22. How the Government Wints Its Cases

22. How the Government Wins Its Cases President Truman once said, "I know that it would be easier to catch and jail criminals if we did not have a Bill of Rights. But," he went on, "I thank God every day . . . that that Bill of Rights is fundamental law." But as far as business and the Sherman Antitrust Act are concerned, the Department of Justice has practically riddled the Bill of Rights. The letter of the law is still there. But the spirit is gone. Article 4 of the Bill of Rights says: The right of the people to be secure in their persons, houses, papers and effects, against unreasonablesearchesand seizures,shall not be violated, and no warrant shall issue but upon probable cause, supported by oath or affirmation,and particularly describing the place to be searched,and the per son or things to be seized. The Antitrust Division can and has made itself so troublesome to corporations through vague subpoenas for vaguely defined papers referring to vaguely defined charges that the corporation today usually in the end opens all its files, the Antitrust men swarm through, and they carry off or photostat records by the tens of thousands and the truckloads.

Ten years ago Antitrust went through the offices of 171 172 HOW GOVERNMENT WINS CASES the Standard Oil Company (N. ].). They took 47,000 documents involving 65,000 separate pages. In the Madison Oil case,1 they took 18 truckloads of documents from the defendant companies. In the A&P case,' as already reported, they examined 2,000,000 documents, photostated 50,000, and submitted 5,000 of these at the trial. In February, 1950, the Division asked the Sun Oil Company for information on year-by-year sales volume for gasoline, lubricating oils, and automobile accessories in each of the 18 states and the District of Columbia, where it operates, for the period 1929-1949 inclusive, and other information. The company's answer filled 157 pages. The company left only one of 16 questions unanswered; Antitrust wanted the names of dealers whose contracts had been terminated against their wishes dur ing the last 13 years. (This would probably be a gold mine of complaints). The company said Antitrust could have the keys to the warehouse and dig out the names themselves.

Antitrust is not the only government agency that does this. In the late 1930's the Federal Communications Commission's investigators pulled out all the drawers in the telephone company's head office. The cost of the in vestigation to the government was $1,500,000. AT&T officials estimated it cost the company $2,500,000. The resultant 1939 "Report of the Investigation of the Tele phone Industry" was an economic farce. It recom mended that AT&T increase depreciation, reduce rates and maintain the dividend-all at the same time. These "fishing expeditions" are a field-day for Antitrust lawyers. More than one businessman has commented to this writer that "It's too bad businessmen ever learned to write. " No batch in the world of tens of thousands HOW GOVERNMENT WINS CASES 173 of papers would fail to yield some documents which, torn from their contexts and pieced together adroitly, would not make out a bad case against their corporate owners.

Most troublesome· of all are the inter-office memos of over-smart subordinates who, to gain favor with their superior officers, make reports of their shrewd disposal of government officials, competitors, and so on, bearing often no relation to the corporation's actual policies. But there is more trouble to come. The law strictly limits the use of subpoenaed documents to actual court proceedings, where they are admissible only under the legal rules of evidence, which are designed to protect the individual against a powerful government. But the law does not prevent a Congressional Commit tee from subpoenaing the documents in tum from Anti trust and spreading them on the record. Nor is there anybody to prevent Antitrust from letting some friendly newspapermen look over the documents. A great deal of inside information about corporations has been pub lished in·recent years by newspapermen who have never visited with the victim corporation even by telephone.

"They didn't get it from us," corporate officials have time and again told this writer. "They've never been round to see us and they've never even telephoned· to check for accuracy." There is still more to it. The cases have grown so huge that no judges could ever get through them. The files in the Alcoa case filled one side of the courtroom. In the Cement case, the trial examiner's hearing took three years and produced 49,000 pages of testimony and 50,000 pages of exhibits. (Equal to about 400 books of this size and probably duller.) There is only one result possible. Judges are human.

