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The end of criminal antitrust's per se conclusive presumptions.

The Supreme Court in the Booker line of cases revolutionized sentencing law by applying a criminal defendant's constitutional right for a jury, not a judge, to decide key sentencing fact issues. Applying this constitutional line of cases in the course of defending a criminal antitrust case led to bringing together four separate silos of law with four revolutionary implications for antitrust: criminal antitrust, Sixth Amendment rights to jury fact finding, constitutional limits on the use of conclusive presumptions in jury instructions, and the constitutional prohibition of federal common law crimes. The four revolutionary implications for antitrust were as stunning for the author as they are sure to be to the antitrust bar, any one of which, when adopted by the courts or the Antitrust Division, will end criminal antitrust's long-accepted practices regarding per se conclusive presumptions.

KEY WORDS: right to jury fact finding, per se criminal jury instructions, conclusive presumption jury instructions, naked agreement fact issues, indictment pleading, legal v. jury fact issues

I. INTRODUCTION

In Booker and related decisions, (1) the Supreme Court revolutionized sentencing law by applying a criminal defendant's Sixth Amendment right to have a jury, not a judge, decide key fact issues related to sentencing.

Serendipitously, in the course of defending a twelve-count criminal antitrust case that went to trial in Cleveland in June 2009, United States v. Alliance National Limited Partnership dba DeMilta Iron & Metal, Ltd. (DeMilta), (2) four specialized areas and silos of law came together--criminal antitrust, Sixth Amendment rights to jury fact finding, constitutional limits on the use of conclusive presumptions in jury instructions, and the constitutional prohibition of federal common law crimes.

A result as revolutionary for criminal antitrust law as the Booker line of cases was for sentencing law is covered in part II, a result as stunning for the author as it is sure to be to the antitrust bar: Per se conclusive presumptions of the unreasonable restraint of trade element in criminal jury instructions are unconstitutional, and there is already a Supreme Court decision virtually directly on point. Further, there are three constitutional jury trial fact finding and other defects in how the "naked agreement" element of per se offenses is customarily treated. If one or more of these four are adopted by the Antitrust Division or by the courts, it will mean the end to long-accepted practices regarding per se conclusive presumptions in criminal antitrust.

Part III is for litigators. It provides highlights on winning the DeMilta case. Appendix A is the very informative and rarely published (in antitrust journals) judgment entered by the DeMilta trial judge summarizing what happened each day of the three-week trial, the twelve counts and the jury's verdicts on each.

II. THE END OF CRIMINAL ANTITRUST'S PER SE CONCLUSIVE PRESUMPTIONS

A. Under Gypsum, jury instructions that conclusively presume an element of a crime are unconstitutional--first intent, then unreasonable restraint of trade

"Serious questions under the United States Constitution are raised by the creation and use of presumptions in criminal cases," (3) a very specialized legal issue little discussed in antitrust circles. Indeed, it has long been assumed that jury instructions in per se criminal antitrust cases can include a conclusive presumption of the "unreasonable restraint of trade" element of the crime. The ABA's Model Jury Instructions in Criminal Antitrust Cases, for example, suggest the following jury instruction in per se cases:

   The Sherman Act makes unlawful certain agreements that, because of
   their harmful effect on competition and lack of any redeeming
   virtue, are conclusively presumed to be an unreasonable restraint
   on trade and are always illegal, without inquiry about the precise
   harm they have caused or the business excuse for their use. (4)


Yet the Supreme Court has made clear that it is a violation of the Sixth Amendment's right to have a jury decide key factual issues to have jury instructions conclusively presume an element of a crime, taking the decision away from the jury.

In the leading case of Morissette v. United States, (5) the defendant was a junk dealer who took old bomb casings that had been lying unused from an Air Force practice bombing range and sold them for a profit. He was indicted and convicted of violating a statute that made it a crime to knowingly convert government property but made no mention of intent. The Court held that criminal intent is an essential element of the crime and that its existence is a question of fact that must be submitted to the jury for determination in the light of all relevant evidence. The trial court may not withdraw or prejudge the issue by instructing the jury that the law raises a presumption of intent from a single act:

   As we read the record, this case was tried on the theory that, even
   if criminal intent were essential, its presence (a) should be
   decided by the court (b) as a presumption of law, apparently
   conclusive, (c) predicated upon the isolated act of taking, rather
   than upon all of the circumstances. In each of these respects we
   believe the trial court was in error.

   Where intent of the accused is an ingredient of the crime charged,
   its existence is a question of fact which must be submitted to the
   jury.

   A conclusive presumption which testimony could not overthrow would
   effectively eliminate intent as an ingredient of the offense. (6)


Most importantly, the Supreme Court has already ruled in a criminal antitrust case that conclusive presumptions are unconstitutional. In United States v. U.S. Gypsum Co., (7) the Supreme Court specifically applied this precedent to an antitrust case. There the Court held clearly that a jury instruction that conclusively presumed an element of an antitrust violation, there the intent element, was unconstitutional:

   "A conclusive presumption [of intent] which testimony could not
   overthrow would effectively eliminate intent as an ingredient of
   the offense." The challenged jury instruction, as we read it, had
   precisely this effect; the jury was told that the requisite intent
   followed, as a matter of law, from a finding that the exchange of
   price information had an impact on prices. Although an effect on
   prices may well support an inference that the defendant had
   knowledge of the probability of such a consequence at the time he
   acted, the jury must remain free to consider additional evidence
   before accepting or rejecting the inference. Therefore, although it
   would be correct to instruct the jury that it may infer intent from
   an effect on prices, ultimately the decision on the issue of intent
   must be left to the trier of fact alone. The instruction given
   invaded this factfinding function. (8)


Gypsum involved the intent element of antitrust crimes, not the unreasonable restraint of trade element. However, the same constitutional prohibition on the use of conclusive presumptions applies to all elements of an antitrust criminal case. Therefore, a jury instruction that the jury is to conclusively presume the unreasonable restraint of trade element is also unconstitutional. In the Supreme Court's words, "ultimately the decision on the issue ... must be left to the trier of fact alone"--the jury.

