This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.
Japan-based auto parts maker Tokai Rika Co. Ltd., has agreed to plead guilty and to pay a $17.7 million criminal fine for its role in a conspiracy to fix prices of heater control panels (HCPs) installed in cars sold in the United States and elsewhere, the Department of Justice announced on October 30. HCPs are located in the center console of an automobile and control the temperature of the interior environment of a vehicle.
Tokai Rika has also agreed to plead guilty to a charge of obstruction of justice related to the investigation of the antitrust violation. A two-count felony charge was filed in the federal district court in Detroit.
Including Tokai Rika, nine companies and 11 executives have pleaded guilty or agreed to plead guilty in the Justice Department’s ongoing investigation into price fixing and bid rigging in the auto parts industry, according to the announcement.
Tokai Rika and its co-conspirators carried out the conspiracy from at least as early as September 2003 until at least February 2010, the government alleged. The company admitted to fixing prices of HCPs sold to Toyota in the United States and elsewhere, on a model-by-model basis.
The company also admitted to obstructing the government’s investigation. After learning that the FBI had executed a search warrant on Tokai Rika’s U.S. subsidiary, a company executive directed employees to delete electronic data and destroy paper documents likely to contain evidence of antitrust crimes in the United States and elsewhere, according to the Justice Department.
“The conspirators used code names and chose meeting places and times to avoid detection,” said Scott D. Hammond, Deputy Assistant Attorney General in charge of the Department of Justice Antitrust Division’s criminal enforcement program. “They knew their actions would harm American consumers, and attempted to cover it up when caught. The division will continue to hold accountable companies who engage in anticompetitive conduct and who obstruct law enforcement.”
Showing posts with label obstruction of justice. Show all posts
Showing posts with label obstruction of justice. Show all posts
Wednesday, October 31, 2012
Wednesday, June 27, 2012
Rebates to Large Utility Customers May Have Violated Federal, Ohio RICO Laws
This posting was written by Mark Engstrom, Editor of CCH RICO Business Disputes Guide.
An individual and three Ohio businesses could proceed with federal RICO and Ohio Corrupt Practices Act claims against an electric utility and its subsidiary (Duke Energy Corp. and Duke Energy International, Inc.), the U.S. Court of Appeals in Cincinnati has ruled.
The utilities allegedly made “side agreements” to pay substantial and unlawful rebates to large customers, including General Motors, in exchange for withdrawing their objections to a rate-stabilization plan that the utilities had proposed as part of a move to market-based rates. The plaintiffs sufficiently alleged: (1) money laundering and mail fraud; (2) proximate cause; and (3) obstruction of justice.
Money Laundering
According to the court, the alleged transfer of money—from large customers to the utility, from the utility to one of its affiliates, and from the affiliate back to the large customers—tainted the money, which became the proceeds of mail fraud. The plaintiffs thus alleged a cognizable claim of money laundering based on mail fraud.
Mail Fraud
The defendants argued that they were not required to disclose any rebates because differential pricing was not, by itself, a fraudulent practice. The plaintiffs, however, alleged that the utilities had engaged in mail fraud by using the mails to inform their customers that everyone had to pay “mandatory and unavoidable” electricity charges.
Because these mailings implied that all customers paid the same rate, the plaintiffs adequately alleged that the utilities had engaged fraud by failing to disclose their side agreement with large customers.
Proximate Cause
The utilities argued that: (1) the plaintiffs’ theory of liability rested on the independent actions of the Public Utilities Commission of Ohio (PUCO) and (2) the remedy sought by the plaintiffs would require the PUCO to enforce the law. The argument was flawed because the utilities confused the relationship between an allegedly wrongful act and a proximately caused injury with the relationship between an allegedly wrongful act and a remedy for a proximately-caused injury.
The PUCO did not the cause the plaintiffs’ alleged injury; the defendants did, through an allegedly fraudulent scheme. The fact that the plaintiffs had to bring their case before the PUCO or the court did not mean that a third party had disrupted the chain of causation. The defendants’ argument that a finding of proximate cause would be speculative—because the PUCO might not have found the rebates to be unlawful—was also unavailing.
Obstruction of Justice
The plaintiffs sufficiently alleged obstruction of justice as a predicate act for their Ohio Corrupt Practices Act claim against the utilities. The plaintiffs alleged that the utilities’ legal counsel “consciously and deceptively denied,” in on-the-record proceedings before the Ohio Supreme Court, the existence of side agreements between the utilities and some of their customers.
