UNITED STATES OF AMERICA v. JEAN PAUL VAN AVERMAET (2023)

REPORT AND RECOMMENDATION

This case involves allegations of an anticompetitive conspiracy among several Belgian security providers related to contracts for the provision of security services. Mr. Jean Paul Van Avermaet (“Mr. Van Avermaet”), the former CEO of a Belgian security services company, is one of four defendants charged in the instant action. He faces one charge by indictment of violating the Sherman Antitrust Act, 15 U.S.C. § 1 (“Sherman Act”). Pending before the Court are two motions from Mr. Van Avermaet seeking the dismissal of distinct portions of Count One. See Def. Van Avermaet's Mot. Dismiss NATO Portion of Count One for Lack of Jurisdiction (“Mot. Dismiss NATO”), ECF No 42; Def. Van Avermaet's Mot. Dismiss DoD Portion of Count One for Failure to State Offense (“Mot. Dismiss DoD”), ECF No. 43. For the reasons explained below, the undersigned recommends DENYING Mr. Van Avermaet's motions.

I. BACKGROUND

A. The Sherman Act

The Sherman Act outlaws “[e]very contract, combination ․, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations[.]” 15 U.S.C. § 1. Restraints on trade may be per se unreasonable when they are “imposed by agreement between competitors,” such as price-fixing or bid-rigging agreements. Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 730 (1988). However, the Foreign Trade Antitrust Improvements Act (“FTAIA”), 15 U.S.C. § 6a, “makes the Sherman Act inapplicable to conduct involving non-import foreign trade or commerce with one exception: when such conduct has a direct, substantial, and reasonably foreseeable effect on domestic trade or commerce and such effect gives rise to a claim under [the Sherman Act].” Empagran S.A. v. F. Hoffmann-La Roche, Ltd., 417 F.3d 1267, 1268 (D.C. Cir. 2005) (cleaned up). Conversely, the Sherman Act does not apply when “[t]he price-fixing conduct significantly and adversely affects both customers outside the United States and customers within the United States, but the adverse foreign effect is independent of any adverse domestic effect.” F. Hoffmann-La Roche, Ltd. v. Empagran S.A., 542 U.S. 155, 164 (2004), rev'g 315 F.3d 338 (D.C. Cir. 2003).

B. Factual Background

The government charged: Mr. Van Avermaet; Seris Security NV (“Seris”), another Belgian security service company; Mr. Danny Vandormael, the former Chief Executive Officer (“CEO”) of Seris; and Peter Verpoort, the former Director of Guarding & Monitoring for Seris (collectively, “Defendants”). See Indictment ¶¶ 3–7, ECF No. 1. “From at least as early as 2010 and continuing until 2020,” Mr. Van Avermaet served as CEO of G4S Secure Solutions NV (“G4S”), a Belgian security services company. Id. ¶ 7. The general thrust of the conspiracy allegation is that “[b]eginning at least as early as Spring 2019 and continuing until as late as Summer 2020,” three competitor security service companies—Seris, Securitas, and G4S (charged elsewhere)¹ —came to a “continuing agreement” under which they would “coordinat[e] price increases; submit[ ] artificially-determined, non-competitive, inflated bids; and refrain[ ] from bidding for certain contracts,” all to allocate security service contracts among themselves at inflated, non-competitive prices. Id. ¶¶ 13, 16, 17; see Mot. Dismiss DoD at 1. The government specifically singles out contracts “with the United States, through the Department of Defense [(‘DoD’)],” which invited firms to bid on contracts for security services on American military bases in Belgium and with the North Atlantic Treaty Organization (“NATO”).² Indictment ¶ 16. According to the government, Defendants and their co-conspirators carried out the conspiracy by

attending meetings and engaging in discussions during which they agreed to allocate customers, rig bids, and fix prices ․; participating in meetings to discuss which co-conspirator would submit the winning bid on particular tenders, including those issued by the [DoD] for locations in Belgium ․; agreeing, during those meetings and communications, not to compete against each other for particular tenders ․; submitting or withholding bids in accordance with the agreements reached ․; [and] providing security services at collusive and non-competitive prices[.]

Id. ¶ 18.