Hasn't the Supreme Court fixed this constitutional problem by interpreting the Sherman Act to make per se violations a crime? The government has argued that the Supreme Court can interpret the Sherman Act to establish a substantive rule of law rather than an evidentiary presumption, in effect, writing a per se crime. In United States v. Brighton Building & Maintenance Co., for example, the Antitrust Division argued:

   Since the per se rules define types of restraints that are illegal
   without further inquiry into their competitive reasonableness, they
   are substantive rules of law, not evidentiary presumptions. It is
   as if the Sherman Act read: "An agreement among competitors to rig
   bids is illegal." (9)


However, the Supreme Court does not have the constitutional power to make common law crimes. Common law crimes in federal law are unconstitutional: "The legislative authority of the Union must first make an act a crime, affix a punishment to it, and declare the court that shall have jurisdiction of the offense." (10) More recently, the Supreme Court in 1985, citing Hudson, explained: "The definition of the elements of a criminal offense is entrusted to the legislature, particularly in the case of federal crimes, which are solely creatures of statute." (11) The Supreme Court can interpret the Sherman Act to limit existing statutory crimes, for example, by adding "intent" as an element of the crime or by limiting it to "unreasonable" restraints. But the Court cannot make new crimes. Since the statutory terms of the Sherman Act do not contain per se crimes, the Justice Department's argument that the Supreme Court has the constitutional power to interpret the statute to make a crime, "[a]s if the Sherman Act read: 'An agreement among competitors to rig bids is illegal,'" is unconstitutional.

As a result, the per se rules are evidentiary presumptions, not new crimes under the Sherman Act. A permissive evidentiary presumption of the unreasonable restraint of trade element can be used in jury instructions, but it must comply with the Supreme Court's strict constitutional limits on presumptions. An in-depth analysis of this issue is beyond the scope of this article. However, a useful indication of the Court's constitutional holdings on conclusive and permissive presumptions is contained in Federal Rule of Evidence 303, Presumptions in Criminal Cases, adopted by the Court in 1972 but not enacted by Congress. (12) Those holdings, which are described at length in the Advisory Committee Notes, cannot, of course, be changed by Congress. Therefore, even though Congress did not enact Rule 303, and thus Rule 303 is not in effect, it provides a cogent summary of the Court's constitutional holdings as of 1972 on both types of presumption.

Specifically, Rule 303 indicates the do's and don'ts of how a per se permissive evidentiary presumption of the unreasonable restraint of trade element can be used in jury instructions, "when the presumed fact ... is an element of the offense."

   Rule 303(b), Submission to Jury, states:

   The judge is not authorized to direct the jury to find a presumed
   fact against the accused. When the presumed fact establishes guilt
   or is an element of the offense or negatives a defense, the judge
   may submit the question of guilt or of the existence of the
   presumed fact to the jury, if, but only if, a reasonable juror on
   the evidence as a whole, including the evidence of the basic facts,
   could find guilt or the presumed fact beyond a reasonable doubt.

   Further, Rule 303(c), Instructing the Jury, provides:

   Whenever the existence of a presumed fact against the accused is
   submitted to the jury, the judge shall give an instruction that the
   law declares that the jury may regard the basic facts as sufficient
   evidence of the presumed fact but does not require it to do so. In
   addition, if the presumed fact establishes guilt or is an element
   of the offense or negatives a defense, the judge shall instruct the
   jury that its existence must, on all the evidence, be proved beyond
   a reasonable doubt.


These restrictions on the use of presumptions in criminal cases explains why the government takes the position that per se rules are "not evidentiary presumptions." (13) Permissive presumptions of the unreasonable restraint of trade element are permitted in jury instructions under Rule 303(c), but they are subject to the requirement that the judge instruct "the jury that [the unreasonable restraint of trade element] must, on all the evidence, be proved beyond a reasonable doubt."

In summary, the Supreme Court has already ruled in Gypsum, a Sherman Act case, that a conclusive presumption in jury instructions of one element of the antitrust crime, intent, is unconstitutional. It follows, of course, that the long-accepted use of a conclusive presumption of another element of the crime in jury instructions, the unreasonable restraint of trade element, is unconstitutional as well.

This by itself means the end of criminal antitrust's per se conclusive presumptions. There are in addition, however, three other constitutional defects in the use of per se conclusive presumptions in criminal antitrust.

B. Naked agreement is an element of a per se crime and must be decided by the jury

It has long been assumed in both criminal and civil antitrust practice that naked agreement, a key element of a per se criminal or civil case, is a legal issue, not a jury issue. As the Antitrust Division and Federal Trade Commission have stated: "Antitrust law treats naked agreements among competitors that fix prices or allocate markets as per se illegal." (14) As Professors Areeda and Hovenkamp put it, "per se condemnation is appropriate for restraints that are properly classified as 'naked.'" (15)

But who does the classifying, the judge or the jury?

Professors Areeda and Hovenkamp, without analyzing the Sixth Amendment, argue that "both principle and practice make clear that a judge rather than a jury decides what is per se unreasonable, even though that decision depends on factual assessments about the nature and likelihood of the harms and benefits at stake for competition," (16) and, further, that "[w]hile applying any one of antitrust's modes of analysis might involve many fact questions, the selection of a mode is entirely a question of law." (17)

Similarly, the ABA's Model Jury Instructions in Civil Antitrust Cases (18) states that a per se jury "instruction is appropriate if a court determines that the alleged restraint is illegal per se," whereas " if the court determines that the alleged restraint should be evaluated under the rule of reason, the jury should be instructed in accordance with the rule of reason." (19)

This long-standing assumption in antitrust practice ignores a criminal defendant's constitutional right to a jury trial on factual issues relating to an element of the crime. Yet in 1995, a unanimous Supreme Court held in United States v. Gaudin (20) that a criminal defendant is guaranteed a jury trial of all the elements of a crime under the Fifth and Sixth Amendments:

   The Fifth Amendment to the United States Constitution guarantees
   that no one will be deprived of liberty without "due process of
   law"; and the Sixth, that "[i]n all criminal prosecutions, the
   accused shall enjoy the right to a speedy and public trial, by an
   impartial jury." We have held that these provisions require
   criminal convictions to rest upon a jury determination that the
   defendant is guilty of every element of the crime with which he is
   charged, beyond a reasonable doubt.... (21)


The Court explained that the right to jury decision making "was designed 'to guard against a spirit of oppression and tyranny on the part of rulers,' and 'was from very early times insisted on by our ancestors in the parent country, as the great bulwark of their civil and political liberties.'" (22)

Gaudin was a criminal case involving an alleged false loan application to a federal agency. The defendant challenged what had become the standard practice for that crime--that the judge, not the jury, decided the materiality element of the crime. The rationale used was that materiality was a legal, not a jury, issue.

