March 3, 2000

A Forgiving Policy: But DOJ Grants Amnesty Only to the First Firm in the Door

Legal Times

Criminal antitrust enforcement by the Clinton Justice Department continues to set new records. In 1999 alone, the Antitrust Division collected more than $1 billion in fines from corporate offenders, more than in the prior 30 years combined. Significant jail time for culpable executives has become the norm. Even foreign nationals are choosing to voluntarily submit themselves to U.S. jurisdiction and serve prison sentences rather than living out their lives as fugitives from American justice.

What explains this dramatic rise in criminal antitrust prosecution- Most knowledgeable observers would agree that it stems largely (although not entirely) from the 1993 expansion of the Antitrust Division's Corporate Leniency Policy-the so-called Amnesty Program.

Under this program, a cooperating company can obtain a complete pass from federal criminal prosecution for both itself and its culpable individuals a benefit potentially worth hundreds of millions of dollars in saved fines and years of avoided prison time-in exchange for complete disclosure of its wrongdoing to the government and cooperation with the government's ongoing investigation.

Two recent high-profile investigations tell the story. In May 1999, the government confirmed that Rhone-Poulenc, SA, had entered the Amnesty Program and escaped criminal prosecution for antitrust violations in the bulk vitamins industry-a matter in which industrywide criminal fines are approaching a staggering $1 billion. And in January of this year, the auction house Christie's announced that it had received corporate amnesty almost three years into a government investigation of art auction commissions. Prior to 1993, those administering the Amnesty Program were as lonely as a Maytag repairman. Hardly anyone used the program because amnesty was available only so long as the DOJ had not begun an investigation. Few corporations were prepared to confess to wrongdoing without any indication of enforcement activity. The 1993 revisions, by allowing for amnesty even after an investigation had begun, provided a much stronger inducement to talk. Indeed, DOJ officials in recent years report receiving amnesty applications at the rate of approximately two per month, a more than twentyfold increase over the prior amnesty program.

The benefits of today's Amnesty Program are obvious for a company facing substantial liability. Seeking amnesty nevertheless involves potential risks that the company should weigh carefully. And once a decision is made to seek amnesty, making the approach to the government requires considerable care.

The 1993 revisions to the DOJ Corporate Leniency Policy provide two alternative sets or criteria by which an applicant may be granted amnesty. Part A provides automatic amnesty for a company and cooperating employees if no DOJ investigation is pending, and the company (1) is the first to report the activity; (2) has terminated its participation in the conspiracy; (3) provides complete, candid, and continuing cooperation to the DOJ; (4) owns up to its wrongdoing as a corporation; (5) makes restitution where possible; and (6) was not the ringleader and did not coerce participation by others.

Part B provides for discretionary amnesty, regardless of whether an investigation has already begun. To qualify, companies must meet seven conditions. Five of these conditions mirror those required for Part A amnesty: The corporation (1) must be the first to come forward, (2) have taken prompt steps to terminate its participation, (3) cooperate fully in the investigation, (4) accept corporate responsibility, and (5) make restitution where possible. Part B adds two other requirements: (6) The Antitrust Division must not yet have evidence against the company that is likely to result in a sustainable conviction; and (7) the division must determine that granting leniency would not be unfair to others, considering the nature of the illegal activity, the corporation's role in it, and the timing of the corporation's decision to come forward.

Assuming the other conditions are met, the Antitrust Division's primary considerations in exercising its discretion are whether the applicant coerced another party to participate in the illegal activity or otherwise acted as a ringleader, and how early the amnesty application is made. The division applies a sliding scale: An applicant's burden will be "low" where the corporation comes forward before an investigation has begun, and will increase "the closer the Division comes to having evidence that is likely to result in a sustainable conviction."

Interestingly, the publicity that has accompanied the availability of discretionary amnesty seems to have triggered new interest in automatic amnesty as well. DOJ officials and outside counsel report that more companies are seeking protection under the automatic amnesty provisions, where the government has yet to learn of the alleged wrongdoing.

