A Fourth Corporation is Prosecuted in DOJ’s International Marine Hose Cartel Investigation
On February 16, 2010, Parker ITR S.r.l. (Parker), an Italian subsidiary of U.S.-based Parker Hannifin Corp., agreed to enter a guilty plea and pay a $2.29 million criminal fine for its role in a global conspiracy to rig bids, fix prices and allocate market shares of marine hose sold in the United States and abroad. This plea is another reminder of the very aggressive enforcement trend at the Antitrust Division of the U.S. Department of Justice (DOJ). Last year, the Antitrust Division recorded its second-largest year ever in terms of the amount of criminal fines collected and the number of jail days imposed on individuals. All indications are that the Division will be at least as aggressive in criminal enforcement in 2010.
The Antitrust Division’s prosecution of the marine hose cartel has been underway for almost two years. So far, Dunlop Oil & Marine Ltd. (a U.K. corporation), Manuli Rubber Industries SpA (an Italian corporation) and Trelleborg Industrie S.A.S. (a French corporation) have been convicted of conspiring with Parker and other companies to rig bids and fix prices in the sale of marine hose. Marine hose is large flexible rubber hose used to transfer oil between tankers and storage facilities. Nine executives of these companies have also been convicted for their roles in the conspiracy. To date, $12.33 million in criminal fines have been imposed on the companies that have pleaded guilty to their involvement in the marine hose conspiracy.
According to the DOJ, the marine hose manufacturers conspired from 1999 to 2007. The conspiracy was concealed through the use of private e-mail accounts, private telephone numbers and code names. Parker and its co-conspirators agreed to assign shares of the global marine hose market and used a marine hose price list to implement and monitor the conspiracy. The conspirators also agreed not to compete for one another’s customers either by refraining from submitting bids, or by submitting inflated bids, for certain contracts. One co-conspirator acted as the conspiracy coordinator, and Parker and its fellow conspirators passed information from customers about impending marine hose jobs to the coordinator. The conspiracy coordinator then provided Parker with marine hose prices for its customers in the United States and abroad, and Parker sold marine hose to its customers at collusive and noncompetitive prices.
Aggressive Enforcement Techniques
The marine hose prosecutions are a reminder that aggressive enforcement techniques— informants, wiretaps and FBI raids—are not limited to street crimes. The Antitrust Division is regularly using these techniques in its prosecutions of corporations and executives.
According to law enforcement affidavits made public in the case, the Division used cooperators and informants in a variety of ways in these prosecutions. For example, one or more informants were used to record telephone conversations with members of the conspiracy as the conspiracy was ongoing. In addition, the Division obtained court approval to covertly audio- and videotape a meeting of the conspirators that took place in a hotel room in Houston, Texas. The day after secretly recording the Houston cartel meeting, law enforcement agents arrested the individuals who attended the meeting and searched their hotel rooms for evidence of the crime.
Coordination with Foreign Law Enforcement Authorities
In addition to showcasing the aggressive enforcement techniques at the Division’s disposal, the marine hose prosecutions highlight the Division’s willingness to cooperate with foreign law enforcement authorities to ensure that their cases reach conduct throughout the globe. For example, the law enforcement raids conducted on the hotel rooms of the executives in Houston after the cartel meeting were, according to a law enforcement affidavit, coordinated with the execution of warrants “in locations across the United States and in several foreign countries.”
The Division’s cooperation with foreign authorities does not end with coordinating the investigation of the crimes—the marine hose cases saw an unprecedented level of cooperation with foreign law enforcement authorities in the prosecution of several executives. The Division reached plea agreements with three citizens of the U.K.—Bryan Allison, David Brammar and Peter Whittle—that required each of them to serve significant jail sentences. However, the plea agreements contained an unusual provision that allowed all three to return to the U.K., plead guilty to offenses in that jurisdiction and receive credit in the U.S. for whatever jail sentence they received in the U.K. Ultimately, all three received jail sentences in the U.K. of equal length to the sentences in their U.S. plea agreements, and, therefore, none had to return to the United States to serve any of their jail sentences. These agreements mark the first time that the Department of Justice has ever entered plea agreements that make provisions allowing a defendant to be prosecuted in the United States and a foreign jurisdiction and that allow the individual to receive credit in the United States for his foreign jail time. These kinds of plea agreements will likely add to the Division’s ability to entice foreign executives to cooperate in Division investigations.
DOJ’s Aggressive Antitrust Enforcement Continues
The DOJ’s criminal charge against Parker and its prosecution of the other marine hose cases should provide a wake-up call to multinational companies throughout the world. To avoid problems with the Antitrust Division, it is not enough to focus on compliance in the United States. Because of these aggressive techniques and cooperation with enforcers in other jurisdictions, companies must assume that DOJ has an ability to reach conduct anywhere in the world that has an impact on the U.S. Corporate compliance efforts to educate and train employees to be aware of U.S. laws must be integrated throughout a company’s units around the globe.
The aggressive investigation and enforcement efforts used in the marine hose prosecutions will continue. In 2009, the Antitrust Division imposed over $1 billion in fines for antitrust violations, the second-highest fine total in its history. The Division also secured more than 25,000 jail days—the equivalent of over 68 years—against individual defendants. This jail day total is also the second-highest in the Division’s history. There is every reason to believe that the Division will be equally aggressive in 2010.
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