Regarding Mr. Van Avermaet, the government points to a “coordination[ ] breakfast meeting” that Mr. Van Avermaet arranged between Mr. Vandormael and an executive for another Belgian security service as an overt act in furtherance of the conspiracy. Id. ¶¶ 11, 18(a). More broadly, the government alleges Mr. Van Avermaet's involvement in the conspiracy via his role as CEO of G4S. See U.S.’s Consolidated Opp'n Def. Van Avermaet's Mots. Dismiss (“Gov't Opp'n”) 9, ECF No. 48.

The government charges that this conspiracy “was a per se unlawful, and thus unreasonable, restraint of interstate and foreign trade and commerce in violation of Section 1 of the Sherman Act (15 U.S.C. § 1).” Indictment ¶ 16. Among other effects, the conspiracy allegedly “prevented the [DoD] from receiving true competition for bids on a contract” and “caused the [DoD] to pay non-competitive prices for security services.” Id. ¶ 20.

C. Procedural History

On June 29, 2021, the grand jury returned an indictment against Defendants. See Indictment. On December 8, 2021, Judge Chutkan arraigned Mr. Van Avermaet. See Min. Entry (Dec. 8, 2021). On August 16, 2022, Mr. Van Avermaet moved to dismiss Count One. First, Mr. Van Avermaet moved to dismiss the portion of Count One related to the NATO contracts for lack of jurisdiction. See Mot. Dismiss NATO. Second, Mr. Van Avermaet moved to dismiss the portion of Count One related to the DoD contracts for failure to state an offense. See Mot. Dismiss DoD. On September 8, 2022, the government filed its consolidated response. See Gov't Opp'n. On September 20, 2022, Mr. Van Avermaet filed two reply briefs. See Reply Supp. Mot. Dismiss NATO Portion for Lack Jurisdiction (“NATO Reply”), ECF No. 49; Reply Supp. Mot. Dismiss Count DOD Portion for Failure to State Offense (“DoD Reply”), ECF No. 50. On January 26, 2023, Judge Chutkan referred the case to this Court for full case management and a report and recommendation. See Min. Order (Jan. 26, 2023).

II. LEGAL STANDARD

Under Federal Rule of Criminal Procedure 12(b)(3)(B), a motion alleging “a defect in the indictment or information” must be made raised pretrial. “[W]hen considering a motion to dismiss an indictment, a court assumes the truth of those factual allegations.” United States v. Ballestas, 795 F.3d 138, 149 (D.C. Cir. 2015) (citing Boyce Motor Lines v. United States, 342 U.S. 337, 343 n.16 (1952)).

III. DISCUSSION

A. Motion to Dismiss NATO Portion for Lack of Jurisdiction

1. Legal Standard for Subject Matter Jurisdiction Under FTAIA

The government suggests that FTAIA's applicability is non-jurisdictional. See Gov't Opp'n at 18. However, the D.C. Circuit has held otherwise. While deciding Empagran S.A. v. F. Hoffmann-La Roche, Ltd., the D.C. Circuit twice analyzed the scope of the Sherman Act's applicability to foreign commerce under the FTAIA under a subject matter jurisdiction framework, ultimately concluding that the Court was “without subject matter jurisdiction under FTAIA.” 417 F.3d at 1269; see also Empagran, 315 F.3d at 341, vacated on other grounds, 542 U.S. at 159.

To determine if the FTAIA exception applies—and thereby confers jurisdiction—courts examine causation. See Empagran S.A., 417 F.3d at 1268, 1271. “ ‘[B]ut-for’ causation between the domestic effects and the foreign injury claim is simply not sufficient to bring anticompetitive conduct within the FTAIA exception[.]” Id. at 1270–71; see 15 U.S.C. § 6a(1)(A). Rather, there must be a “direct causal relationship, that is, proximate causation.” Empagran S.A., 417 F.3d at 1271.

2. Mr. Van Avermaet's Motion to Dismiss NATO Portion of Count One is Denied.

Under the Sherman Act, “[t]he character and effect of a conspiracy are not to be judged by dismembering it and viewing its separate parts, but only by looking at it as a whole.” Cont'l Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 699 (1962) (citing United States v. Patten, 226 U.S. 525, 544 (1913)). In this vein, courts have recognized “a clear and compelling countervailing interest in the comprehensive adjudication of conspiracy claims brought under the Sherman Act,” rather than compartmentalizing “conspiracy allegations in antitrust cases” and “consider[ing them] in isolation[.]” Jung v. Ass'n of Am. Med. Colls., 300 F. Supp. 2d 119, 155–56 (D.D.C. 2004).

