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Article: Extradition for U.S. Antitrust Crimes: An Anomaly or the New Normal?

Business Litigation Reports

In April 2014, Germany extradited Romano Pisciotti, an Italian national, to the United States to face criminal charges related to his alleged participation in an international cartel in the marine hose industry. (Press Release, U.S. Dep’t of Justice, First Ever Extradition on an Antitrust Charge (Apr. 4, 2014) (“April 4 Press Release”).) Mr. Pisciotti’s extradition represented the first time that the Antitrust Division of the U.S. Department of Justice (“DOJ”) had obtained the extradition of a foreign national solely based on antitrust charges. (Id.) It was clearly a landmark achievement for the DOJ. In his May 2015 testimony before the House Judiciary Committee, the Assistant Attorney General for the Antitrust Division, Bill Baer, took a firm stance: “Foreign nationals do not escape responsibility when they conspire to injure American consumers from afar. We prosecute foreign companies and their executives, and seek extradition of foreign nationals who attempt to evade the jurisdiction of the U.S. courts.” (Assistant Attorney General Bill Baer’s Prepared Remarks Before the United States House of Representatives, Judiciary Committee, Subcommittee on Regulatory Reform, Commercial and Antitrust Laws (May 15, 2015).)

But more than one year after Mr. Pisciotti’s extradition, it remains unclear whether those proceedings were a watershed moment in extraterritorial U.S. antitrust enforcement or just an anomaly. 

Dual Criminality, Extradition, and Antitrust Offenses
Extradition is a complicated process in any context, but the nuances of criminal antitrust laws outside of the United States make extraditions particularly difficult to obtain for antitrust charges. In any type of case, for prosecutors to extradite a foreign fugitive to face charges in the United States, there must be an extradition treaty between the United States and the country where the fugitive is located. If there is such a treaty in place, the requirements for obtaining extradition are determined by the terms of the treaty between the two countries.

Generally speaking, prosecutors must evaluate at least three threshold considerations before seeking extradition.

First, the charged offense must be one for which extradition is available. Extraditable offenses may be specifically identified in the underlying treaty or described by a formula set out in the treaty. For example, the extradition treaty between the United States and Germany provides that a criminal offense must be punishable by “deprivation of liberty for a maximum period exceeding one year” to be eligible for extradition. (Extradition Treaty, U.S.-Germany, art. 2, para. 2, cl. a, June 20, 1978, 32 U.S.T. 1485 (“Germany Extradition Treaty”).)

Second, under most treaties, the requirement of “dual criminality” must be satisfied before extradition can proceed. “Dual criminality requires that an accused be extradited only if the alleged criminal conduct is considered criminal under the laws of both the surrendering and requesting nations.” United States v. Saccoccia, 18 F.3d 795, 800 n.6 (9th Cir. 1994).

Finally, prosecutors must consider possible exemptions that apply to a particular fugitive under the governing treaty. Under some circumstances, even if the fugitive has been charged with an extraditable offense in the United States, extradition may not be available. For example, some countries, like Germany, have not agreed to extradite their own citizens to face criminal charges in the United States. (Germany Extradition Treaty, art. 7.)

The “dual criminality” requirement in most extradition treaties has historically created an obstacle to extraditions based on violations of U.S. antitrust laws. While criminal penalties have been attached to price-fixing and other “hard core” violations of the antitrust laws in the United States since the passage of the Sherman Act, similar conduct is not subject to criminal penalties in many other nations around the world. Consequently, antitrust charges alone will not be enough to sustain an extradition request in many cases.

United States v. Norris
In recent years, to avoid the complications created by the “dual criminality” hurdle, U.S. antitrust authorities have demonstrated that they are willing to use alternative charges to pursue extradition of fugitives residing in countries where antitrust offenses do not satisfy the requirements for extradition. The first example of the successful pursuit of such an extradition request occurred in 2010, after a multiyear effort by the DOJ to extradite Ian Norris, the former CEO of Morgan Crucible PLC, from the U.K. to the United States. Mr. Norris was ultimately extradited to face obstruction charges arising from his alleged efforts to conceal his company’s involvement in a price-fixing conspiracy, but only after a multiyear battle in the United Kingdom. (Press Release, U.S. Dep’t of Justice, Former CEO of the Morgan Crucible Co. Found Guilty of Conspiracy to Obstruct Justice (July 27, 2010).)

