Amicus Curiae Brief — Stolt-Nielsen v. United States (No. 06-97)

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No. 06-97 Fi ED

‘ SEP 20 2006

IN THE

FICE OF THE CLERK

F

Supreme Court of the United. Sere COURT, U.S.

STOLT-NIELSEN, S.A..,

STOLT-NIELSEN TRANSPORTATION GROUP LTD.,

and RICHARD B. WINGFIELD,

Petitioners,

Vv.

UNITED STATES OF AMERICA,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Third Circuit

BRIEF FOR THE CHAMBER OF COMMERCE OF

THE UNITED STATES OF AMERICA AND THE

ASSOCIATION OF CORPORATE COUNSEL AS

AMICI CURIAE IN SUPPORT OF PETITIONERS

ROBIN S. CONRAD JOHN K. VILLA

AMAR D. SARWAL RICHARD A. OLDERMAN *

NATIONAL CHAMBER LITIGATION DANIEL M. DOCKERY

CENTER, INC. WILLIAMS & CONNOLLY LLP

1615 H Street, N.W. 725 Twelfth Street, N.W.

Washington, D.C. 20062 Washington, D.C. 20005

(202) 463-5337 (202) 434-5000

SUSAN HACKETT * Counsel of Record

ASSOCIATION OF CORPORATE

COUNSEL

1025 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 293-4103

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WILSON-EPES PRINTING CO., INC. — (202) 789-0096 -— WASHINGTON, D. C. 20001

QUESTION PRESENTED

Whether a corporation, which has self-reported its own

misconduct to the government pursuant to an immunity

agreement which promises that the corporation and _ its

employees will not be prosecuted, may thereafter be indicted

without opportunity to seek judicial review and enforcement

of the government’s promise, on the ground that post-

indictment review is an adequate remedy at law.

TABLE OF CONTENTS

Page

QUESTION PRESENTED. ........ccesssesecscsssesssssessessseessees

TABLE OF AUTHORITIES. .........sseccscsscsssccsssssecesseesees iv

INTERESTS OF THE AMICI ...0.ccccsccescsssessssessescssesssees 1

rk isiagiie seaddaaumels 4

REASONS FOR GRANTING THE PETITION.......... 7

THE COURT OF APPEALS DECISION IS

WRONG BOTH AS A MATTER OF LAW

PGES Baas € seviitivcncnasciitinigianionnmninitnivcitinnietys 7

A. An Indictment Can Have Devastating

Consequences for a Corporation, and Thus

a Post-Indictment Motion To Dismiss Is

Not an Adequate Remedy.............::csseceseeeee 7

1. Customer Relationships...............:cce0e 9

2. Suspension from Government

PIII suinicssatuiiiiouicusacknasesityiadhindnnaeidnid 10

3. Access to Capital Markets ..............:00 11

4. Damage to Shareholders and Employees... 13

B. The Court of Appeals Failed To Ackiowl-

edge that the Basis of the Bargain Was the

Government’s Commitment Not To Indict

IIT 5k ss ccsibiaseinssinigiaadresnndeissisestslibniilainaniailes 15

C. The Court of Appeals Decision Is Wrong

as a Matter of Law and Eliminates any

Mechanism for Enforcing Leniency Agree-

ments Prior to Indictment ..............::eseeeeeees 16

Se IIT baiccchicias susndinuishaisiashicnbdisasapentactciavnsinianinsioe 19

(ili)

iv

TABLE OF AUTHORITIES

CASES Page

Arthur Andersen LLP y. United States, 544 U.S.

SU Oe A cavnsieessaniinsievecisngsibotunesneiancepialar sce 9

Behrens v. Pelletier, 516 U.S. 299 (1996)............. 18

Heike v. United States, 217 U.S. 423 (1910)......... 18

Mitchell v. Forsyth, 472 U.S. 511 (1985).......0...... 18

Parr v. United States, 351 U.S. 513 (1956)........... 18

Santobello v. New York, 404 U.S. 257 (1971)....... 17

United States v. Alegria, 192 F.3d 179 (lst Cir.

ST ickiscs ciesiiesspsiatiebiatuiacieriesapentadomaaens 16

United States v. Casteneda, 162 F.3d 832 (Sth

Sali FIED sh stcavesditecsecsincbdiierichesumennociamaneonen 18

United States v. Cimino, 381 F.3d 124 (2d Cir.

MIE cmnsiiedcecieejinbosdabguiguiniaastecuaiaetaetcceaieaaimatae. 17

United States v. Helivwooil Motor Car Co., 458

S7.aes RS UE tasasenshcecicestrntinencdencatemmeecatvadieas 18

-United States v. Lieber, 473 F. Supp. 884

CPL ARas 8 FETE smitrniatieasiesctns ened 17

United States v. McQueen, 108 F.3d 64 (4th Cir.

PER icscstctusnpcccmdde staple lccianaaalcier aaa: 14

United States v. Riggs, 287 F.3d 221 (1st Cir

ED iieksiviiniiicihecenteaedteaminbintastdiniesteiaiihdalmid 14

United States v. Serubo, 502 F. Supp. 290 (E.D.

PUL, 5 i scan titetedsssiichusscvbvatcexchendeomiaventeusxadanisk 17

United States v. Stein, 425 F. Supp. 2d 330

CTP ee loci tateclintinicasednncacistunetogsttecttabliaeoles 13

United States v. W.T. Grant Co., 345 U.S. 629

EF a Ditincis ecersckorestnsdaniastsitansecmmamaibamanciiaien 14

United States v. Watson, 988 F. 2d 544 (Sth Cir.

