image via wsj.com
Federal prosecutors are scheduled to begin a trial Monday in which a former Pratt & Whitney manager is accused of conspiring with his suppliers to prevent them from poaching one another’s workers, in a new test of the government’s more aggressive antitrust strategy.
The case, in federal court in Bridgeport, Conn., is the latest example of a new category of prosecution: collusion among employers to restrict workers’ mobility or wages. The Justice Department has struggled to convince jurors at three prior trials to convict defendants accused of crafting such agreements.
The trial centers on Mahesh Patel, a former director at Pratt & Whitney who was in charge of its relationships with suppliers. A subsidiary of Pratt has tens of thousands of employees and is one of the world’s largest aircraft-engine makers.
Mr. Patel allegedly conspired with five executives of Pratt’s suppliers not to hire or recruit one another’s engineers or other skilled workers. Robert Harvey, Harpreet Wasan, Steven Houghtaling, Tom Edwards and Gary Prus also were charged. Prosecutors said the aim of the alleged conspiracy was to hold down labor costs and preserve the companies’ profit margins.
Mr. Patel was the leader and primary enforcer of the conspiracy, according to a grand jury indictment issued in December 2021. The other executives complained to Mr. Patel after learning a rival supplier had offered a job to or sought to hire one of their employees, prosecutors said.
Prosecutors obtained emails in which the men talked about rescinding employment offers that would have violated their agreement. According to one message cited by prosecutors, a chief executive wrote: “Our general aim is NOT to recruit from the local ‘competition’ because no one wins; salaries rise, the workforce get [sic] unstable, and our margins all get hurt.”
Brian Spears, a lawyer for Mr. Patel, said his client “has maintained his innocence throughout these proceedings and looks forward to the opportunity to clear his name.” A Justice Department spokeswoman and a lawyer for Mr. Houghtaling declined to comment. Attorneys for the other defendants didn’t respond to messages seeking comment.
The Justice Department once treated wage-fixing or no-poaching agreements as civil violations, but it changed its position in 2016 and said it would deal with them as crimes. “These types of agreements eliminate competition in the same irredeemable way as agreements to fix product prices or allocate customers, which traditionally have been criminally investigated and prosecuted as hardcore cartel conduct,” the DOJ announced in October 2016.
Judges overseeing cases prosecutors have so far brought have agreed that labor-market collusion can be criminally prosecuted. Assistant Attorney General Jonathan Kanter, the DOJ’s top antitrust official, has said that affirms the DOJ’s reasoning for bringing the cases. Juries have proven harder to convince.
A jury in Colorado last year rejected the first attempt to prosecute an alleged no-poach agreement. Dialysis provider and its former chief executive officer, Kent Thiry, were acquitted on three counts of conspiring with other companies not to recruit one another’s senior-level employees. The first criminal wage-fixing case also ended in acquittal last year for defendants in Texas.
“The record is undeniable that they are having a hard time winning these cases,” said Andre Geverola, a former federal prosecutor and now partner at Arnold & Porter Kaye Scholer LLP.
Jeffrey Stone, a lawyer for Mr. Thiry, criticized the prosecution of his client at an American Bar Association conference earlier this month. Mr. Stone said the judge in the case allowed jurors to consider whether his client intended to create an illegal agreement to divide up the labor market. That was a departure from the government’s typical burden in a criminal antitrust case, in which prosecutors only have to show an agreement that violates the law.
“This was a case in which the government was extending policy into uncharted waters,” Mr. Stone said at the conference.
In another trial loss for the DOJ, a federal jury in Maine last week acquitted four managers of home-health agencies accused of fixing wages and agreeing not to hire one another’s workers. Prosecutors argued the four defendants cheated their workers, who cared for elderly or disabled adults, out of additional pay they were due during the early months of the pandemic.
The four defendants were all immigrants from Iraq, several of whom fought alongside U.S. soldiers or served as military translators during the Iraq war, according to their defense lawyers, who said they never agreed to restrict wages or not poach rivals’ employees.
In October, prosecutors obtained their lone win in a criminal wage-fixing and no-poaching case. VDA OC LLC, a healthcare staffing company in Nevada, pleaded guilty to one count of conspiring to restrict the pay of nurses around Las Vegas. The company agreed to pay a fine and restitution totaling $134,000.
In the Pratt case, in which jury selection begins Monday, prosecutors plan to call several engineers or skilled laborers as witnesses who may testify about having job offers blocked or rescinded, according to court records. In the government’s prior wage-fixing trials, they didn’t use victim testimony, which might have blunted the impact of the government’s allegations, according to attorneys.
“The more that the DOJ can tell a story of real people having been harmed by conduct, that is a lot better case than something that looks like a technical violation of the law that doesn’t harm anyone,” Mr. Geverola said.
