The opinion of the court was delivered by: SAROKIN
The defendants in this criminal antitrust case move for dismissal of the indictment. The motion is denied.
On September 10, 1987, a grand jury indicted nineteen corporate and seventeen individual defendants
for violating federal antitrust law and for conspiring to defraud the United States. The court has accepted guilty pleas from, and sentenced, a number of the defendants. The remaining defendants now move to dismiss the indictment for legal insufficiency. Because defendants contend that the facts alleged in the indictment, even if proved beyond a reasonable doubt, do not charge a violation of federal law, the court must review the allegations.
On December 2, 1985, a company called S & S Corrugated was declared bankrupt under Chapter 7 of the bankruptcy code. The United States Bankruptcy Court for the Southern District of New York entered an order on February 12, 1986 authorizing the trustee to hold an auction of S & S Corrugated's commercial equipment. That auction, administered by the Daley-Hodking Corporation under the trustee's supervision, occurred on March 11, 1986. The bankruptcy court entered an order on March 14 confirming and approving the auction and authorizing the trustee to execute documents consummating the sale.
According to the indictment, the defendants agreed before the public auction not to bid against one another, and implemented their plan at the auction. Then, immediately after the auction, the defendants held their own private auction of the equipment they had just purchased. Once all items were resold at the private auction, the defendants divided up and shared the difference between the higher prices paid at the private auction and the lower prices paid at the public bankruptcy auction. That difference was in excess of $ 75,000.
Count One of the indictment charges a violation of the Sherman Act, 15 U.S.C. § 1. The defendants' plan, according to the indictment, was a "combination and conspiracy in unreasonable restraint of interstate trade and commerce." It had the effects of restraining and eliminating competition among the defendants, enabling the defendants to pay artificially low prices for equipment at the public auction, and depriving S & S Corrugated and its creditors of full compensation and the benefits of free competition.
Count Two charges a violation of 18 U.S.C. § 371, which forbids conspiracies to defraud the United States. The theory of the indictment is that the defendants defrauded the United States "by impeding, impairing, obstructing and defeating the lawful government function of the Bankruptcy Court in the due administration and enforcement of the Bankruptcy Code," and by deceiving the bankruptcy court into believing that the bids submitted at the auction were products of full and fair competition. The indictment charges the commission of a large number of overt acts in furtherance of the conspiracy, including defendants' attendance at the auction, agreement not to bid competitively, agreement to rebid privately any item bought at the public auction, attendance at the private auction, bidding at the private auction, payment for items, and sharing of the second auction's profits.
Moving to dismiss the indictment in its entirety, the defendants now argue that the indictment fails to charge a violation of 15 U.S.C. § 1 or of 18 U.S.C. § 371, that the counts of the indictment are multiplicitous, and that the indictment represents an impermissibly selective prosecution. The court considers each contention in turn.
A. Bid Rigging as a Per Se Violation
Under 15 U.S.C. § 1, "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." As written, the Sherman Act is of extraordinary breadth. Indeed, it would appear to render illegal even the simplest commercial contract, since the contracting parties' agreement to trade with one another entails, for the purposes of their transaction, an implicit agreement to trade with no other. Despite the Act's breadth, the Supreme Court has upheld the Sherman Act over the objection that it is unconstitutionally vague. See Nash v. United States, 229 U.S. 373, 57 L. Ed. 1232, 33 S. Ct. 780 (1913).
The Court, however, has also narrowed the reach of the Sherman Act to restraints of trade ...