TI ori ctscicistsnasrvtiniaseachenchenuneeni seein aaa 17

United States Parole Comm’n v. Geraghty, 445

CE See CP IOD icvlsstentissuinceendtiiagstisdeteaaaianaas 14

Wilton v. Seven Falls Co., 515 U.S. 277 (1995)... 14

Vv

TABLE OF AUTHORITIES—Continued

FEDERAL STATUTES AND REGULATIONS Page

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Sn TITEL TO on sicidshchd eceenpahpnteahdiceniinnasinineninn 10

seis HET TPIIIET sisisiccincessseipihicstavtninaturieiiiaticiuotaiesiio 10

Fea SPOUT cihetasetiesdnnentaideneehieotinigsiinmeiccdbecegiinnes 1]

Es TINT heiniieieusicceeniiincinnapucbavinsebeiiiivedibamsetie 1]

N.Y. Comp. Codes R. & Regs., Tit. 9, § 4-

I ITT ics ciccesidnssssbslaibiaheesllcesiseoneinnsnlibesicateniedinies 11

Dep’t of Defense Indus. Sec. Reg. DOD

5220.22-R §§ C2.2.29.10, @f SOG. .....sscccsececsserees }]

COURT RULES

Be ks Tes Ic Oo W sntasiicdnaispnpnesacleconhileidiniialiNemsmiiniebialind 14

IN, Sigil: Te Se esiinanshaiedacrepSaerieinselccigeenisniionsisbealslitheehs ]

MISCELLANEOUS

Andersen Pleads Not Guilty, As Workers Protest

at Courthouse, Wall St. J., Mar. 20, 2002......... 9

John C. Coffee, Jr., Decoding the Andersen

Incident: Myth and Reality, N.Y.L.J., Apr. 5,

TITEE Wodishdiichiisetsduasonbdinubideanatiedensdpibidbctpbaientiawctlans 9

vi

TABLE OF AUTHORITIES—Continued

James Comey, Deputy Att’y Gen., U.S. Dep’t of

Justice, Statement at Press Conference on

Charges and Settlement Against America

Online for Aiding and Abetting Securities

Fraud (Dec. 15, 2004), available at http://

transcripts.cnn.com/TRANSCRIPTS/0412/15/

PEPIN cicctiuciosiniictinindisstubcaiediahptniciiiaamebeniemanniaila

Executive Order 12,549, 51 Fed. Reg. 6370

Eee ieivsnieinisphessshh inci tithedaclncaieclabaciaiindaen

Kurt Eichenwald, Conspiracy of Fools: A True

Ne Ce Bicintihnadenecsiipciciiietensinaiteicneabietniiiaiiin

Kurt Eichenwald, Enron’s Many Strands: The

Accountants, Miscues, Missteps and the Fall of

Anderson, N.Y. Times, May 8, 2002.................

Benjamin M. Greenblum, Note, What Happens

to a Prosecution Deferred? Judicial Oversight

of Corporate Deferred Prosecution Agree-

ments, 105 Colum. L. Rev. 1863 (2005) ...........

Scott D. Hammond, Dir. of Crim. Enforcement,

Antitrust Div., “Cornerstone of an Effec-

tive Leniency Program” (Nov. 22, 2004), avail-

able at www.usdoj.gov/atr/public/speeches/

I Ta caicccicieniselinasuiinevinitietna, a

Eric Holder, Don’t Indict WorldCom, Wall St. J.,

FEE Fel ee Riwtstociivinnsvenicniarsanniiiniinninnsenennien

Posting of Peter Lattman to Wall Street Journal

on Line Law Blog, http://dlogs.wsj.com/

law/category/milberg-weiss (Sept. 11, 2006,

ap Sp SRR Ie Aer ce ey Lae ana WO

Anthony Lin, Comptroller Seeks To Jettison

Milberg as Pension Fund Counsel, N.Y.L.J.,

pp ARETE, CPE DsSouen re Nes Nee ere EE LES

Page

13

10

Vii

TABLE OF AUTHORITIES—Continued

Loan Agreement (Line of Credit) Between

Wells Fargo Bank, N.A. and Advanced

Materials, Inc., §10.1(d), available at

http://contracts.onecle.com/admat/wells.credit.

SFG. Fo cca vctniciownhivennensiieiinnindeentainneacin

Lynnley Porowning, U.S. Tactic on KPMG

Questioned, Judge Criticizes Legal-Fee Cutoff,

IU, F. FRM, FUNG Zs CW cccistveisnsetssnnnvinssarineess

Quickstart Loan and Security Agreement

Between Silicon Valley Bank and Bombadier

Software Inc., §5(f), available at http://

contracts.onecle.com/avantgo/svbank.loan. 199

DIOL EC IE, vaiculscinininnvinsigiaieettuniiiadetial

Revolving Line of Credit Loan Agreement

(Accounts Receivable ‘and Inventory) Between

Schuff Steel Co. and Bank One, Az., § 5.1(f),

available at http://contracts.corporate.findlaw.

com/agreements/schuff/bankone.credit. 1995.0

© FADE csncvvissessniineiundbetnvtsncelisaicaptabdcniiausannelinies

Joel Rosenblatt, /ndictment May Doom Milberg

Weiss Law Firm, Seattle Times, May 20, 2006,

available at http://seattletimes.nwsource.com/

html/businesstechnology/2003007065_milberg

WORE scsccnininninictaseiiinicssntshgjileubandisiaiasinarcaiie

Joel Rosenblatt, /ndicted Firm May Go Way of

Andersen: Kickback Allegation Could Create

Exodus of Clients, San Diego Union Trib.,

PE DAs Bee incisesshedisdvnvidicaiamibaiiisiaaaeiiiin,

Barbara Ley Toffler & Jennifer Reingold, Final

Accounting: Ambition, Greed and the Fall of

Arthur Andersen (2003).......::cccssssesssssssessssseesees i

Page

12

12

12

10

Vill

. TABLE OF AUTHORITIES—-Continued

Page

Jonathan Weil, Richard B. Schmitt & Devon

Spurgeon, Arthur Andersen Met with U.S.

