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The Wall Street Journal: Cartel Arrests in U.S. Bolster Europe Probes

By MARY JACOBY
May 4, 2007; Page A9

BRUSSELS — The arrest in the U.S. of eight non-American executives involved in an alleged price-fixing scheme shows how the U.S.’s tough criminal laws against cartels can add teeth to European investigations.

Executives from companies in the United Kingdom, France and Italy were arrested in Houston Wednesday in connection with an alleged international cartel for industrial rubber hose, the Justice Department said. An alleged conspirator from Japan was arrested in San Francisco.

All were charged in criminal complaints filed in federal court in Florida, where prosecutors said some of the alleged price-fixing discussions took place.

The industrial hoses at issue are used to transfer oil between tankers and storage facilities. Prosecutors said hoses valued at hundreds of millions of dollars were purchased at inflated prices between 1999 and 2007 by the Defense Department and oil companies including Royal Dutch Shell PLC and Exxon Mobil Corp.

The arrests were the result of a joint U.S. investigation with European Union and U.K. agencies under a program of trans-Atlantic cooperation against bid rigging. EU Antitrust Commissioner Neelie Kroes and the U.S. have made cartel-busting a priority in recent years. But unlike the U.S., EU cartel-fighters can’t threaten criminal sanctions. Nor can they target individual executives, only their companies.

“The lack of any personal liability for cartel participants is a real issue in EU-wide enforcement,” said Ted Henneberry, an antitrust lawyer at Heller Ehrman LLP and a former cartel regulator in Ireland. “The U.S., meanwhile, has been very aggressive in putting in jail many European nationals.”

EU investigators carried out raids yesterday and Wednesday of companies in Italy, France and the U.K., looking for documents and other evidence of the alleged conspiracy. Beyond confirming the probe, an EU spokesman had no comment.

Some countries in the 27-nation EU bloc — including Britain and Ireland — do have laws allowing for criminal sanctions against price fixers. But these countries may act only within their borders, reducing their ability to bust international conspiracies. Furthermore, Ireland has pursued only two cartel-related prosecutions and Britain, none, Mr. Henneberry said.

There is no EU-wide authority to put alleged cartel conspirators in jail. To compensate, the EU antitrust authority, based in Brussels, has been leveling larger fines, more than €2 billion ($2.71 billion) this year, up from €390 million in 2004, against companies accused of price fixing.

One of the Europeans charged in Houston was released yesterday. He posted $500,000 in bail, handed his passport to U.S. authorities and agreed to wear a Global Positioning System tracking device. A Justice Department spokeswoman said prosecutors would ask a judge to impose the same bail conditions on the other accused executives.

Write to Mary Jacoby at [email protected]

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