Investigative techniques workshop:cartel activity

Investigative techniques workshop:cartel activity

INVESTIGATIVE TECHNIQUES WORKSHOP: CARTEL ACTIVITY

Workshop Materials

For all participants

DISCLAIMER FOR THE ENGLISH LANGUAGE MATERIALS This material was financed by the United States Agency for International Development (USAID). Opinions expressed in this material are those of the author(s). They do not purport to reflect the views of the United States Department of Justice and are not necessarily shared by USAID.


INFORMATION AND OVERVIEW

This three-day workshop is designed to improve skills in investigating suspected cartel activity. The ultimate goal is to develop a better understanding of what evidence may be available, useful, and necessary to bring a successful enforcement action.

The case material centers on suspected price fixing by a group of industrial linen suppliers in Moscow. The workshop will combine presentations/lectures, discussions, demonstrations, participatory «analysis and strategy sessions» of the kind that agency investigators might have during an investigation, and participatory «learning by doing» witness questioning.

Full-group sessions and breakout groups

Much of the workshop will be conducted in one large group of all participants - presentations, discussions, and demonstrations. In the participatory sessions involving witness questioning, as many participants as possible can have the opportunity for questioning.

Witnesses

There are five witnesses who could be questioned (examined) during the workshop. Department of Justice (DOJ) advisors will probably play the roles of the witnesses. Workshop participants will be responsible for preparing to question the witnesses. The witnesses become more difficult as the workshop progresses, both in factual content and method of answering questions.

A DOJ advisor will begin the questioning of the first witness, Katerina Ivanovna.. Workshop participants may volunteer or be selected to continue the questioning of Katerina Ivanovna. The DOJ advisors will monitor the questioning by participants, assist where necessary, and demonstrate techniques where it would be helpful to do so, and provide comments and lead a discussion about the questioning process.

Workshop participants will be divided into groups and asked, either by the Federal Antimonopoly Service (FAS) before the workshop starts or by the DOJ advisors on the first day of the workshop, to prepare to question some or all of the remaining witnesses. The DOJ advisors will also serve as instructors to oversee and assist their questioning.

The remaining witnesses are: Peter Pavlovitch, Maria Mihalovna, Dimitri Dostoyevsky, and Alexander Andreovitch. While the roles as written have an identity as men or women, all roles are designed so that they could be played by participants of either gender. At this conference, it is likely that the DOJ advisors will play the witnesses, although that is not necessary.

If requested, after the workshop is over, a separate information package with the descriptions of each witness will be available for future use. In addition to discussing the facts and documents each witness knows about, the description includes a brief discussion of the lessons each examination is designed to teach. To make each examination as realistic as possible, we have also provided suggestions about the personality of the witness or the ways each might respond to questions. Those who are assigned to witness roles are asked not to share these witness facts with the participant questioners; the purpose of the exercise is for the participants to find out these facts by questioning the witnesses. If we do not have enough time to examine each witness, the portion of the package relating to any witness we skip will be distributed so that participants can be prepared to examine the remaining witnesses

In general, witnesses are encouraged to be creative, both with the facts and the witness's personality, where it would make the examination more life-like. (For example, when some witnesses are questioned by investigators, they provide information of little relevance to the investigation and have difficulty staying on the subject.)

Participant Questioners

Also included in this information package is a short summary of the «Facts Known to the Investigation to Date» and a copy of each relevant document. This is the only information that should be given to the participant questioners before the conference starts.

While this material will be helpful in examining some of the witnesses, much of the questioning of the later witnesses will, for the most part, build on the facts that are developed during the examinations of the earlier witnesses.

The workshop is set up to allow as many participants as possible to participate in the witness examinations. We request that the FAS assign multiple participants to prepare the examination of each witness, with a different group of participants for each witness. In this way, as many people as possible will have a chance to practice interviewing more than one witness.

Each participant should be prepared to conduct the entire examination of his or her assigned witness. However, if necessary to prevent undue repetition or to stay within the time limitations, the DOJ advisors may ask a participant to focus the questions on a particular subject matter. (For example, the first participant might be asked to develop background facts and office procedures, the next participant to focus on communications between Dimitri Dostoevsky and Alexander Andreovitch, and the last participant to establish facts about the discussions at trade association meetings.) If time permits after the assigned participants have completed their questioning, other participants who have been watching may volunteer to ask questions of the witness.