The Court held that the standard practice of having the judge, not the jury, decide the materiality issue---like the naked agreement issue here--was unconstitutional. There is, the Court held, an "historical and constitutionally guaranteed right of criminal defendants to demand that the jury decide guilt or innocence on every issue, which includes application of the law to the facts." (23) Accordingly, the "trial judge's refusal to allow the jury to pass on the 'materiality' of Gaudin's false statements infringed that right." (24)

Thus, the long-standing antitrust practice that assumes that the naked agreement element is a legal issue for the judge, not a factual issue for the jury, like the materiality element in Gaudin, is unconstitutional. At trial, the jury must be presented jury instructions and decide the naked agreement element, not the judge at a charging conference.

C. Naked agreement factual issues are for the grand jury, not the Antitrust Division

Russell v. United States (25) is the leading case on constitutional issues regarding grand juries and indictments. In Russell, the Supreme Court held that the indictments of six people were constitutionally defective under the Fifth and Sixth Amendments for not including sufficient facts. The Court explained:

   Any discussion of the purpose served by a grand jury indictment in
   the administration of federal criminal law must begin with the
   Fifth and Sixth Amendments to the Constitution. The Fifth Amendment
   provides that "No person shall be held to answer for a capital, or
   otherwise infamous crime, unless on a presentment or indictment of
   a Grand Jury...." This specific guaranty, as well as the Fifth
   Amendment's Due Process Clause, are, therefore, both brought to
   bear here. Of like relevance is the guaranty of the Sixth Amendment
   that "[i]n all criminal prosecutions, the accused shall enjoy the
   right.., to be informed of the nature and cause of the accusation
   .... (26)


The Court further explained that the "'very purpose of the requirement that a man be indicted by grand jury is to limit his jeopardy to offenses charged by a group of his fellow citizens acting independently of either prosecuting attorney or judge."' (27) Otherwise, "a defendant could then be convicted on the basis of facts not found by, and perhaps not even presented to, the grand jury which indicted him." (28)

It has also long been assumed that facts proving and related to the naked agreement element are not to be presented to the grand jury. As a result, the grand jury is asked to indict without ever knowing the essential facts supporting this element of the crime. The Antitrust Division, not the grand jury, decides the issue. The result is just what the Supreme Court in Russell makes clear the Constitution intended not happen.

Excluding the naked agreement facts from the grand jury undermines the "very purpose of the requirement that a man be indicted by grand jury," which is "to limit his jeopardy to offenses charged by a group of his fellow citizens acting independently of either prosecuting attorney or judge." As noted, a defendant could therefore "be convicted on the basis of facts ... not even presented to, the grand jury which indicted him."

Accordingly, a criminal defendant's constitutional jury rights require that the grand jury, not the Antitrust Division, decide the factual issues related to the naked agreement element of a per se crime. Failing to present the naked agreement facts for the grand jury's decision is unconstitutional.

D. Naked agreement facts are "'essential" and must be included in the indictment

The Court in Russell also held that "[w]here guilt depends so crucially upon such a specific identification of fact, our cases have uniformly held that an indictment must do more than simply repeat the language of the criminal statute." (29) The Court explained that "these basic principles of fundamental fairness retain their full vitality under Rule 7(c) of the Federal Rules of Criminal Procedure," (30) which requires that the "indictment or the information ... be a plain, concise and definite written statement of the essential facts constituting the offense charged...." (31) As the Court further emphasized in 1999 in Jones, if "a fact is an element of an offense [it] must be charged in the indictment, submitted to a jury, and proven by the Government beyond a reasonable doubt." (32)

In antitrust, where the naked agreement facts are assumed to be a legal, not a jury, issue, the essential facts of the naked agreement element usually are not included in the indictment. Accordingly, this long-standing practice is also unconstitutional.

In summary, defending the DeMilta case, and the nearly contemporaneous Booker line of cases on a criminal defendant's rights to jury fact finding on key fact issues, triggered analysis of whether the same constitutional jury rights applied to long-accepted practices in criminal antitrust. The result is admittedly revolutionary: There are four constitutional defects in the use of the per se conclusive presumptions in criminal antitrust, including one with a Supreme Court decision, United States v. U.S. Gypsum Co., that is virtually directly on point. One or more means the end to long-accepted practices regarding the use of per se conclusive presumptions in criminal antitrust.

III. WINNING DEMILTA

In DeMilta, the Justice Department brought a twelve-count criminal case against DeMilta and its two top officers, Frank DeMilta and Ron Vaughn. Count 1 alleged per se illegal supplier allocation by DeMilta and M. Weingold & Co. (Weingold). Counts 2 through 12 alleged that Mr. Vaughn lied to the grand jury eighty-eight times. The case went to trial in Cleveland on June 2, 2009, and the jury acquitted the three defendants on all counts three weeks later. A copy of the judgment appears in appendix A.At one time, scrap metal generated in Cleveland was a staggering 100,000 tons every month. It was generated as waste by Cleveland's automobile and other manufacturing companies. By the time of the indictment, the scrap metal business in the Cleveland area had become highly concentrated. DeMilta was one of the few remaining competitors, but a small player with only three percent of the market (and, fortunately, still in business).

