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One spring day this year proved that the Justice Department can move markets. That day, April 3, the Nasdaq took a header, falling more than 300 points — its largest single-day decrease ever. It wasn’t hard to pinpoint the reason. Settlement negotiations between the federal government and the Microsoft Corp. in their history-making antitrust dispute had collapsed during the weekend, shaking the faith of high-tech investors. A month later, hospital giant Columbia/HCA Healthcare Corp., the target of a four-year fraud investigation, surrendered unconditionally, agreeing to a $745 million settlement. At the same time as it was facing off mano a mano with two industry Goliaths, the Justice Department was also taking on a corporate titan of a different sort: Swifty Mart. Swifty Mart, a chain of 53 convenience stores in Alabama, Florida, and Georgia, had come under fire for allegedly failing to provide access to the disabled under the Americans With Disabilities Act. Under pressure from the department’s Civil Rights Division, it agreed to modify all of its stores in its chain and pay a puny $5,000 penalty. All in a day’s work for the DOJ. Discuss Janet Reno’s legacy and you hear the same two or three words over again: Waco. Elian. Microsoft. But one thing is incontrovertible: The department, under her command, has pushed and prodded at American business like none before it. It wasn’t just Microsoft. It wasn’t even stepped-up antitrust enforcement. A large part involved a crackdown on health care fraud, headlined by the Columbia/HCA case. And while some of the largest companies in America were targeted by the department, small businesses didn’t escape either. An all-out effort by the Civil Rights Division to ensure equal access to hotels and restaurants made complaints against small-town diners and movie theater chains commonplace. TRUSTBUSTERS Microsoft may have served as the poster boy for the department’s antitrust activities, but the landmark case didn’t define the universe. Reno’s Antitrust Division, led first by Anne Bingaman and later by Joel Klein, took on some of the largest corporate citizens in America. Some actions were unqualified successes. The department brought the largest antitrust criminal conspiracy case in history against the Archer Daniels Midland Co., which paid a then-record $100 million fine in 1996 for fixing prices. (That was dwarfed last year by the $500 million fine paid by vitamin maker F. Hoffman-LaRoche.) “You have to give the division a fair amount of credit,” says Kevin Sullivan, an antitrust lawyer at King & Spalding in Washington. But the division made most of its headlines with respect to mergers — or attempted mergers. Sullivan was a victim. He was counsel to the Sprint Corp. in its aborted mating with WorldCom Inc. “We obviously didn’t like the result there,” he says. Sprint wasn’t the only company complaining. In just the last three years, under the stewardship of Klein, the DOJ blocked mergers involving defense contractors like the Lockheed Martin Corp. and Northrop Grumman Corp. and aluminum industry titans Reynolds Metals Corp. and Alcoa Inc. It has grumbled about the proposed United Airlines-U.S. Airways merger. Already, that’s more mergers than were blocked during the entire Reagan administration. On the enforcement side, the division has aggressively pushed anti-competition cases against heavyweights like Visa, MasterCard, and American Airlines. “Have they been overeager?” says Sullivan. “I think it’s a fair criticism.” Antitrust lawyer John Stuart Smith, a Washington, D.C. partner at Nixon Peabody, says: “There has been a change. It is more aggressive in terms of mergers.” While Reno’s name will forever be tied to Microsoft, few saw her as playing a particularly vivid role in the case, or antitrust policy generally. Bingaman was responsible for taking over the Microsoft investigation from the Federal Trade Commission. And Klein — along with the senior career officials in the division — was viewed as having a high degree of autonomy. Still, under Reno, resources for the neglected Antitrust Division were rededicated. Staff grew to 800, although that remained short of the 1,000 or so employees that worked there during the Carter administration. Another new wrinkle: using outside lawyers, like David Boies of Boies, Schiller & Flexner to prosecute Microsoft. Smith contends that both Bingaman and Klein were more “politically sensitive” than their predecessors in terms of deciding which cases to take on. Klein, specifically, made no secret of his desire to move the division away from working out consent decrees privately with businesses and take a more litigious posture. Klein, with Reno’s blessing, pressed the pedal down. Under his leadership, it wasn’t uncommon for the government to persuade — using the threat of suit — merger candidates to allow the DOJ more than the 30 days required by law to review a deal. Not surprisingly, those who shared the government’s responsibility for antitrust enforcement don’t agree that the administration overreached. William Baer, the former chief of the FTC’s Bureau of Competition, points to the explosive number of mergers during the Clinton administration, saying that antitrust overseers actually challenged a smaller percentage of transactions overall. The number of reviewable corporate mergers in the United States in 1999 was more than 5,000, compared with about 1,700 in 1991. “They were able to clear 97 percent [of proposed mergers] in 30 days or less,” says Baer, now a partner at Arnold & Porter. “They stayed out of the way of a lot of stuff.” Douglas Melamed, the acting assistant attorney general for antitrust, says the increased activity is a reflection of the dramatic change in the marketplace under the Clinton administration. “There has been an increase in the number of economically significant transactions,” Melamed says, “prompted by technological changes, regulatory changes, and increased globalization.” There were rocky moments as well for the division. This year, after the antitrust division became involved in the fight in San Francisco over ownership of the city’s two newspapers, a federal judge had harsh criticism for Klein’s unit, accusing it of playing politics to ensure that control of the San Francisco Examiner was turned over to the city’s influential Fang family. U.S. District Judge Vaughn Walker called the DOJ’s actions “political favoritism masquerading as a law enforcement.” “That’s a real black eye that was uncomfortable and unprecedented,” says Nixon Peabody’s Smith. BAD MEDICINE One industry, however, was specifically targeted by Reno after she took office in 1992 — health care. “Reno identified health care fraud as her top white collar crime priority. It was just the type of thing that she would care about,” says John Bentivoglio, who, until earlier this year, served as associate