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The government’s intensified focus on international cartel prosecutions has led to an unprecedented number of jail sentences, a steadily climbing number of guilty pleas and record prison sentences against foreign executives. Antitrust lawyers representing foreign companies and executives said the trends will most likely continue, bringing a number of challenges for defendants in these cases. “What I see is the [U.S. Department of Justice becoming] increasingly aggressive in terms of investigating foreign companies,” said John Potter, a partner in the San Francisco office of Los Angeles-based Quinn Emanuel Urquhart Oliver & Hedges who co-chairs the firm’s white collar and corporate-investigations practice group. “I see this as an area where the government has clearly beefed up its enforcement efforts and the penalties they are seeking.” Since 1999, the U.S. Department of Justice’s Antitrust Division has reached plea agreements with 29 executives from nine countries. A department spokeswoman said she could not provide a year-by-year breakdown, but case filings show a number of these plea agreements were settled in recent months. Prison sentences now average 12 months, which is nearly double what it was just a year ago and four times the average three-month sentence in 2001. And during the past year, the division has secured its two longest sentences against foreign executives, including a record 14-month term imposed in May during a price-fixing conspiracy. Also in May, the department arrested eight executives from the United Kingdom, France, Italy and Japan for their alleged roles in a conspiracy to fix prices and allocate markets for sales of marine hose, a rubber hose used to transfer oil between tankers and storage facilities. And in August, the U.K.-based British Airways PLC and the South Korea-based Korean Air Lines Co. agreed to plead guilty and pay $300 million each for their roles in a conspiracy to fix flight prices. The cases are USA v. British Airwaysand USA v. Korean Air Lines. ‘MORAL TURPITUDE’ Lawyers said there are several reasons that explain the trend, including the Justice Department’s ability to negotiate foreign executives’ residency status. This is possible due to a 1996 memo of understanding that says the Immigration and Naturalization Service � now part of the Department of Homeland Security � considers violations of the Sherman Antitrust Act to be “crimes involving moral turpitude,” therefore subjecting the foreign national to deportation. Under the agreement, if the foreign national agrees to cooperate, the government does not seek his or her deportation. Some lawyers said that even though the courts may not find these violations involve moral turpitude, the threat of deportation is enough to push foreign executives to plead guilty rather than go to trial. “For many foreign executives, the prospect of being banned from travel in the United States would be more of a career killer than spending a couple of years in prison,” said Eric Grannon, a partner in the Washington, D.C., office of White & Case who focuses on antitrust matters. “Many of these foreign executives plead guilty because of the leverage of this memo of understanding and its immigration consequences rather than the strength of the government’s antitrust case.” The memo has surfaced in a number of recent plea agreements, including several reached this year with Samsung Group executives from South Korea over a price-fixing conspiracy. Lawrence Callaghan, counsel to the San Francisco office of Cleveland-based Tucker Ellis & West, who has represented foreign executives in antitrust cases, said it’s tough to say whether the moral-turpitude test would pass in court, but no executive has dared to take the risk. “It’s intellectually appealing and it would be a fun thing to take up if there wasn’t an individual involved,” he said. “But you have a human being there.” SHIFTING THE BALANCE Scott D. Hammond, deputy assistant attorney general in the Justice Department’s Antitrust Division, said the memo is one of a number of tools used to secure guilty pleas. The department has also been working more closely with antitrust enforcement agencies in other countries, using border watches to detect executives’ entry into the United States, and notices through the International Criminal Police Organization to help extradite them. “We have a number of tools available to use that are more powerful, and that has shifted the balance in the favor of the Department of Justice,” Hammond said. Improved cooperation from other countries has made it tougher to be an international fugitive, so the foreign executives are left without any good options, Hammond said. As far as the lengthening jail sentences, Hammond credited Congress for increasing in 2004 the maximum sentence for Sherman Act violations from three to 10 years. In the fiscal year ending Sept. 30, the department secured about 31,000 jail days � which includes foreign and U.S. executives � a figure that is more than double the previous high of about 13,000 jail days in fiscal year 2005. Hammond said the department does not have a particular goal when it comes to the length or number of jail terms against foreign executives. While the government has made great strides in obtaining jurisdiction over foreign nationals, these cases are still more difficult to prosecute than those involving U.S. citizens, so the department simply hopes to achieve proportionality, he said. “We are moving closer to our ultimate goal of treating similarly situated foreign cartel members no differently than their U.S. co-conspirators,” he said. In May, the division secured a record 14-month prison sentence against Il Ung Kim, a Samsung executive and a South Korean national. In addition to the prison term, Kim has agreed to pay $250,000 in connection with the case, which involved a global conspiracy to fix prices of memory chips. Callaghan, who represented Kim, said he could not discuss specific cases. Potter, who also declined to discuss specific cases, defended Young Hwan Park, another South Korean Samsung executive who pleaded guilty in the scheme. Courts have imposed fines totaling more than $730 million and charged 18 individuals and four companies in connection with the antitrust investigation. In addition to Samsung, another South Korean manufacturer, as well as a German and Japanese manufacturer, were involved. For antitrust lawyers, this has led to a challenging climate, said Kathryn Fenton, a partner in the Washington office of Jones Day who chairs the American Bar Association’s Section of Antitrust Law. “For a number of years, both the U.S. Antitrust Division and the foreign investment bodies have been focusing on international cartels and you’re now seeing the fruits of their efforts,” she said. As the U.S. government works more closely with other countries, antitrust defense lawyers have also been driven to seek out lawyers in other countries to help them with increasingly complex international cases, she said. Because a number of recent cases have involved Asian executives, the section will hold a conference in San Francisco in January to discuss emerging issues in international cartel activity, she said. Callaghan and others said they believe the trends will continue in the direction of more jail sentences and longer jail terms for foreign nationals. “It would make sense to me that the Justice Department is going to push the envelope,” he said. “They are getting heavier fines and longer sentences, and they are pushing it because they believe this will serve domestically and internationally as a deterrence.” This article originally appeared inThe National Law Journal , a publication of ALM. �

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