching cases civilly, so why the change to a criminal enforcement?

MS. HESSE: The goal of the guidance was to reach the community of HR professionals who are on the front lines in this area and that may be in the best position to identify when this kind of conduct is happening and to give them some guidance about what they should be looking for and what they should do if they see something that fits within the guidance that we have given. The conduct discussed in the HR guidance is just as bad as any other kind of collusive conduct, as I said, price-fixing, customer allocations, it is the same kind of thing.

We have previously pursued this type of conduct civilly, in some cases, because there was an ancillary procompetitive justification for the conduct in those cases. And the guidance is not intended to say we will never again pursue this conduct civilly. But if you think about the conduct and what it does for workers in terms of suppressing wages and other forms of compensation, it really belongs in the criminal category to begin with.

And so we are going to start it there, and we are going to do the investigation that way from the beginning. If, in the end, there are facts or considerations that cause us to exercise our prosecutorial discretion in another way, then we’ll take another path.

But at the beginning it certainly seems right to say that there’s no difference between fixing the price of an auto part and fixing the wage that you pay someone. So that’s really why we did it. We wanted to put people on notice that—and in particular, since we had these civil cases before—that we are going to begin looking at this kind of conduct criminally. So now you all know and won’t come in and say, "Oh, but you have always done this civilly. Why are you doing it criminally?" Well, we are going to do it criminally.

So if you find conduct like this in your client’s documents or elsewhere, then you should be calling Brent and not one of our civil folks to begin with. And we’ll see what happens with it.

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MR. LYNCH: I will take the moderator’s prerogative and editorialize, very briefly, without commenting on the guidance, I will say one thing. The guidance suggests that if HR professionals have any questions, to call up the DOJ. I would suggest that the penalties are criminal and your employees could go to jail. I would suggest caution dictates to contact antitrust counsel first before confessing to a crime to the DOJ, but that’s just me.

MR. LUNDER: I suppose it depends on the quality of the advice.

MR. LYNCH: Moving along, I have a question for you, Brent, and that is, in light of the Yates Memo which Renata discussed, has the Division made changes to its corporate leniency policy that reduced the protections for individuals?

MR. SNYDER: Before I answer the question, I want to add one thing to Kate’s answer about our abilities to subpoena documents once they come into the United States for purposes of civil discovery.

If your client is going to inevitably bring documents into the country in response to civil discovery, it might as well turn them over to us subject to the protections of grand jury secrecy. Your client will receive cooperation credit for having done so. If your cleint brings them into the country, and we have to subpoena them, it won’t get any cooperation credit. We will end up with the documents just the same. So I would suggest when you find yourself subject to civil litigation, that you seriously consider just giving us the documents. Because one way or the other, we are likely to get them.

With respect to the question about our leniency policy and whether there have been any changes to it with respect to coverage for individuals, there haven’t been.

First, for those of you who might not know what the Yates Memo is, it was a memorandum issued by the Deputy Attorney General last year emphasizing to Department of Justice attorneys that we should be prioritizing the prosecution of individuals, especially in corporate cases.

Over the course of the past year, the Antitrust Division has made some public statements regarding leniency coverage for individuals that really just put a fine point on what our leniency policy has always said, and those would include some of the statements that Renata made today.

Under Type A leniency, which applies when we have no prior knowledge of the conspiracy that’s being reported, Type A leniency includes coverage for all current directors, officers, employees of the company who provide full, complete and candid cooperation. That’s always been the case since 1993, and that hasn’t changed.

With respect to Type B leniency, which applies in situations when a company seeks leniency where we have already initiated an investigation or are aware of the conspiracy that’s being self-reported, our leniency policy has always given us more discretion, both to deny leniency if we are close to having a prosecutable case, and also to cover fewer than all current directors, officers and employees of the company. So, again, that’s what the policy has always been since 1993, so there has not been any change to it.

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We don’t often exclude current directors, officers and employees from a leniency even in a Type B situation, and we don’t anticipate that that’s likely to change substantially in the future. But our policy does allow it, and it is a question that we will be asking of counsel who seek leniency markers in Type B leniency situations where we already have developed significant evidence. And it’s important for counsel to understand that distinction, because that is the primary distinction between Type A leniency and Type B leniency.

Counsel sometimes express surprise when we advise them that we have more discretion in that area, but, again, that has always been the case and it is expressed on the face of our leniency policy, which has been in place since 1993.

Finally, our leniency policy hasn’t ever required us to cover former directors, officers and employees of a company in a leniency letter. To the contrary, they are presumptively not covered by leniency. Nonetheless, our practice has often, but not always, been to cover former directors, officers, and employees. In those situations where we provided coverage for formers, however, we haven’t always been consistent in the approach that we have taken.

Our recent statements have clarified that if we exercise our discretion to cover former directors, officers, or employees in a leniency letter, we are going to take a consistent approach by including the former directors, officers, or employees who are covered by name rather than by just providing blanket coverage for all former employees. Not all former employees need coverage and not all former employees are going to provide the cooperation that would justify coverage.

Giving blanket coverage also raises the risk to us of inadvertently covering somebody who is a former employee of the leniency applicant but who may be a current employee and potentially a target of our investigation at a co-conspirator.

And so by not providing blanket coverage for former employees, we are reducing the risk to ourselves of inadvertently extending coverage to somebody who otherwise, by virtue of their role in a conspiracy at a competing company, we might end up charging.

