Under Patriot Act, Feds Could Bug Boards

When President Bush signs the Patriot Act amendments into law later this week, the civil liberties of people targeted in terrorism investigations will be strengthened. That's not the case, however, for corporate executives and directors under investigation for antitrust crimes. For them, the amendments will enable the government to wiretap phone conversations and bug boardrooms and offices if there's probable cause that antitrust violations are being committed.

Up until now, the Department of Justice has used wiretaps and bugs mainly to gather evidence against suspected mobsters, drug runners, terrorists, and other "blue collar" criminals, as prosecutors like to refer to them. But the USA Patriot Improvement and Reauthorization Act, which was narrowly passed by the House Tuesday night after sailing through the Senate last week, should change all that.

The act will now allow government prosecutors to use electronic surveillance of alleged white-collar criminals involved in price fixing, bid rigging, conspiracy among competitors to divide up territories and customers, and other suspected crimes. The antitrust wiretap provision is contained in Section 113 of the Patriot Act amendments. In the section, Congress adds antitrust crimes to the list of misdeeds in U.S. legal code, that could warrant wiretaps and bugs.

Under the amendments, the DOJ could thus ask a federal judge for permission to wiretap or bug suspected violators of conspiratorial antitrust crimes like price fixing. But corporate directors and officers are likely to be more troubled by prosecutors' new ability to request wiretaps for such milder suspected antitrust violations as setting up trade monopolies or distribution arrangements that restrain commerce.

The new wiretap power for lesser antitrust crimes might not end up being all that threatening, however. The DOJ's Antitrust Division generally prosecutes the lesser infractions as civil complaints, says Tyler Baker, who heads the antitrust litigation practice for Fenwick and West, a Mountain View, California, law firm. And it's only criminal complaints that would warrant electronic surveillance.

Further, federal judges have traditionally granted wiretap and bugging warrants for only "hard-core or cartel-type" crimes, not civil infractions, he says. If that history holds true to form, directors or officers that appear to be trying to monopolize a market or manipulate distributors, for instance, won't have to check their phones and boardrooms for bugs.

At the same time, the new wiretapping of suspected hard-core antitrust criminals permitted under the act could spell intellectual property problems for corporations, thinks Mark Racanelli, a white-collar defense attorney with the New York office of O'Melveny and Myers. Trade secrets might be picked up on tape inadvertently and then made part of the public record in connection with an indictment.

That could happen when a legitimate business discussion –such as talk about a planned merger or the introduction of a new product—provides context for the crime or is intertwined with a conversation about illegal activities, explains Racanelli.

But keeping corporate information under wraps may not be possible. That's because tapes from wiretaps or bugs are usually considered critical to a case, adds Racanelli, a former lawyer for the federal government. "From a prosecutor's perspective, it is better to have a tape than just a witness. Tapes are more powerful evidence," he notes.

Defense teams might also want to use the tapes as evidence, according to Racanelli, especially if they're planning to argue that the defendant was under duress or coerced into doing something illegal. Tapes are also helpful to illustrate entrapment, adds the defense attorney.

To avoid such possibly unintended consequences of the new law, attorneys say, distinctions must be made. To be sure, Congress isn't likely to amend the Sherman Antitrust Act to spell out which levels of antitrust crime warrant criminal prosecution, and thus possible wiretapping, says Donald Klawiter, the chairman of American Bar Association's antitrust section.

But Klawiter, a partner and antitrust expert in the Washington office of Morgan, Lewis, and Bockius, would like to see lawmakers clarify their position. Perhaps Congress could do that by staging floor debates that would enter the Congressional Record or by issuing a report on legislative history that clarifies how Sherman Act cases have been prosecuted over the past 30 years. In that way, there would be a written record to help courts interpret Congressional intent.

For about three decades, prosecutors and judges have divided litigation into criminal cases, such as those involving cartel schemes, and civil infractions that include monopolistic activity. Klawiter and other attorneys would like Congress to make it clear that lesser antitrust crimes don't justify wiretapping.

Comment by the Voluntary Trade Council

Congress & Legislation : Patriot Act authorizes antitrust wiretaps Posted by smoliva on 2006/3/10 0:37:26 (807 reads)

FOR IMMEDIATE RELEASE Friday, March 10, 2006

Arlington, Virginia—This week, President Bush signed several amendments to the Patriot Act that gives federal prosecutors the power to spy on businesses during antitrust investigations. Although antitrust does not related to the Patriot Act’s stated goal to “deter and punish terrorist acts,” Republican congressional leaders abandoned a previous proposal to consider the antitrust provision separately.

Section 113 of the Patriot Act amendments, H.R. 3199, adds the Sherman Antitrust Act to a list of “predicate offenses” that enable the Justice Department to wiretap phone lines and bug private buildings. Such wiretaps and bugs would have to be authorized by a federal judge.

The antitrust wiretap provision was not included in H.R. 3199—or its Senate counterpart, S. 1389—during initial votes by either house of Congress. Instead, the antitrust language was added during a December 8, 2005, meeting of House and Senate conferees who were reconciling differences in the two Patriot Act bills. The final conference report was passed six days later by the House and approved by the Senate earlier this month.

The conference report said that Section 113 “adds new ‘wiretap predicates’ . . . which relate to crimes of terrorism.” There was no other discussion or debate regarding the antitrust wiretap provision in the Congressional Record.

In October 2005, the Senate unanimously passed S. 443, a bill that contained the same language as the antitrust wiretap provision later added to the Patriot Act bill. The House referred S. 443 to its Judiciary Committee, which never held hearings or otherwise considered the measure. Several Judiciary Committee members—including chairman F. James Sensenbrenner, Wisconsin Republican—participated in the Patriot Act conference committee.

Because the Sherman Act is vaguely worded and does not distinguish between criminal and civil violations, the Patriot Act amendments constitute a de facto expansion of criminal antitrust liability. Cases that have been treated as civil matters by the Justice Department (or administrative matters by the Federal Trade Commission) may now be prosecuted as criminal violations. For example, had the DOJ possessed wiretap powers during its investigation of Microsoft Corporation, prosecutors could have bugged Microsoft offices and spied on the company’s product development meetings in order to develop a criminal “monopolization” case.

And an article published this week by CFO.com noted that corporate trade secrets would likely be compromised by antitrust-related wiretaps. “Trade secrets might be picked up on tape inadvertently and then made part of the public record in connection with an indictment,” said the article written by Marie Leone.

Skip Oliva, president of the Voluntary Trade Council, said Congress sent a dangerous message by equating antitrust violations with terrorist acts. “The original Patriot Act was passed in the wake of the September 11 attacks. The law gave prosecutors new powers, because Congress believed that would help thwart future attacks. Granting the Antitrust Division the unrestricted power to spy on every business in America has nothing to do with fighting terrorism. Quite the contrary, it hands unelected, unaccountable prosecutors the power to terrorize the American economy.”

Oliva said there was no justification for granting the DOJ wiretap authority in antitrust cases. “The Antitrust Division currently wins over 95% of its criminal cases, almost exclusively through plea bargains. Jury trials are rare in antitrust, and this means that there is virtually no public or judicial scrutiny of Antitrust Division activities. Wiretap authority will encourage more prosecutions and pleas. Antitrust policy will be driven further out of the public’s eye, leaving prosecutors broad policymaking powers over every sector of the U.S. economy, including health care, energy, and technology.”

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For more information contact Skip Oliva at (703) 740-8409 or smoliva@voluntarytrade.org. The CFO.com article cited in this release can be viewed at http://www.cfo.com/article.cfm/5600289?f=home_featured.

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