-Caveat Lector-
"For nine years, top executives for several of the world's biggest firms
held secret annual meetings to divide world markets, fixing prices to the
penny ..."
Roche, BASF pay record U.S. price fixing fines
By David Lawsky
WASHINGTON, May 20 (Reuters) - European pharmaceutical and chemical giants
Roche Holding ROCZg) and BASF AG agreed on Thursday to pay the United States
record criminal antitrust fines totalling $725 million for fixing world
vitamin prices, and a former Roche executive agreed to go to jail.
Switzerland's Roche will pay a record U.S. criminal fine of $500 million and
Germany's BASF will pay $225 million for participating in a world-wide
vitamin cartel.
``What they did was very wrong,'' Attorney General Janet Reno told a news
conference. Antitrust Division Chief Joel Klein said the conspiracy
``affected more than $5 billion of commerce in products found in every
American household.''
For nine years top executives for several of the world's biggest firms held
secret annual meetings to divide world markets in common vitamins, setting
prices to the penny, officials said. Lower-level managers carried the scheme,
rigging bids when necessary.
Roche's fine will surpass the previous criminal fine record of $340 million
paid by Daiwa Bank Ltd. in 1996 for fraud and cover-up of massive securities
trading losses.
And both fines will top the previous antitrust record of $135 million paid
earlier this month by German graphite and electrode maker SGL Carbon in a
price fixing case.
A BASF spokesman in Frankfurt told Reuters that the company's ``capability to
continue its dividend policy for shareholders for 1999 will not be affected
by this incident.''
Roche Holding Chief Executive Franz Humer said in Zurich the fine was
``painful'' but his company could handle it. Roche shook up its management,
announcing the head of its vitamins and fine chemicals division was suddenly
leaving the firm.
Its former director of worldwide marketing for the vitamins and fine
chemicals division, Dr. Kuno Sommer, agreed to serve a four-month prison
sentence and pay a $100,000 fine.
Sommer agreed to plead guilty to participating in the cartel and then lying
to Justice Department investigators about it in 1997.
``Foreign borders will not serve as a sanctuary from prosecution for
individuals who conspire to steal from U.S. businesses and customers,'' said
Justice's Klein.
Deputy Assistant Attorney General Gary Spratling noted pointedly that the
investigation will continue for up to 12 other vitamin makers. And Klein said
that four executives of BASF and three from Roche were not covered by the
settlement.
``Those who lie, obstruct, and attempt to cover up the truth in our
investigations will be prosecuted,'' Klein said.
France's Rhone-Poulenc SA escaped criminal charges by co-operating with the
government's two-year investigation. It recently provided what Spratling
described as the ``big break'' in the case.
Spratling said that the conspirators had been told to destroy every piece of
incriminating paper, but Rhone-Poulenc painted a picture for the government
of the way the scheme worked.
Although Rhone-Poulenc will not face criminal charges, Spratling said that it
-- and the other companies -- may be found liable for huge damages in civil
cases brought by corporate victims.
A Roche spokesman in Zurich was unable to say if his company could pay a
dividend, noting the firm faced large exposure from a number of civil suits.
``We don't know the actual figure, but it is not just two or three. It is a
lot more.''
Roche, BASF, Sommer and the other, unidentified co-conspirators fixed prices
on vitamins A, B2, B5, C, E, Beta Carotene and vitamin premixes, Justice
said. Vitamin premixes are sold to manufacturers to blend into cereals,
animal feeds and other products.
Klein said the conspiracy ``hurt the pocketbook of virtually every American
consumer -- anyone who took a vitamin, drank a glass of milk or had a bowl of
cereal.''
In Brussels, a European Commission source told Reuters the commission had its
own investigation into the firms. But the source said that any final decision
was still a long way off.
Justice's Spratling said that Roche had cooperated in the investigation, but
noted that it was a recidivist firm and that was taken into account in
setting the fine. Roche was fined $14 million in 1997 for participating in a
separate cartel involving citric acid.
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