obtaining evidence through discovery & witnesses john w. mcreynolds assistant chief new york...

Obtaining Evidence through Discovery & Witnesses

John W. McReynoldsAssistant Chief

New York Field OfficeAntitrust Division

U.S. Department of JusticeJohn.McReynolds@usdoj.gov

Today’s Topics

• Overview of U.S. Cartel Enforcement

• Detecting Cartels

• Investigative Tools & Evidence Gathering

“Per Se” Criminal Antitrust Violations

Agreements among Horizontal Competitors to:

• Fix Prices

• Rig Bids

• Allocate Markets

“Per Se” Criminal Antitrust Violations

• Price Fixing– Raise, fix or otherwise agree on prices – This includes:

• Agreeing on discounts• Eliminating discounts• Fixing credit terms• Maintain certain price differentials between

different quantities, types or sizes of products• Others

“Per Se” Criminal Antitrust Violations

• Bid Rigging– Bid rotation or allocation– Complementary or “cover” bids– Bid suppression

“Per Se” Criminal Antitrust Violations

• Allocation agreements– Specific customers or types of customers– Geographic territories– Type of product

Elements of a “Per Se” Antitrust Crime

• General Intent

• Agreement is the Crime

• No Overt Act

• No Proof of Price Impact

U.S. Penalties

For offenses committed on or after June 22, 2004

•Individuals - 10 Years in jail & $1 million fine

•Corporations - $100 million fine

•Alternative Fine = Double Gain or Loss

Other Crimes Committed By Antitrust Defendants & Prosecuted By the Antitrust Division

• Mail & Wire Fraud• Conspiracy• Tax Evasion• Perjury & False Statements• Obstruction of Justice

DETECTING CARTELS

• Nature of Crime — Secret Conspiracy

• Hidden from Law Enforcement and Victims

DETECTING CARTELS

• Conditions Favorable to Collusion

• Few firms• Standardized products• High entry costs• Products do not have close substitutes• Bidding process may be involved• Seasonality

DETECTING CARTELS

• Sources of Leads• Amnesty & amnesty plus applicants

• Cooperators in unrelated crimes

• Other geographic areas

• Dissatisfied employees

• Competitors

• Customers

• Referrals from other agencies

• Civil cases

• Newspapers

Key is Proactive Outreach Efforts

– Make sure they know who you are• Law firms

• Other agencies & investigators

• Educate those working directly in the marketplace

DETECTING CARTELS

DETECTING CARTELS

• What do we tell these groups to look for?– Suspicious statements– Suspicious bid patterns– Suspicious pricing patterns– Suspicious conduct

DETECTING CARTELS

• Suspicious Statements– A customer or territory “belongs” to a supplier– “We don’t sell in that area”– It was a supplier’s “turn” to win– Reference to industry or association price list– Advance knowledge or prediction of a

competitor’s prices

DETECTING CARTELS

• Suspicious bid patterns– Same company always wins– Sellers take “turns” winning– Few competitors submit bids– Bids are much higher than previous bids by the

same supplier– Bid prices appear to drop whenever a new or

infrequent bidder submits a bid

DETECTING CARTELS

• Suspicious pricing patterns– Suppliers charge identical prices– Suppliers increase prices at same time without

cost justification– Suppliers are charging higher prices to local

customers than to distant customers– Suppliers eliminate discounts

DETECTING CARTELS

• Suspicious conduct– A bidder appears in person to submit bid & also

submits a competitor’s bid– A successful bidder repeatedly subcontracts

work to competitors that submitted higher bids– Competitors regularly socialize together– Competitors hold meetings or otherwise get

together in the vicinity of the procurement offices shortly before bid deadline

DETECTING CARTELS

• Suspicious conduct– Company submits bid for work it can’t do– Bids contain last minute changes– Similar irregularities on bid form

INVESTIGATIVE TOOLS & EVIDENCE GATHERING

• Recordings

• Documents

• Interviews

INVESTIGATIVE TOOLS & EVIDENCE GATHERING

• Recordings– Consensual

• Telephone calls

• Body wires

• Video taping

– Non Consensual• Wiretapping – new legislation

INVESTIGATIVE TOOLS & EVIDENCE GATHERING

• Documents (including computers)– Search & seizures– Subpoenas

INVESTIGATIVE TOOLS & EVIDENCE GATHERING

• Search & seizures – Warrant signed by a judge– Probable cause

INVESTIGATIVE TOOLS & EVIDENCE GATHERING

• Search & seizures: what & where to search– Offices – Homes– Brief cases– Computers

INVESTIGATIVE TOOLS & EVIDENCE GATHERING

• Search & seizures: what to seize– Email with competitors– Correspondence with competitors– Calendars– Meeting notes– Bid documents– Pricing documents

INVESTIGATIVE TOOLS & EVIDENCE GATHERING

• Subpoenas– If no search: same documents

• Email with competitors

• Correspondence with competitors

• Calendars

• Meeting notes

• Bid documents

• Pricing documents

INVESTIGATIVE TOOLS & EVIDENCE GATHERING

• Additional documents– Corporate structure– Information on officers & those with pricing authority

• Personnel file• Wages• Calendars & address books• Name of secretaries

– Financial statements – General ledger, cash disbursements, sales journals– Cancelled checks– Telephone records– Trade association

INVESTIGATIVE TOOLS & EVIDENCE GATHERING

• Form of documents– Originals– In original order– In original folders – Electronic data

INVESTIGATIVE TOOLS & EVIDENCE GATHERING

• Document control– Custodian– Log– Chain of custody

• Create databases

• Review promptly

• Compliance

INVESTIGATIVE TOOLS & EVIDENCE GATHERING

• Interviews– Who– Circumstances

INVESTIGATIVE TOOLS & EVIDENCE GATHERING

• Who to interview– Informants/amnesty applicants– Former employees– Competitors– Customers– Subjects

• Least culpable companies

• Lowest level employees

INVESTIGATIVE TOOLS & EVIDENCE GATHERING

• Circumstances of interviews– No notice: drop in interviews– Voluntary: no lawyer– Voluntary: informal immunity, with lawyer– Compelled: formal immunity– Proffer?