174 HOW GOVERNMENT WINS CASES As a New York lawyer recently said, "the enormous size to which records in antitrust cases have grown has reached a point where the issues have almost ceased to be justiciable." 2 The judges take the government lawyers' word for it. And that word is "guilty." Article 6 of the Bill of Rights says in part: "In all criminal prosecution, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed . ..." And this echoes not only Anglo-Saxon common law, but also the complaint in the Declaration of Independ ence against George III "for transporting us beyond seas to be tried for pretended offenses." But most antitrust cases involve companies whose operations or markets are widely scattered. So Anti trust brings its indictments almost anywhere it wants to. And its choice of "venue" (place of trial) is highly significant.

A cautiously worded statement of this was made some years ago by an Antitrust official. He said, "If there is a choice of jurisdiction, it is advisable to confer with the district attorney in the prospective district and, if possible with the judge, to see whether there are any objections to proceeding there." 3 So Antitrust brought the first big case against the oil companies in Madison, Wisconsin. None of them pro duced or refined there and the complaints only remotely involved Wisconsin. But Wisconsin is a state of farmers, with a long record of radical legislation and fear of busi ness. More than that, jurors in the Madison case were warned that it would be a long one and those with much business were let off. Thus, profound and intricate matters of antitrust law and oil industry trade practice HOJV GOVERNit1.ENT WINS CASES 175 were heard by a jury, few of whose members had a high school education.

Likewise, the automobile financing cases against Ford, Chrysler, General Motors, and the big financing com panies were brought in Milwaukee, though the business heads up in Detroit. The Pullman Company, with its head officein Chicago, was indicted in Philadelphia, home of its chief competitor. The Big Three cigarette com panies were indicted in Kentucky, where the farmers grow tobacco, though their offices and plants are largely in Virginia and the. Carolinas. The A&P was indicted in Dallas, in the home-state of Wright Patman, implacable foe of the chains, and A&P's officers had to travel back and forth the 1,600 miles from the head office in New York (or move to Dallas "for the duration)." The du Pont people, their head office in Wilmington, Delaware, and their chief operations in the East, were indicted in Chicago. Du Pont asked that the venue be moved to Wilmington, but the Supreme Court refused.

The story has already been told 4 of how the judge in Dallas threw out the Antitrust lawyers' case against the A&P because it contained "inflammatory statements" that he wouldn't let be presented to the jury. Yet almost ten years earlier the Antitrust lawyers had been· royally bawled out by the Supreme Court itself for the same thing, in the Madison case. Said the Antitrust lawyers in that case to the poorly educated jury,: it is a "terrible thing that a group of influential, wealthy millionaires or billionaires should take over the power, take over the control, the power to make prices. . . malefactors of great wealth . . . eager, grasping men . . . [ corporations] who take the law into their own hands. . . without any consideration for the under-dog or the poor man. . . . We are going to 176 HOW GOVERNMENT WINS CASES stop it, as our forefathers stopped it before us. . . or we are going down to ruin as did the Roman Empire."

(The "crime" of the companies had been to steady the price of gasoline during NRA days, at the request of the government, so as to save, a number of little inde pendent refiners. from going to the wall.) Said the judge to the jury: ". . . any man of wealth has just as much standing in a court as a man that is poverty-stricken . .. Whether a man be rich or poor, he is entitled to the same consideration in this court. . ." Said the Supreme Court majority: "... appeals to class prejudice' are highly improper and cannot be con doned and trial courts should ever be alert to prevent them. Some of the statements fall in this class. They were, we think, undignified and intemperate. They do not comport with the standards of propriety to be ex pected of the prosecutor." And said Justice Roberts dissenting: ". . . I think the closing address of ... the Government is ground for setting aside the verdict. . .. The final . . . address covers 28 pages . . . about five refer to the facts. . . .

The balance consists largely of what the speaker himself characterized as 'clowning,' . .. At many points coun sel should have been stopped by the Court. . . ." A Sherman Act "consent decree" amounts to an agree ment between Antitrust and one or several corporations and their officers that these firms will abide by certain rules laid down by Antitrust. It is a civil process and takes only a day in court. In the late 1930's the Anti trust lawyers began using the threat of criminal indict ments to extort consent decrees. An outstanding instance was the so-called "Geiger case" in 1937.