The advisors will offer comments on each participant's examination, both as to substance and style. The advisors may also demonstrate certain lines of questioning. Before each witness session, the DOJ advisors will make presentations or lead discussions on subjects of general application or on subjects likely to arise in the upcoming session. After each witness session, the entire group will review whether all relevant facts were obtained, what information may require follow-up, and what the next step in the investigation might be.


IDENTIFYING AND INVESTIGATING CARTELS: THREE-DAY AGENDA FOR CARTEL ACTIVITY WORKSHOP

DAY ONE: Identifying Cartels

10:00 a.m to 11:00 a.m.- Introductions

11:00 a.m. to 11:45 a.m.- Program Overview
·Advisors' Introductions
·Overview of Workshop

11:45 a.m. to 12:45 p.m.- Lecture: Detecting Cartels
·Defining and Identifying Cartels
·How Cartels Operate

12:45 p.m. to 2:00 p.m.-Lunch

2:00 p.m. to 4:00 p.m.-Lecture: Planning an Investigation
·Basic Approach to Cartel Investigations
·Strategic Considerations When Beginning an Investigation

Hypothetical Part I
·Review Fact Pattern

4:00 p.m. to 4:15 p.m.-Break

4:15 p.m. to 5:00 p.m.-Hypothetical Part II
·Open Discussion: What Information We Might Hope to Obtain from Katerina Ivanovna
·Question Katerina Ivanovna (played by Advisor) by Advisor.
·Open Discussion: Review Katerina Ivanovna questioning. Discuss how that information can advance the investigation.

5:00 p.m. to 6:00 p.m.-Roundtable: Compare and Contrast DOJ, FTC and FAS Investigations

DAY TWO: Investigating Cartels

10:00 a.m. to 11:00 a.m.- Lecture: Questioning a Witness
·Preparation
·Using Documents
·Obtaining Evidence

11:00 a.m. to 12:30 p.m.- Hypothetical Part III
·Review: What Information We Might Hope to Obtain from Peter Pavlovitch
·Question Peter Pavlovitch.
·Review Peter Pavlovitch questioning. Discuss how that information can advance the investigation.

12:30 p.m. to 2:00 p.m.-Lunch

2:00 p.m. to 3:00 p.m.-Lecture: Obtaining and Using Documents in an Investigation

3:00 p.m. to 3:30 p.m.-Hypothetical Part IV
·Review: What Information We Might Hope to Obtain from Maria Mihalovna

3:30 p.m. to 3:45 p.m.-Break

3:45 p.m. to 5:00 p.m.-Hypothetical Part IV (continued)
·Question Maria Mihalovna
·Review Maria Mihalovna questioning. Discuss how that information can advance the investigation.

5:00 p.m. to 6:00 p.m.-Open Forum: Detecting Cartels
·Markets Most Likely to Have Cartels
·How Cartels Can Come to Your Attention

DAY THREE: Proving a Cartel Exists

10:00 a.m. to 11:00 a.m. -Lecture: Cartel Defenses and Responses

11:00 a.m. to 12:30 p.m.-Hypothetical Part V
·Review: What Information We Might Hope to Obtain from Alexander Andreovitch
·Question Alexander Andreovitch
·Review Alexander Andreovitch questioning. Discuss how that information can advance the investigation.

12:30 p.m. to 2:00 p.m.-Lunch

2:00 p.m. to 3:30 p.m.-Hypothetical Part V
·Review information obtained from Alexander Andreovitch. Discuss how that information can advance the investigation.
·Question Dimitri Dostoevsky; discuss how that information can advance the investigation.

3:30 p.m. to 3:45 p.m.-Break

3:45 p.m. to 5:00 p.m.-Lecture: Proving an agreement

Open Discussion: has a violation been established under Russian law? Under U.S. law?

5:00 p.m. to 6:00 p.m.-Closing Remarks


FACTS KNOWN TO THE INVESTIGATION

You are investigating possible price fixing among suppliers of industrial linen services throughout Moscow. These companies provide laundered linens in daily deliveries to large facilities such as hospitals and hotels. While there are a number of companies that provide linen services to businesses such as restaurants, only seven companies located in Moscow are capable of servicing such large-scale facilities. (Despite high transportation costs, there is only one other company, St. Petersburg Linens, that is also capable of competing for the same customers.) These Moscow industrial linen companies compete for the same customers and are part of the Moscow Industrial Linen Supplier Association (MILSA).