Jack Weingold, owner of Weingold, had previously pleaded guilty to a similar charge involving many other companies in the scrap metal business in northeast Ohio. (33) He was the government's key witness.

Specifically, the Superseding Indictment charged that, "'Beginning at least as early as August 1997 and continuing at least until January 2004, the exact dates being unknown to the Grand Jury, the Defendants DEMILTA IRON & METAL and FRANCIS DEMILTA and [Weingold] entered into and engaged in a combination and conspiracy to suppress and restrain competition by allocating scrap metal suppliers for the purchase of scrap metal in Northeast Ohio," and that, "in return for not soliciting scrap suppliers of its co-conspirators, DEMILTA IRON & METAL was sold scrap metal by [Weingold] at prices below market value," specifically, "$25 under the [trade magazine] Iron Age price" for a type of processed scrap called No. 1 busheling. (34)

   The government's theory was contained in its opening statement:

   Here's what the United States will prove to you beyond any
   reasonable doubt: That on every single type of busheling scrap that
   was sold by the Weingold Company to the DeMilta Iron Company over
   the course of the charged conspiracy, more than six years, on every
   single ton of scrap, it cost Jack Weingold money. He lost money on
   every single ton of busheling scrap that he sold to DeMilta Iron.
   15,000 tons is the approximate amount of busheling scrap that Jack
   Weingold sold to DeMilta Iron between August, 1997 and January 22,
   2004.

   The loss to Jack Weingold was approximately $600,000 in the
   aggregate, and that's a conservative figure.... (35)


The fundamental factual flaw in the government's case, which we pointed out numerous times before and during the trial, was to assume that two types of customers at different levels of the supply chain, and thus the prices they paid for scrap metal, were the same. All twelve counts of the Superseding Indictment assumed that the price DeMilta agreed to pay Weingold for scrap, $25 less than the monthly price published for processed No. 1 busheling in Iron Age, was $25 below the market value for the unprocessed scrap DeMilta bought. Thus the mistake in the government's theory was that DeMilta was a processor that bought unprocessed scrap metal from various sources, including Weingold. DeMilta processed it, and then sold the processed scrap to various buyers, including "brokers." In effect, DeMilta bought wholesale from Weingold and sold to brokers at retail. DeMilta paid $25 below the brokers" price for processed scrap.

More specifically, every month Iron Age magazine published the prices paid by two types of buyers, "consumers" and "brokers," for various types of ferrous scrap metal in Cleveland and a number of other cities. The page containing the price list also included definitions of the two types of customers. As to "brokers," it stated, in relevant part, that"[t]he broker buying price ... represents the price of processed scrap...." (36) That is, the Iron Age price for No. 1 busheling was the processed price for brokers, not the processor's price for unprocessed scrap like the scrap Weingold sold Demilta. Table 1 shows for Cleveland the prices listed for brokers, not processors like DeMilta, including broker-paid prices for the No.1 busheling the government focused on.

36 Scrap Price Bulletin, IRON AGE, Sept. 2, 2008, at 1 (emphasis added). The full text reads: "These are prices obtained in trade based on representative tonnages per gross ton (2,240 pounds) delivered to the consumer unless otherwise stated. The broker buying price is the price of scrap delivered to the consumers minus the freight and commission. The broker buying price thus represents the price of processed scrap loaded onto railroad cars, trucks, or barges FOB the processor or dealer's yard. Prices are the opinions of Scrap Price Bulletin editors and correspondents, based on contacts with dealers, brokers, generators, processors, and users in the industry on the effective date above." Id.

Obviously many things of interest happened in three weeks of trial that are beyond the scope of this article. But the key event in winning the case in my opinion was how we showed the jury that the government's assertion that Weingold lost money on every ton he sold to DeMilta--at $25 under the Iron Age price---was not true (he made money on every ton) and that its key witness was not credible. This undermined the government's entire case.

To grasp the persuasive power of this presentation, imagine you are a member of the jury. Roger Synenberg, counsel for Ron Vaughn, first set up the easel he would use in his cross-examination of Mark Weingold, the son of Jack Weingold, who did not go to jail and did not enter a plea agreement to testify like his father.

Roger started with a blank piece of paper. The jury was spellbound as he worked with Mark Weingold on the witness stand to determine whether or not Weingold made a profit on its sales to DeMilta or, as the government promised to show, "lost money on every single ton of busheling scrap that [it] sold to DeMilta Iron."

Roger started with August 1997. At what price did Weingold buy the scrap? The purchase contract with his supplier used the monthly Iron Age prices as a benchmark, with an agreed-to discount of $11 from the price of a different type of scrap called No. 1 heavy melting. In August 1997, the Iron Age price was $91, and, with the $11 discount, Weingold paid $80.

How much did DeMilta pay Weingold for unprocessed scrap? Again, Iron Age broker prices were used as a reference point. Their agreed-to price, central to the government's case, was $25 less than the price published in Iron Age that month for a different type of scrap, No. 1 busheling. In August 1997, the published price was $121, less $25, so Weingold sold the scrap to DeMilta for $96.

All of which means that in August 1997, Weingold made a profit of $16 per ton ($96-$80), contrary to the government's core theory that Weingold "lost money on every single ton of busheling scrap that [it] sold to DeMilta Iron."

To make sure the jury and everyone else in the courtroom understood, Roger analyzed prices for eleven additional months in riveting detail. He showed that Weingold always made a profit selling to DeMilta and never lost money, as the government repeatedly asserted.

Adding another nail in the coffin of the government's case, Roger showed that, in the last five months of their alleged agreement, Weingold actually paid far less than $11 off the published price the purchase contract called for. This implied that Weingold "cheated" his supplier, probably by paying off one of its employees. How he did it did not matter. The price Weingold paid meant he always made a profit selling to DeMilta.