The alleged bid-rigging conduct as it relates to DoD contracts—i.e., foreign contracts with the American government—brings the entire conspiracy within the ambit of the Sherman Act. See United States v. Hsiung, 778 F.3d 738, 759 (9th Cir. 2015) (holding indictment for Taiwanese company's sales to U.S. companies sufficiently alleged fell within exception of FTAIA because price-fixing of foreign sales affected domestic price) (quoting 15 U.S.C. § 6a). Mr. Van Avermaet's proposed “dismembering” of the conspiracy on a contract-by-contract basis—instead of “looking at it as a whole”—is at odds with how the Court determines the applicability of the Sherman Act. See Cont'l Ore Co., 370 U.S. at 699 (citing Patten, 226 U.S. at 544).

Mr. Van Avermaet's attempt to reduce the Indictment to a contract-by-contract accounting also fails by ignoring the discrete bases of criminal liability required for such compartmentalization. Mr. Van Avermaet asserts that “[c]ourts regularly” allow such atomization by “dismiss[ing] the parts of a single antitrust conspiracy that concern foreign commerce claims barred by the FTAIA and allow[ing] the remaining parts of the lawsuit to proceed.” NATO Reply at 6. Yet, his supporting cases involve the dismissal of discrete claims in civil antitrust cases, rather than the dismissal of discrete portions of a single conspiracy charge in a criminal antitrust case. In Emerson Elec. Co. v. Le Carbone Lorraine, S.A., the court dismissed the plaintiffs’ Sherman Act claims arising out of purchases abroad because “there [was] no claim that the foreign purchases directly affected domestic commerce or American import or export commerce,” but allowed the domestic claims to proceed. 500 F. Supp. 2d 437, 443–47 (D.N.J. 2007). Similarly, in eMag Sols. LLC v. Toda Kogyo Corp., the court dismissed claims raised by foreign plaintiffs in “purely foreign commerce ․ because [those] plaintiffs [were] unable to allege that their injury was directly linked to acts that caused injury to U.S. commerce,” but allowed claims by domestic plaintiffs to proceed. No. 2-cv-1611, 2005 WL 1712084, at *8 (N.D. Cal. July 20, 2005) (cleaned up). And in Motorola Mobility, Inc. v. AU Optronics Corp., the court dismissed the Sherman Act claims related to purchases by the plaintiff's foreign affiliates that were delivered to those affiliates’ facilities abroad, distinguishing “[plaintiff's] claims based on overseas purchases” from the domestic category of claims. No. 9-cv-6610, 2014 WL 258154, at *10 (N.D. Ill. Jan. 23, 2014), aff'd, 775 F.3d 816, 819 (7th Cir. 2015).

Even if “[a] court may dismiss a portion of a count,” they may—by Mr. Van Avermaet's own admission—do so only “where the allegations could establish a discrete basis of criminal liability.” Mot. Dismiss NATO at 2. Yet Mr. Van Avermaet does not establish that the NATO contract and the DoD portion each “provide a discrete basis for the imposition of criminal liability[.]” United States v. Oakar, 111 F.3d 146, 150 (D.C. Cir. 1997) (confirming D.C. Circuit's jurisdiction to hear appeal of order striking specific allegations from conspiracy count if they “provide a discrete basis for the imposition of criminal liability”).

Regardless, the foreign commerce here allegedly had a direct effect on domestic commerce that “follows as an immediate consequence of the defendant's activity” and “gives rise” to the injury. United States v. LSL Biotechs., 379 F.3d 672, 680 (9th Cir. 2004) (citing Republic of Arg. v. Weltover, Inc., 504 U.S. 607, 618 (1992)); 15 U.S.C. § 6a(2). The DoD suffered injury by paying inflated, non-competitive prices for security service contracts. See Indictment ¶¶ 17, 20. In other words, the U.S. government—the ultimate domestic consumer—overpaid for security services because of the conspiracy to mitigate competition, “[taking] money from the federal treasury.” United States v. Anderson, 326 F.3d 1319, 1330 (11th Cir. 2003) (affirming conspiracy convictions in connection with scheme to rig bids for USAID-funded contracts abroad).