Origin of Investigation

The investigation was begun March 2005 after a hotel, the Moscow Excelsior Hotel, lodged a complaint. The Moscow Excelsior alleged that it requested a price quote from its current industrial linen supplier, Alpha Linen Corp., and received in response a fax dated 4 January 2005 stating that, according to an agreement among industrial linen suppliers, each linen supplier would now additionally charge for the retrieval of linens as of 31 January 2005. The complaint stated that the hotel then requested a price quote from Beta Company on 4 January 2005, hoping to avoid this linen retrieval charge. In response, Moscow Excelsior received a price quote by fax from Beta Company on 6 January 2005 that did not include a linen retrieval charge. However, the general manager of Beta Company, Alexander Andreovitch, called back to withdraw that quote the next day.

Moscow Excelsior submitted to the FAS a copy of its price quote request to Beta Company (SE-001), Beta Company's faxed price quote (SE-002-003), and a phone message slip reflecting Alexander Andreovitch withdrawing the price quote (SE-004).

The complaint also noted that Moscow Excelsior had been trying to reduce its linen costs by repeatedly requesting competitive price quotes from some of the linen suppliers over the last calendar year (2004), but that all the companies quoted very similar prices. Also, Moscow Excelsior observed that prior to last year, in spring of 2003, some companies were quoting different, lower prices, but it did not maintain records of those price quotes. You have requested and obtained the price quote documents from 2004, as well as the January price quote fax from Moscow Excelsior.


Review of Alpha Linen Corp.'s Information

Based on the documents and information that Alpha Linen Corp. produced to the FAS, you have identified the key players at Alpha Linen Corp. The Alpha Linen Corp. appears to be run by Dimitri Dostoevsky, the general manager, who has been with Alpha Linen Corp. since 1994. Peter Pavlovitch was the sales manager for Alpha Linen Corp. from 2001 until early 2005. He was responsible for handling all current and prospective customer accounts, including communication of price quotes. Katerina Ivanovna has been the secretary to Dimitri Dostoevsky since 1994. Katerina Ivanovna signed the document compliance statement on behalf of Alpha Linen Corp., certifying that the FAS had received all of the company's relevant documents.

Documents received from Alpha Linen Corp. include a memo from Alpha Linen Corp.'s Assistant General Manager, Fyodor Rostov, about a June 2003 MILSA meeting (A-001); a revised price list from June 2003 (A-002); telephone message slips (A-003-004); and a price quote to Moscow Excelsior in January 2005 (A-005-006).

Review of MILSA's Information

Based on documents and information obtained from MILSA, including minutes of association meetings (e.g., MILSA-001-002), you have identified Maria Mihalovna to be the president of MILSA and that Dimitri Dostoevsky regularly attended MILSA meetings, and that Alexander Andreovitch infrequently attended meetings. You have also learned that Alpha Linen Corp.'s Assistant General Manager, Fyodor Rostov, occasionally attended MILSA meetings when Dimitri Dostoevsky was not present.

Review of Price Information

From your review of price quote information provided by Moscow Excelsior, you observed that over the calendar year 2004, while the «per kilo» prices for laundering linen quoted were nearly identical among all linen supply companies, the companies sometimes quoted different prices for other additional services. However, the «per kilo» price would account for nearly 90% of the total cost of the service for the hotel. January 2005 was the first time that any company had quoted an additional charge for linen retrieval.

Investigation

You are the investigators in this matter and plan to interview Katerina Ivanovna, Peter Pavlovitch, Maria Mihalovna, Dimitri Dostoevsky, and Alexander Andreovitch.
Your review of the Alpha Linen Corp. document submission has raised concerns on your part because no diaries, calendars or other form of notebooks used by Dimitri Dostoevsky were produced to the FAS, even though the Commission requested that each company, including Alpha Linen Corp., produce such documents.

ASSIGNMENTS

Workshop participants are needed for the following assignments.

WITNESS QUESTIONERS: Each participant should be assigned to prepare to question several witnesses, using the principles developed in the course in a «learning by doing» method. DOJ Advisors will advise and assist in preparing the questioning.

