United States: Antitrust Division Reinforces Its Resolve And Ability To Extradite Foreign Executives

Last Updated: December 11 2014
Article by Mark Krotoski

The DOJ's Antitrust Division has extradited two executives of foreign companies in the last eight months, demonstrating its commitment to enforcing the Sherman Act outside of the United States.

Before 2014, some questioned the U.S. Department of Justice's (DOJ) Antitrust Division's ability to extradite individuals abroad. Since April, the Division has extradited two foreign executives: the first from Germany in April, and the second from Canada only a few weeks ago. This LawFlash provides an update on these recent developments and reviews the practical implications for companies and their executives.

Extradition Process

Extradition "is the formal process by which a person found in one country is surrendered to another country for trial or punishment" and is normally "regulated by treaty" between two countries.1 The extradition treaty establishes the terms by which one country agrees to surrender fugitives for consideration in the other country's criminal justice system. The United States has extradition treaties with more than 100 countries.2 The language of those treaties varies from country to country and may be amended or updated over time.  

First Extradition from Germany

The first extradition this year involved Romano Pisciotti, an Italian executive of marine hose manufacturer Parker ITR S.r.I. In the government's investigation into bid rigging, price fixing, and allocating market shares in the sales of marine hoses, the company pled guilty to a Sherman Antitrust Act violation in February 2010, agreeing to pay a $2.29 million criminal fine.3 Four other companies and nine individuals also pled guilty, and one German national remains a fugitive.4

In August 2010, Pisciotti was indicted in a one-count sealed indictment for the same violation of the Sherman Act and was arrested in June 2013 while traveling in Frankfurt, Germany.5 Following his arrest, the indictment was unsealed.6

On January 22, 2014,7 the Higher Regional Court of Frankfurt decided that extradition was warranted under the treaty's "dual criminality" requirement because the charged bid-rigging conduct was punishable under the laws of both countries.8 After the Federal Constitutional Court of Germany denied Pisciotti's appeal,9 he was ordered extradited. According to court records, he was held in custody for nine months and 16 days while he fought his extradition to the United States.

He was transferred to the U.S. District Court for the Southern District of Florida in April 2014, and was ordered detained.10 Shortly after, Pisciotti pled guilty.11 On the same day, the federal court sentenced him to a term of 24 months in prison and ordered him to pay a $50,000 criminal fine. He was given credit for his time in custody during the extradition proceedings.12

In April, the Antitrust Division lauded the extradition as "the first successfully litigated extradition on an antitrust charge."13 Assistant Attorney General Bill Baer, who heads the Antitrust Division, added that the conviction "demonstrates the Antitrust Division's ability to bring to justice those who violate antitrust laws, even when they attempt to avoid prosecution by remaining in foreign jurisdictions."14

Second Extradition from Canada

The second extradition this year concerns Canadian executive John Bennett, a former chief executive officer of Bennett Environmental Inc., a Canadian company. On December 15, 2008, Bennett Environmental pled guilty to conspiring to defraud the Environmental Protection Agency (EPA) and was ordered to pay a criminal fine of $1 million and to pay the EPA $1.66 million in restitution.15

On August 31, 2009, a sealed indictment charged Bennett and two others with engaging in fraud, kickbacks, and bid rigging involving contracts at EPA Superfund sites.16 Bennett was charged in 2 of 12 counts alleging a kickback and fraud conspiracy and major fraud against the United States. A Sherman Act violation was alleged against a lead defendant, among other counts.

After the charges were unsealed, Bennett fought his extradition in Canada while his co-defendants wrestled with the charges in the United States. Ultimately, a jury convicted the lead defendant on 10 counts, including bid rigging, kickback, fraud, and related charges. He was sentenced to serve 14 years in prison, which the Antitrust Division noted was "the longest prison sentence ever imposed involving an antitrust crime."17 Another co-defendant pled guilty to participating in a kickback and fraud conspiracy and committing fraud against the United States. He was sentenced to 33 months in prison.18 To date, nine individuals and two other companies have been convicted in the investigation.19

For the last few years, Bennett unsuccessfully challenged his extradition. For example, on August 24, 2012, the Canadian Minister of Justice ordered Bennett to surrender to the United States. Other appeals were denied.20 Finally, on October 30, 2014, the Supreme Court of Canada declined to hear Bennett's appeal, paving the way for his extradition.21

Two weeks later, Bennett arrived in the United States and made his initial court appearance in the U.S. District Court for the District of New Jersey.22 He was ordered detained.23 At the time of publication, the disposition of his criminal case remains pending.

