Stolt-Nielsen Finally Gets Amnesty
January 2, 2008
On December 21, 2007, the Department of Justice announced that it will not appeal a district court's dismissal of an antitrust indictment against Stolt-Nielsen S.A., a Norwegian shipping company. The announcement brings to a close the government's prosecution of Stolt-Nielsen. The
Stolt-Nielsen case had created some concern in the defense bar about the Antitrust Division's much-touted Corporate Leniency Program because it marked the first time that the Antitrust Division had sought to prosecute a company after previously giving that company amnesty under the Leniency Program. The District Court, however, rejected the Justice Department's view that Stolt-Nielsen had breached the leniency agreement. It concluded that there was "no reasonable basis upon which to revoke the Agreement" and dismissed the indictment "because fundamental fairness demands it."
The government's loss will likely strengthen the Justice Department's leniency program and encourage greater corporate self-reporting. The prosecution of Stolt-Nielsen had created uncertainty about the consequences of seeking amnesty, and, even before dismissal of the indictment, some Division attorneys were labeling Stolt-Nielsen a unique case. Defense counsel should be less fearful in the future that ambiguities in a leniency agreement will be construed against their clients and used as a basis to revoke amnesty. On the other hand, the case is likely to make the Justice Department more careful about drafting leniency agreements, and may prompt prosecutors to extend the period of informal cooperation that typically precedes a formal acceptance into the leniency program. Finally, the case is a reminder that the courts, not prosecutors, ultimately decide whether an amnesty applicant has fulfilled its obligations.
In November 2002, Stolt-Nielsen sought amnesty under the Justice Department's Corporate Leniency Program for its participation in a parcel tanker shipping conspiracy. Pursuant to a written agreement, the Department granted amnesty for any illegal cartel activities before January 15, 2003. Stolt-Nielsen's cooperation resulted in fines and jailtime against the two other co-conspirators, Norwegian company Odfjell Seachem AS and Dutch company Jo Tankers BV, and several of their executives.
Less than three months after signing the amnesty agreement, the Justice Department revoked the agreement, claiming that Stolt-Nielsen had breached the agreement by failing to take "prompt and effective action" to terminate its part in the conspiracy. In a March 2004 press release, the Department explained that "At any time throughout the process, the Division may expel an applicant after concluding that a company has made false representations to the Division or has otherwise not fully complied with the leniency policy requirements."
In January 2005, Judge Timothy J. Savage of the US District Court for the Eastern District of Pennsylvania enjoined the Department from prosecuting Stolt-Nielsen, finding that the company had "performed its obligations under the agreement when it supplied DOJ with self-incriminating evidence that led to the successful prosecution of [its] co-conspirators." In March 2006, a two-judge panel of the Third Circuit reversed the injunction on separation-of-powers grounds, holding that federal courts lack the power to enjoin indictments except where the prosecution itself would chill the exercise of free speech or certain other constitutional rights. According to the court, the proper procedure was to file a pre-trial motion to dismiss following issuance of the indictment.
On September 6, 2006, a federal grand jury in Philadelphia returned a one-count indictment against the company for violating Section 1 of the Sherman Act for conduct from 1998 to November 2002. Stolt-Nielsen moved to dismiss the indictment, and on November 29, 2007, Judge Bruce W. Kauffman granted the motion and threw out the indictment. Judge Kauffman explained that the government "has failed to produce any credible evidence that Stolt-Nielsen's participation in the customer-allocation conspiracy continued past March 2002." The court concluded: "Since the Division had no reasonable basis upon which to revoke the Agreement, and because fundamental fairness demands it, the indictment will be dismissed."
The Division's decision not to appeal means that after almost five years Stolt-Nielsen will get the amnesty it had been promised.
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Steve Bunnell, an O'Melveny partner licensed to practice law in the District of Columbia, and Darren Tucker, an O'Melveny counsel licensed to practice law in the District of Columbia, have contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
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