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A Pennsylvania district court ruling has rejected the U.S. Department of Justice’s attempt to revoke an amnesty agreement with a company that exposed a shipping industry cartel � an action that had tested lawyers’ faith in the credibility of the antitrust amnesty program. The recent decision in the closely watched case dismissed the government’s indictment of London-based Stolt-Nielsen S.A., a parcel tanker shipping company, and two executives, for antitrust violations. USA v. Stolt-Nielsen, No. 06-466 (E.D. Pa.). The indictment was the first time the government revoked a written amnesty agreement since its major overhaul of the Corporate Leniency Program in 1993. The 2006 indictment “sent shock waves through corporate America” because the amnesty program has been widely used, said Christopher Curran, a Washington litigation partner with White & Case who argued the case for Stolt-Nielsen. To reverse the indictment, Curran’s team relied on principles of contract law and case law concerning government attempts to revoke nonprosecution agreements in other contexts, primarily drug and murder cases. “The court has made a very strong statement that, when the government grants amnesty, it must honor its promise,” Curran said. “Due process and fundamental fairness are at the heart of a prosecutor’s promise.” In 1998, Stolt-Nielsen and its two primary competitors began a so-called “customer allocation conspiracy” by agreeing not to bid or compete with the other parties’ deep-sea trade routes. In 2002, Stolt-Nielsen reported its activities to the Department of Justice (DOJ) Antitrust Division and sought amnesty. Using Stolt-Nielsen’s information about the co-conspirators, the government “obtained the benefit of its bargain” by securing criminal convictions and fines totaling $62 million, but the defendants “have not been afforded the benefit of their bargain,” wrote Judge Bruce W. Kauffman. Under the subheading “credibility” in the 33-page opinion, Kauffman also wrote that the Antitrust Division “failed to produce any credible evidence that Stolt-Nielsen’s participation in the customer allocation conspiracy continued past March 2002.” DOJ spokeswoman Gina Talamona said the agency was disappointed in the decision, but declined to discuss the department’s plans for the litigation or the amnesty program. “We’re reviewing the opinion and considering our options,” Talamona said. A complex history The case’s complex procedural history began with Stolt-Nielsen and one of the executives filing a case for declaratory and injunctive relief to bar the DOJ from prosecuting the company and executives after the DOJ threatened to revoke amnesty. The DOJ believed that the company and its executives lied about when it stopped participating in the conspiracy. In that case, Judge Timothy Savage stopped the division from revoking Stolt-Nielsen’s amnesty and indicting the company. Stolt-Nielsen S.A. v. U.S., 352 F. Supp. 2d 533 (E.D. Pa. 2005). The 3d U.S. Circuit Court of Appeals reversed Savage’s decision by ruling that the separation of powers principle meant the court couldn’t stop the government from indicting Stolt-Nielsen, but it could dismiss an indictment once it happened. The 3d Circuit also instructed the reviewing court to undertake a new review of the agreement, determine when Stolt-Nielsen discovered the anti-competitive conduct and review the company’s actions after the discovery. Stolt-Nielsen S.A. v. U.S., 422 F. 3d 177 (3d Cir. 2006). Before the Stolt-Nielsen indictment, lawyers could advise their clients that follow-on civil litigation was the only major downside of signing up for the DOJ’S amnesty program, said J. Mark Gidley, a Washington lawyer who chairs White & Case’s global antitrust group. “The case has caused some companies to really think twice about what was almost a corporate no-brainer until 2003,” Gidley said. Companies widely embraced the amnesty program prior to the Stolt-Nielsen indictment, according to lawyers and DOJ data. Cooperation from companies in the amnesty program generated scores of convictions and nearly $4 billion in criminal fines for the Justice Department’s Antitrust Division since 1993, according to a November speech by the division’s deputy assistant attorney general for criminal enforcement, Scott Hammond. The 2006 indictment of Stolt-Nielsen was a disincentive for companies considering amnesty, said Reed Smith partner Daniel Booker, who practices in Washington and Pittsburgh. Private companies, which aren’t subject to the same level of intense scrutiny as companies with public shareholders, are particularly skittish about turning themselves in to the government, Booker said. “Kauffman’s decision . . . removes a question about whether, if you take this step, you’re really going to get a benefit from it,” Booker said. DLA Piper’s Carl Hittinger, an antitrust partner in Philadelphia, said the decision could change how carefully the DOJ drafts amnesty agreements. Hittinger said the agreement between Stolt-Nielsen and the government didn’t have clear enough guidelines for Stolt-Nielsen. “In the future, you’re not going to see immunity agreements with these kinds of holes in them,” Hittinger said. Reed Smith’s Booker said there’s a danger the government could overreact to the decision by changing the amnesty program in ways that make it less effective. “It’s important for the government not to miss the forest because they’re worried about one tree,” Booker said. “The forest is the leniency program [that] has proven to be a very effective way of uncovering and ending collusion in many, many industries. It’s been a factor many, many times.”

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