Jim Mutchnik, the former US prosecutor who was portrayed in the film The Informant, right, and Davies lawyer Adam Fanaki, left.J.P. MOCZULSKI
Jim Mutchnik's short career as a cartel cop culminated in a billion-dollar case and a major Hollywood movie, The Informant! , starring Matt Damon.
In the staid circles of competition law, Mr. Mutchnik, former prosecutor with the U.S. Department of Justice, is a rare celebrity. By getting anti-trust prosecutors to work with gun-toting FBI agents, he and a team of investigators worked with a senior Archer-Daniels-Midland Co. executive in the mid-1990s to expose an international price-fixing conspiracy on food additives.
The case sent three Archer-Daniels officials to jail and generated billions of dollars in fines and civil settlements. The pioneering use of wire taps, immunity deals and FBI muscle on the case inspired U.S. regulators to use similar techniques to bring down other cartels.
"It was five years of some of the most intense, enjoyable … experiences. … It had everything you could want. It had guns, criminals, travel, hookers, tapes, there was everything," Mr. Mutchnik says.
But he does not expect a Canadian sequel to the blockbuster tale - despite new federal anti-cartel laws coming into effect in March that will make it easier for the Competition Bureau to investigate and convict price-fixers. Canada, he says, arching an eyebrow, has been too "quaint" and "quirky" a jurisdiction to successfully take down powerful and illegal price fixing conspiracies.
Though he left the Justice Department 10 years ago to work as a white-collar defence lawyer in Chicago with Kirkland & Ellis LLP, when it comes to some things, Mr. Mutchnik still thinks like a prosecutor when its comes to regulators.
Yes, Ottawa has upped the ante by nearly tripling the maximum prison sentence for price fixing convictions to 14 years and hiking penalties to a maximum of $25-million per count, from $10-million. But these harsh new penalties "are no deterrent," he warns, unless Ottawa's competition watchdog wins some major cartel convictions and judges start sending conspirators to jail.
He's referring to the bureau's prosecution of gas station owners in Sherbrooke, Que. Although the bureau successfully used wiretaps and other evidence to wring guilty pleas from a ring of gas station owners for illegally fixing pump prices last year, the defendants either paid fines or were allowed to serve jail sentences in their communities.
Hearing the terms, Mr. Mutchnik swivels sharply in his chair and barks at a reporter to write down his comments.
"In the United States, when you get sentenced to jail, you actually go there. In Canada, when you get sentenced to jail, it's called jail in the community, otherwise known as not jail," he said.
Sitting in a boardroom of Davies Ward Phillips & Vineberg LLP with a handful of the firm's top competition and corporate partners, Mr. Mutchnik is speaking to the converted.
To his right is Adam Fanaki, a new recruit to Davies and former senior counsel with the Competition Bureau, who blames the courts for being too lax. "There is a judicial reluctance in Canada to sentence people to serious terms of imprisonment for white-collar crimes," Mr. Fanaki says.
Across the table is George Addy, a Davies partner and former Competition Bureau commissioner, who says accused price fixers in Canada have historically challenged the regulator because when they "look at the track record [they think]it sucks."
The list of successful Canadian cartel prosecutions is so tiny it barely merits being called a record. Since 1980, the Competition Bureau has secured only three convictions out of 23 price fixing proceedings that were contested by corporate targets. Nearly 90 per cent of the fines were collected by piggybacking Canadian penalties onto guilty pleas struck by foreign cartel regulators, mostly in the United States and Europe.
The biggest obstacle for the bureau is decades-old legislation that required proof that price fixing cartels caused an "undue" lessening of competition. The vague language gave birth to a cottage industry of experts and economists who muddied any assessment of industry competition. Proving the economic impact of cartels, said Mr. Mutchnik, "is where cases go to die."
The "undue" rule will be swept away in March and in its place will be U.S.-style laws that only require proof companies conspired with competitors to fix prices.
Armed with tougher laws, Competition Bureau Commissioner Melanie Aitken has identified cartels as a top priority for her administration. She has made this pledge during a severe global recession, a typically ripe environment for cartel conspiracies as companies struggle to reverse losses.
Mr. Mutchnik said the bureau won't be taken seriously in its fight against cartels unless it "goes out and brings cases and is aggressive."
Brian Facey, a competition specialist with Blake Cassels & Graydon LLP who successfully challenged the bureau on a number of fronts, said businesses are already taking the bureau much more seriously. Gone are the days, he says, when businesses viewed Canadian cartel investigations as " a cost of doing business, that you would pay a fine and move on. There are serious implications for this now. And I think it all began with Jim's case."