Strategic Considerations in Deciding to Seek Leniency

• Pages: 81-112

81

CHAPTER V

STRATEGIC CONSIDERATIONS IN DECIDING TO

SEEK LENIENCY

A. Introduction

Antitrust law enforcement by government agencies creates

tremendous risks for companies and individuals involved in cartel

activity. Once proven, cartel activity can give rise to long prison

sentences for individuals and substantial fines for companies. Until

recently,1 cartel activity was one of the very few federal criminal

violations for which complete corporate and individual protection from

prosecution, criminal fines, and prison sentences is available—and

regularly awarded.

The U.S. Department of Justice Antitrust Division’s Leniency

Program and the many similar foreign leniency programs2 require

1. The U.S. Department of Justice has recently instructed every Department

component that prosecutes corporate crime to develop a formal, written

policy to incentivize voluntary self-disclosure. Lisa O. Monaco, Deputy

Attorney General, “Further Revisions to Corporate Criminal Enforcement

Policies Following Discussions with Corporate Crime Advisory Group”

(Sept. 15, 2022), available at

https://www.justice.gov/opa/speech/file/1535301/download. It remains

unclear whether the benefits of forthcoming programs will align with

those of the Leniency Program.

2. Some non-U.S. jurisdictions use the term “immunity” to refer to the

complete elimination of penalties for qualifying applicants, and

“leniency” to refer to a reduction in penalties for qualifying applicants.

Under the Antitrust Division’s Leniency Program, qualifying

organizations and individuals avoid criminal conviction, fines, and

incarceration for any act or offense in furtherance of the reported criminal

antitrust violation. See, e.g., ANTITRUST DIV., U .S. DEP’T OF JUST.,

FREQUENTLY ASKED QUESTIONS ABOUT THE ANTITRUST DIVISION’S

LENIENCY PROGRAM 5-6 (2022), available at

https://www.justice.gov/atr/page/file/1490311/download [hereinafter

LENIENCY FAQS]; ANTITRUST DIV., U.S. DEP’T OF JUSTICE, MODEL

CORPORATE CONDITIONAL LENIENCY LETTER ¶ 2 (2022), available at

https://www.justice.gov/atr/page/file/1490291/download [hereinafter

MODEL CORPORATE CONDITIONAL LENIENCY LETTER]; ANTITRUST DIV.,

U.S. DEP’T OF JUST., MODEL INDIVIDUAL CON DITIONAL LENIENCY

82 Antitrust Cartel Leniency and Sentencing Handbook

companies to make quick decisions to take advantage of their benefits.

By creating incentives for all cartel members to compete to capture the

sole leniency position, these leniency programs seek to undermine the

bonds of trust that create the fabric of international cartels.

Despite the obvious benefits of receiving this complete corporate and

individual protection, the decision to seek leniency is one of the most

difficult choices faced by a corporation and its executives. Some have

compared this to a classic cost/benefit analysis. The costs associated with

applying for leniency can be high and include legal fees, business

distractions, civil damage claims, and potential retaliation from

competitors. These costs could multiply if the company engaged in a

global cartel and, therefore, must seek leniency in multiple jurisdictions.

However, the benefits are also high, including (1) avoiding the filing of

charges, criminal penalties, and prison terms for culpable executives; (2)

detrebling of civil damages in the United States; and (3) the likely ability

to resolve legal problems more quickly. A strict cost/benefit analysis,

however, may assume that the corporation can avoid prosecution and the

financial costs if it chooses not to apply. The avoidance of prosecution is

not necessarily in the corporation’s control. Even if a company or

individual chooses not to take advantage of leniency, such person would

be faced with the same costs and more if an employee or coconspirator

decides to take advantage of leniency instead. In addition, it is difficult,

if not impossible, to quantify the value of nonprosecution and the

avoidance of imprisonment for the corporation’s directors, officers, and

employees.3

This chapter will address some of the strategic considerations that

must be evaluated when deciding to seek leniency.

LETTER ¶ 2 (Apr. 4, 2022) available at

https://www.justice.gov/atr/page/file/1490301/download. As discussed in

the LENIENCY FAQs, the conditional leniency agreement binds the

Antitrust Division and no other federal or state prosecuting agencies.

LENIENCY FAQS at 5-6; see also supra Chapter III.D.1.

3. Scott D. Hammond, Dir. of Criminal Enforcement, Antitrust Div., U.S.

Dep’t of Justice, When Calculating the Costs and Benefits of Applying

for Corporate Amnesty, How Do You Put a Price Tag on an Individual’s

Freedom?, Address Before the ABA’s Criminal Justice Section’s

Fifteenth Annual National Institute on White Collar Crime (Mar. 8,

2001), available at www.justice.gov/atr/speech/when-calculating-costs-

and-benefits-applying-corporate-amnesty-how-do-you-put-price-tag.

Strategic Considerations in Deciding to Seek Leniency 83

B. Initial Considerations

Although strategic considerations will flow through the entire life

cycle of an antitrust investigation, the initial stage of counseling the

client and gathering the facts is critical. As a lawyer develops initial

advice and recommendations, four areas are of particular importance.

1. The Client’s Preferences

Not all clients are the same. Some will initially reject advice that

counsels them to report the crime. These clients may instinctively seek a

robust defense and want to fight the government. In these situations, an

extensive internal investigation may be required to educate the client on

the full scope and serious nature of the conduct under investigation.

However, counsel must appreciate, and inform the client of, the

importance of timing in making a leniency application as discussed

below. In some instances, the client’s instincts may be correct, and there

may be no violation to report. For other clients, the question of strategy

concerning corporate cooperation is reduced to a single consideration:

“do the right thing.” In this situation, a lawyer who leads his or her

advice with a more nuanced decision-making strategy for whether to

self-report may face blank stares or a lack of engagement.

2. Identification of the “Client”

For corporate clients, it is imperative from an ethical and strategic

standpoint to clearly identify the corporation as the client, and not the

senior executives who might be implicated in the illegal conduct. If the

business executives in charge of the culpable unit or division or the in-

house counsel in charge of giving advice to that unit retained the lawyer,

conflicts may arise. The interests of those individuals may not be

consistent with the company’s interests, particularly if leniency is not

available.

Because the outside lawyer does not initially know who, if anyone,

in management has liability, the outside lawyer may want to recommend

that the Board of Directors supervise the investigation and make the

strategic decisions as the client through an existing or specially formed

committee. This advice can be unpopular and difficult, particularly for

the individual who engaged the firm and may have expected to control

the strategy choices.