Hoping To Strike Agreement, Wall St. J., Apr.

rs Lad len atic cilesectinaheasioguacnbianienbianeel 10

INTERESTS OF THE AMICI

The Chamber of Commerce of the United States of

America (“Chamber”), and the Association of Corporate

Counsel (“ACC”), have a substantial interest in expressing

the views of the American business community and the

lawyers who advise it regarding federal programs which

promise significant benefits to corporations that cooperate

with law enforcement officials, the foremost benefit being an

immunity from the threat of a criminal indictment.’ Their

views are particularly important in a case such as this where

the stigma resulting from the government’s accusations

against the petitioners may obscure the importance and

impact of the issue to the business community at large.

Criminal indictments cause dislocation and damage that reach

far beyond the particular company involved and inflict injury

on innocent corporate constituents such as employees, re-

tirees, shareholders, suppliers and customers. These groups

have an interest in whether the government should be per-

mitted to inflict irreparable damage on a company. Further-

more, when such indictments issue after the government has

made an express promise not to prosecute, it erodes respect

for federal law enforcement. It is appropriate, therefore, that

the organized business community be heard on government

conduct that can have such a severe impact on American

businesses.

The Chamber is the nation’s largest federation of business

companies and associations, representing an underlying mem-

bership of more than 3,000,000 businesses and professional

organizations of every size and in every sector and geo-

graphic region of the country. An important function of the

' Pursuant to Rule 37.6, no counsel for a party to this case authored any

part of this brief, and no person or entity, other than the amici, made a

monetary contribution to the preparation or submission of this brief. All

parties have consented to the filing of this amicus curiae brief, and their

consent letters are on file with the Clerk of the Court.

2

Chamber is to represent the interests of its members by filing

amicus curiae briefs involving cases of national concern to

the American business community.

The ACC, formerly known as the American Corporate

Counsel Association, or ACCA, was formed in 1982 as the

bar association for in-house counsel. With over 20,000 mem-

bers from over 8,400 private sector organizations in 57

countries, ACC members represent a broad range of domestic

and international public, private, and not-for-profit com-

panies. Its members represent 98 of the Fortune 100 com-

panies; internationally, its members represent 74 of the

Global 100 companies. One of the primary missions of the

ACC is to act as the voice of the in-house bar on matters of

concern to corporate legal practice and, specifically, the

ability of its members to fulfill their functions as leading legal

and compliance counselors to their corporate clients.

Federal law enforcement policy over the past generation

has encouraged corporations to report their misconduct in

exchange for a promise that the corporations will avoid the

irreparable damage that results from a criminal indictment,

including potential disqualification from federal and state

procurement, loss of customers, decreased access to capital

markets and possible collapse. The Department of Justice has

capitalized upon the concerns of corporate America through

its Antitrust Division’s Leniency Program. Under that pro-

gram, the first corporation to report wrongdoing receives

complete amnesty, while corporations that are not the first

to report do not receive the same degree of leniency. The

purpose of this program is to create a strong incentive for

corporations to self-report antitrust violations. Yet the

decision to self-report is a very difficult one, and whether a

corporation decides to do so rests in large part on whether it

has confidence that the government will honor its promises

or, if the government fails to do so, that the federal courts will

3

be open to hear the corporation’s grievances before damage

is done.

The court of appeals decision shatters that confidence by

closing the courthouse doors. It bars any pre-indictment

review of the government’s finding of breach of a leniency

agreement and gives the government carte blanche to indict a

corporation, even after that corporation has provided damning

evidence about itself—which makes a successful defense

hopeless—as well as information leading to the criminal

convictions of others. If history is any guide, the immense

and rising pressure from a criminal indictment then brings the

company to its knees and forces a plea to a lesser offense,

with the result that the aggrieved corporation never has its

day in court. Put another way, post-indictment review for the

modern corporation is often no review at all.

If the government can arbitrarily breach its agreement not

to indict in this case, after it received the full benefit of its

bargain (and received the very evidence that it will now use

against the corporation), it can a fortiori breach its agreement

in any case, under any pretext, knowing that no pre-

indictment remedy is available in the courts. The court of

appeals ruling has thus put corporate management and

corporate lawyers in the untenable position of deciding

whether to be good corporate citizens, abandon available

defenses and cooperate with law enforcement, while being

aware that there is no effective manner of enforcing the

government’s corresponding promise not to indict.

This case, accordingly, presents the Court with the op-

portunity to assure the business community that it has some

opportunity, however limited, to be heard before the gov-

ernment acts unfairly. Contrary to the court of appeals ruling,

no separation of powers concerns bar a district court from

enforcing the government’s leniency agreement, and ordering

the remedy of specific performance, when the court de-

4

termines (as the district court did here) that no breach of

contract has occurred.

