Cartels And Compliance

A post earlier this month reported the sentencing of former Bridgestone manager Misao Hioki to two years in jail and an $80,000 fine for violating the Foreign Corrupt Practices Act and conspiring to rig bids. Hioki, a Japanese citizen, became the ninth person from the so-called marine hose cartel to plead guilty to bid-rigging and the first to plead to an FCPA charge.

We’ve said before that cartel behavior often involves corrupt payments. That point was well made by Gary Spratling when he was Deputy Assistant Attorney General of the Antitrust Division at the Justice Department. In a 1999 speech to the American Conference Institute’s National Conference on the FCPA, Spratling (who’s now a partner in the San Francisco office of Gibson, Dunn & Crutcher), said this:

The fact is that in today’s global economy there is a recurring intersection of conduct that violates both the Sherman Antitrust Act and the Foreign Corrupt Practices Act. A payment to a foreign official in violation of the FCPA may also be an act by an international bid-rigging, price-fixing, or market-allocation cartel in furtherance of its scheme injuring American businesses and consumers in violation of the Sherman Act. . . . Thus, a compliance audit by a multinational firm that detects a payment potentially in violation of the FCPA may actually have detected much more: international cartel activity with additional — indeed, likely far greater — exposure for the firm and its executives.

When the Antitrust Division discovers evidence of illegal payments during international cartel investigations, he said, it may refer the facts to the Fraud Section of the DOJ’s Criminal Division for follow-up. We think that’s probably what happened to Bridgestone’s Misao Hioki.

And on compliance programs to fight both antitrust and FCPA violations, Spratling said: “Here the important point is that a compliance audit that detects a payment potentially in violation of the FCPA may simultaneously have detected a payment (as part of a bid-rigging or project-allocation scheme) potentially in violation of the Sherman Act, and vice versa.”

We would add that a lax approach to compliance in one area often leads to problems in other areas. Siemens, for example, which just resolved FCPA violations with U.S. authorities, heard earlier this month from European Union antitrust regulators that it was being charged with forming a price-fixing cartel among makers of power transformers. And the overseas sales practices of leading orthopedic device makers, who settled domestic bribery charges last year, are also under investigation by the DOJ and SEC.

Fair competition, cash management, tax reporting, workplace health and safety, proper disclosure, export controls, hiring, employment and environmental practices — all compliance is driven by the attitudes of an organization’s leaders.
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