What should a company and its counsel do when confronted with evidence of possible criminal antitrust misconduct- While there is no "one size fits all" approach, here are some key issues to consider when contemplating an amnesty application.


Once a corporation begins to consider the Amnesty Program, timing becomes paramount. Because the government will grant amnesty to only one participant per conspiracy, delays of days or even hours in submitting an application might well make the difference between a complete pass from criminal prosecution on the one hand and substantial corporate fines and prison sentences on the other. Indeed, officials report receiving calls from two or more companies in the same industry on the same day; only the first caller was considered for amnesty. Initially, counsel must gather sufficient evidence of the nature and extent of the wrongdoing-and the company's role in it-to determine whether the company is potentially eligible. This includes finding out whether an investigation is pending, understanding the role the company played in the wrongdoing, and terminating the company's involvement. Of course, there is a real tension between the need to get enough information to get in the door at the DOJ and the risk that inquiries will cause individual employees or other companies to beat you to the punch. It is generally not necessary to have completed a thorough internal investigation before approaching the government. Counsel can place an amnesty "marker" with h simple telephone call. Given the consequences of being second, a number of companies have gone to the government where it was unclear that the conduct -at issue even rose to the level of a criminal antitrust violation-so as to be sure they were covered by the Amnesty Program if it did.

The government, in turn, has demonstrated a willingness to work with counsel to determine whether amnesty is available in a manner that does not reveal to the government the name of the client or even the specific industry involved. However, while the government has committed to not using such "anonymous" inquiries as a basis for launching or assisting investigations, prudent counsel should still be sure to keep any preliminary approaches truly anonymous until it is clear that amnesty remains available.

Before granting amnesty, the government will ordinarily require a detailed summary of the unlawful conduct and the cooperation that the applicant is pre- pared to give. This information may be provided in the form of a submission from counsel without waiver of any applicable attorney-client or work product privilege in the event that the application is denied.

When producing documents or information to the Antitrust Division, lawyers need also be mindful of the consequences for civil litigation. Anything shared with the government no doubt will be sought immediately by private plaintiffs looking for a road map to treble damages. This suggests preferring oral proffers over written submissions and negotiating carefully with the government over the nature and extent of document production.

Where amnesty is unavailable for particular conduct because the company is too late or otherwise does not satisfy the requirements, counsel should be alert to the possibility that the company may nonetheless benefit from the Amnesty Program if its investigation uncovers any additional wrongdoing in a separate product market not yet under investigation. In such an "amnesty plus" situation, the corporation would likely be in a position to receive both amnesty protection for its conduct in the additional market and a substantial credit for its cooperation in the government's calculation of the appropriate criminal fine regarding its misconduct in the original market.


So long as they agree to cooperate with the investigation, current officers, directors, and employees are automatically covered under any corporate amnesty granted under Part A of the Corporate Leniency Policy. Under Part B, any persons who come forward with the corporation are considered for immunity on the same basis as if they had approached the government under the Individual Leniency Policy, which essentially involves an exercise of prosecutorial discretion by the Antitrust Division. To maximize the likelihood of individual immunity being granted, counsel should make clear at the outset that the cooperation of certain individuals is an integral part of the corporation's amnesty application.

While the failure of one or more relevant persons to cooperate is not necessarily fatal to an amnesty application, it is generally in the corporation's best interests to offer up cooperation from as many key individuals as possible. The absence of cooperation from a critical mass of individuals with knowledge of the unlawful activity is likely to suggest that the application is not "truly a corporate act"-a result that could lead to denial of amnesty under Part A or Part B.