STATEMENT

1. Petitioner Stolt-Nielsen Transportation Group is a

world-wide supplier of parcel tanker shipping services. In

early 2002, its general counsel resigned after advising his

superiors of collusive trading practices between petitioner and

its two competitors. Petitioner thereafter approached the

Antitrust Division of the United States Department of Justice

about obtaining leniency through the Division’s Corporate

Leniency Policy. Under this program, the government cov-

enants not to charge a firm for the activity being reported, so

long as several qualifying conditions are met—including the

applicant’s representation that upon discovery of the wrong-

doing, the corporation took prompt and effective action to

terminate the illegal activity. (Pet. App. 41a.)

The Department accepted petitioner into the leniency pro-

gram and, by letter of January 15, 2003, entered into a

binding contractual agreement with petitioner, agreeing not to

prosecute the corporation or its employees, officers or

directors “for any act or offense it may have committed prior

to the date of this letter in connection with the anticompetitive

activity being reported.” (Pet. App. 41a.) The Department,

however, maintained the right to declare the agreement void,

should petitioner violate its obligations and, in such cir-

cumstances, to prosecute petitioner.”

? The Corporate Conditional Leniency Letter provided that in the event

of a failure to fully comply with the terms of the Agreement, the Agree-

ment would be void and could be revoked by the Antitrust Division.

“Should the Antitrust Division revoke the conditional acceptance of

SNTG into the Corporate Leniency Program, the Antitrust Division may

thereafter initiate a criminal prosecution against SNTG, without limita-

tion. Should such a prosecution be initiated, any documents or other

information provided by any Qurrent or former director, officer or

5.

Despite fully cooperating with the government, and aiding

in the government’s conviction of two other corporations, the

Department notified Stolt-Nielsen on April 8, 2003, that it

was suspendiiig its own obligations under the agreement. On

March 2, 2004, the government officially withdrew its grant

of leniency. The Department did not assert that petitioner

failed to honor its commitment to deliver information and

assistance to the government. Rather, the government

claimed that petitioner, and in particular Richard B. Wing-

field, the company’s former Managing Director for Tanker

Trading, represented that the corporation’s anticompetitive

activity ceased in March 2002, when it actually continued

until October 2002. This was viewed as a breach of

petitioners’ representation that, upon discovery of the

wrongdoing, prompt and effective action was taken to

terminate the illegal activity. The same day that leniency was

formally revoked, the government announced its intention to

indict both Stolt-Nielsen and Wingfield for violations of the

Sherman Act. (Pet. App. 8a.)

2. On February 6, 2004, petitioners Stolt-Nielsen and

Wingfield filed a complaint in the United States District

Court for the Eastern District of Pennsylvania seeking en-

forcement of their rights under the agreement, and requesting

declaratory and injunctive relief. After an evidentiary hear-

ing, in which the government participated, the court deter-

mined that the agreement had not been breached. Accord-

ingly, the court enjoined the government from prosecuting

petitioners “for the anticompetitive activity through January

15, 2003.” (/d.)

employee of SNTG to the Antitrust Division pursuant to this Agreement,

may be used against SNTG in any such prosecution.” (Pet. App. 68a.)

6

3. A two judge panel’ of the Third Circuit reversed. The

court concluded that the separation of powers between the

Executive and Judicial branches barred the use of an

injunction to prevent the government from seeking an

indictment; that immunity agreements protect only against

conviction, not indictment; and that petitioners were confined

to their post-indictment remedies at law. (Pet. App. 15a, 20a.)

The court did not consider whether the district court erred in

it; finding, that petitioner had not breached the leniency

agreement. (/d. at 21a.) An order amending the court’s

opinion issued on May 16, 2006. (Pet. App. 23a-25a.) A

timely petition for rehearing and rehearing en banc was

denied on June 20, 2006. (Pet. App. 30a-3 1a.)

On June 23, 2006, the court of appeals denied petitioners’

motion to stay the mandate pending certiorari. (Pet. App. 32a-

33a.) On July 20, 2006, petitioners filed a timely petition for

a writ of certiorari with this Court and applied to Tustice

Souter to recall and stay the court of appeals mandate. The

motion was denied by Justice Souter on July 26, 2006. A

renewed motion was then made to Justice Stevens who

referred the motion to the full Court. On August 21, 2006,

the Court issued an order denying petitioners’ motion.

On September 6, 2006, a grand jury returned an indictment

against the petitioners.”

> Justice Samuel A. Alito, Jr. was a member of the panel that heard the

case, but was thereafter appointed to this Court.

* A discussion as to why this case is nor moot appears infra at p.14.

7

REASONS FOR GRANTING THE PETITION

THE COURT OF APPEALS DECISION IS

WRONG BOTH AS A MATTER OF LAW AND

POLICY

A. An Indictment Can Have Devastating Conse-

quences for a Corporation, and Thus a Post-

Indictment Motion To Dismiss Is Not an

Adequate Remedy.

It is hardly news that the indictment of a corporation,

coupled with adverse publicity, potential loss of various

- licenses and rights, disaffection of suppliers, customers, and

financing institutions that might otherwise arrange loans, and

possible suspension from government contracts, can be cat-

astrophic, no matter how the criminal process ultimately

concludes. The case of the former accounting giant Arthur

Andersen is illustrative. As Kurt Eichenwald observed in

Conspiracy of Fools: A True Story, his account of the fall of

Enron and its associates, “(t]he Andersen indictment for

obstruction of justice ended the company’s last hope for

survival. Clients fled in droves, unwilling to allow a firm

charged with a crime to serve as their financial watchdog.

