Sentence for Executive’s Bid Rigging, Price Fixing Upheld

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The U.S. Court of Appeals in St. Louis has upheld a 48-month prison sentence imposed on a former ready-mix concrete executive who pleaded guilty to participating in separate bid rigging and price fixing conspiracies with three different companies in northern Iowa.

The prison sentence was not substantively unreasonable, even though it was well above the U.S. Sentencing Guidelines range of 21 to 27 months. A fine of nearly $830,000 also was upheld.

The appellate court concluded that the district court considered appropriate factors in varying from the guidelines and adequately explained its prison sentence and fine.

The district court gave two permissible reasons for varying from the guidelines: (1) a policy disagreement with the antitrust guidelines and (2) the defendant’s lack of remorse. The district court believed that, while the antitrust guidelines and the fraud guidelines attacked a similar societal harm, the antitrust guidelines were too lenient. The district court gave cogent reasons for its policy disagreement by comparing the guidelines for antitrust offenses to the guidelines for fraud, and then using the alternate calculation under the fraud guidelines.

The district court also tied its policy disagreement to the specific facts involved in the defendant’s case, the appellate court explained. According to the district court, the primary reason that the U.S. Sentencing Commission gave for increasing the levels of antitrust violations less drastically than levels of fraud cases depending on the relative amount of loss or volume of commerce involved was that, with respect to antitrust violations, the level of markup may tend to decline with the volume of commerce involved. However, the defendant’s prices for concrete did not decrease as the volume of sales increased.

The appellate court rejected at the outset the defendant’s contention that the district court abused its discretion by not accepting his initial binding plea agreement under Rule 11(c)(1)(C) of the Federal Rules of Criminal Procedure. The binding agreement, if accepted by the district court, called for the defendant to serve a sentence of 19 months and pay a fine of $100,000. However, the district court never rejected the earlier agreement. It merely deferred the decision until after reviewing the presentence report.

The defendant chose to change his plea agreement after the district court said that there was “a less than 10 percent chance” that it would accept the plea.

The new plea agreement did not preserve the defendant’s right to challenge the district court’s nonacceptance of the binding pleas agreement, and the defendant did not claim that his decision to enter the nonbinding plea agreement was unknowing or involuntary. Nor did the defendant challenge the factual basis for the plea.

The defendant’s decision to enter a nonbinding plea agreement under Rule 11 (c)(1)(b) waived the right to complain on appeal about the district court’s nonacceptance of the earlier binding plea agreement entered into with the Justice Department.

A dissent argued that the district court lacked authority to set aside the guidelines sentencing range for antitrust offenses in favor or the alternate calculation using the guidelines for offenders convicted of fraud.

The decision is U.S. v. VandeBrake, 2012-1 Trade Cases ¶77,880.

Infomercial Pitchman’s Criminal Contempt Order, Prison Sentence Vacated

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

Notorious infomercial producer and marketer Kevin Trudeau should not have been held in direct criminal contempt of court and sentenced to prison for conduct related to ongoing civil contempt proceedings against him in connection with an FTC consumer protection suit, the U.S. Court of Appeals in Chicago has held.

The federal district court in Chicago overstepped its authority when it summarily punished Trudeau for exhorting the audience of his radio program to send e-mails supporting him to the district judge overseeing the civil contempt action, the court found. The district court’s decision was therefore vacated and remanded.

Trudeau—who was first sued by the FTC in 1998 over his marketing of hair growth, memory, and weight loss products, and has been in near-constant litigation against the agency ever since—was found by the district court in 2007 to have acted in civil contempt of a 2004 FTC consent order by making numerous false claims about the weight loss program described in his book, The Weight Loss Cure "They" Don't Want You to Know About. He was ordered to pay a $37.6 million monetary sanction and was enjoined from appearing in infomercials (2007-2 Trade Cases ¶75,949).

Solicitation of E-mails

In the course of appealing that decision—which was later partially vacated for insufficient explanation (2009-2 Trade Cases ¶76,718) but restored on remand (2010-1 Trade Cases ¶76,992)—Trudeau allegedly encouraged listeners to send e-mails to the judge’s
court address.

After receiving several hundred e-mails, some of which contained “threatening overtones,” the district judge notified Trudeau’s counsel of a possible criminal contempt charge, ordered him to appear, and instructed his counsel to ensure that Trudeau made the e-mails stop.

Though Trudeau did then implore his listeners to stop sending the judge e-mails, the judge nevertheless summarily found Trudeau guilty of criminal contempt and imposed the prison sentence.

“Presence” Requirement

The conviction was defective on procedural grounds, in the appellate court’s view. A finding of direct contempt was only appropriate if the criminal conduct occurred in the presence of the judge, the court noted. The “presence” requirement of Federal Rule of Criminal Procedure 42, which outlines the ordinary procedures necessary for a finding of criminal contempt, was not satisfied by virtue of the judge being able to read the e-mails on the court’s computers and on his own personal digital assistant device. That the effects of an act were felt by the district judge was insufficient to justify summary disposition.

The justification for summary process was that because a judge personally witnessed the contemptuous conduct, he knew all he needed in order to punish the defendant, the appellate court explained. However, the district judge had to do research to learn why he was getting the e-mails. The judge’s fact-finding belied the notion that the contemptuous act was committed in the judge’s presence. This rendered summary disposition improper.

The judge’s questioning of Trudeau about the e-mails showed that relevant facts had to be determined before Trudeau could be found in contempt—precisely because the conduct had occurred outside the judge’s presence, the appellate court reasoned.

Urgency of Threat

An argument offered by amicus curiae that summary punishment was justified by the urgency of the threat to the court was rejected. “[T]he need to preserve the court’s security and the need to punish Trudeau summarily were not closely linked,” the appellate court said.

The need for punishment was not so urgent as to warrant the disregarding of procedural safeguards. The record in the case “was devoid of any suggestion that Trudeau’s summary punishment was necessary to restore the court’s ability to resume its duties,” in the appellate court’s view.

To find in favor of Trudeau on the matter was “not to say that there should be consequence for Trudeau’s actions,” the appellate court clarified, only that “absent a compelling reason for summary disposition, Trudeau was entitled to the normal array of procedures under Rule 42(a).”

Further details concerning the May 20 decision in FTC v. Trudeau, will appear in CCH Trade Regulation Reporter.