Federal prosecutors are scheduled to begin a trial Monday in which a former Pratt & Whitney manager is accused of conspiring with his suppliers to prevent them from poaching one another’s workers, in a new test of the government’s more aggressive antitrust strategy.
The case, in federal court in Bridgeport, Conn., is the latest example of a new category of prosecution: collusion among employers to restrict workers’ mobility or wages. The Justice Department has struggled to convince jurors at three prior trials to convict defendants accused of crafting such agreements.
The trial centers on Mahesh Patel, a former director at Pratt & Whitney who was in charge of its relationships with suppliers. A subsidiary of Raytheon Technologies Corp., increase; green up pointing triangle Pratt has tens of thousands of employees and is one of the world’s largest aircraft-engine makers.
Mr. Patel allegedly conspired with five executives of Pratt’s suppliers not to hire or recruit one another’s engineers or other skilled workers. Robert Harvey, Harpreet Wasan, Steven Houghtaling, Tom Edwards and Gary Prus also were charged. Prosecutors said the aim of the alleged conspiracy was to hold down labor costs and preserve the companies’ profit margins.
Mr. Patel was the leader and primary enforcer of the conspiracy, according to a grand jury indictment issued in December 2021. The other executives complained to Mr. Patel after learning a rival supplier had offered a job to or sought to hire one of their employees, prosecutors said.
Prosecutors obtained emails in which the men talked about rescinding employment offers that would have violated their agreement. According to one message cited by prosecutors, a chief executive wrote: “Our general aim is NOT to recruit from the local ‘competition’ because no one wins; salaries rise, the workforce get [sic] unstable, and our margins all get hurt.”
Brian Spears, a lawyer for Mr. Patel, said his client “has maintained his innocence throughout these proceedings and looks forward to the opportunity to clear his name.” A Justice Department spokeswoman and a lawyer for Mr. Houghtaling declined to comment. Attorneys for the other defendants didn’t respond to messages seeking comment.
The Justice Department once treated wage-fixing or no-poaching agreements as civil violations, but it changed its position in 2016 and said it would deal with them as crimes. “These types of agreements eliminate competition in the same irredeemable way as agreements to fix product prices or allocate customers, which traditionally have been criminally investigated and prosecuted as hardcore cartel conduct,” the DOJ announced in October 2016.
Judges overseeing cases prosecutors have so far brought have agreed that labor-market collusion can be criminally prosecuted. Assistant Attorney General Jonathan Kanter, the DOJ’s top antitrust official, has said that affirms the DOJ’s reasoning for bringing the cases. Juries have proven harder to convince.
A jury in Colorado last year rejected the first attempt to prosecute an alleged no-poach agreement. Dialysis provider DaVita Inc. DVA -1.68%decrease; red down pointing triangle and its former chief executive officer, Kent Thiry, were acquitted on three counts of conspiring with other companies not to recruit one another’s senior-level employees. The first criminal wage-fixing case also ended in acquittal last year for defendants in Texas.
“The record is undeniable that they are having a hard time winning these cases,” said Andre Geverola, a former federal prosecutor and now partner at Arnold & Porter Kaye Scholer LLP.
Jeffrey Stone, a lawyer for Mr. Thiry, criticized the prosecution of his client at an American Bar Association conference earlier this month. Mr. Stone said the judge in the case allowed jurors to consider whether his client intended to create an illegal agreement to divide up the labor market. That was a departure from the government’s typical burden in a criminal antitrust case, in which prosecutors only have to show an agreement that violates the law.
“This was a case in which the government was extending policy into uncharted waters,” Mr. Stone said at the conference.
In another trial loss for the DOJ, a federal jury in Maine last week acquitted four managers of home-health agencies accused of fixing wages and agreeing not to hire one another’s workers. Prosecutors argued the four defendants cheated their workers, who cared for elderly or disabled adults, out of additional pay they were due during the early months of the pandemic.
The four defendants were all immigrants from Iraq, several of whom fought alongside U.S. soldiers or served as military translators during the Iraq war, according to their defense lawyers, who said they never agreed to restrict wages or not poach rivals’ employees.
In October, prosecutors obtained their lone win in a criminal wage-fixing and no-poaching case. VDA OC LLC, a healthcare staffing company in Nevada, pleaded guilty to one count of conspiring to restrict the pay of nurses around Las Vegas. The company agreed to pay a fine and restitution totaling $134,000.
In the Pratt case, in which jury selection begins Monday, prosecutors plan to call several engineers or skilled laborers as witnesses who may testify about having job offers blocked or rescinded, according to court records. In the government’s prior wage-fixing trials, they didn’t use victim testimony, which might have blunted the impact of the government’s allegations, according to attorneys.
“The more that the DOJ can tell a story of real people having been harmed by conduct, that is a lot better case than something that looks like a technical violation of the law that doesn’t harm anyone,” Mr. Geverola said.
Source: WSJ.com March 27, 2023 | By Dave Michaels