Around the globe, Andersen partners jumped to competing

firms. By the time of Andersen’s conviction in June only a

small shel] of the once-great firm remained, and it announced

that it would cease auditing public companies. . . . The death of

Andersen triggered public criticism that the prosecutors had

gone too far in charging the firm.” Kurt Eichenwald, Con-

spiracy of Fools: A True Story (2005) 667.°

> See Kurt Eichenwald, Enron's Many Strands: The Accountants, Mis-

cues, Missteps and the Fall of Andersen, N.Y. Times, May 8, 2002, at C1

(observing that Arthur Andersen began to unravel after the indictment);

Benjamin M. Greenblum, Note, “What Happens to a Prosecution

Deferred? Judicial Oversight of Corporate Deferred Prosecution Agree-

ments,” 105 Colum. L. Rev. 1863, 1888 (2005) (reporting that Andersen

8

Andersen is not the only entity that has been adversely

affected by an indictment. In May 2006, federal prosecutors

indicted the law firm of Milberg Weiss. As a result of the

indictment, some of the firm’s most significant clients

withdrew their business. For example, the Attorney General

- of Ohio required that Milberg Weiss withdraw as counsel for

the Ohio Tuition Trust Authority. New York State Com-

ptroller Alan G. Hevesi, the trustee of the $140 billion New

York State Common Retirement Fund, forced Milberg Weiss

to step down as lead counsel in a shareholder suit against

German pharmaceutical giant Bayer, and removed Milberg

Weiss from the pool of firms eligible to be retained by the

Fund. See Anthony Lin, Comptroller Seeks To Jettison

Milberg as Pension Fund Counsel, N.Y.L.J., June 2, 2006. -

As Columbia University law professor John C. Coffee Jr.

observed, “[a] number of public pension funds, which are

always publicity sensitive, will find it difficult to use a law

firm that’s been indicted.” See Joel Rosenblatt, Indicted Firm

May Go Way of Andersen: Kickback Allegation Could

Create Exodus of Clients, San Diego Union Trib., May 20,

2006. In addition, a number of partners left the firm fol-

lowing the indictment. See, e.g., Posting of Peter Lattman to

Wall Street Journal on Line Law Blog, http://blogs.wsj.

com/law/category/milberg-weiss (Sept. 11, 2006, 8:55 EST)

(“Milberg Weiss continues to fight a battle to keep its talent

from walking out the door. Since May, when the once-

dominant class-action firm was indicted on fraud charges by a

federal grand jury in Los Angeles, 20 of Milberg Weiss’s

partners have left or are leaving the firm—close to half the

CEO Joseph Berardino told Justice Department officials “If you want to

il} us, go kill us. If you want to keep us alive, we can get through this,

but we can’i take an indictment.”). See also Lynnley Porowning, U.S.

Tactic On KPMG Questioned, Judge Criticizes Legal-Fee Cutoff, N.Y.

Times, June 28, 2006, at C1-C2 (observing that in the modern era, “an

indictment is often a death knell for a company, as it was for KPMG’s

rival, Arthur Andersen.”).

9

total.”); see also Joel Rosenblatt, /ndictment May Doom

Milberg Weiss Law Firm, Seattle Times, May 20, 2006,

available at http://seattletimes.nwsource.com/html/business

technology/2003007065 milbergweiss20.html (“The Milberg

Weiss indictment is comparable to the charges made in 2002

against Arthur Andersen, which all but drove the fifth-largest

accounting firm out of business, New York University law

professor Stephen Gillers said.”).

The American business community,. therefore, must con-

tend with the fact that an indictment can by itself have

disastrous consequences, wholly apart from whether the cor-

poration is ultimately found innocent of the charges.

Andersen, after all, is today defunct, although this Court

ultimately overturned its conviction. See Arthur Andersen

LLP v. United States, 544 U.S. 696 (2005). Eighty thousand

innocent Andersen employees nonetheless lost their jobs.

The practical business consequences that can befall a cor-

poration as a result of an indictment are numerous, and

include the following categories of harm:

1. Customer Relationships.

Adverse publicity from an indictment can by itself affect

relationships with other companies, with customers, with

creditors, and with the general public. The effects can be

particularly harsh for a company that trades on its reputation.

See Eric Holder, Don’t Indict WorldCom, Wall St. J., July 30,

2004, at A14; (“[FJor a firm that trades on its reputation... .

the effect of the indictment and conviction was close to a

death sentence.”); Andersen Pleads Not Guilty, As Workers

Protes* at Courthouse, Wall St. J., Mar. 20, 2002, at C13

(quoting Andersen’s lead trial attorney as saying that an

indictment would be “just as bad as a conviction” in terms of

reputational harm to the company); John C. Coffee, Jr.

Decoding the Andersen Incident: Myth and Reality, N.Y.L.J.,

10

Apr. 5, 2002, at 1 (“[i]n comparison to an indictment, a

deferred prosecution is far less stigmatizing”). Even beyond

this, there is the possible loss of customers attributable to

adverse publicity from an indictment. In Andersen, major

clients left the company, and overseas offices began severing

ties with the firm, after the indictment. Barbara Ley Toffler

& Jennifer Reingold, Final Accounting: Ambition, Greed and

the Fall of Arthur Andersen 219 (2003).

2. Suspension from Government Programs.

An indicted company may be suspended from doing

business with the government, and may lose valuable gov-

ernment licenses. In Andersen’s case, the corporation was

aware that an indictment would threaten its viability since

absent a waiver the SEC could ultimately bar Andersen from

auditing public companies, and state regulators could revoke

state licenses and impose other sanctions on the firm. See—

Jonathan Weil, Richard B. Schmitt & Devon Spurgeon,

Arthur Andersen Met With U.S., Hoping To Strike Agreement,

Wall St. J., Apr. 8, 2002, at C15.

