A New Approach To Compliance: True Corporate Leniency for ...

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To Compliance: True Corporate. Leniency for Executives. BY DONALD C. KLAWITER AND. JENNIFER M. DRISCOLL. LENIENCY PROGRA
Antitrust, Vol. 22, No. 3, Summer 2008. © 2008 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

A New Approach To Compliance: True Corporate Leniency for Executives BY DONALD C. KLAWITER AND JENNIFER M. DRISCOLL

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ENIENCY PROGRAMS ESTABLISHED first by the United States and now by enforcement authorities around the world have been the most effective vehicles in detecting and prosecuting illegal cartels. 1 The enforcement community has uncovered and prosecuted literally hundreds of cartels that would have remained undetected but for these leniency programs, and corporations have used these programs to avoid or limit corporate fines, keep executives out of jail, and mitigate the severity of private damage liability.2 Despite this enormous success, enforcement officials still believe that many illegal cartels remain undetected. Assistant Attorney General Thomas O. Barnett, while touting the success of the Corporate Leniency Policy of the Antitrust Division of the U.S. Department of Justice (DOJ Leniency Policy), also has acknowledged: It is notoriously difficult to discover cartel behavior . . . . To penetrate the elaborate concealment strategies cartels use, prosecutors must have a tool to convert cartel members into cooperative witnesses, so that prosecutors can gain access to background information, testimony, and the documents that otherwise might be destroyed.3

Given the compelling incentives already offered by the Antitrust Division and other enforcement agencies around the world, these same officials naturally ask what more can be done to persuade executives to come forward with evidence of illegal cartels. The answer may lie in the fact that current leniency programs only mitigate some of the ruinous consequences to an Donald C. Klawiter is a Par tner and Jennifer M. Driscoll is Counsel in the Antitrust Practice Group of Mayer Brown LLP, Washington, DC. He ser ved as Chair of the Section of Antitrust Law in 2005–06, and she is Vice-Chair of the Section’s Unilateral Conduct Committee. The authors acknowledge the helpful comments and ideas of our colleagues, Richard M. Steuer and Holly Daee Runge.

executive who comes forward with evidence of his or his colleagues’ anticompetitive conduct.4 Even if the company and its executives receive complete amnesty from criminal prosecution, executives directly involved in the cartel face severe personal and professional repercussions. The culpable executive is likely to be fired at the end of the investigation and then become a pariah in the industry, if not for the misconduct itself, then for betraying the trust of co-workers. Professional redemption and financial security may elude the whistleblower for years—if not forever—as he tries to rebuild his reputation and life. It is no surprise, therefore, that executives may weigh the personal incentives they face under current leniency programs and decide to keep illegal cartel activity a secret. In this article, we advocate a new approach to antitrust compliance and corporate governance policies to better align executives’ incentives with those of the corporation. Under our proposal, the company’s board of directors will adopt a formal antitrust corporate compliance and leniency policy (Corporate Leniency Policy) that establishes specific and severe zero-tolerance penalties for employees who participate in antitrust misconduct, but will offer “leniency” or protection from adverse consequences in the work setting, such as termination, demotion, or financial forfeiture, for the executive or other employee who is the first to report such conduct. In effect, the corporate executive or employee who meets the criteria of the Corporate Leniency Policy would be exempt from corporate punishment for illegal conduct, just as the Antitrust Division exempts the company from criminal prosecution and fines if it self-reports before the Antitrust Division has opened a cartel investigation or has evidence to sustain a conviction. The Corporate Leniency Policy provides employees with a clear incentive to come forward and report wrongdoing with complete candor, reaping dividends for the company, the enforcement agencies seeking to eradicate cartel activity, and the executive or other employee who reports illegal conduct. This proposal is workable from a corporate governance perspective, because the corporate executive who self-reports will be covered by the DOJ Leniency Policy, and thus will not be convicted of a felony or sentenced to prison. The idea is both simple and potentially controversial. On the one hand, “[i]f prospective cooperating parties cannot predict, with a high degree of certainty, their treatment following cooperation, then they are less likely to come forward.” 5 On the other hand, the notion of shielding an executive wrongdoer from employment-related consequences of his own illegal conduct may seem distasteful—even unfair— in the post-Enron era of corporate governance.6 The DOJ Leniency Policy adopted in 1978,7 and significantly expanded in 1993,8 provides a model for companies to successfully import the incentives of leniency into corporate compliance programs. We proceed by showing how each condition in the DOJ Leniency Policy should be applied in the corporate setting. S U M M E R