Witness - Questioner:
Katerina Ivanovna - 1. DOJ Advisor
Peter Pavlovitch - 1.
Maria Mihalovna - 1.
Alexander Andreovitch - 1.
Dimitri Dostoevsky - 1.


Documents Obtained in the Investigation

You have reviewed and copied for use during the interviews the following records submitted by Alpha Linens Corporation:

·Report of MILSA meeting (2 June 2003) to Dimitri Dostoevsky by Fyodor Rostov, dated 3 June 2003 (A-001)
·Alpha Corp.'s «Revised Price List,» dated 4 June 2003 (A-002)
·Phone message slip reflecting a return call from Alexander Andreovitch, dated 4 June 2003 (A-003)
·Phone message slip reflecting a returned call from Alexander Andreovitch, dated 6 January 2005 (A-004)
·Fax response to price quote request from Moscow Excelsior Hotel (3 January 2005), dated 4 January 2005 (A-005-006)

You have reviewed and copied for used during the interviews the following records submitted by MILSA:

·Minutes of MILSA meetings, including 2 June 2003 (MILSA-001) and 30
December 2004 (MILSA-002) meetings

You have reviewed the following records submitted by Moscow Excelsior:

·Moscow Excelsior's price quote request to Beta Company, dated 4 January 2005 (SE-001)
·Beta Company's faxed price quote, dated 6 January 2005 (SE-002-003)
·Phone message slip reflecting a call from Alexander Andreovitch
withdrawing Beta Company's price quote, dated 7 January 2005 (SE-004)


DOCUMENTS OBTAINED FROM ALPHA LINENS CORP.
(numbered A-001, etc.)


Alpha Linens Corp.

Quality Service Always

MEMORANDUM

DATE: 3 June 2003
TO: Dimitri Dostoevsky, General Manager
FROM: Fyodor Rostov, Assistant General Manager
RE: MILSA Meeting 2 June 2003

According to your instruction, I attended the meeting of the Moscow Industrial Linen Suppliers Association, MILSA, on 2 June 2003.

In addition to usual business, the main topic of discussion, of course, was St. Petersburg Linenes and what it is doing to the marketplace. Everybody reports that St. Petersburg is attacking their customers, charging ridiculously low prices, making promises that it cannot keep, and generally ruining the industry. Even the General Director of MILSA, Ms. Maria Mihalovna, said that she is afraid of a return to the unsettled and unprofitable times of the early 1990s.

The general feeling was that the only way is to «fight fire with fire.» Prices are being quoted as low as 20 roubles per kilo. That is the lowest that anyone can remember, and even lower than St. Petersbug Linens has dared to charge. Maybe now St. Petersburg will come to its senses and either return to its home territory or behave like a responsible company.

Following your instructions, I did not say anything at the meeting.


Alpha Linens Corp.

Quality Service Always

REVISED PRICE LIST, 4 June 2003 Effective Immediately

Normal Laundry service, wash and fold, per kilo: 20 roubles
All special services and requests will be charged per prior price list issued 1 September 2002.


Alpha Linens Corp.

Quality Service Always
Fax Number: 333-777-6555
Voice Number: 333-777-6543

FAX COVER SHEET
Date: 4 January 2005
To: Ms. Borodina
Of: Moscow Excelsior Hotel, Purchasing Dept.
Fax Number: (333) 514-0536
From: Peter Pavlovitch

Pages Sent (including this sheet): 2

Remarks: Attached is the price quotation that you requested. We look forward to continuing to provide linen service to Moscow Excelsior Hotel.


Alpha Linens Corp.

Quality Service Always

Price Quotation
4 January 2005
For: Moscow Excelsior Hotel
Submitted in response to your request of 3 January 2005

Linen service, wash and fold: 40 roubles per kilogram
Linen retrieval charge: 1500 roubles per delivery*

* Effective 31 January 2005, MILSA members will impose a linen retrieval charge of 1500 roubles per delivery
Other services per usual and customary charges.


DOCUMENTS OBTAINED FROM MILSA
(numbered MILSA-001, etc.)