Below is a likeness of the trial exhibit on the easel:

           Weingold Purchase Price

           = Iron Age price for
           #1 Heavy Melt--$11

Date       Iron Age   Contract   Net

Aug '97    $91        -$11       $80
Sep '97    $91        -$11       $80
Oct '97    $85        -$11       $74
Nov '97    $88        -$11       $77
Dec '97    $93        -$11       $82
Jan '98    $93        -$11       $82
Feb '98    $93        -$11       $82

                                          Actual
                                          Price
                                          Paid
                                       ("Cheating")

Jan '99    $51        -$11       $40       $13
Feb '99    $61        -$11       $50       $23
Mar '99    $71        -$11       $60       $33
Apr '99    $61        -$11       $50       $23
May '99    $61        -$11       $50       $23

           Weingold Selling             Weingold
           Price To DeMilta              Profit
           = Iron Age price for         Or Loss?
           Busheling--$25

Date       Iron Age   Contract   Net     Profit

Aug '97    $121       -$25       $96      $16
Sep '97    $116       -$25       $91      $11
Oct '97    $121       -$25       $96      $22
Nov '97    $129       -$25       $104     $27
Dec '97    $129       -$25       $104     $22
Jan '98    $129       -$25       $104     $22
Feb '98    $119       -$25       $94      $12

Jan '99    $63        -$25       $38      $25
Feb '99    $76        -$25       $51      $28
Mar '99    $73        -$25       $48      $15
Apr '99    $72        -$25       $47      $24
May '99    $78        -$25       $53      $30

SOURCE: (Transcript of Record at 1471-95, United States v. Alliance
National Limited Partnership dba DeMilta Iron & Metal, Ltd., No. 1:
08 CR 68 (N.D. Ohio June 29, 2009); Vaughn Trial Exhibit 2122,
DeMilta, No. 1: 08 CR 68.


As a result, the government's basic theory and repeated representations to the jury that Weingold "lost money on every single ton of busheling scrap that [it] sold to DeMilta Iron," and that "every single type of busheling scrap that was sold by the Weingold Company to the DeMilta Iron Company over the course of the charged conspiracy, more than six years, on every single ton of scrap, it cost Jack Weingold money" were shown repeatedly not to be true--Weingold always made a profit. Roger made sure every juror was engaged and understood every calculation for each of the twelve transactions on the exhibit. Further, the cheating by Weingold further destroyed the credibility of the government's key witnesses. The net result was to effectively destroy the government's case.

On June 29, 2009, the jury acquitted all three defendants, on all twelve counts. See Appendix A for the verdicts.

IV. CONCLUSION

Applying constitutional limits on criminal presumptions, a criminal defendant's constitutional rights to jury fact finding and the unconstitutionality of federal common law crimes has revolutionary implications for criminal antitrust law, as revolutionary as the Supreme Court's Booker line of cases for sentencing law. Ideally the Antitrust Division and, if not, the courts, will end one or more of four long-standing practices in criminal antitrust regarding jury instructions with per se conclusive presumptions and the naked agreement element:

1. per se jury instructions with conclusive presumptions of the unreasonable restraint of trade element of per se crimes should no longer be used and should be replaced by permissive presumptions that follow Supreme Court strictures;

2. the naked agreement element of a per se crime should be decided by the jury at trial and should no longer be treated as a legal issue to be decided by the judge at the charging conference.

3. the naked agreement element of a per se crime should be presented to and decided by the grand jury for an indictment and should not be decided by the Antitrust Division as a legal issue; and

4. indictments should include the essential facts regarding the naked agreement element of a per se crime.

As a policy matter, since 1977, the Supreme Court has been extensively revising U.S. antitrust laws to better match the seismic shift of the U.S. economy to a global applied knowledge economy by eliminating the now dysfunctional antitrust law the Court developed when the U.S economy was industrial and dominant. (37) Thus ending the use of per se conclusive presumptions in criminal antitrust is consistent with what the Supreme Court has been doing for over thirty years, and will be a great advance in antitrust and competition policy (as well as for constitutional rights).

Cases like DeMilta, which never should have been brought for the reasons shown and because sending its two top executives to jail would have eliminated one of few remaining competitors and imposed huge costs on two people and their small company, will no longer be pursued.

Instead, the government will have to focus enforcement on real matters affecting today's global market system, rather than a theoretical world with artificial litigation leverage enabled by conclusive presumptions that are removed from actual evidence of anticompetitive impact. And the government will still be able to win criminal cases against the egregious offenders and real cartels the criminal sanction is intended to reach. (38)

Finally, the United States and the world are at the crossroad between a "perfect storm" of opportunity with the shift to an applied knowledge and entrepreneurial economy, and a "perfect storm" of danger with economies worldwide producing dangerously high levels of unemployment and underemployment (twenty percent in the United States (39) and often worse overseas). Jim Clifton, the chief executive officer of Gallup, Inc., reported that "an increasing number of people in the world are miserable, hopeless, suffering, and becoming dangerously unhappy because they don't have a good job--and in most cases, no hope of getting one." (40)

The tragic failure of government-run economies in Russia and Eastern Europe, China, India and elsewhere, and the thrilling success of countries like South Korea, Taiwan, Singapore, Malaysia and Indonesia, and, after they moved from a government-run economy toward a market economy, China and India, as well as most of America's history, demonstrate the "perfect storm" of opportunity of a market economy. (41) Indeed, the new Prime Minister of China, Li Keqiang, in a recent speech spoke eloquently of the powerful opportunity private markets provide for all (having witnessed first hand the tragedy of China's decades of government-run economics). He said, "The market is the creator of social wealth and the wellspring of self-sustaining economic development." (42)

Accordingly, ending criminal antitrust's per se conclusive presumptions will significantly help antitrust policy to support, rather than continue to suppress, private market competition and innovation in the new reality of a global applied knowledge economy. Thus it will help seize this "perfect storm" of opportunity--and help prevent a "perfect storm" of danger from forming and raging.

APPENDIX A

THE UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION

UNITED STATES OF AMERICA, Plaintiff, CASE NO. 1:08 CR 68 JUDGE DONALD C. NUGENT v. JUDGMENT ALLIANCE NATIONAL LIMITED PARTNERSHIP, d/b/a DEMILTA IRON & METAL, LTD; FRANCIS DEMILTA; and RONALD VAUGHN, Defendants.