HOW GOVERNMENT WINS CASES 177 Antitrust had brought criminal charges before a Mil waukee Grand Jury sitting under the late Judge Frank A. Geiger, against the leading automobile and automo bile finance companies. Grand Jury proceedings are supposed to be secret. Grand Jurors are not supposed to "even tell their wives" what goes on. Least of all, is it to be revealed to those against whom the city, state, or federal attorneys seek a bill of indictment. Two months after 'the Milwaukee Grand Jury began hearing the Antitrust Division's charges, the companies involved were invited to Washington by Antitrust. Meantime, it recessed its presentation in Milwaukee. Cautiously Antitrust lifted the veil of secrecy, enough to show the companies, or at least to make them think, that the jury was "rarin' to indict." But (they were allowed to surmise) if the companies would sign a con sent decree, on Antitrust terms, all would be forgiven.

This is a hard knuckle to rub in a corporation executive's ribs and was even more so, then, because business officials had not become hardened to having the word "criminal" applied to them. General Motors refused to accept a consent decree, its counsel explaining.that ". . . even under the threat of criminal proceedings [later brought in South Bend] we prefer to have our rights and obligations determined in an atmosphere free from coercion.... " When the judge got wind of how his Grand Jury proceedings were being used in Washington he called in all the lawyers, said such a thing was "against all the proprieties," and then and there dismissedthe Grand Jury. The Justice Department then went to the House Ju diciary Committee and tried to get the judge. unseated. The Wisconsin Bar Association then sent men toWash ington, who upheld the judge's personal dignity and 178 HOW GOVERNMENT WINS CASES called his action "plainly in furtherance of justice." The Judiciary Committee let the matter drop.

Since the "var, the Antitrust Division has been writing more and more consent decrees, which have become more and more elaborate. By no means does everything that is written into these decrees represent a writing of com mercial practice legislation by the Antitrust lawyers. A part of the promises signed by business are on the nature of "I promise not to stick pins in little children." A New York lawyer recently said: One who has studied the consent decrees . . . entered since V-J Day will be horrified by the practices described, unless he is sufficiently sophisticated to know that the De partment makes a point of including in consent judgments not only the things which industry has been engaged in doing but the· things which it has been suspected or accused of doing; and it then embodies these in elaborate injunctions which are made to appear as if they were present realities.5 Article I, Section 9.3 of the Constitution of the United States says, in part: "No ... ex post facto law shall be passed." That means that a man may not be punished for sOlnething which was legal when he did it, but is later made illegal. For instance, under the law passed in January 1934 against hoarding gold, he could not be punished for having hoarded it in 1932.

In theory, a law like the Sherman Act means the same today as when it was written in 1890. But everybody knows better. Business policies of years ago, which everybody then thought entirely legal, are now con sidered illegal, and the interpretation extends backward. It is as though.a man who made a right tum on a red light when it was considered legal, "vas later punished for this tum when such turns were made illegal. The statute of limitations would mercifully cut this HOW GOVERNMENT WINS CASES 179 menace off after three years, if it were not for two things. In the first place, the Supreme Court now allows evi dence from the long-dead past to be dug up by the Antitrust Division and used to show a "pattern" or "state of mind" that is then applied to the previous three years. Thus, in the Pullman case,6 a resolution of the Board of Directors of Pullman in 1870 was relied on in finding the "intent to monopolize."

And, in the second place, antitrust cases often take many more years than three from indictment to final decision; meantime the law is reinterpreted. An example was the Carboloy case, already mentioned, which went as follows: In 1926, a unanimous Supreme Coun sustained Gen eral Electric in using a certain type of license contract. In 1928, Carboloy and other companies set up a similar license contract. Antitrust indicted Carboloy in 1941, charging that this contract was illegal. The case didn't finally go to trial until early in 1947. All this time, the doctrine of the 1926 General Electric case had been con sistently applied by the lower courts and never shaken in the Supreme Court. But in the year and a half after trial before the judge got round to handing down his decision, the Supreme Court handed down three major decisions (Line l\1aterial, Gypsum, and Paramount) , sharply narrowing the 1926 decision. Perhaps the judge was waiting to see what the Supreme Court would do.

Anyw:ay he found the defendants guilty, largely on the basis of these three decisions, including the president of Carboloy who hadn't been with the company at the time the original contract was made. The Antitrust lawyers asked for jail sentences, but the judge wouldn't go that far.