Cartel Investigations Under Trump: Turning the Page, or Throwing the Book?

Stephen Kuperberg

By Stephen Kuperberg

Stephen Kuperberg, a former trial attorney in the U.S. Department of Justice Antitrust Division’s national criminal enforcement section, is an attorney in Bethesda, Maryland.

In recent years, international banks and currency traders have become the new vitamin and animal feed manufacturers—at least, as far as the agencies tasked with enforcement of global competition laws, including the U.S. Department of Justice’s Antitrust Division, are concerned.

The Sherman Antitrust Act, 15 U.S.C. § 1, criminalizes conspiracies “in restraint of trade” including price-fixing, bid-rigging, market allocation, and other forms of anticompetitive cartel behavior. Since the fall of 2013, when U.S. and other competition authorities announced investigations into potential price manipulation in the foreign currency exchange markets , international banks including Barclays, Citicorp, JPMorgan Chase, and the Royal Bank of Scotland have pleaded guilty and agreed to fines totaling more than $2.5 billion for conspiring to manipulate the price of U.S. dollars and euros exchanged in the foreign currency exchange (FX) spot market. A fifth bank, UBS, pleaded guilty to manipulating the London Interbank Offered Rate (LIBOR) and other benchmark interest rates and paid a $203 million criminal fine on top of previous plea agreements regarding LIBOR manipulation. In January 2017, as the sentencing judge accepting bank plea agreements in the currency market investigation urged the government to pursue individuals involved aggressively, the Antitrust Division announced both the firstindividual pleas as well as indictments of several individuals associated with the investigation. This most recent targeting of individuals furthers both a longstanding practice within the Antitrust Division, as well as furthering the Justice Department policy enshrined in the Yates Memorandum, in which pursuing individuals is core to prosecuting corporate wrongdoing.

The cascading dominoes of investigations leading to guilty pleas and cooperation, which in turn lead to further evidence of wrongdoing and further charges, is reminiscent of the Antitrust Division’s investigation in the 1990’s of the vitamin industry cartel. The Division still describes the vitamin cartel, which inspired books and even movies, as “the most pervasive and harmful criminal antitrust conspiracy ever uncovered by the Division.” Now, however, the fines and pleas already obtained in the currency market investigation dwarf those obtained in the vitamins investigation. With the bank investigations apparently broadening to other aspects of the banks’ activities, and with a five-year statute of limitations applicable to criminal antitrust violations, it would be very conceivable, all else equal, that the financial industry—and particularly its individual practitioners—have not seen the end of intense scrutiny from the Antitrust Division and other global financial enforcement entities.

Yet some observers, notably Peter J. Henning of The New York Times, have predicted that the Trump Administration could reduce resources available to financial enforcement, particularly to price-fixing and related investigations.

Although President Trump’s nominee for attorney general, Senator Jeff Sessions, is still awaiting confirmation, there are several factors that tend to weigh in favor of continued, if not increased, focus on investigations and prosecutions of wrongdoing in the financial industry under the new Administration.

1. Criminal Antitrust Enforcement Has Historically been Separated from the Political Process

Many priorities change on a political level when a new Administration of the opposite party takes office, but historically, criminal antitrust enforcement is not among those changes. Although technically subject to political appointment, the Antitrust Division’s deputy assistant attorney general for criminal enforcement has by longstanding tradition been filled by a career prosecutor.

For example, Brent Snyder, the Division’s most recent criminal deputy and currently the acting assistant attorney general in charge of the Antitrust Division, served for a decade in the Division’s national criminal enforcement section and its San Francisco field office. Snyder’s predecessors similarly came from the ranks of career criminal antitrust prosecutors.

Even during prior changes in administration from Clinton to George W. Bush, and from Bush to Obama, continuity remained both among the views regarding criminal antitrust enforcement as well as the personnel charged with enforcing it. To date, there has been no indication that the Trump Administration will break from this precedent.

Indeed, criminal antitrust enforcement could even see an increase in resources under the Trump Administration should the Administration choose to take a more permissive approach in merger and anti-monopoly enforcement, because anti-cartel enforcement will likely remain a source of attention for Antitrust Division personnel.

2. Antitrust Division Amnesty Program and Cooperation Agreements Incentivize Defection from Cartels

The Yates Memorandum, which requires corporations seeking any cooperation credit from the Justice Department as part of a plea agreement to provide facts relevant to the individuals involved in the wrongdoing, generated headlines when it was instituted in 2015, but it is far from the first or only mechanism that incentivizes cooperation regarding cartel behavior.

Beginning in the early 1990’s, the Antitrust Division pioneered a leniency program popularly known as the amnesty program to incentivize defections from cartels by decriminalizing and reducing penalties for the first cartel participant, whether individual or a corporation, to cooperate with the Division.

The Division’s Leniency Program, as updated in January 2017, substantially aids the Division’s criminal enforcement because it tends to yield direct evidence of the conspiratorial agreements at the heart of criminal cartel behavior. With its first-in-the-door structure, the amnesty program also chips away against the tendency for cartel participants to band together in an omerta, or code of silence. Even for those too late to obtain leniency for the original cartel behavior, the Division offers “leniency plus”—as well as “penalty plus”—to incentivize reporting of separate criminal antitrust wrongdoing uncovered during the investigation.

The Division touts the success of its amnesty program, and with good reason; the total fines and average prison term lengths that the Division obtains continue to grow over the years, with the most recent bank fines setting historic records. With plea agreements in place that require ongoing monitoring and cooperation, and with motivation to cooperate under the amnesty program as well as the related Yates Memorandum guidance, there are ample incentives to both corporations and individuals to continue to provide information that will fuel investigations in the financial industry.

3. Enforcement Against the Financial Industry Allows the Administration to Throw the Book at the One Percent

Considering these successes, will the Trump Administration curtail or restrict criminal antitrust enforcement? Not likely.

Particularly when it comes the financial industry, continued or even increased enforcement would appear to be consistent with President Trump’s pledge to defend the “forgotten” against wealthy elites. Attorney General nominee Sessions has indicated that he intends to maintain the Justice Department’s focus on individual wrongdoing under the Yates Memorandum. And, while the Administration’s choice for an assistant attorney general to head the Antitrust Division is yet to be revealed, past continuity of policy and personnel in criminal antitrust enforcement would suggest that it is unlikely for the Trump Administration to change course in aggressively pursuing corporations and individuals in the financial industry.

Rather than expecting a turn of the page, the financial industry would be well advised to brace for the Administration to continue to throw the book.

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