MOSCOW INDUSTRIAL LINEN SUPPLIERS ASSOCIATION

Minutes, Association Meeting, 2 June 2003

1. General Director Maria Mihalovna called the meeting to order.

2. Minutes of the previous meeting were reviewed and approved.

3. A report of the Government Relations Committee was heard.

4. A general discussion of industry market conditions was had. Members observed the disruption caused in the marketplace by recent entry of St, Petersburg Linens. Members discussed the need for firms to carefully consider all their actions and behave in a manner that does not harm the group unnecessarily. Members recognized that all must share in any sacrifice caused by difficult market conditions that affect all members.

Attending:

Staff:
Ms. Maria Mihalovna, General Director, MILSA
Mr. Ivan Sharpov, Assistant Director, MILSA

Members:
Mr. Fydor Rostov, Alpha Linens
Mr. A. Kusnetsov, Gamma Laundry
Mr. P. Gergiev, Delta Industrial Linens
Ms. N. Ustinov, Epsilon Corp.
Mr. L. Plishka, Theta Brothers Linen Supply
Mr. D. Horostovsky , Sigma Laundry, Inc.


MOSCOW INDUSTRIAL LINEN SUPPLIERS ASSOCIATION

Minutes, Association Meeting, 30 December 2004

1. General Director Maria Mihalovna called the meeting to order.

2. Minutes of the previous meeting were reviewed and approved.

3. A report of the Insurance Committee was heard.

4. Members discussed current market conditions. Special attention was given to increased pressure on profit margins. Ms. Maria Mihalovna observed that all firms need to maintain profitability in order to meet their responsibilities to the industry as well as their shareholders. Particular discussion was had of costs of delivery and pickup, including the recent studies documenting increased traffic congestion and the current high rate of petrol prices. All members took careful note of the problems and the need to behave wisely was recognized.

Attending:

Staff:
Ms. Maria Mihalovna, General Director, MILSA
Mr. Ivan Sharpov, Assistant Director, MILSA

Members:
Mr. Dimitri Dostoevsky, Alpha Linens
Mr. A. Kusnetsov, Gamma Laundry
Mr. P. Gergiev, Delta Industrial Linens
Ms. N. Ustinov, Epsilon Corp.
Mr. M. Barishnikov, St. Petersburg Linen Co.
Mr. L. Plishka, Theta Brothers Linen Supply
Mr. D. Horostovsky , Sigma Laundry, Inc.


DOCUMENTS OBTAINED FROM Moscow EXCELSIOR HOTEL
(numbered SE-001, etc.)



Moscow Excelsior Hotel

Purchasing Department

47 Moscow Road

Fax Number: (333) 514-0536
Voice Number: (333) 514-0500

If you have received this facsimile in error, please immediately notify the sender at the telephone number listed on this coversheet and the original facsimile must be returned to the address above. Thank you.

FAX COVER SHEET
Date: 4 January 2005
To: Mr. Alexander Andreovitch
Of: Beta Company
Fax Number: (333) 221-9876
From: Ms. Borodina

Pages Sent (including this sheet): 1

Remarks: Please provide a price quotation for providing laundry service to Moscow Excelsior Hotel. We are considering changing suppliers, and we are looking for an affordable and reliable linen supplier. Thank you.



Beta Company

»The finest linens for the finest customers.»
Providing industrial linens to Moscow since 2001

Head Office
Fax: (333) 221-9876
Fax Cover Sheet
Date: 6 January 2005
Time: 9:30 a.m.

To: Ms. Borodina
Section: Purchasing Dep't, Moscow Excelsior Hotel
Fax Number: (333) 514-0536
From: Alexander Andreovitch, Beta Company
Phone Number: 765-4321
Total Pages Transmitted: 2 (Including Transmittal Sheet)

Comments:

In response to your request of 4 January 2005, we submit the attached price quotation for Moscow Excelsior Hotel linen service.
We are pleased at the opportunity to provide service to Moscow Excelsior Hotel. We believe that you would find our company efficient and responsive. We would provide the highest quality service.
We hope that you accept this offer. Please contact us with any questions.


Beta Company

»The finest linens for the finest customers.»
Providing industrial linens to Moscow since 2001

PRICE QUOTATION

Beta Company would be pleased to provide complete linen service to:
Moscow Excelsior Hotel

on the following basis:

Per kilo: 40 roubles

Any special or additional services would be at our normal rates.

We look forward to being of service to you.

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