Obstruction of justice under Ohio law involved the communication of false information to any person for the purpose of hindering the discovery of a crime. The selective payment of rebates, the court noted, was a felony in Ohio. Therefore, the communication of false information to any person—for the purpose of hindering the discovery of the selective payment of rebates—constituted obstruction of justice.
The defendants argued that the alleged communication of false information had occurred in civil proceedings, but that fact was irrelevant. Ohio’s obstruction of justice law contained no requirement that a false statement had to be made in a criminal proceeding. The defendants’ contention that the alleged obstruction was made in defense of the corporation did not shield the defendants’ counsel from liability.
Even if corporations were not considered “persons,” corporate counsel was not permitted to freely make false statements before a court and evade liability for obstruction of justice.
The decision is Williams v. Duke Energy International, Inc., CCH RICO Business Disputes Guide ¶12,222.
An individual and three Ohio businesses could proceed with federal RICO and Ohio Corrupt Practices Act claims against an electric utility and its subsidiary (Duke Energy Corp. and Duke Energy International, Inc.), the U.S. Court of Appeals in Cincinnati has ruled.
The utilities allegedly made “side agreements” to pay substantial and unlawful rebates to large customers, including General Motors, in exchange for withdrawing their objections to a rate-stabilization plan that the utilities had proposed as part of a move to market-based rates. The plaintiffs sufficiently alleged: (1) money laundering and mail fraud; (2) proximate cause; and (3) obstruction of justice.
Money Laundering
According to the court, the alleged transfer of money—from large customers to the utility, from the utility to one of its affiliates, and from the affiliate back to the large customers—tainted the money, which became the proceeds of mail fraud. The plaintiffs thus alleged a cognizable claim of money laundering based on mail fraud.
Mail Fraud
The defendants argued that they were not required to disclose any rebates because differential pricing was not, by itself, a fraudulent practice. The plaintiffs, however, alleged that the utilities had engaged in mail fraud by using the mails to inform their customers that everyone had to pay “mandatory and unavoidable” electricity charges.
Because these mailings implied that all customers paid the same rate, the plaintiffs adequately alleged that the utilities had engaged fraud by failing to disclose their side agreement with large customers.
Proximate Cause
The utilities argued that: (1) the plaintiffs’ theory of liability rested on the independent actions of the Public Utilities Commission of Ohio (PUCO) and (2) the remedy sought by the plaintiffs would require the PUCO to enforce the law. The argument was flawed because the utilities confused the relationship between an allegedly wrongful act and a proximately caused injury with the relationship between an allegedly wrongful act and a remedy for a proximately-caused injury.
The PUCO did not the cause the plaintiffs’ alleged injury; the defendants did, through an allegedly fraudulent scheme. The fact that the plaintiffs had to bring their case before the PUCO or the court did not mean that a third party had disrupted the chain of causation. The defendants’ argument that a finding of proximate cause would be speculative—because the PUCO might not have found the rebates to be unlawful—was also unavailing.
Obstruction of Justice
The plaintiffs sufficiently alleged obstruction of justice as a predicate act for their Ohio Corrupt Practices Act claim against the utilities. The plaintiffs alleged that the utilities’ legal counsel “consciously and deceptively denied,” in on-the-record proceedings before the Ohio Supreme Court, the existence of side agreements between the utilities and some of their customers.
Obstruction of justice under Ohio law involved the communication of false information to any person for the purpose of hindering the discovery of a crime. The selective payment of rebates, the court noted, was a felony in Ohio. Therefore, the communication of false information to any person—for the purpose of hindering the discovery of the selective payment of rebates—constituted obstruction of justice.
The defendants argued that the alleged communication of false information had occurred in civil proceedings, but that fact was irrelevant. Ohio’s obstruction of justice law contained no requirement that a false statement had to be made in a criminal proceeding. The defendants’ contention that the alleged obstruction was made in defense of the corporation did not shield the defendants’ counsel from liability.
Even if corporations were not considered “persons,” corporate counsel was not permitted to freely make false statements before a court and evade liability for obstruction of justice.
The decision is Williams v. Duke Energy International, Inc., CCH RICO Business Disputes Guide ¶12,222.
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