MR. LYNCH: So if I have it right, you have to opt in as a former, you have to explicitly list the name of the employees in the letter?

MR. SNYDER: That’s right. And we have been doing this for a while now. So if a company comes in and gets Type A leniency, all of its current employees are covered, and it says that broadly in the leniency letter. But then we can also extend the coverage to former employees as well, and we will simply name them by name either in the letter itself or in an addendum attached to the letter. And if those former employees are people that are necessary for the company to perfect its leniency, then those former employees will get coverage.

If they can provide cooperation that’s valuable to our investigation, those former employees can be covered by name. But we are not going to say all former employees of the company receive coverage automatically.

MR. LYNCH: Very interesting. Let me pose my last question to Matt.

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Matt, the Division offers waivers of inadmissibility as part of a memorandum of understanding (MOU) between the Antitrust Division and Immigration and Customs Enforcement (ICE) to foreign national defendants who submit to U.S. jurisdiction and agree to plead guilty. Can you explain the waiver process and talk about the issues a waiver holder might encounter and how to deal with them?

MR. LUNDER: Sure. For some reason the people at this end of the table don’t speak for the Department ofJustice, so I have to give the same disclaimer that Kate made.

For those of you who are not familiar with the waiver of inadmissibility, this is a bargained for term of a plea agreement in a criminal case. And it allows a foreign national to avoid the usual consequences of a felony conviction, which is: Once you leave the United States, you can’t come back. It is a result of an MOU between the Antitrust Division and ICE, which as successor to the Immigration and Naturalization Service, which met its fate with the creation of the Department of Homeland Security.

So ICE now carries on the duties under the MOU with the Antitrust Division. What we have done at the division is make whoever is in the position that I currently hold, Counsel to the Director of Criminal Enforcement, the sole point of contact with all of the agencies involved in the waivers of inadmissibility, because there are issues that arise that often have to be dealt with.

You can always—if you have a client who has a waiver or is bargaining for a waiver, you can always deal with the prosecutor of any office that is handling your case, but any questions will ultimately be referred to the Counsel to the Director.

The purpose of the waiver is to induce a foreign national, who isn’t subject to the jurisdiction of the United States, to submit to the jurisdiction of the United States, plead guilty and cooperate in exchange for this benefit of being able to return to the United States to carry on business and to travel for that purpose.

There are several other agencies involved in the process. I think the best way to think about this is on the front end, the prosecutor who you are dealing with in the criminal case will petition ICE to grant the waiver. And this process can take a few months, at least. The reason for this is there is a process by which ICE has to ask several other agencies if they object to granting the waiver, and the process of sending out that request and getting back those answers, given the bureaucracy, takes some time.

Once the waiver is in place, it becomes a term of the plea agreement. The waiver is granted by a letter from the office of the principal legal advisor at ICE. The letter is attached to the plea agreement, and becomes part of the plea agreement that’s filed with the Court.

The issues that we are seeing, I think, more often, are on the back end of the process, where the waiver holder submits to the jurisdiction of the United States, pleads guilty, serves time in a U.S. prison, leaves the country—that’s the point at which the waiver becomes operative—and then goes to the consulate in the home country to apply for a visa. The problem is if the waiver holder goes to the consulate, say, six or eight weeks before his business trip is scheduled, he’s not going to have his visa in time because there’s another internal process.

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You have the State Department that’s got to communicate with the Department of Homeland Security, which, I’ll say euphemistically, is subject to bureaucratic complexities like you have never seen.

So the waiver holder goes to the consulate, submits a visa application. This is what happens: First, the consulate denies the visa. A lot of times everybody says, "Oh, the United States is breaching the term of the plea agreement. They denied the visa." Well, there has to be a denial, because that’s what the waiver is for, it waives the denial. So the consulate will always initially deny the visa application.

Once they have denied the visa application, they then send it to a dark hole called the Admissibility Review Office, which is within Customs and Border Protection, which is within the Department of Homeland Security, to confirm that this person already has a waiver and to authorize the consulate in the home country to go ahead and issue the visa. This is where there’s a serious backlog, in the Admissibility Review Office.

If you think about this, right now, given the current environment in terms of immigration policy, these are not going to the top of the stack to be processed. So we have seen backlogs of three months. We have seen backlogs of even longer.

So we are now beginning to tell counsel, if you have a client who has bargained for a waiver, advise the client to make part of their reintegration into their professional life to get a visa in place. Because visas issue for five-year periods. So if you have a client who is going to be returning to the United States to do business, you can have that visa approved hopefully well in advance of any business trip. It creates a five-year window in which the person can travel.

MR. LYNCH: So the words I heard were "bureaucratic," "dark hole" and "serious backlog." Is this a recent phenomena or is it progressively getting more challenging or anything you can point to?

MR. LUNDER: My experience dealing with these issues leads me to the conclusion that you have a problem that you see in a lot of areas of the federal government, which is a dramatic increase in the amount of applications, in the amount of petitions that need to be processed with no corresponding increase in funds, budget allocation and no corresponding increase in personnel, and so things take longer.

And so, now that we have consolidated the whole waiver issue with this position, I think we are beginning to build a better network with the other agencies, more personal contacts in the right place to deal with these issues when they arise. But I think it is just that sort of a problem.

MR. LYNCH: I see. As a victim of your own success, you are charging so many foreign nationals that now the waivers are piling up, so a mixed blessing.

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