Suspension from participating in federal programs can be

devastating to a company. Under the-Federal Acquisition

Regulations (“F.A.R.”) and the Nonprocurement Common

Rule, an agency of the federal government may suspend a

company from doing business with the federal government

if (a) there is adequate cause and (b) immediate action

is necessary to protect the Government’s interest. F.A.R.

9.407-1(a), (b); Executive Order 12,549, 51 Fed.-Reg. 6370

(Feb. 21, 1986) (setting forth Nonprocurement Common

Rule). An indictment automatically constitutes “adequate ~

evidence” for suspension. See F.A.R. 9.407-2(a)(7), (b)

(providing that an indictment for any “offense indicating a

lack of business integrity or business honesty” constitutes

adequate cause for suspension). A suspension is generally

government-wide. F.A.R. 9.407-1(d). A suspension based

1]

upon an indictment is effective until the legal proceedings

arising from that indictment are completed. F.A.R. 9.407-4.°

Suspension from doing business with the government would

be a matter of great consequence for a company like Stolt-

Nielsen, one of the world’s largest parcel tanker operators.

3. Access to Capital Markets.

Many companies depend at least in part on debt financing

to provide the capital necessary to sustain their operations.

An indictment often prevents a company from being able to

obtain favorable, or indeed any, financing. An indictment

may also cause currently outstanding loans to go into default.

Without access to debt financing, a company may become

insolvent. The presence of an indictment also affects the

underwriting of any new loan that a company obtains.

Lenders perform a credit assessment of prospective borrowers

before financing is approved. If a company is under in-

dictment, the credit assessment will require an analysis of the

* In addition, a suspended company is restricted in conducting business

with entities that receive federal funds. It may not act as a surety on

federal programs. F.A.R. 28.203-7. An indicted company may be

suspended from offering mortgages that are backed by the Department of

Housing and Urban Development or by the Department of Veterans

Affairs. 24 C.F.R. 25.5, 25.9(m), 200.229, 202.5(j); 38 C.F.R. 44.1105(b).

The government may revoke or deny renewal of a company’s facilities

security clearance if it is suspended from participating in government

contracts. Dep’t of Defense Indus. Sec. Reg. DOD 5220.22-R §§

C2.1.12.7 and C2.1.19.10, et seg. (Dec. 4, 1985). Companies indicted for

certain violations may also be denied licenses for the export or reexport of

defense articles and defense services controlled under the Arms Export

Control Act. 15 C.F.R. 764.3(c)(2)(iiKA). Indicted companies may also

be suspended from purchasing timber from the government. 36 C.F.R.

223.142(a(2). Finally, state and local governments may also suspend

contracting with an indicted company. See, e.g., N.Y. Comp. Codes R. &

Regs., Tit. 9, § 4-10(a)(1){i) (2005) (indicted entities may be suspended

from contracting witn the City of New York while the indictment

is pending).

12

likelihood of criminal liability, the potential cost of defending

the suit, the potential extent of criminal liability, the impact of

the indictment and potential conviction on the company’s

reputation, and the extent to which management resources

will be diverted toward defending the company. A lender

may decide not to issue financing at all, or may offer

financing with terms less favorable than it would if the

company were not under indictment. Indeed, many financing

agreements require the borrower to represent that it is not

under indictment, before obtaining the loan.’

Even if only one of a company’s loans goes into default as

a result of an indictment, it can trigger a domino effect that

may endanger the company’s entire financing structure.

Many loans contain “cross-default” provisions that cause the

loan to go into default if the borrower defaults on other loans

or obligations. See, e.g., Loan Agreement (Line of Credit)

Betweet. Wells Fargo Bank, N.A. and Advanced Materials,

Inc., §10.1(d), available at http://contracts.onecle.com/admat/

wells.credit.1996.11.26.shtml (triggering default if the bor-

rower defaulted on any other debt or obligation in excess of

$200,000). And even if a loan does not expressly contain

such a provision, default may nonetheless result from the fact

that as a practical matter, a default on one loan may constitute

a “material adverse change” that triggers default on another

loan. See, e.g., Quickstart Loan and Security Agreement

Between Silicon Valley Bank and Bombadier Software

Inc., §5(f), available at http://contracts.onecle.com/avantgo/

svbank.loan.1998.01.28.shtml.

” See, e.g., Revolving Line of Credit Loan Agreement (Accounts Re-

ceivable and Inventory) Between Schuff Steel Co. and Bank One, Az.,

§ 5.1(f), available at http://contracts.corporate.findlaw.com/agreements

/schuff/bankone.credit. 1995.06.30.html.

13

4. Damage to Shareholders and Employees.

When a company suffers as a result of an indictment, its

shareholders suffer as well, for the company’s shares lose

value. If the company becomes bankrupt, shares become

worthless. Shareholders, moreover, generally do not share in

the company’s remaining assets as distributed by a bank-

ruptcy court.

Employees also suffer when a company is indicted. An

indictment is “a matter of life and death to many companies

and therefore a matter that threatens the jobs and security of

blameless employees.” United States v. Stein, 435 F. Supp.