In 1999, the U.S.-based subsidiary of Morgan Crucible received a grand jury subpoena seeking information regarding possible price fixing related to certain carbon products. According to prosecutors, when the company received the subpoena, Mr. Norris directed the destruction of documents and prepared “scripts” to ensure all employees who attended the meetings under investigation provided the same, exculpatory information to investigators. (Id.) In 2002, Morgan Crucible pleaded guilty to witness tampering and document destruction. (Plea Agreement, United States v. Morganite, Inc., & The Morgan Crucible Company PLC, No. 02-733 (E.D. Pa. Nov. 4, 2002).) At the same time, a U.S.-based subsidiary of Morgan Crucible pleaded guilty to fixing prices for certain carbon products. (Id.) Two years later, Mr. Norris—a British citizen—was indicted in Pennsylvania. He was charged with violations of the Sherman Act, for conspiracy to fix the prices of various carbon products, witness tampering, and obstruction of justice. (Indictment, United States v. Norris, No. 03-632 (E.D. Pa. Sept. 28, 2004).)

The DOJ initially sought to extradite Mr. Norris from the U.K. on all charges, including the charged antitrust offenses. (See Scott Hammond, Deputy Assistant Attorney General for Criminal Enforcement, Antitrust Division, U.S. Dep’t of Justice, Address Before The ABA Section of Antitrust Law Cartel Enforcement Roundtable, An Update of the Antitrust Division’s Criminal Enforcement Program (Nov. 16, 2005).) Ultimately, it achieved mixed results. A lower court in the U.K. initially concluded results. A lower court in the U.K. initially concluded that Norris should be extradited on both the charged antitrust and obstruction offenses. See United States v. Norris, [2005] UKCLR 1205. But after several appeals, and nearly six years of proceedings, the U.K. Supreme Court determined that Norris could only be extradited on obstruction charges because the alleged conduct underlying the indictment had occurred before a “cartel offense” was established under U.K. law. See Norris v. United States, [2008] UKHL 16.

In March 2010, Norris was extradited to face obstruction charges in the Eastern District of Pennsylvania. (Press Release, U.S. Dep’t of Justice, Former CEO of the Morgan Crucible Co. Found Guilty of Conspiracy to Obstruct Justice (July 27, 2010).) After a seven-day trial, a jury convicted him on one count of obstruction and acquitted him on all remaining counts. (Judgment Order at 1, United States v. Norris, No. DPAE2:03CR000632-001 (Dec. 10, 2010).) The court sentenced Mr. Norris to serve 18 months in prison and ordered him to pay a $25,000 fine. (Id. at 2.)

The Norris extradition is noteworthy in two important respects. It was the first time that the DOJ had successfully extradited a foreign fugitive involved with a price-fixing conspiracy. But it also demonstrates the difficulties that U.S. authorities face when seeking to obtain jurisdiction over foreign antitrust fugitives. If Mr. Norris had not been subject to obstruction charges, he likely would have avoided extradition and may have escaped prosecution altogether. That same result would still hold for foreign antitrust fugitives in many other countries around the world today, including countries such as China, where antitrust offenses still do not carry criminal penalties. (Gregory C. Shaffer, Nathaniel H. Nesbitt, Criminalizing Cartels: A Global Trend?, 12 Sedona Conf. J. 313, 322 (2011).)

The tide, however, is gradually changing. Since 2000, a number of countries, including Ireland (Section 6 of the Competition Act of 2002), the United Kingdom (Section 188 of the Enterprise Act of 2002), and Australia (Competition and Consumer Act of 2010), have passed laws that impose criminal penalties for cartel offenses, increasing the number of countries around the world with criminal antitrust statutes to more than 30. (See generally Shaffer, supra at 315.) While the true impact of these new statutes remains to be seen, they have created new opportunities for U.S. authorities to prosecute foreign antitrust fugitives, even where similar actions would not have been possible in the past. Romano Pisciotti’s extradition marks another step in the direction of increased international antitrust enforcement and cooperation.

The Marine Hose Cartel
In May 2007, antitrust authorities around the world simultaneously raided the offices of the major suppliers of marine hoses, which are flexible rubber hoses used to transfer oil between tankers and storage facilities. During those raids, the DOJ arrested eight foreign executives and charged them with conspiracy to rig bids, allocate market shares, and fix prices for marine hoses sold in the United States and throughout the world. According to the DOJ, the marine hose conspiracy impacted the prices of hundreds of millions of dollars of marine hose sales between 1999 and 2007. (Press Release, U.S. Dep’t of Justice, Eight Executives Arrested on Charges of Conspiring to Rig Bids, Fix Prices, and Allocate Markets for Sales of Marine Hose (May 2, 2007).)

