Largest criminal antitrust case surpasses the break-up of a vitamin cartel in the late 1990s.
SAN FRANCISCO — The US Department of Justice is demanding that a “remorseless” Taiwanese company pay a $1 billion fine and two former top executives each serve 10 years in prison for their roles as central figures in what prosecutors called the most serious price-fixing cartel ever prosecuted by the US.
The proposed sentences would be the stiffest penalty ever meted out for price-fixing convictions if a federal judge adopts the DOJ’s position at sentencing Sept. 19. The DOJ argues the sentences are necessary to punish a company that unfairly forced US consumers to pay billions more than they should have for electronics and to deter others from engaging in price fixing.
The DOJ lawyers made the demands, which include $1 million fines for each of the executives, in court filings. They are wrapping up a years-long investigation of a global price-fixing scheme that artificially increased the price of LCD screens used in televisions, computers and other electronic products made by Apple Inc., Dell Computers and many of the largest high-tech companies in the US.
Au Optronics and the other co-conspirators are also the targets of class action lawsuits filed by customers, retailers and consumers.
In July, the company, along with Toshiba and LG, agreed to pay a combined $571 million to settle one of the lawsuits. Other manufacturers, including Hitachi, Sharp and Samsung, agreed in December to pay $538 million to settle.
US District Judge Susan Illston is expected to sentence AU Optronics and its two top executives. Seven other Asian manufacturers and 22 of their executives have previously pleaded guilty and agreed to pay a combined $890 million in fines.
It’s the largest criminal antitrust case ever prosecuted by the DOJ, surpassing the break-up of a vitamin cartel in the late 1990s that netted $875 million in criminal fines.
The 10 executives who have been sentenced so far received prison terms ranging from six months to a little more than year in prison.
A jury found Au Optronics, its former president H.B Chen and former executive vice-president Hui Hsiung guilty and acquitted two others. The jury couldn’t agree on a verdict for a fifth executive, and prosecutors dropped charges.
AU Optronics refused to plea bargain with the DOJ, becoming the only company to go to trial. Its lawyer Dennis Riordan says the company plans to appeal the conviction after Illston recently refused to overturn the jury’s verdict issued in March.
Lawyers representing the executives contend the harsh penalties sought by the DOJ are in retaliation for the company’s refusal to settle the case before trial. The lawyers are arguing for sentences similar to those given to the other executive who have pleaded guilty and received less than a year in prison.
They said in court papers that a 10-year sentence “would be more than twice the length of the longest jail sentence ever imposed on any defendant nationwide for violating the antitrust laws in the 100-plus-year history of the Sherman Act,” which made price-fixing among competitors illegal.
Prosecutors counter that the AU Optronics executives and the company do deserve harsher treatment than the others who pleaded guilty and helped with the investigation.
Prosecutors say the conspiracy began on Sept. 14, 2001, in a luxury hotel in Tapei, Taiwan, and ended when the FBI raided AU Optronics’ Houston office in December 2006. In between, executives from the companies met more than 60 times in luxury hotels throughout Taiwan to set prices for the world market, racking up $72 billion in sales during that time.
Prosecutors say the executive dubbed the gatherings “crystal meetings,” which were attended at first by top company officials and later by middle managers. Prosecutors allege the top executives began sending their underlings to the meetings after important customers began suspecting the manufacturers were scheming to fix prices. The underlings also began conducting a series of one-on-one meetings rather than gathering all at once after the DOJ announced it was prosecuting makers of certain types of computer memory chips.
Nonetheless, prosecutors said they compiled overwhelming evidence through emails and documents detailing decisions made at the meetings. They argue for the harsh penalties to punish what they describe as Au Optronics’ brazen behaviour and to send a message to what they say is a growing problem.
“In the past dozen years, new cartels have continued to spring up in spite of the many fines of more than $100 million imposed in cartel cases,” the prosecutors wrote. “The continuing discovery of new cartels throughout the world is evidence that the fines imposed to date – as large as they are – have failed to provide adequate deterrence and that potential cartelists continue to see fines as an acceptable cost of doing business.”