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The Conditions of Company Leniency 1. A self-reporting employee automatically receives amnesty if there is no pre-existing government investigation or the first individual to come forward and report the illegal conduct after an investigation has started receives complete amnesty. The cornerstone of the DOJ Leniency Policy is that only the company qualifying as “first in the door” receives complete immunity—i.e., “avoids a criminal conviction, pays no criminal fine, and keeps its cooperating executives out of jail.” 9 This extraordinary guarantee creates powerful incentives for a company to come forward as soon as it becomes aware that its employees have possibly engaged in unlawful cartel conduct.10 The “race to the courthouse” also creates a sense of urgency and substantially destabilizes the cartel. A company that makes a similar leniency pledge, including protection from termination, demotion, or financial consequences to the first employee to report misconduct in the workplace environment, where cartels take root and fester, will maximize “the incentive for defection and encourage cartels to break down more quickly.” 11 The proliferation of international amnesty programs suggests that “[p]rospective cooperating parties come forward in direct proportion to the predictability and certainty of their treatment following cooperation.” 12 To further promote selfreporting, the Corporate Leniency Policy must enable an executive “to predict, with a high degree of certainty, how [he] will be treated if [he] cooperates, and what the consequences will be if [he] does not.” 13 Accordingly, an effective Corporate Leniency Policy must make clear, both on paper and in practice, that the possibility of being first-in and therefore receiving leniency is remote because of how the program is structured. As with existing corporate compliance programs, the Corporate Leniency Policy should state clearly that every employee is expected to comply fully with federal and state antitrust laws, but will go further by establishing clear adverse consequences in the workplace for employees who break the law and are not the first to selfreport, as discussed infra. 2. The company does not yet have evidence of the illegal conduct from another source. As with the DOJ Leniency Policy, leniency is available only to the first employee who provides significant evidence of the wrongdoing, meaning that there is enough indicia of wrongdoing for the company to seek and receive leniency from the Antitrust Division. The Corporate Leniency Policy should not provide for group leniency in the case of a “tie”; only the first person to provide information gets the prize. If there is no pending government investigation, the path is relatively straightforward: The executive who reports the conduct and meets the other conditions gets leniency. If a government investigation has already begun, however, the situation is more difficult. Unlike the Antitrust Division, corporate general counsel and boards may not have knowledge of the existence or status of a criminal antitrust investigation; they only know what is going on within the company itself. 7 8

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Under a Corporate Leniency Policy, an employee may come forward, confess his wrongdoing and fully cooperate in preparing the company to self-report to the Antitrust Division, only to find that a competitor was first in and won the coveted grant of amnesty. In this case, should the company still give corporate leniency to that individual? Unfortunately, in order for the company to maximize the goals of deterrence and detection, the executive should only get leniency under the Corporate Leniency Policy if the company gets leniency from the Antitrust Division. While some may argue that the company should honor the executive’s leniency effort in good faith because the company still may limit its fines and costs of investigation if it is second in, awarding amnesty in these circumstances sends mixed messages. Corporate leniency should be an all-or-nothing proposition to induce an employee to act quickly, lest someone beat him and the company in the race to the Antitrust Division. Importantly, the individual at the second-in company does not receive amnesty from criminal prosecution and will likely face felony prosecution and a jail term. Corporate leniency for the executive in that situation is untenable and flouts the main goals of the Corporate Leniency Policy, i.e., to deter illegal conduct and promote early reporting within the company so the company can seek and obtain leniency. 3. The employee takes prompt and effective action to terminate his or her part in the illegal conduct. Under the DOJ Leniency Policy, the commitment to take “prompt and effective action to terminate . . . illegal activity” does not “require announcement of withdrawal to other participants in the activity.” 14 This commitment can be accomplished by “reporting the illegal activity to the Division and refraining from further participation in the conspiracy unless continued participation is with [the Antitrust Division’s] approval.” 15 Likewise, under a Corporate Leniency Policy, the employee need not advise his fellow conspirators of his withdrawal. Indeed, reporting the conduct to the company should constitute the necessary prompt and effective action to withdraw from the conspiracy. The company, presumably in seeking leniency from the Antitrust Division, may conduct its own internal investigation and may direct that the individual not make a noisy withdrawal. The executive must follow the advice of company counsel and the Antitrust Division as to how to proceed.16 4. The employee reports the wrongdoing with candor and completeness and provides full, continuing, and complete cooperation that advances the company’s investigation. It is axiomatic that an executive who reaps the benefits of leniency under the Corporate Leniency Policy must provide truthful, timely, and complete cooperation throughout the course of the company and/or government investigations. However inconvenient the commitment or embarrassing the disclosure, the executive must provide all information, evidence, and documents that relate to the cartel investigation. The obvious sanction, if the company discovers that the executive withheld specific information or