Parker ITR Srl, an Italian supplier of marine hoses, was an alleged participant in the conspiracy. In February 2010, Parker entered a guilty plea in Houston, Texas, in which it agreed to pay a $2.29 million fine and admitted its involvement in the conspiracy. (Plea Agreement, United States v. Parker ITR S.R.L., No. H-10-75 (S.D. Tex. Feb. 8, 2010) (“Parker Plea Agreement”).) At the time, Parker was the fourth company to be charged for its role in the conspiracy. (Press Release, U.S. Dep’t of Justice, Italian Subsidiary of U.S.-Based Company Agrees to Plead Guilty for Participating in International Price- Fixing Conspiracy (Feb. 16, 2010).) As a condition of its plea agreement, Parker agreed to cooperate with the DOJ’s ongoing investigation into the cartel’s activities. (Parker Plea Agreement at 11-13.)

Romano Pisciotti, an Italian citizen, was an executive at Parker between 1999 and 2006. He was “carved out” of the company’s plea agreement with the DOJ, which left him exposed to independent prosecution. Six months after Parker entered its guilty plea, Mr. Pisciotti was indicted. The indictment alleged that Mr. Pisciotti participated in meetings in which he and other co-conspirators agreed to rig bids for marine hose contracts and allocate shares of the marine hose market. (Indictment, United States v. Pisciotti, No. 10-60232 CR-Cohn (S.D. Fla. Aug. 26, 2010).)

United States v. Pisciotti Extradition Proceedings
While living in Italy, Pisciotti was beyond the reach of U.S. antitrust authorities. In Italy, during the time period in which the marine hose cartel was active, cartel offenses did not carry criminal penalties. (See Julian M. Joshua, Peter D. Camesasca, Youngjin Jung, Julian M. Joshua, Peter D. Camesasca, Youngjin Jung, Extradition and Mutual Legal Assistance Treaties: Cartel Enforcement’s Global Reach, 75 Antitrust L.J. 353, 397 (2008).) The extradition treaty between the United States and Italy requires dual criminality; therefore, Pisciotti was safe from prosecution while he remained within Italian borders. (Extradition Treaty, U.S.-It., art. II, para. 1, Oct. 13, 1983, TIAS 10837.)

Consistent with its established practice for prosecuting foreign antitrust fugitives, the DOJ placed Mr. Pisciotti on INTERPOL’s “red notice” list, which is a list of wanted fugitives maintained by INTERPOL member nations. (See Scott Hammond, Deputy Assistant Attorney Gen. for Criminal Enforcement, Antitrust Division, U.S. Dep’t of Justice, Address Before the 24th National Institute on White Collar Crime, The Evolution of Criminal Antitrust Enforcement Over the Last Two Decades (Feb. 25, 2010).) When fugitives on the list are detected entering an INTERPOL nation, they may be provisionally detained to facilitate potential extradition. (Id.) Accordingly, even if a fugitive is outside the reach of U.S. prosecutors while within his own country, he could face the risk of detention and arrest while traveling abroad.

Although Mr. Pisciotti was indicted in 2010, his indictment was filed under seal. (Motion to Unseal the Indictment, United States v. Pisciotti, No. 10-60232 (S.D. Fla. Aug. 1, 2013).) Because his indictment was filed under seal, Mr. Pisciotti would not have known charges were pending against him in the United States. When traveling back to Italy in June 2013, Mr. Pisciotti’s itinerary included a layover in Germany. Once he landed in Germany, German authorities detained Pisciotti. (See April 4 Press Release.) The DOJ promptly sought to extradite him to the United States to face charges arising from his alleged participation in the marine hose cartel. (Id.)

German authorities ultimately agreed that the extradition request was proper. Bid-rigging became a criminal offense in Germany in the late 1990s, just like it is in the United States. (See German Criminal Code, Section 298.) Therefore, the charges satisfied the dual-criminality requirement under the extradition treaty between the United States and Germany. And as an Italian, not German, national, Mr. Pisciotti could not invoke the exception under the extradition treaty between the United States and Germany that exempts German citizens from extradition from Germany.

