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Soon government wiretaps and electronic eavesdropping may not be limited to exposing mobsters and drug lords but will be used by antitrust investigators to bug corporate boardrooms. A one-page bill now in Congress would add Sherman Antitrust Act violations to the list of predicate crimes that can serve as the basis for court-approved wiretaps, giving far greater investigative power to the Justice Department’s Antitrust Division. The Antitrust Investigative Improvements Act of 2005, Senate Bill 443, sailed through the Senate in October and is currently in the House, where it is part of proposed amendments to the USA Patriot Act. It has the bipartisan sponsorship of senators Michael DeWine, R-Ohio; Patrick Leahy, D-Vt.; and Herbert Kohl, D-Wis. “There is no principled reason for excluding criminal antitrust violations from the list of over 150 predicate offenses for obtaining a wiretap,” DeWine said following Senate passage of the measure. “Given the gravity of these crimes, it is time that antitrust violations are added as a predicate offense,” he said. Yet the power to monitor phone calls or even boardroom discussions amounts to a radical change in the way federal prosecutors pursue antitrust cases, according to Mark A. Racanelli, a white-collar defense attorney with the New York office of O’Melveny & Myers and a former federal prosecutor in the Southern District of New York. And it is likely to present some new dilemmas for investigators. “When you have a boardroom bugged or executives bugged there is an increased chance that legitimate business, strategic business information, can be overheard by the government . . . and disclosed,” Racanelli said. “It could be bet-the-company information that is going into an FBI speaker a couple blocks away, then into an FBI memo and into a prosecutor’s office and finally going into a public complaint or indictment,” he said. Generally, the government is mindful about exposing trade secrets, but sometimes you have rogue players in the company and the disclosure of future plans that would be very valuable to competitors, he said. The new power is consistent with 20 years of increased government use of criminal sanctions to enforce antitrust law, according to Tyler A. Baker, the head of antitrust litigation for Fenwick & West in Mountain View, Calif. In 2004, Congress increased criminal penalties of the Sherman Act by raising maximum prison terms from three years to 10 years, and increasing the potential corporate fine from $10 million to $100 million and individual fines from $350,000 to $1 million. While Baker said that he did not fear government overreaching in the use of wiretaps, he pointed out there is a “long history of the Supreme Court being willing to accept more vagueness in defining where the civil [violation] line ends and the criminal line begins.” The Sherman Antitrust Act encompasses both civil and criminal conduct, he said. Prosecutors have historically used their discretion to limit the criminal investigations to “hard-core price-fixing, bid rigging and illegal allocation of market territory,” he said. Yet private antitrust specialists have expressed concern about the breadth of the change. The American Bar Association’s Section of Antitrust said in a June 2005 statement it would support the government wiretap authority so long as it was limited to suspected “hard core” or “cartel” types of anti-competitive behavior. The statement warned the proposal could be “over-inclusive and relate to conduct that is not contemplated by the sponsors of the legislation. “Unfortunately, the amendment proposed to Sec. 2516(1) potentially would include conduct far beyond this type of ‘cartel’ behavior,” according to the Antitrust Section statement. The bill would allow the Department of Justice to use electronic surveillance if it can demonstrate probable cause to believe that a suspect is using a particular phone or location to communicate about criminal anti-competitive behavior. A federal judge must authorize the eavesdropping. The prosecutors can listen in on telephones, cellphones or faxes; they can use hidden video cameras and listening devices or even intercept data via the Internet. Prosecutors investigating racketeering, narcotics and a variety of fraud offenses have long had the ability to seek wiretaps and electronic surveillance. This bill, for the first time, would extend that authority to antitrust investigations. In the past, antitrust investigators have had to rely on the so-called “consent exception” to allow wiretaps only when one party in the conversation consents to being recorded. The new proposal “would give us another tool in our arsenal to protect consumers from illegal price-fixing,” said Gina Talamona, Justice Department spokeswoman. Often the only way to gain insight into a suspected conspiracy is through a cooperating witness from the inside, Racanelli said. “But prosecutors realize at the end of the day they bet the entire case on a single cooperator” who agrees to be recorded, he said. This became a problem in the famous Archer Daniels Midland Co. price-fixing case of the 1990s, when insider Mark Whitacre agreed to record price-fixing conversations with other ADM executives. Although three officials were convicted and the company paid a $100 million fine, Whitacre was also accused of embezzling and eventually indicted for price-fixing as well. The DOJ Antitrust Division “is waking up to what U.S. attorney’s offices who prosecute blue-collar crimes know: The faster you get from a cooperator to the evidence, the stronger the case will be,” Racanelli said. The ability to bug a room without having to wire up a cooperating witness eliminates the risks of relying on that informer. But there will be new risks for the government if it employs eavesdropping and wiretaps, Racanelli warned. The government risks suppression of the tapes if it wiretaps innocent conversations. There is a requirement to minimize the intrusions, he said. There may be a conversation between executives about a trade conference, their kids or a joint venture as well as illegal behavior. “If there is not an indication they are talking about criminal behavior [agents] have to stop taping and stop listening. They can spot check,” he said. But if a judge sees an investigator listened in to legitimate conversations, the wiretap could be suppressed, he said. When listening in to sophisticated corporate meetings there is the potential the government agents could violate attorney-client privilege if counsel sits in on meetings. “There is no such thing as an in-house mob lawyer or drug lawyer,” Racanelli said. So it is clear if a mob target calls a law firm the agents must turn off the tape. But in a meeting of 15 people it may not be clear a lawyer is in the room, he said. Another requirement obligates a prosecutor to send a letter to everyone intercepted through electronic bugging within 90 days after the tap ends, according to Racanelli. In blue-collar cases that is not much of an issue because the first notice they get is usually an indictment, he said. But for the white-collar executive “they are not just talking to criminals. They are talking to the sales force, the marketing department and others. A very small subset will be criminal conversations, but everyone . . . has to get letters. If they don’t, that’s another pitfall,” he said. Said Baker, “To some extent this is one more indication that the government is very serious about applying criminal sanctions [in antitrust cases]; it will ratchet up the advice and the seriousness with which the advice is received. It is one thing for an executive to think he is exposing the company to treble damages and another that he might go to prison. That does get people’s attention.”

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