In Anderson, the Eleventh Circuit similarly recognized a potential “substantial effect on domestic commerce” because the defendant's conduct “took money from the federal treasury.” Id. Mr. Van Avermaet contends that Anderson is inapposite because the contracts at issue were 1) funded with earmarked U.S. funds; 2) administered by a U.S. agency; and 3) awarded to U.S. companies. See Mot. Dismiss NATO at 6; Anderson, 326 F.3d at 1330. But these factors were not dispositive. Anderson, 326 F.3d at 1330. Rather, the court looked at the anticompetitive scheme “[t]aken as a whole” and evaluated the government's “considerable evidence” of the intended and actual “substantial effect on domestic commerce.” Id. Applying such a holistic frame of analysis, the involvement of DoD contracts in this alleged scheme creates the requisite “direct, substantial, and reasonably foreseeable effect” on domestic commerce. 15 U.S.C. § 6a.

Even without the DoD contracts, Mr. Van Avermaet's anticompetitive conduct concerning the NATO contracts and its substantial harm to domestic commerce creates an independent, direct substantial effect by “[taking] money from the federal treasury, depriving other projects and services of money.” Anderson, 326 F.3d at 1330. The U.S. government suffered sufficient domestic harm from anticompetitive conduct in NATO's contracting process because the U.S. government was the most significant funder of NATO and the main force behind NATO.³ This created a direct and substantial effect on domestic commerce through the misuse of American dollars to pay excessive prices, even though the U.S. government was not a direct party to the contract. See Caribbean Broad. Sys., Ltd. v. Cable & Wireless P.L.C., 148 F.3d 1080, 1085–87 (D.C. Cir. 1998) (holding foreign radio station and telecommunications company's alleged anticompetitive conduct had direct and substantial effect on “relevant market” by forcing U.S. advertisers, and thus consumers, to pay higher prices due to lack of competing stations).

Under U.S. Department of Justice Guidelines, “U.S. government interests [are not] sufficiently implicated with respect to a transaction that is merely funded by an international agency, or a transaction in which the foreign government received non-earmarked funds from the United States as part of a general government-to-government aid program.” U.S. Dep't of Just. & Fed. Trade Comm'n, Antitrust Guidelines for International Enforcement and Cooperation 27 (2017) (“Guidelines”). But this guidance does not account for the unique case of transactions made by an international organization in which the United States acted as a major funder and leader. See n.3.

Mr. Van Avermaet expresses a policy concern: that exercising U.S. jurisdiction over a NATO contract would “ ‘create[ ] a serious risk of interference’ with the ability of Belgium, other NATO members, and NATO itself to regulate their own commercial affairs.” Mot. Dismiss NATO at 7 (quoting F. Hoffman-La Roche Ltd., 542 U.S. at 165). But these slippery-slope concerns regarding American overreach into foreign commerce do not negate the importance of protecting domestic commerce and consumers, especially given the novelty of NATO's funding structure and the predominance of the United States in its funding. See Anderson, 326 F.3d at 1330 (government payment of inflated bid prices through USAID had substantial effect on domestic commerce). Though the U.S. government ought not “interfere[ ] with other nations’ prerogative to safeguard their own citizens from anticompetitive activity within their own borders,” Empagran S.A., 417 F.3d at 1271, foreign citizens are not the consumer here. Rather, the consumer that the government seeks to protect with this action is a multilateral alliance with the United States government at its conceptual and financial core.