The above-captioned case came before this Court for a trial by jury. At the conclusion of the trial, the Jury returned unanimous Verdicts of not guilty on Count1 against Defendants Alliance National Limited Partnership d/b/a/ DeMilta Iron & Metal Ltd ("Alliance") and Francis DeMilta and 11 unanimous Verdicts of not guilty on Counts 2 through 12 against Defendant Ronald Vaughn on the Superseding Indictment.

Defendants Alliance and Francis DeMilta were each charged with one count of Conspiracy to Restrain Trade in violation of 15 U.S.C. [section]1. Defendant Ronald Vaughn was charged with 10 counts of making False Declarations in violation of 18 U.S.C. [section] 1623 and one count of Obstruction of Justice in violation of 18 U.S.C. [section] 1503.

The trial commenced on June 2, 2009. A Jury of twelve was duly empaneled and sworn with four alternates. Court was adjourned until June 3, 2009 at 8:30 a.m.

The trial continued on June 3, 2009. Opening statements of counsel were made. The United States called the following witness(es): (1) Jack Weingold. Court was adjourned until June 4, 2009 at 8:30 a.m.

The trial continued on June 4, 2009. The United States called the following witness(es):

(1) Jack Weingold, continued. Court was adjourned until June 5, 2009 at 8:30 a.m.

The trial continued on June 5, 2009. The United States called the following witness(es):

(2) Loren Margolis. Court was adjourned until June 8, 2009 at 8:30 a.m.

The trial continued on June 8, 2009. The United States called the following witness(es):

(2) Loren Margolis, continued. Court was adjourned until June 9, 2009 at 8:30 a.m.

The trial continued on June 9, 2009. The United States called the following witness(es):

(3) Mark Weingold. Court was adjourned until June 10, 2009 at 8:30 a.m.

The trial continued on June 10, 2009. The United States called the following witness(es):

Mark Weingold, continued;

(4) Jerrod Anthony Mink. Court was adjourned until June 11, 2009 at 8:30 a.m.

The trial continued on June 11, 2009. The United States called the following witness(es):

(4) Jerrod Anthony Mink, continued; (5) Phil Zelznik. Court was adjourned until June 16, 2009 at 8:30 a.m.

The trial continued on June 16, 2009. The United States called the following witness(es):

(5) Phil Zelznik, continued; (6) Brian Michael Brink; (7) Diane Marie Kaiser. Court was adjourned until June 17, 2009 at 8:30 a.m.

The trial continued on June 17, 2009. The United States called the following witness(es): (7) Diane Marie Kaiser, continued; (8) Special Agent David Becarra; (9) Karen Toth. Court was adjourned until June 18, 2009 at 8:30 a.m.

The trial continued on June 18, 2009. The United States called the following witness(es): (9) Karen Toth, continued; (10) Heide Timpiris; (11) Deborah Farran. The United States rested. Defendants' Motions pursuant to Fed. R. Crim. P. 29 were denied as to each Defendant on each count. Defendant DeMilta calls the following witness(es): (1) Judith Roth. Court was adjourned until June 19, 2009 at 8:30 a.m.

The trial continued on June 19, 2009. Defendant DeMilta calls the following witness(es): (2) Kelly Lynn Knight; (3) Sharon Ann Waseleski; (4) Roger Steven Tooley; (5) Dennis Skinner; (6) Clark Edmund Barker; (7) Nichola Swoore; (8) William White; (9) Christopher Jakutis. Court was adjourned until June 22, 2009 at 8:30 a.m.

The trial continued on June 22, 2009. The Defendants call the following witness(es): (9) Christopher Jakutis, continued; (10) Martin B. Socha; (11) Kimberly Stewart; (12) Steven Prince. Court was adjourned until June 23, 2009 at 8:30 a.m.

The trial continued on June 23, 2009. The Defendants call the following witness(es): (13) Ronald Vaughn. Court was adjourned until June 24, 2009 at 8:30 a.m.

The trial continued on June 24, 2009. Closing arguments of counsel were made. The Court instructed the Jury on the law. The Alternate Jurors were excused and the Jury thereafter retired to deliberate. Court was adjourned until June 25, 2009 at 8:30 a.m.

The trial continued on June 25, 2009. The Jury, in open court, returned unanimous Verdicts of Not Guilty as to each of the twelve counts in the Superseding Indictment. The Verdicts were as follows:

VERDICT FORM

VERDICT AS TO COUNT 3, MAKING A FALSE DECLARATION

We the Jury, being duly impaneled and sworn, find the Defendant Ronald Vaughn, NOT GUILTY (insert in ink guilty or not guilty) of Making False Declarations, in violation of Title 18, United States Code, Section 1623 as charged in Count 3 of the Superseding Indictment.

VERDICT FORM

VERDICT AS TO COUNT 4, MAKING A FALSE DECLARATION

We the Jury, being duly impaneled and sworn, find the Defendant Ronald Vaughn, NOT GUILTY (insert in ink guilty or not guilty) of Making False Declarations, in violation of Title 18, United States Code, Section 1623 as charged in Count 4 of the Superseding Indictment.

VERDICT FORM

VERDICT AS TO COUNT 5, MAKING A FALSE DECLARATION

We the Jury, being duly impaneled and sworn, find the Defendant Ronald Vaughn NOT GUILTY (insert in ink guilty or not guilty) of Making False Declarations, in violation of Title 18, United States Code, Section 1623 as charged in Count 5 of the Superseding Indictment.

VERDICT FORM

VERDICT AS TO COUNT 6, MAKING A FALSE DECLARATION

We the Jury, being duly impaneled and sworn, find the Defendant Ronald Vaughn, NOT GUILTY (insert in ink guilty or not guilty) of Making False Declarations, in violation of Title 18, United States Code, Section 1623 as charged in Count 6 of the Superseding Indictment.