documents, is that he may lose his job and other protection under the Corporate Leniency Policy. 5. Where possible, the employee makes restitution to the company. Under the DOJ Leniency Policy, “[a]nother measure of a party’s good faith is its effort to remedy the damage it has inflicted on others.” 17 Even if a company qualifies as first in and is shielded from criminal punishment, the onslaught of civil actions and concomitant legal fees portend steep financial penalties to be borne by the company’s shareholders. These financial consequences usually are so great that full restitution to the shareholders by a culpable executive is unlikely no matter how well that employee is compensated. Indeed, if financial restitution were a requirement of the program, no executive would have any incentive to participate. Nonetheless, consistent with the restitution condition, there must be some cost or consequence to the executive. The Corporate Leniency Policy may provide that the individual who comes forward must make amends in a significant and meaningful way outside of his usual employment responsibilities. This is essential if the executive, especially a very senior executive, is to continue to function credibly among his peers. The leniency recipient must be viewed as someone who ultimately did the right thing to the benefit of the company, even though he violated the law by his cartel behavior. Company morale could suffer and make relationships difficult unless it is made clear that the executive accepts responsibility for his wrongdoing and very publicly shows his colleagues how to avoid this problem in the future. The company may condition leniency on the executive’s cooperation with internal compliance training, to educate coworkers about the severe consequences of illegal cartel activity. This may be difficult and embarrassing, especially for a CEO or senior executive, but will further the company’s ongoing antitrust compliance efforts and may help explain to co-workers why the individual still is employed. Another option is for the employee to perform community service on behalf of the company for a specific time. 6. The employee did not coerce other employees to participate in the illegal conduct, and granting “amnesty” would not be unfair to others. Virtually all government leniency programs allow enforcement authorities to weigh other equity considerations before awarding leniency. Under the DOJ Leniency Policy “[a] firm that originated or led the conspiracy or that coerced others to join would face a heavier burden—indeed, would probably be disqualified for leniency—as would a firm that does not come forward until the [Antitrust Division] is on the verge of having enough evidence to sustain a conviction.” 18 Similarly, the Canadian Competition Bureau has made clear that it will disqualify a leniency applicant “where there is evidence that the party pressured unwilling participants to be involved in the offence.” 19 A Corporate Leniency Policy should follow these examples and deny leniency to an executive who forced his subordinates or peers to participate in the unlawful activity