Practical Impact and Lessons from the Recent Extradition Cases

In the last four years, the Antitrust Division has extradited four individuals. In addition to Pisciotti and Bennett this year, Ian P. Norris, a British national, was extradited from the United Kingdom on March 23, 2010 based on obstruction of justice charges and ultimately convicted on one count by a jury.24 David Porath, a dual U.S. and Israeli citizen, was extradited from Israel in February 2012 and eventually pled guilty to three charges, including a bid-rigging count.25

A few lessons can be highlighted from the two recent extradition cases. First, both extraditions demonstrate the Antitrust Division's resolve to enforce the Sherman Act outside of the United States. The contested extradition efforts in each case took several years. The Pisciotti case took more than three years and seven months from the filing of the sealed indictment in August 2010 until his extradition in April 2014. The Bennett case took more than five years from the initial indictment in August 2009 until his extradition in November 2014.

Second, the Antitrust Division has demonstrated that it can obtain extradition on antitrust and related charges. Both the Bennett and Norris cases involved the extradition on non–Sherman Act charges, but the cases pertained to Sherman Act matters. The Porath case involved Sherman Act and non–Sherman Act convictions. 

Third, extradition may result while an executive is traveling abroad, as demonstrated by the arrest of Pisciotti in Frankfurt, Germany. Any travel abroad by an executive, including the risk of a redirected flight for weather or other reasons, can expose the executive to extradition proceedings if the country of arrest has a treaty with the United States. Pisciotti was an Italian national who fought his extradition in a foreign country. As such, Germany's law against extraditing its own nationals could not protect him.26

Fourth, an executive may not know that Sherman Act charges are pending at the time of arrest. In the Pisciotti case, the sealed indictment was unsealed only after he was arrested while traveling internationally.

Fifth, the extraditions are consistent with recent global trends in which countries are cooperating and coordinating their efforts to enhance enforcement of their antitrust laws. Although the treaties impose certain obligations on the participating countries, many countries have seen the benefits of assisting one another on antitrust enforcement issues. 

Finally, the two extraditions this year provide concrete answers to those who recently questioned whether the Antitrust Division could effectively extradite foreign executives. As these recent cases illustrate, the Antitrust Division continues to take steps to aggressively expand the enforcement and reach of the Sherman Act around the world. The two extraditions are also consistent with other efforts by the Antitrust Division to enforce the Sherman Act against foreign executives, as demonstrated in recent briefs and cases prosecuted in the United States.

Perhaps it is as a result of the Antitrust Division's determination to prosecute executives abroad and to aggressively pursue extradition that numerous foreign executives elect to plead guilty and serve prison sentences in the United States. Generally, a more favorable sentence may be negotiated with the Antitrust Division than one following contested proceedings and trial. Additionally, these executives may seek the peace of mind from resolving the case rather than risking an arrest during international travel.

Footnotes

1. United States Attorneys' Manual (USAM) § 9-15.000 (International Extradition and Related Matters), available here.

2. See generally list of countries with an extradition treaty with the United States, available here.

3. See Plea agreement, United States v. Parker ITR S.r.l., Crim. No. H-10-75 (S. D. Tex. Mar. 25, 2010), available here; see also Press Release, U.S. Dep't of Justice, Italian Subsidiary Of U.S.-Based Company Agrees To Plead Guilty For Participating In International Price-Fixing Conspiracy (Feb. 16, 2010), available here.

4. Press Release, U.S. Dep't of Justice, Marine Hose Executive Who Was Extradited To United States Pleads Guilty (Apr. 24, 2014) (hereinafter Pisciotti Conviction Press Release), available here.

5. Id; United States v. Romano Pisciotti, No. 10-CR-60232 (S.D. Fla. Aug. 26, 2010), available here.

6. See Press Release, U.S. Dep't of Justice, First Ever Extradition On Antitrust Charge (Apr. 4, 2014) (hereinafter First Ever Extradition On Antitrust Charge), available here; Unsealing Order, United States v. Romano Pisciotti, No. 10-CR-60232 (S.D. Fla. Aug. 5, 2013), available here.