VERDICT FORM

VERDICT AS TO COUNT 7, MAKING A FALSE DECLARATION

We the Jury, being duly impaneled and sworn, find the Defendant Ronald Vaughn, NOT GUILTY (insert in ink guilty or not guilty) of Making False Declarations, in violation of Title 18, United States Code, Section 1623 as charged in Count 7 of the Superseding Indictment.

VERDICT FORM

VERDICT AS TO COUNT 8, MAKING A FALSE DECLARATION

We the Jury, being duly impaneled and sworn, find the Defendant Ronald Vaughn, NOT GUILTY (insert in ink guilty or not guilty) of Making False Declarations, in violation of Title 18, United States Code Section, 1623 as charged in Count 8 of the Superseding Indictment.

VERDICT FORM

VERDICT AS TO COUNT 9, MAKING A FALSE DECLARATION

We the Jury, being duly impaneled and sworn, find the Defendant Ronald Vaughn, NOT GUILTY (insert in ink guilty or not guilty) of Making False Declarations, in violation of Title 18, United States Code, Section 1623 as charged in Count 9 of the Superseding Indictment.

VERDICT FORM

VERDICT AS TO COUNT 10, MAKING A FALSE DECLARATION

We the Jury, being duly impaneled and sworn, find the Defendant Ronald Vaughn, NOT GUILTY (insert in ink guilty or not guilty) of Making False Declarations, in violation of Title 18, United States Code, Section 1623 as charged in Count 10 of the Superseding Indictment.

VERDICT FORM

VERDICT AS TO COUNT 11, MAKING A FALSE DECLARATION

We the Jury, being duly impaneled and sworn, find the Defendant Ronald Vaughn, NOT GUILTY (insert in ink guilty or not guilty) of Making False Declarations, in violation of Title 18, United States Code, Section 1623 as charged in Count 11 of the Superseding Indictment.

VERDICT FORM

VERDICT AS TO COUNT 12, OBSTRUCTION OF JUSTICE

We the Jury, being duly impaneled and sworn, find the Defendant Ronald Vaughn, NOT GUILTY (insert in ink guilty or not guilty) of Obstruction of Justice, in violation of Title 18, United States Code, Section 1503 as charged in Count 12 of the Superseding Indictment.

The Court read the Verdicts in open court, and thereafter, the Court polled the Jury as to its Verdicts pursuant to Rule 31(d) of the Federal Rules of Criminal Procedure. Each Juror affirmatively responded to the correctness of the Verdicts. The Court accepted the Jury's Verdicts. The Jury was then discharged. Judgment is entered in favor of Alliance and Francis DeMilta on Count 1 and in favor of Ronald Vaughn on Counts 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12 of the Superseding Indictment. The Defendants were discharged. Court was adjourned.

IT IS SO ORDERED.

s/Donald C. Nugent

DONALD C. NUGENT

UNITED STATES DISTRICT JUDGE

DATE: June 29, 2009

APPENDIX B

Rule 303 Federal Rules of Evidence

Presumptions in Criminal Cases (adopted by the Supreme Court based on Constitutional precedent but not enacted by Congress and not in effect)

(a) Scope. Except as otherwise provided by Act of Congress, in criminal cases, presumptions against an accused, recognized at common law or created by statute, including statutory provisions that certain facts are prima facie evidence of other facts or guilt, are governed by this rule.

(b) Submission to jury. The judge is not authorized to direct the jury to find a presumed fact against the accused. When the presumed fact establishes guilt or is an element of the offense or negatives a defense, the judge may submit the question of guilt or of the existence of the presumed fact to the jury, if, but only if, a reasonable juror on the evidence as a whole, including the evidence of the basic facts, could find guilt or the presumed fact beyond a reasonable doubt. When the presumed fact has a lesser effect, its existence may be submitted to the jury if the basic facts are supported by substantial evidence, or are otherwise established, unless the evidence as a whole negatives the existence of the presumed fact.

(c) Instructing the jury. Whenever the existence of a presumed fact against the accused is submitted to the jury, the judge shall give an instruction that the law declares that the jury may regard the basic facts as sufficient evidence of the presumed fact but does not require it to do so. In addition, if the presumed fact establishes guilt or is an element of the offense or negatives a defense, the judge shall instruct the jury that its existence must, on all the evidence, be proved beyond a reasonable doubt.

AUTHOR'S NOTE: I served as antitrust counsel for the defense in United States v. Alliance National Limited Partnership dba DeMilta Iron & Metal, Ltd., discussed in this article, and have practiced antitrust law since 1973. I was privileged to work with outstanding criminal defense lawyers, Roger Synenberg, William Byer, and members of their law firms.

CHARLES D. WELLER, Charles D. Weller, LLC, Cleveland, Ohio.

(1) United States v. Booker, 523 U.S. 220 (2005). See also Jones v. United States, 526 U.S. 227 (1999); Apprendi v. New Jersey, 530 U.S. 466 (2000); Blakely v. Washington, 542 U.S. 296 (2004); Cunningham v. California, 549 U.S. 270 (2007); Alleyne v. United States, 133 S. Ct 2151 (2013).

(2) No. 1: 08 CR 68 (N.D. Ohio June 29, 2009). Two individuals and a company were charged with one antitrust violation, ten counts of false declaration, and one count of obstruction of justice. Given the government's insistence on jail time and other matters, the case could not be settled and went to trial in June 2009 in Cleveland.

(3) KENNETH BROUN, McCORMICK ON EVIDENCE 583 (6th ed. 2006). I give special thanks to Constitutional Law Professor Ovid Lewis for covering the constitutional issues regarding criminal presumptions in 1971 at Case Western Reserve Law School.

(4) MODEL JURY INSTRUCTIONS IN CRIMINAL ANTITRUST CASES 54 (2009) (emphasis added). See also ABA, Cartel and Criminal Practice Committee, Model Criminal Antitrust Jury Instructions, http://www.abanet.org / antitrust/at-committees/at-crim/resources/model_jury_instructions.shtml (collected criminal jury instructions).