B. Motion to Dismiss DoD Portion for Failure to State an Offense

1. Legal Standard for Failure to State an Offense

“The operative question [in whether an offense is properly stated] is whether the allegations in the indictment, if proven, permit a jury to conclude that the defendant committed the criminal offense as charged.” United States v. Akinyoyenu, 199 F. Supp. 3d 106, 109 (D.D.C. 2016). “Failure to state an offense is simply another way of saying there is a defect in the indictment.” Al Bahlul v. United States, 767 F.3d 1, 10 n.6 (D.C. Cir. 2014). “In ruling on a motion to dismiss for failure to state an offense, a district court is limited to reviewing the face of the indictment and, more specifically, the language used to charge the crimes.” United States v. Sunia, 643 F. Supp. 2d 51, 60 (D.D.C. 2009) (citing United States v. Sharpe, 438 F.3d 1257, 1263 (11th Cir. 2006)). However, “[a] defendant has no right to judicial review of a grand jury's determination of probable cause to think a defendant committed a crime.” Kaley v. United States, 571 U.S. 320, 333 (2014). Thus, “[b]ecause a court's ‘use[ ] [of] its supervisory power to dismiss an indictment ․ directly encroaches upon the fundamental role of the grand jury,’ dismissal is granted only in unusual circumstances.” Ballestas, 795 F.3d at 148 (quoting Whitehouse v. U.S. Dist. Ct., 53 F.3d 1349, 1360 (1st Cir. 1995)).

2. Mr. Van Avermaet's Motion to Dismiss DoD Portion of Count One is Denied.

Section 1 of the Sherman Act prohibits “unreasonable restraints” on trade. State Oil Co. v. Khan, 522 U.S. 3, 10 (1997)); see 15 U.S.C. § 1. Restraints that are “imposed by agreement between competitors,” such as price-fixing or bid-rigging agreements, are unreasonable per se under the Sherman Act. Bus. Elecs. Corp., 485 U.S. at 730.

“[R]eviewing [only] the face of the indictment” and “assum[ing] the truth of those factual allegations,” the government has sufficiently alleged Mr. Van Avermaet's participation in a conspiracy to survive a motion to dismiss. Sunia, 643 F. Supp. 2d at 60; Ballestas, 795 F.3d at 149. The Indictment alleges that Defendants and their co-conspirators engaged in a conspiracy “by coordinating price increases; submitting artificially-determined, non-competitive, inflated bids; and refraining from bidding for certain contracts.” Indictment ¶ 17. Specifically, the government cites Defendants’ “attend[ance] [at] meetings and engag[ement] in discussions during which they agreed” to such conduct as instances through which the Defendants and their co-conspirators allegedly carried out the conspiracy. Id. ¶ 18(a). This included the September 17, 2019 “coordination[ ] breakfast meeting” that Mr. Van Avermaet allegedly organized with other Belgian security service providers. Id. Taken as true, such allegations indicate the conspirators’ “unity of purpose ․ [and] meeting of [the] minds in an unlawful arrangement” to coordinate prices and bids—anticompetitive behavior that is per se unreasonable under the Sherman Act. Am. Tobacco Co. v. United States, 328 U.S. 781, 810 (1946); see also Bus. Elecs. Corp., 485 U.S. at 720, 735–36 (holding express or implied agreement on price levels is per se illegal under Sherman Act).

Mr. Van Avermaet purports that “the indictment fails to allege the essential element that [he] joined a conspiracy regarding the DoD contract” because “the alleged agreement was between Securitas and Seris,” not his former employer, G4S. Mot. Dismiss DoD at 3. But “conspiracies under the Sherman Act are not dependent on any overt act other than the act of conspiring.” United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 224 n.59 (1940). “[T]he conclusion that a conspiracy is established is justified” here because the indictment alleges that Mr. Van Avermaet and “the conspirators had a unity of purpose, ․ a common design and understanding, [and] a meeting of minds in an unlawful arrangement.” Am. Tobacco Co., 328 U.S. at 810; see Indictment ¶ 16. Indeed, the indictment identifies a specific action by Mr. Van Avermaet—organizing a September 2019 meeting with a co-conspirator—to demonstrate Mr. Van Avermaet's conspiring. See Indictment ¶ 18(a). With this allegation of Mr. Van Avermaet's “meeting of minds [with his co-conspirators] in an unlawful [and anticompetitive] arrangement, the conclusion that a conspiracy is established is justified.” Am. Tobacco Co., 328 U.S. at 810.