or otherwise put unwilling employees at risk for criminal liability. In a similar vein, the company should be wary of protecting an executive ringleader who organizes a cartel during an economic downturn and seeks leniency when the immediate threat of a slump dissipates. As with the DOJ Leniency Policy some corporate discretion is required in such circumstances so company employees are not able to “game the system.” Creating Structural Incentives for a Strong Corporate Leniency Policy 1. A Corporate Policy of Severe Punishment for the Wrongdoer. In order to be effective, the Corporate Leniency Policy must embody the complete “carrot and stick” approach used by the Antitrust Division.20 Just as the Antitrust Division promises severe corporate fines and stiff jail sentences for those who do not obtain leniency, the company must announce in no uncertain terms that it will not tolerate employees who violate antitrust laws, and make clear that any employee caught violating the antitrust laws will be terminated immediately, with forfeiture of corporate benefits such as stock options, and retirement and severance packages.21 Most major international corporations now have a formal zero-tolerance policy for antitrust violations, but the consequences for individual employees who commit antitrust violations often are nebulous. Corporate compliance policies and employee handbooks may allude to potential penalties, including termination, but companies often do not commit to a definitive penalty. Culpable executives often reach a compromise with the corporation, with a severance package that allows for graceful retirement, a consulting contract, or other monetary benefits, and the company forgives the repayment of fees advanced for the executive’s own legal counsel. As a result, the executive may escape financial ruin even if he is fired. A company policy that revokes retirement benefits, cancels stock options, and eliminates the possibility of a severance package, is a much harsher sanction than virtually anything occurring today. The Corporate Leniency Policy should state clear consequences for violating antitrust laws, and the company should include the same consequences in employment contracts for senior executives, since nothing will draw an executive’s attention quicker than the possible demise of his career and his fortune.22 2. The Increased Possibility of Detection. If the chances of detection are low, a corporate executive simply has no incentive to come forward and confess his unlawful conduct.23 The biggest threat of detection lies in the hands of the Antitrust Division and enforcement agencies around the world, which are actively looking for violations and have effective leniency programs that encourage companies to selfreport. Although an increasing number of corporate legal departments conduct antitrust audits as part of their compliance programs, discovering violations through these audits may be very difficult. Many executives still operate under the assumption that they are somehow “smarter” than those who S U M M E R

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have been caught and can beat any compliance and detection system of the company or the government. Our proposal adds a third and much more tangible threat of detection— the possibility that co-workers will capitulate to the pressure and self-report to obtain leniency under the Corporate Leniency Policy. 3. Transparency and Second-In Cooperation. Consistent with the DOJ Leniency Policy, although “the benefits of the leniency program are only available to the first company to come forward and be accepted into the program,” 24 a Corporate Leniency Policy should recognize the value of “second-in” cooperation, particularly when the company or government enforcers still are “developing key evidence against others, or after significant evidence has already been provided . . . self-reporting on previously unidentified cartels.” 25 Although “leniency to those who come in later should be clearly less generous,” 26 some inducement may be warranted for employees who furnish previously undisclosed evidence during the cartel investigation. Traditionally, the Antitrust Division has relied on a “proportional assessment” to reward second-in cooperation, based on factors such as “the state of the investigation at the time of the cooperation, the nature and extent to which the cooperation advanced the investigation,” 27 and whether the second-in cooperation furnished evidence of undetected cartel offenses for another product, now known as “Amnesty Plus.” 28 Under a Corporate Leniency Policy, employees who come forward with valuable and reliable information after the first in may receive some form of proportional “leniency” at the company’s discretion, i.e., “any reduction in the penalty compared to what would be sought in the absence of full, voluntary co-operation,” 29 that is commensurate with the value of the evidence provided by the second-in employee. Such “leniency” will likely require termination of employment, but with some severance, retention of retirement benefits, or continued advancement of fees for the employee’s own legal counsel. The inherent problem of meting out leniency based on qualitative evidence is the lack of clear and discernable consequences to the executive considering whether to self-report. Under the DOJ Leniency Policy, second-in applicants can receive “leniency” only to the extent that they provide substantial assistance to an ongoing investigation or evidence that leads to a new one. Similarly, the Corporate Leniency Policy cannot and should not offer “an absolute, fixed discount for second-in cooperation.” 30 The desire for certainty and transparency must yield in such circumstances to the “need for proportionality.” 31 The Potential Hazards to an Effective Program Companies that are first to implement a Corporate Leniency Policy should be prepared to address potential pitfalls, and take appropriate steps to assure that the program (i) does not run afoul of provisions in the U.S. Sentencing Guidelines on corporate compliance and ethics programs, (ii) is not used 8 0