2d 330, 381-382 (S.D.N.Y. 2006); see also James Comey,

Deputy Att’y Gen., U.S. Dep’t of Justice, Statement at

Press Conference on. Charges and Settlement Against

America Online for Aiding and Abetting Securities Fraud

(Dec. 15, 2004), available at http:/Aranscripts.cnn.com/

TRANSCRIPTS/0412/15/lol.05.html) (touting deferred prose-

cutions as “minimiz[ing] the collateral consequences of an

indictment, which would have been borne by innocent .

employees and investors.”). Employee pension plans also

may be put in jeopardy by an indictment.

In sum, the effects of an indictment can be devastating to a

corporation, its employees, shareholders and customers.

Accordingly, a post-indictment motion to dismiss is simply

not an adequate remedy at law. The court of appeals con-

clusion that “the availability of dismissal after final judgment

will adequately protect and secure for the defendant the

benefit of his bargain under the non-prosecution agreement if

he is entitled to it,” (Pet. App. 20a) cannot be squared with

the practical reality of how indictments adversely affect com-

panies doing business in today’s world.’ A pre-indictment

* Moreover, petitioners sought both injunctive and declaratory relief.

An adequate remedy at Jaw does not preclude declaratory relief, if that

14

remedy should be available, to guard against government

arbitrariness, and to ensure the kind of predictability that

corporations rely upon in their dealings with the United

States.’ The stakes are too high for corporations not to

have access to the courts to construe and enforce leniency

agreements prior to indictment.

The fact that an indictment has now occurred does not

make the issues presented any less important; nor does the

indictment render the case moot. There is a strong public

interest in the Court’s resolution of important precedential

issues such as those presented by petitioners, an interest that

clearly militates against a finding of mootness. See United

States v. W.T. Grant Co., 345 U.S. 629, 632 (1953); United

States Parole Comm'n vy. Geraghty, 445 U.S. 388, 400

(1980). Moreover, although the petitioners have been

indicted, the question is not whether the precise relief sought

at the time the complaint was filed is still available, but

whether the Court can grant effective relief. In this case, the

district court may still grant effective relief by issuing a

declaratory judgment that, based on its already-established

findings of fact, petitioner was not in breach of its agreement

with the government.

relief is otherwise appropriate. See Fed. R. Civ. P. 57. See also 28 U.S.C.

2201 (a); Wilton v. Seven Falls Co., 515 U.S. 277, 287-89 (1995).

* As many courts have recognized, the government's failure to honor

its commitments does more than discourage others from seeking a plea

bargain or immunity agreement. Violations of such agreements “directly

involve the honor of the government, public confidence in the fair

administration of justice, and the effective administration of justice in a

federal scheme of government... .” United States v. Riggs, 287 F.3d 221,

226 (ist Cir. 2002) (quoting United States v. McQueen, 108 F.3d 64, 66

(4th Cir. 1997)).

15

B. The Court of Appeals Failed To Acknowledge

that the Basis of the Bargain Was the Govern-

ment’s Commitment Not To Indict Petitioners.

Corporations that enter the leniency program must incrim-

inate themselves, waive attorney-client privilege, turn over

key documents, and fully cooperate with the Department of

Justice in securing criminal convictions of competitors. What

the corporation receives in return is immunity from indict-

ment and prosecution, for as we have demonstrated the ef-

fects of an indictment can be devastating to a corporation.

The court of appeals erroneously ruled, however, that

imminity and non-prosecution agreements “that have prom-

ised not to charge or~atherwise criminally prosecute a

defendant . . . protect the defendant against conviction rather

than indictment and trial.” (Pet. App. 14a.) This con¢lysion

ignores the express terms of the leniency program, which

grants a corporation protection from all criminal procedures

including indictment so long as certain conditions are met.

The Division defines “leniency” as “not charging such a firm

criminally for the activity being reported” and notes that the

policy is properly characterized as a grant of immunity. (Pet.

App. 72a.) The Antitrust Division’s Grand Jury Practice

Manual expressly states that the term of art “lenient

treatment” “means not indicting such a firm.” (Pet. App. 85a.)

(emphasis added) Representatives of the Antitrust Division

have described the Leniency Policy as “a complete pass from

criminal prosecution or total immunity for a company and its

cooperating employees,” and have observed that “if a

corporation comes forward prior to an investigation and

meets the program’s requirements, the grant of amnesty is

certain and is not subject to the exercise of prosecutorial

discretion.” Scott D. Hammond, Dir. of Crim. Enforcement,

Antitrust Div., U.S. Dep’t of Justice, Cornerstone of

an Effective Leniency Program’ “November 22, 2004”,

available at www.usdoj.gov/atr/public/speeches/20661 1 .htm

16

(emphasis added). Accordingly, if the government’s repre-

sentations are to be credited, and the agreement worth the

paper it is written upon, the leniency agreement must be

construed as having protected petitioners from indictment.

Permitting the government to indict petitioners, in the face of

the express terms of the agreement, and notwithstanding

petitioners’ cooperation and compliance, undermines the

confidence of corporations in the fairness of the process given

by the government and ignores the practical reasons why the

government’s promise not to indict was so crucial to

petitioners—and to all corporations who seek protection

under the government’s Leniency Program.

C. The Court of Appeals Decision Is Wrong as a

Matter of Law and Eliminates any Mechanism

for Enforcing Leniency Agreements Prior to

Indictment.