Mr. Van Avermaet further alleges that he could not have participated in the alleged conspiracy “because the terms of the agreement were not fixed until after [he] left G4S” in January 2020. Mot. Dismiss DoD at 4. But because “conspiracy is a continuing offense, a defendant who has joined a conspiracy continues to violate the law ‘through every moment of [the conspiracy's] existence.’ ” Smith v. United States, 568 U.S. 106, 111 (2013) (citing United States v. Kissel, 218 U.S. 601, 610 (1910); quoting Hyde v. United States, 225 U.S. 347, 369 (1912)) (cleaned up). Thus, the government need only allege that Mr. Van Avermaet “joined [the] conspiracy.” Id. And so it did with the broad allegation that the Defendants entered into a conspiracy “[b]eginning at least as early as Spring 2019,” Indictment ¶ 16, and the specific allegation regarding Mr. Van Avermaet's “coordination[ ] breakfast meeting” in September 2019. Indictment ¶ 18(a).

Much of the material underlying Mr. Van Avermaet's contention—that he could not have participated in the conspiracy because it was codified after he left G4S—draws upon information that surfaced in discovery.⁴ However, this Court cannot consider such materials. “In ruling on a motion to dismiss for failure to state an offense, a district court is limited to reviewing the face of the indictment and, more specifically, the language used to charge the crimes.” Sunia, 643 F. Supp. 2d at 60 (cleaned up). Thus, this Court “may not dismiss an indictment on a determination of facts that should have been developed at trial” through consultation with, for example, witness statements obtained in discovery. Id. Thus, Mr. Van Avermaet's contention that the conspiracy began after he departed from G4S is not only factually incorrect but also unsupported given the exclusion of the non-indictment materials. See Mot. Dismiss DoD at 5.

IV. RECOMMENDATION

For the foregoing reasons, the Court recommends DENYING Mr. Van Avermaet's Motion to Dismiss NATO Portion of Count One for Lack of Jurisdiction and Motion to Dismiss DoD Portion of Count One for Failure to State an Offense.

V. REVIEW BY THE DISTRICT COURT

The parties are hereby advised that, under the provisions of Local Rule 72.3(b) of the United States District Court for the District of Columbia, any party who objects to the Report and Recommendation must file a written objection thereto with the Clerk of this Court within fourteen days of the party's receipt of this Report and Recommendation. The written objections must specifically identify the portion of the report and/or recommendation to which the objection is made and the basis for such objections. The parties are further advised that failure to file timely objections to the findings and recommendations set forth in this report may waive their right of appeal from an order of the District Court that adopts such findings and recommendation. See Thomas v. Arn, 474 U.S. 140, 144–45 (1985).

FOOTNOTES

1.   G4S pleaded guilty to participating in a conspiracy to rig bids, allocate customers, and fix prices, including for a DoD contract, in violation of the Sherman Act. See Plea Agreement 3, United States v. G4S Secure Sols. NV, No. 21-cr-432 (D.D.C. July 16, 2021), ECF No. 9. Two former G4S executives also pleaded guilty to conspiracy under the Sherman Act in a separate action. See Plea Agreement, United States v. Verbeeck, No. 21-cr-574 (D.D.C. Oct. 18, 2021), ECF No. 9; Plea Agreement, United States v. Van Mele, No. 21-cr-573 (D.D.C. Oct. 18, 2021), ECF No. 7.

2.   NATO is a multilateral military alliance of which the United States is a member and leading funder. See Funding NATO, N. Atl. Treaty Org. (May 22, 2023), https://www.nato.int/cps/en/natohq/topics_67655.htm [hereinafter Funding NATO].

3.   The United States is “the key architect and master builder of the institutions undergirding [the alliance].” Strobe Talbott, A Brief History of NATO, From Truman to Trump, Brookings Inst. (March 27, 2019), www.brookings.edu/blog/order-from-chaos/2019/03/27/a-brief-history-of-nato-from-truman-to-trump/. “Militarily, NATO is a hegemonic American protectorate.” David P. Calleo, The American Role in NATO, 43 J. Int'l Affs. 19, 19 (1989). And the United States (alongside Germany) is one of the two largest funders of NATO. See Funding NATO.

4.   For example, this includes statements from witness interview reports for G4S and Securitas employees. See Mot. Dismiss DoD at 5 n.3.

ZIA M. FARUQUI UNITED STATES MAGISTRATE JUDGE