Former employees, although not formally covered by the Amnesty Program, will be considered for immunity if they come forward with the corporation and agree to cooperate. Particularly where former employees have unique knowledge of the misconduct, counsel should aggressively seek them out and arrange for them to come forward at the time of the amnesty application in order to bolster the package of cooperation being offered to the government. Consideration also needs to be given to whether corporate counsel can simultaneously represent company employees. In some cases, especially Part A discussions, corporate and individual interests are likely to be aligned, and separate representation is neither needed nor desirable. In Part B discussions, however, where the government may seek to exclude one or more high-ranking officials from the amnesty, separate counsel may be necessary. The company needs to have procedures for paying legal fees for individuals whose cooperation is desired and who need their own lawyers.

Corporations receiving amnesty from criminal prosecution still remain exposed to potentially massive civil liability, as evidenced by the ongoing private litigation in the vitamins industry and by the civil suits filed immediately after the Christie's announcement. But the threat of civil litigation does not necessarily argue against seeking amnesty. Rather, the risk of triggering civil litigation needs to be weighed against the likelihood that misconduct will become public whether or not the company seeks amnesty.

Where civil litigation has already been filed, a corporation considering amnesty may be able to open concurrent settlement negotiations with private plaintiffs. By giving assistance against other defendants or by providing a "war chest" settlement to fund the ongoing litigation, an amnesty applicant might be able to resolve its civil liability for substantially less than if it were to wait for developments in the criminal investigation. Moreover, evidence of good faith negotiations with private plaintiffs might well convince the government that there is no need to require any further restitution.

In addition to treble damages antitrust liability, the distinct possibility exists that the amnesty candidate will be faced with shareholder derivative suits as well. News of the company's involvement in unlawful activities, coupled with the substantial civil liability likely to follow, may come as a rude surprise to the shareholders. Therefore, even though the government ordinarily treats applications and grants of amnesty as confidential, the corporation should consider making prompt public disclosure of its acceptance into the Amnesty Program-particularly if related civil liability is likely to be material to the bottom line.

A potential applicant for amnesty should also carefully consider the implications for any joint defense cooperation already under way. Formal joint defense agreements often are drafted so as to require withdrawal in the event of cooperation with the government or, at a minimum, the provision of notice to other parties of the decision to cooperate. Once notice is provided, other parties are likely to feel angry or betrayed, and may well decide to suspend any contacts with the amnesty applicant which could place the applicant in a disadvantageous position in ongoing civil litigation.


Largely in response to the success of the U.S. amnesty program, several foreign jurisdictions-including Canada, Great Britain, and the European Union-have instituted their own amnesty policies covering violations of competition law. An applicant for the DOJ program might thus want to approach foreign antitrust agencies simultaneously. Because of the severity of U.S. penalties relative to the penalties historically imposed in other countries, however, and because of the significant implications to being first in the door here, it would rarely, be in a corporation's best interests to , approach foreign agencies prior to at least placing an amnesty marker with the DOI and getting some assurance that amnesty will follow. To encourage amnesty applications from foreign corporations, the Antitrust Division has indicated that information received from applicants will be protected from disclosure to foreign enforcement agencies. This policy comes in sharp contrast to the government's treatment of information received from companies negotiating plea agreements-which is routinely shared with foreign agencies pursuant to cooperation agreements. The benefits of this policy to an amnesty applicant are somewhat limited, however, by the likelihood that foreign authorities will launch their own investigations once plea agreements or indictments are publicly announced in the United States.

Any corporation facing potential criminal antitrust liability needs to assess its strategic options at the earliest possible moment. While the revised Amnesty Program offers tremendous benefits, the submission of an application is far from risk-free. The approach to the government needs to get the government interested in granting amnesty without providing a road map to prosecutors in case amnesty is denied. And given the government's hard and fast rule that only the first corporate applicant will qualify, timing is everything.

William J. Baer, former director of the Federal Trade Commission's Bureau of Competition, chairs the antitrust and trade regulation practice group at D.C.'s Arnold & Porter. Franklin R. Liss is a senior associate in the antitrust and trade regulation practice group.

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