The court of appeals erroneously determined that even

though the district court, after a hearing, found that peti-

tioners had not breached their agreement, separation of

powers concerns barred the entry of equitable relief in favor

of petitioners. While it is true that as a general principle the

Executive Branch has absolute discretion whether to

prosecute a case, it is equally true that once the Executive

Branch knowingly exercises that discretion by entering into

an immunity agreement it is bound to honor the agreement’s

terms, and separation of powers questions do not come into

play. The government’s prosecutorial discretion in this case

was exercised when it accepted petitioner into the Leniency

Program and executed the January 15, 2003 letter, which

constituted a binding and enforceable agreement.'” Ordering

© See United States v. Alegria, 192 F.3d 179, 182 (Ist Cir. 1999) (“As

a general rule, nothing precludes a prosecutor from bargaining away

something over which he has discretion in return for promises extracted

17

specific performance of that agreement, in conformance with

well-established principles of contract law, does not offend

the separation of powers doctrine. This Court has ruled, in

the context of plea agreements, that the government must

honor its promises insofar as the plea agreement rests “in any

significant degree” on those promises. Santobello v. New

York, 404 U.S. 257, 262 (1971). The Court has advised that

specific performance of such agreements is among the arsenal

of remedies available in district court. /d. at 263. Thus

federal courts regularly order specific performance of plea

agreements, looking to general principles of contract law.

See, e.g., United States v. Cimino, 381 F.3d 124, 127 (2d Cir.

2004). The courts have, in such contexts, rejected separation

of powers arguments, concluding, for example, that “the

power of trial courts to order specific performance of plea

agreements. . . . does not violate the doctrine of separation of

powers, because it derives from the court’s exercise of its

supervisory powers.” United States v. Serubo, 502 F. Supp.

290, 293 (E.D. Penn. 1980). See also United States v.

Lieber, 473 F. Supp. 884, 895-96 (E.D.N.Y. 1979) (ordering

specific performance of a plea agreement and rejecting the

argument that the court’s order interfered with the prose-

cutorial powers of the Executive Branch).'!

Accordingly, this is a straight-forward case calling for

the construction of an agreement between a corporation and

the government, where the government clearly breached its

promise not to indict, and petitioners relied to their detriment

from a criminal defendant.”); United States v. Watson, 988 F.2d 544, 552

(Sth Cir. 1993) (“[T]he government may bargain away its discretion.”).

'' That these cases involved plea agreements rather than immunity

agreements, is of no consequence. As the court of appeals acknowledged,

citing this Court’s Santobello decision, “the Government must adhere

Strictly to the terms of agreements made with defendants— including plea,

cooperation and immunity agreements—to the extent the agreements

require defendants to sacrifice constitutional rights.” (Pet. App. 13a.)

18

on that promise, after performing their end of the bargain.’

Authorizing federal courts to review such agreements, and to

order specific performance if no breach occurred, does not

transgress the Constitution’s delegation of authority to the

Executive Branch to conduct investigations and present

criminal charges.’ It does, however, ensure that before an

'? It is undisputed that petitioners fully cooperated with the government

and that the information they supplied helped convict two major

corporations of wrongdoing. In such circumstances, it is difficult to

understand how the government could find any breach of the agreement

material, for “the less the non-breaching party is deprived of the expected

benefits, the less material the breach.” United States v. Casteneda, 162

F.3d 832, 837 (Sth Cir. 1998).

'’ While the court of appeals found this Court’s rulings in United States

v. Hollywood Motor Car Co., 458 U.S. 263 (1982) (per curiam), and Parr

v. United States, 351 U.S. 513 (1956), “instructive” because they “rein-

force the narrowness of a defendant’s ability to challenge the Govern-

ment’s decision to pursue a prosecution,” those cases are not apposite.

Hollywood Motor Car barred raising a vindictive prosecution claim in an

interlocutory appeal to halt an ongoing prosecution. Parr barred an

interlocutory appeal of an order dismissing an indictment. These cases

did not involve the construction of an immunity agreement in which a

corporation was assured it would not be indicted, but only whether certain

orders were final judgments within the meaning of 28 U.S.C. 1291. The

government’s citation of the 1910 case Heike v. United States. 217 USS.

423 (1910), is also flawed. Heike involved a statutory grant of immunity

to persons who fell into a particular defined class. This Court simply held

that an interlocutory appeal, prior to trial, was not available to individuals

in that class.

Nonetheless, if any collateral order decisions are relevant, they are

surely the rulings of this Court in Mitchell v. Forsyth, 472 U.S. 511

(1985), and Behrens y. Pelletier, 516 U.S. 299 (1996), permitting inter-

locutory appeals of orders denying official immunity. Those decisions are

founded on the Court’s recognition that the immunity doctrine protects an

official from the burdens of both discovery and trial, rights that would be

effectively lost if an interlocutory appeal of a denial of immunity was not

available. The Antitrust Division’s Leniency Policy is by its own terms

an immunity from all criminal prosecution, including indictment. This

immunity would also be irrevocably lost if the government could, without

19

indictment triggers what is often devastating harm, a corpo-

ration may have a court review whether a breach of the

agreement occurred.

CONCLUSION

For the foregoing reasons, the petition for a wmt of

certiorari should be granted.

Respectfully submitted,

ROBIN S. CONRAD JOHN K. VILLA

AMAR D. SARWAL RICHARD A. OLDERMAN *

NATIONAL CHAMBER LITIGATION DANIEL M. DOCKERY

CENTER, INC. WILLIAMS & CONNOLLY LLP

1615 H Street, N.W. 725 Twelfth Street, N.W.

Washington, D.C. 20062 Washington, D.C. 20005

(202) 463-5337 (202) 434-5000

SUSAN HACKETT * Counsel of Record

ASSOCIATION OF CORPORATE

COUNSEL

1025 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 293-4103

regard to the terms of its bargain, seek an indictment after it had cov-

enanted not to do so.