deputy attorney general. “It has an impact on real people.” During his three-year tenure at Justice, Bentivoglio became the department’s point man for health care fraud enforcement. “It was a huge program,” he says. “It had a major effect on the health care system, and it had a big impact on holding down costs. There was a lot of inflated billing going on.” The health care fraud section at Justice boomed under Reno. In 1998, the department estimated that a total of 672 attorneys and FBI agents were dedicated solely to health care fraud. In 1999, the Civil Division filed more than 180 new actions. The Republican-controlled Congress, lobbied hard by Reno and Justice, helped out. In 1996, it passed a bill that created new penalties and added resources for the fight. This year, the department announced that it recovered more than $1.5 billion from fraudulent health care providers through civil litigation during FY 1998. One of the most striking features of the bill was the automatic appropriation provision. Under its terms, the DOJ receives a 15 percent increase in health care fraud resources each year until 2003, with no congressional action required. “You double your money pretty quickly that way,” says Bentivoglio, now at Arnold & Porter in Washington, D.C. Critics, however, complain that the department has become overzealous, hungry for the big score. A Government Accounting Office report issued last year essentially said as much. “There was a lot of animosity toward the department, and some of it was deserved,” Bentivoglio says. One of those critics is Washington, D.C. health care lawyer Lynn Shapiro Snyder, who served as counsel to the Olsten Corp., a medical staffing company that was involved in the Columbia/HCA case. “I didn’t become a health care lawyer to become a white collar criminal lawyer,” says Snyder, a partner in the Washington, D.C. office of Epstein Becker & Green. “I don’t think there’s a region [in America] where a health care provider has not been touched.” Snyder complains that Justice has become so involved in health care concerns that slight, innocent mistakes in billing are treated as criminal offenses. “Is every mistake a criminal complaint or a civil claim? I don’t think it is.” And, she says, the power of the department forces most health care providers to settle quickly, regardless of whether the provider is criminally liable. But that has an effect, Snyder says. Venture capital firms stay away when they sense government trouble. “The industry needs capital,” she says. “We need to have a vibrant, cost-effective health care industry.” Now Reno is turning her attention to the nursing home and elder care industry. “Today, too many older Americans are victims of abuse and neglect in places where they should be safe,” she told a national symposium on aging in October. ALL ACCESS Last spring, while the DOJ was playing hardball with Microsoft and forcing Columbia/HCA to the table, its Civil Rights Division was making its mark a bit differently. On March 1, the division reached a settlement with a restaurant in Houston for a grand total of $12,000. The restaurant owner was accused of making ethnic slurs to an Iranian waiter. Three weeks later, it won a $60,000 settlement from a North Carolina mobile-home park for its alleged failure to rent to African-American renters. There were larger cases. In March, the Adam’s Mark hotel chain agreed to an $8 million settlement with the division, stemming from allegations that the hotel discriminated against African-American guests at a Black College Reunion in Daytona Beach, Fla., in 1999. Reno publicly criticized the chain when the department filed its complaint, saying that that it “was hard to believe … this kind of discrimination still exists.” That earned her some flak from House Republicans, who felt she had spoken before any evidence had been gathered in the case. And in June, the division announced that Domino’s Pizza Inc., in a headline-grabbing case, had agreed to alter its delivery policies. The DOJ had accused Domino’s of refusing to deliver to predominantly African-American neighborhoods, but never filed a lawsuit. (And, in fact, a Domino’s spokeswoman denies there was ever any conflict between the company and the government.) The Civil Rights Division, under controversial and unconfirmed Clinton appointee Bill Lann Lee, has been zealous in pursuing equal access suits against hotels, restaurants, housing complexes, and other public business. Armed with new laws passed with the Civil Rights Act of 1991, the division has also made a priority of suing to demand equal accommodations for minorities and the disabled. “They have been extremely aggressive in a way that has been very hard for these respondents to fight back,” says Lawrence Lorber, a former Department of Labor official who is now a Washington, D.C. partner at Proskauer Rose. After Swifty Mart, the Southeastern chain of convenience stores, was hit by an ADA complaint, company officials quickly agreed to a settlement with the Justice Department. Jim Card, then the president and CEO, says that the company asked Justice to lower the fine to $5,000, which it did. Card says he has no complaints. “We were going to do the work anyway,” he says. Lee’s predecessor was Deval Patrick, now the general counsel of Texaco Inc. Patrick was given the job after Congress refused to appoint Yale law professor Lani Guinier to the job. “Patrick was in many respects the same as Guinier was,” Lorber says. “He took an expansive view of civil rights. They’ve taken very aggressive positions.” Lee has enjoyed strong support from Reno, who spoke out on his behalf three years ago when the Senate was blocking his nomination. “Some say he should be denied the job simply as a payback for the rejection of past nominees,” she said then. “Others say he should be rejected because he shares the views of the president on affirmative action. I say ‘no’ to that.” Reno, who made civil rights a cornerstone of her tenure, encouraged a push-the-envelope approach. She and Lee also jointly crafted some initiatives, including a task force chaired by Lee, that deals with violence at abortion clinics. Lorber says the division’s focus under Patrick and Lee has changed. “In the past, the Civil Rights Division has taken the big case to make their law,” he says. “Now you have the government blasting in on some small restaurant or some small bank in a redlining case. When you look at what’s happened, it isn’t a hell of a lot. There’s a lot of press release stuff going on.” Patrick was out of the country and could not be reached for comment. But as Lee told a congressional committee this summer, “The federal civil rights laws are historic legislative achievements to address inequality and unfairness imposed on too many of our people. But these mean nothing unless they are faithfully executed.”

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