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improperly against the company in ensuing civil proceedings, and (iii) does not become a tool that manipulating executives use to “game the system.” The company must make clear to shareholders and the public that, in adopting the Corporate Leniency Policy, the company does not condone illegal conduct. Rather, the company must show that the promise of leniency under the program is an essential tool to combat and eliminate illegal conduct. The company must be resolute in publicizing the Corporate Leniency Policy when it is a success, and work to rebut unfair depictions of the policy in the media or legal proceedings. Enforcement agencies and courts also must be vigilant against parties who try to exploit a company’s earnest attempt to root out antitrust misconduct through this new approach. The Antitrust Division should support a company that adopts a Corporate Leniency Policy and educate courts and international enforcement agencies about its value as a logical policy extension of existing government leniency programs. U.S. Sentencing Guidelines. The U.S. Sentencing Guidelines encourage courts to consider a variety of factors in setting the corporate fine imposed for criminal antitrust violations, and expressly penalize a company that does not have “an effective compliance and ethics program within the meaning of § 8B2.1.” 32 Under Section 8B2.1, an effective compliance and ethics program requires a company to (i) “exercise due diligence to prevent and detect criminal conduct” and (ii) “otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.” 33 A company that adopts a Corporate Leniency Policy should not be penalized under the Sentencing Guidelines on the basis that the company condones or rewards illegal cartel activity.34 Just as the Antitrust Division has been forced to “swallow hard” when accepting leniency applicants, so too will the company and its shareholders. Companies that take extra measures to detect and stop antitrust violations should not be placed in a worse position under the U.S. Sentencing Guidelines. Civil Litigation. The corporate fate of the self-reporting executive also may be a factor in civil litigation. The Antitrust Division and courts must guard against plaintiffs or other defendants who seek to use a Corporate Leniency Policy as evidence that the company approves or condones illegal cartel activity. Although non-privileged information about corporate compliance policies may be open to discovery under the broad mandate of Rule 26(b)(1) of the Federal Rules of Civil Procedure,35 it is critical that evidence about a Corporate Leniency Policy is presented and used in an accurate and fair manner. Evidence about leniency under the DOJ Leniency Policy and a Corporate Leniency Policy may be deemed relevant and admissible to assess witness credibility, but courts should not allow parties to use such evidence to make a dishonest and perverse argument that the company condones illegal cartel conduct. “Gaming the System.” As with the DOJ Leniency Policy, companies must address concerns that a crafty corporate

executive can manipulate a Corporate Leniency Policy. In theory, a senior executive can join a cartel in bad economic times believing he has a “safety net” to obtain leniency at a later time, but, in practice, he would be taking a huge risk: he does not know whether a co-conspirator or co-worker will self-report or whether the company will detect illegal conduct during a routine audit. To reinforce these risks, the Corporate Leniency Policy should provide that the company can deny leniency if there is credible evidence that the executive engaged in such gaming. An executive also may embellish less serious conduct and seek leniency under a Corporate Leniency Policy in an effort to avoid termination or demotion for unrelated performance reasons. To prevent such gamesmanship, which is a risk in all whistle-blower situations, including under Sarbanes-Oxley,36 the company should make clear that, if an executive’s allegations are erroneous or overstated, he will not receive leniency under the program, may lose his job, and may incur additional personal liability. The Corporate Leniency Policy also should address whether an employee who receives leniency under the program can be fired, demoted, or disciplined for other unrelated reasons. The proper way to address such issues is to follow the company’s whistleblower guidelines. 37 The Corporate Leniency Policy should protect the employee only for consequences of the cartel activity that he self-reports, and not for other problems he may have in the workplace. If the executive’s performance deteriorates, or he is dishonest or acts inappropriately in other respects, the company must be able to take necessary actions regarding his job performance. These issues and concerns can be complicated, but should not deter companies from adopting a Corporate Leniency Policy as a tool to destabilize and eliminate illegal cartels. To address these issues effectively, corporate officers who administer the Corporate Leniency Policy should be accountable directly to the Board of Directors. The Corporate Leniency Policy should designate a senior officer who will receive “leniency applications,” interview applicants, and report findings to the Chairman of the Board’s Audit Committee in a confidential manner. The company should advise employees about these reporting procedures as part of its compliance training, and make clear that all employees are required to self-report their own illegal activity, just as they are required to report suspected illegal conduct of other employees. * * * * * * * In the age of Sarbanes-Oxley and corporate accountability, the notion of extending leniency to culpable executives may appear incongruous, but when the DOJ Leniency Policy was announced in 1978 and 1993, self-reporting to the very agency charged with prosecuting cartels seemed, at best, an “alien concept.” 38 Now, few would disagree that early selfreporting under the DOJ Leniency Policy, in conjunction with appropriate internal corporate risk management, has the potential to reduce drastically the criminal and civil conse-

