CRIMINAL CARTELS IN IRELAND: THE HEATING OIL CASE

Transcription

1 CRIMINAL CARTELS IN IRELAND: THE HEATING OIL CASE David McFadden Solicitor, Legal Advisor Competition Authority O.E.C.D. Regional Centre for Competition Seminar on Restrictive Agreements Tirana June 2009

2 Irish Legislation Section 4 Competition Act, 2002: Cartels & Vertical Agreements Section 4 = Article 81 (identical wording) Agreements that prevent, restrict or distort competition in trade in any goods or services within the State. Note: Distinction between mortal sins and lesser venial sins.

3 S.4: Mortal-v- Venial Sins Section 4 deals with horizontal & vertical agreements just like Article 81 Horizontal agreements = Cartels = Hardcore Offences and are the mortal sins Vertical agreements = RPM (resale price maintenance) are the venial (lesser) sins Cartels in Ireland are treated as criminal offences with higher standard of proof RPM are rule of reason cases and are treated at civil standard.

4 Penalties Penalties for a breach of s.4 are: A fine of 3,000 on summary conviction for a minor offence before a Judge only court, A fine of up to 4,000,000 or 10% of last years turnover, whichever is the greater for conviction on indictment (judge & jury trial). Directors, managers etc. of corporate undertakings may receive terms of imprisonment for conviction: Summary conviction of individual = max 6 months Conviction on Indictment = max 5 years Also, S. 160 of Companies Act automatic consequential disqualification from holding a directorship in any company in the State when convicted on indictment!

5 Right of Action 1. Competition Authority may bring summary criminal cases or civil proceedings. 2. Only the Director of Public Prosecutions (DPP) brings cases on indictment. 3. Cases on indictment are in the Central Criminal Court which normally only deals with murder, rape, treason and crimes against humanity!

6 Investigation Tool Kit 1 Search Powers Search Warrant Section 45 of the 2002 Act Authorised officers apply to court for warrants to search premises, including private homes. Gardai (Irish Police) can and usually do assist in investigations. Search powers allow the Competition Authority to seize original documents, computers, or any material that may be of evidential value. Search power under 2002 Act allows for lawful demand for information. Search warrant issued where there are reasonable grounds to suspect that either an offence has been committed or that evidence of an offence may be found at that premises. Premises of nonsuspects can therefore be searched.

7 Investigation Tool Kit 2 Power of Arrest: Maximum penalty for conviction on indictment is 5 years. This means that cartel offence is an arrestable offence under Irish Law Arrest : Criminal Law Act Detention for questioning of suspects arises under Section 4 of criminal Justice Act 1984 (as amended). In theory any person can effect an arrest. In practice only Gardai do this. Currently 1 Detective Sergeant is seconded to work full time in Competition Authority to assist in Cartel investigations. Only 1 arrest made to date.

8 Investigation Tool Kit 3 Section 31 Witness summons Procedure An unusual power that allows for the production of documents to the Competition Authority during an investigation Compels witnesses to give evidence on oath. However Right to silence of suspects in criminal investigations. Evidence compelled from a suspect cannot be used in subsequent trial of that suspect. Power is useful for obtaining telephone and bank records etc.

9 Investigation Tool Kit 4 General Investigative Powers: Authorised officers are trained/experienced criminal investigators. Former Gardai, Customs, Social Welfare officers work in the division. Lawyers also useful...but no room for economists!! Judges Rules Apply: Must Caution suspects before questioning but also a general entitlement to conduct lawful inquiries. Surveillance is carried out but NOT wire-tapping as this is un-constitutional.

10 Investigation Tool Kit 5 Cartel Immunity Programme Immunity from Criminal Prosecution NOT leniency or lenient treatment. Immunity granted at the discretion of the DPP Core principles first in only; not the ringleader; stay quiet and give useful case cracking evidence including evidence at criminal trial. Irish Immunity Programme and the Commission Notice on Immunity from fines both relate to cartels only. Irish Immunity programme is live and there have been applications but the programme remains untested. However, Immunity was granted in both Heating Oil Cartel and Citroen Dealers cases.

11 Heating Oil Cartel Case 1-1 st ever conviction by Judge and Jury of a criminal cartel in Ireland or Europe. - Trial in Galway Circuit Court ended March 2 nd Michael Flanagan t/a Flanagan Oil fined 3,500 (Small fine...but first step) - JP Lambe convicted on 6 th March 2006 of aiding and abetting received 6 month suspended sentence and 15,000 fine, - Total no. of individuals and undertakings convicted was 17 and total in fines was 122,000

12 Heating Oil Case 2 Investigative Tools Used Covert surveillance of meetings of the alleged cartel on several occasions in 2001; Searches of 15 premises over a period of three days in February 2002; Witnesses were examined under oath pursuant to a summons power after the searches in In some cases the witness summons required the procurement of documents in the possession of the witness. Witness statements subsequent to the searches in These are sworn statements but they are given on a voluntary basis; Immunity application made in May 2002 and subsequently accepted by the Authority and the DPP; and, Cautioned interviews during the course of the investigation with persons suspected of breaching Section 4(1) of the 1991 Act as amended.

13 Heating Oil Case 3: The Evidence The evidence found in the heating oil case, employing the investigate tools outlined above, can be divided into five categories: documentary evidence uncovered during the searches, together with admissions made by those being searched; statements by the immunity witness; admissions made by suspects under caution; photographs, videos of suspects at meetings and the statements of those responsible for covert surveillance; and voluntary statements made by witnesses.

14 Heating Oil Case 4: The Cartel Characteristics The investigation uncovered most of the characteristics that are usually associated with an effective cartel: Most suppliers of heating oil in Galway City and County were members of the cartel; An association was formed, the Connaught Oil Promotion Federation ( COPF ), to facilitate cartel meetings. The ostensible purpose of the COPF was to discuss industry concerns such as health and safety, insurance costs, etc. However, the evidence uncovered demonstrated that the principle purpose of COPF meetings was price fixing; an enforcer or referee was appointed who acted as a facilitator at COPF meetings, conducted checks on COPF members invoices to ensure that the agreed price was being charged and acted as a referee where disputes arose between COPF members; and, attempts were made to persuade non-cartel members to join the COPF.

15 Heating Oil Case 5 Judge & Jury s s View Judge Delahunt: Lambe was guilty of very serious offences. Groarke: Those engaged in cartels and involved in the fixing of prices are doing so only with the motivation of greed...i could...see circumstances where persons convicted by a jury could be subjected to terms of imprisonment. Jury: Unanimous Guilty Verdict. Total time deliberating: 2hrs 4mins. Jury understood case & had no sympathy for white collar criminal

16 Heating Oil Cartel 6 Parties than can be prosecuted include both individuals and corporate undertakings. Other legislation can also come into play such as Criminal Law Act 1997 where a person can be prosecuted for aiding and abetting the commission of an offence Heating Oil Cartel prosecuted under repealed 1991 Act (as amended) and case prosecuted in Circuit Court. Subsequent cases, such as the Citroen and Ford (Car) Dealers Cartel cases, prosecuted under 2002 Act in Central Criminal Court. Denis Manning prosecuted and convicted for Aiding and Abetting Irish Ford Dealers association in price-fixing...received 12 months suspended sentence. Numerous parties convicted in Citroen Car Dealers case, fines currently total 292,000 and gaol time (all suspended) totals 24 months