Germany extradited Mr. Pisciotti to the United States in April 2014. (April 4 Press Release.) Three weeks later, he pleaded guilty and was sentenced to serve a 24-month prison term. (Press Release, Dep’t of Justice, Former Marine Hose Executive Who Was Extradited to United States Pleads Guilty for Participating in Worldwide Bid-Rigging Conspiracy (Apr. 24, 2014) (“April 24 Press Release”).)

Implications for the Future
The prosecution of individual defendants is clearly a point of emphasis under the DOJ’s cartel enforcement program. Since 1999, more than 40 foreign nationals have served jail time in the United States for either participating in an international cartel or obstructing the investigation of an international cartel. (See Scott Hammond, Deputy Assistant Attorney General for Criminal Enforcement, Antitrust Division, U.S. Dep’t of Justice, Address Before the 24th National Institute on White Collar Crime, The Evolution of Criminal Antitrust Enforcement Over the Last Two Decades (Feb. 25, 2010).) Most of those individual defendants, however, have voluntarily traveled to the United States for trial, or submitted to U.S. jurisdiction as a part of a plea agreement. (See Scott Hammond, Deputy Assistant Attorney General for Criminal Enforcement, Antitrust Div., U.S. Dep’t of Justice, Address Before the ABA Section of Antitrust Law’s 56th Annual Spring Meeting, Recent Developments, Trends, and Milestones In The Antitrust Division’s Criminal Enforcement Program (March 26, 2008).) The Antitrust Division still has a very limited track record of successfully obtaining the extradition of foreign nationals who refuse to submit to U.S. jurisdiction.

The status of one of Mr. Pisciotti’s alleged coconspirators in the marine hose case illustrates the difficulties U.S. authorities still face when prosecuting antitrust fugitives abroad. Uwe Bangert was the CEO of Phoenix AG, the parent of Dunlap Marine & Oil Ltd., another company that pleaded guilty for its role in the marine hose conspiracy in December 2008. (Plea Agreement, United States v. Dunlop Oil & Marine Ltd., No. 08-60338-CR-Marra (S.D. Fla. Jan. 8, 2009).) In July 2007, Mr. Bangert was indicted in the Southern District of Florida for his alleged role in the marine hose cartel. (Indictment, United States v. Bangert, No. 07-60183 CR-Dimitrouleas (S.D. Fla. July 19, 2007).) Mr. Bangert, a German citizen, has remained a fugitive at-large since the time of his indictment while living in Germany. (April 24 Press Release.) Under the terms of the extradition treaty between the United States and Germany, Germany has no obligation to extradite German citizens. (Germany Extradition Treaty, art. 7.) In an ironic twist, Germany, the same country that extradited Mr. Pisciotti, has no obligation to extradite one of his alleged co-conspirators who has been charged with identical crimes.

Nonetheless, the DOJ appears committed to seeking the extradition of fugitives involved with antitrust crimes wherever possible. Shortly after Romano Pisciotti was extradited to the United States to face the charges pending against him, the DOJ obtained the extradition of John Bennett from Canada on fraud charges arising from an alleged bid-rigging scheme surrounding EPA Superfund sites. (Press Release, U.S. Dep’t of Justice, Canadian Executive Extradited on Major Fraud Charges Involving a New Jersey Environmental Protection Agency Superfund Site (Nov. 17, 2014).) While the alleged conduct at issue, bid-rigging, clearly implicated the antitrust laws, Mr. Bennett and his company were charged with fraud. Again, just like in the Norris case, the DOJ demonstrated it was willing to pursue alternative charges to prosecute individuals involved in conduct that may have also violated U.S. antitrust laws.

As the treatment of cartel-related offenses in the United States and the treatment of the same conduct in other countries continues to converge, the “dual criminality” prong of more extradition treaties will likely be satisfied. Consequently, the number of countries in which extradition for antitrust crimes will be available to U.S. prosecutors will continue to expand. As a practical matter, however, there are still a large number of countries where antitrust offenses do not carry criminal penalties, and in virtually every country with a criminal antitrust enforcement regime, the United States has yet to extradite an antitrust fugitive successfully. Thus, the political sensitivities surrounding extradition of foreign nationals and the evolving approach to antitrust enforcement around the world may continue to impede United States prosecutors’ extradition efforts, at least in the near future.