(5) 342 U.S. 246 (1952). Accord Sandstrom v. Montana, 442 U.S. 510, 523 (1979) (unanimous) ("As in Morissette and United States Gypsum Co., a conclusive presumption in this case would 'conflict with the overriding presumption of innocence with which the law endows the accused and which extends to every element of the crime,' and would 'invade [the] factfinding function' which, in a criminal case, the law assigns solely to the jury."). See also Carella v. California, 491 U.S. 263 (1989) (due process under the 14th Amendment).

(6) Id. at 273-75.

(7) 438 U.S. 422(1978).

(8) Id. at 446 (emphasis added) (footnote omitted) (citation omitted).

(9) 598 E2d 1101, 1106 (7th Cir. 1979) (emphasis added). See also United States v. Giordano, 261 F.3d 1134 (11th Cir. 2001).

(10) United States v. Hudson & Goodwin, 11 U.S. 32, 34 (1812).

(11) Liparota v. United States, 471 U.S. 419, 424 (1985). See also United States v. Bass, 404 U.S. 336, 337-38 (1971) ("[B]ecause of the seriousness of criminal penalties, and because criminal punishment usually represents the moral condemnation of the community, legislatures and not courts should define criminal activity.').

(12) The text of Federal Rule of Evidence 303 appears in appendix B.

(13) United States v. Brighton Bldg. & Maint. Co., 598 F.2d 1101, 1106 (7th Cir. 1979).

(14) U.S. DEP'T OF JUSTICE & FEDERAL TRADE COMM'N, STATEMENTS OF ANTITRUST ENFORCEMENT POLICY IN HEALTH CARE 71, 107 (1996).

(15) PHILLIP AREEDA & HERBERT HOVENKAMP, 7 ANTITRUST LAW 403 (2d ed. 2003).

(16) PHILLIP AREEDA & HERBERT HOVENKAMP, 2 ANTITRUST LAW 74 (3d ed. 2007).

(17) PHILLIP AREEDA & HERBERT HOVENKAMP, 11 ANTITRUST LAW 305 (3d ed. 2011).

(18) MODEL JURY INSTRUCTIONS IN CIVIL ANTITRUST CASES (2005).

(19) Id. [section] B-21 (emphasis added).

(20) 515 U.S. 506 (1995).

(21) Id. at 509-10 (citation omitted).

(22) Id. at 510-11 (quoting 2 JOSEPH STORY, COMMENTARIES ON THE CONSTITUTION OF THE UNITED STATES 541 n.2 (4th ed. 1873)).

(23) Id. at 513.

(24) Id. at 523.

(25) 369 U.S. 749 (1962).

(26) Id. at 760-61.

(27) Id. at 771.

(28) Id. at 770 (emphasis added).

(29) Id. at 764.

(30) Id. at 765-66.

(31) Id. at 762 (quoting FED. R. GRIM. P. 7(C)) (emphasis added).

(32) Jones v. United States, 526 U.S. 227, 232 (1999).

(33) Press Release, U.S. Dep't of Justice, Cleveland Scrap Metal Companies Plead Guilty to Supplier Allocation and Bid-Rigging Charges (Mar. 1, 2005), available at http://www.justice.gov/opa/pr/2005/March/05_at_087.htm.

(34) Superseding Indictment [paragraph][paragraph] 2-3, 24, United States v. Alliance National Limited Partnership dba DeMilta Iron & Metal, Ltd., No. 1:08 CR 68 (N.D. Ohio June 29, 2009)

(35) Transcript of Record at 252, DeMilta, No. 1:08 CR 68 (emphasis added).

(37) Since 1977, the Supreme Court has overruled or rejected the use of per se and quick-look presumptions twelve times: Cont'l T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977); U.S. Steel Corp. v. Fortner, 429 U.S. 610 (1977); Broad. Music, Inc. v. Colum. Broad. Sys., 441 U.S. 1 (1979); Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984); NCAA v. Univ. Okla., 468 U.S. 85 (1984); Bus. Elec. Corp. v. Sharp Elec. Corp., 485 U.S. 717 (1988); State Oil v. Khan, 523 U.S. 3 (1997); NYNEX Corp. v. Discon, Inc., 525 U.S. 128 (1998); Cal. Dental Ass'n v. FTC, 526 U.S. 756 (1999); Texaco Inc. v. Dagher, 547 U.S. 1 (2006); Ill. Tool Works, Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006); Leegin Creative Leather Prod., Inc. v. PSKS, Inc., 551 U.S. 877 (2007).

(38) The Antitrust Division's "inside look" on real cartels and all the effort it takes to make cartels shows the kind of evidence real cartels in operation generate. See Scott Hammond, Deputy Ass't Attorney Gen., U.S. Dep't of Justice, Caught in the Act: Inside an International Cartel (Oct. 18, 2005), available at http://www.justice.gov/atr/public/speeches/212266.htm, and James M. Griffin, Deputy Ass't Attorney Gen., U.S. Dep't of Justice, An Inside Look at a Cartel at Work 20-21 (Apr. 6, 2000), available at http://www.justice.gov/atr / public / speeches / 4489.htm.

(39) JIM CLIFTON, THE COMING JOBS WAR 20 (2011).

(40) Id. at 1.

(41) See, e.g., MICHAEL SCHUMAN, THE MIRACLE (2009); JAGDISH BHAGWATI & ARVIND PANAGARIYA, WHY GROWTH MATTERS (2013); HAROLD EVANS WITH GAIL. BUCKLAND AND DAVID LEFER, THEY MADE AMERICA (2004).

(42) David Barboza & Chris Buckley, China Plan Cuts the State's Role in the Economy, Bold Pro-Market Talk, N. Y. TIMES, May 25, 2013, at A1.

Table 1
Brokers' Buying Prices per
Gross Ton on Cars in Cleveland

Type of Scrap Metal    Range of Prices
                       (dollars)

No. 1 heavy melting    444-445
No. 2 heavy melting    434-435
No. 1 dealer bundles   784-785
No. 2 bundles          419-420
No. 1 busheling        809-810

SOURCE: Scrap Price Bulletin,
IRON AGE, Sept. 2, 2008.
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