quences for a company whose employees have engaged in illegal cartel activity. Much as the DOJ Leniency Policy has proven skeptics wrong, the Corporate Leniency Policy that we propose is the next logical step in effective corporate governance and the global campaign to eradicate cartels. What separates a company from total immunity on the one hand, and unmitigated criminal and civil antitrust penalties on the other, is the employee who comes clean early—indeed, first. For this reason, executives must be given every incentive to make the company aware of serious illegal cartel conduct that has occurred in the workplace. This proposal for true corporate leniency will provide the necessary inducements for selfreporting by executives who would otherwise remain silent in order to protect their livelihood.

1

See, e.g., Donald C. Klawiter, US Corporate Leniency After the Blockbuster Cartels: Are We Entering a New Era?, in EUROPEAN COMPETITION LAW ANNUAL 2006: ENFORCEMENT OF PROHIBITION OF CARTELS 489 (Claus-Dieter Ehlermann & Isabela Atanasiu eds., 2007); Constance K. Robinson, Get-Out-Of-Jail-Free Cards: Amnesty Developments in the United States and Current Issues 8 S EDONA C ONF. J. 29 (2007): The United States’ current amnesty program has been very successful by any measure-the increased number of amnesty applications and cases, including internal investigations and prosecutions, and the higher amount of penalties obtained. The number of applications now averages two per month . . . . Fines which used to be in the single digits have now been as high as $500 million, and the Division has had fines imposed of over $3 billion, over 90% of which were from international cartels. And since imitation is the sincerest form of flattery, the fact that the rest of world has followed the United States’ lead in adopting amnesty policies underscores the successfulness of the policy.

2

See, e.g., William J. Kolasky, Deputy Ass’t Attorney General, Antitrust Division, U.S. Dep’t of Justice, Antitrust Compliance Programs: The Government Perspective (July 12, 2002), available at http://www.usdoj.gov/atr/public/ speeches/11534.htm.

3

Thomas O. Barnett, Ass’t Attorney General, Antitrust Division, U.S. Dep’t of Justice, Criminal Enforcement of Antitrust Laws: The U.S. Model (Sept. 14, 2006), available at http://www.usdoj.gov/atr/public/speeches/218 336.htm.

4

See Kolasky, supra note 2 (noting that one of the “most startling characteristic[s] . . . is that they typically involve the most senior executives at the firms involved—executives who have received extensive antitrust compliance counseling, and who often have significant responsibilities in the firm’s antitrust compliance programs”).

5

Scott D. Hammond, Deputy Ass’t Atty Gen. for Criminal Enforcement, Antitrust Division, U.S. Dep’t of Justice, Detecting and Deterring Cartel Activity Through an Effective Leniency Program (Nov. 21, 2000), available at http://www.usdoj.gov/atr/public/speeches/9928.htm.

6

See id. (noting that the DOJ has had to “swallow hard on a number of amnesty applicants that . . . [it] would have preferred to prosecute”).

7

John H. Shenefield, Ass’t Attorney General, Antitrust Division, U.S. Dep’t of Justice, Statement Before the 17th Annual Corporate Counsel Inst. (Oct. 4, 1978), noted in Trade Reg. Rep. (CCH) ¶ 50,388.

8

U.S. Dep’t of Justice, Corporate Leniency Policy (1993), available at http:// www.usdoj.gov/atr/public/guidelines/0091.htm; see also Anne K. Bingaman, Ass’t Attorney General, Antitrust Division, U.S. Dep’t of Justice, Antitrust Enforcement: Some Initial Thoughts and Actions (Aug. 10, 1993), available at http://www.usdoj.gov/atr/public/speeches/0867.htm.

9

Scott D. Hammond, Deputy Ass’t Attorney General for Criminal Enforcement, Antitrust Division, U.S. Dep’t of Justice, The U.S. Model of Negotiated Plea S U M M E R

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11

Agreements: A Good Deal with Benefits for All (Oct. 17, 2006), available at http://www.usdoj.gov/atr/public/speeches/219332.htm.