7. OLG Frankfurt, 22.01.2014 - 2 AuslA 104/13 (German Higher Regional Court [Oberlandesgericht] Frankfurt) (Jan. 22, 2014), available here.

8. Treaty between the Federal Republic of Germany and the United States of America concerning extradition, 20 July 1978 (as amended on 21 October 1986 and 18 April 2006).

9. Decision of the Federal Constitutional Court of Germany (2 BvQ 4/14) (Feb. 17, 2014).

10. Detention Order, United States v. Romano Pisciotti, No. 10-CR-60232 (S.D. Fla. Apr. 7, 2014) (Doc. No. 14); see also First Ever Extradition On Antitrust Charge.

11. Plea Agreement, United States v. Romano Pisciotti, No. 10-CR-60232 (S.D. Fla. Apr. 24, 2014), available here.

12. See Judgment, United States v. Romano Pisciotti, No. 10-CR-60232 (S.D. Fla. Apr. 25, 2014) (Doc. No. 25); see also Pisciotti Conviction Press Release.

13. First Ever Extradition On Antitrust Charge.

14. See Pisciotti Conviction Press Release (summarizing investigation).

15. Press Release, U.S. Dep't of Justice, Bennett Environmental Inc. Pleads Guilty to Defrauding the U.S. Environmental Protection Agency (July 31, 2008), available here; see also Plea agreement, United States v. Bennett Environmental, Inc., No. 08-CR-534 (D.N.J. July 31, 2008), available here.

16. Indictment, United States v. Gordon D. McDonald, John A. Bennett, and James E. Haas, Jr., Criminal No. 09-CR-656 (D.N.J. Aug. 31, 2009), available here; Unsealing Order (Sept. 11, 2009), available here; Press Release, U.S. Dep't of Justice, Three Individuals Indicted for Roles in Conspiracy Schemes Involving Two U.S. Environmental Protection Agency Superfund Sites (Sept. 11, 2009), available here.

17. Press Release, U.S. Dep't of Justice, Former Project Manager Sentenced to Serve Time in Prison for Role in Bid Rigging and Other Fraudulent Schemes (Mar. 3, 2014) (hereinafter Former Project Manager Sentenced), available here.

18. Press Release, U.S. Dep't of Justice, Former Representative of Backfill Subcontractor Sentenced to 33 Months in Jail (Feb. 23, 2010), available here; Plea agreement, United States v. James E. Haas, Jr., No. 09-CR656 (Oct. 28, 2009), available here.

19. Former Project Manager Sentenced.

20. See United States v. Bennett, 2011 BCSC 1521 (Nov. 10, 2011), available here; United States v. Bennett, 2014 BCCA 145 (Apr. 14, 2014), available here; see also W. Michael G. Osborne, Canada: US Obtains First Ever Extradition From Canada On Antitrust Charges, Mondaq (May 14, 2014), available here.

21. Diversified Royalty Corp. Announces Filing of Final Prospectus and Update on Litigation Involving John Bennett (Oct. 31, 2014) (noting dismissal by the Supreme Court of Canada), available here.

22. Press Release, U.S. Dep't of Justice, Canadian Executive Extradited on Major Fraud Charges Involving a New Jersey Environmental Protection Agency Superfund Site (Nov. 17, 2014), available here.

23. Detention Order, United States v. John A. Bennett, Criminal No. 09-CR-656 (D.N.J. Nov. 24, 2009) (Doc. No. 202).

24. See Press Release, U.S. Dep't of Justice, Former CEO of the Morgan Crucible Co. Sentenced to Serve 18 Months (Dec. 10, 2010), available here; Press Release, U.S. Dep't of Justice, Former CEO of the Morgan Crucible Co. Found Guilty Of Conspiracy To Obstruct Justice (July 27, 2010), available here. Norris's conviction and sentence were affirmed on appeal by the Third Circuit. See United States v. Norris, No. 10-4658 (3d Cir. Mar. 23, 2012), available here

25. See Press Release, U.S. Dep't of Justice, Owner of Insulation Service Company Pleads Guilty to Million Dollar Bid-Rigging and Fraud Conspiracies at New York City Hospital (July 11, 2012), available here.

26. Art. 16(2) of the Basic Law of Germany ("No German may be extradited to a foreign country."), available here.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

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