U.S. District Court Judge James Donato, of the Northern District of California, caught the attention of criminal antitrust litigators over the last several months with his refusal to accept the guilty pleas of three corporations charged in the Department of Justice’s investigation into price fixing in the electrolytic capacitor industry.
In May, Matsuo Electric Co. Ltd. and one of its executives came before Judge Donato for change of plea and sentencing. While Judge Donato accepted the individual executive plea, sentencing the Matsuo sales manager to one year and one day, he refused to impose the sentence included in the company’s plea agreement. The negotiated corporate plea would have required Matsuo to pay a criminal fine of $4.17 million over five years. Judge Donato stated that he did not have sufficient financial information about the company to support the low fine amount and payment plan, calling the plea agreement a “sweetheart deal” for the company. Sentencing for the company has been continued to October 25, 2017.
In June, when Elna Co. Ltd., another co-conspirator in the electrolytic capacitor investigation, came before Judge Donato, his patience with the negotiated fine amounts contained in the corporate plea agreements had worn thin. At the June change of plea and sentencing hearing, Judge Donato rejected the 11(C)(1)(c) plea, indicating that a $3.825 million criminal fine was too lenient. At this hearing, Elna withdrew its guilty plea and Judge Donato set the matter for a November 2017 jury trial. At the close of the hearing, Judge Donato indicated that he would give the parties another opportunity to negotiate an acceptable plea stating, “[I]f you want to take another crack at a plea agreement or proposed sentence and plea that you would like me to consider, I will. But I hope I’ve made clear to you, as I’ve tried in my best ability to outline the rocky shoals, that your settlement ship has not successfully crossed.” The matter is currently set for a change of plea hearing on September 13, at which time the government and counsel for Elna will try to convince Judge Donato to accept the original plea agreement by providing additional information to support the sentence, including details on Elna’s cooperation with the government, the company’s financial status and more detail regarding the volume of commerce included in the plea agreement.
Most recently, on August 9, when a third co-conspirator, Holy Stone Holdings Co. Ltd., came before Judge Donato for a change of plea and sentencing, Judge Donato again rejected the 11(C)(1)(c) plea and set the case for trial in November 2017. During the August hearing, Judge Donato questioned the use of an 11(C)(1)(c) plea, stating he would only accept these types of pleas in exceptional circumstances.
Judge Donato’s rejection of these corporate pleas is not surprising as he has signaled his displeasure of low criminal fine amounts in previous sentencings of corporations in the capacitor antitrust investigation. During the January 2016 sentencing hearing for NEC Tokin, the first company to plead guilty in the capacitors investigation, Judge Donato, while ultimately accepting the plea, called the $13.8 million fine a “drop in the bucket” and stated that he had “serious heartburn” over the plea agreement sentence. In January of this year, Judge Donato, in his acceptance of the $12 million fine for Rubycon Corp., another co-conspirator, stated “[t]he choking spot was the amount of the criminal fine.”