23

See, e.g., Hammond, supra note 9.

24

Id.

See Gerald F. Masoudi, Deputy Ass’t Attorney General, Antitrust Division, U.S. Dep’t of Justice, Cartel Enforcement in the United States (and Beyond) (Feb. 16, 2007), available at http://www.usdoj.gov/atr/public/speeches/ 221868.htm.

25

Id.

26

Id.

27

Scott D. Hammond, Deputy Ass’t Attorney General for Criminal Enforcement, Antitrust Division, U.S. Dep’t of Justice, Measuring the Value of Second-In Cooperation in Corporate Plea Negotiations (Mar. 9, 2006), available at http://www.usdoj.gov/atr/public/speeches/215514.htm.

28

Id.

29

OECD Report, supra note 11, at 8.

30

Hammond, supra note 9.

31

Id.

32

U.S. Sentencing Guidelines Manual § 8C2.8 (2007).

33

Id. § 8B2.1(a)(1)& (2).

34

If the Corporate Leniency Policy works as it should, the company will not have to deal with Sentencing Guidelines issues because it will be a successful leniency applicant. If the Corporate Leniency Policy does not work, and the company later faces criminal sentencing, the program may come to the court’s attention. The important issue is that the court should understand that the program is intended to detect cartels and serve the ends of the enforcement community. If the Antitrust Division expresses support for such programs and explains how they further the goals of the DOJ Leniency Policy, the court is unlikely to enhance a criminal fine because the company had adopted a Corporate Leniency Policy.

35

See Fed. R. Civ. P. 26(b)(1) (providing that “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense”).

36

Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745.

37

For a detailed discussion of alleged illegal conduct by Mark Whitacre and how it affected the investigation of ADM, see K URT E ICHENWALD, T HE I NFORMANT : A T RUE S TORY 357–86 (2000).

38

See Donald C. Klawiter & J. Clayton Everett, The Legacy of Stolt-Nielsen: A New Approach to the Corporate Leniency Program, A NTITRUST S OURCE , Dec. 2006, http://www.abanet.org/antitrust/at-source/06/12/Dec06Klawiter12=19f.htm.

Organisation for Economic Co-Operation and Development, Fighting HardCore Cartels: Harm, Effective Sanctions and Leniency Programmes (2002), available at http://www.oecd.org/dataoecd/41/44/1841891.pdf [hereinafter OECD Report].

12

Hammond, supra note 9.

13

Id.

14

Gary R. Spratling, Deputy Ass’t Atty. General, Antitrust Division, U.S. Dep’t of Justice, The Corporate Leniency Policy: Answers to Recurring Questions (Apr. 1, 1998), available at http://www.usdoj.gov/atr/public/speeches/1626.htm.

15

Id.

16

See, e.g., id.

17

OECD Report, supra note 11, at 18.

18

Id.

19

Canadian Competition Bureau, Immunity Programme Responses to Frequently Asked Questions, http://www.competitionbureau.gc.ca/epic/ site/cb-bc.nsf/en/02482e.html.

20

See, e.g., William E. Kovacic, Commissioner, Federal Trade Commission, Bounties as Inducement to Identify Cartels, in E UROPEAN C OMPETITION L AW A NNUAL 2006: E NFORCEMENT OF P ROHIBITION OF C ARTELS 571 (Claus-Dieter Ehlermann & Isabela Atanasiu eds., 2007).

21

22

The Antitrust Division structured the increased threat of severe sanctions and the increased likelihood of detection as the “stick” to its leniency “carrot” and recommended this approach to enforcement agencies around the world. The same strategy can be used by corporate boards. See Scott D. Hammond, Dir. Of Criminal Enforcement, Antitrust Division, U.S. Dep’t of Justice, Cornerstones of an Effective Leniency Program (Nov. 22–23, 2004), available at http://www.usdoj.gov/atr/public/speeches/206611.htm. See Kovacic, supra note 20, at 571. This is precisely what FTC Commissioner William Kovacic referred to as “providing powerful inducements for cartel participants” to self-report. See id.

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