Infineon Execs Plead Guilty to Price-Fixing

An anonymous reader writes "Executives at Infineon Technologies plead guilty to an international conspiracy to fix prices in the DRAM market. Heinrich Florian, Günter Hefner, Peter Schaefer and T. Rudd Corwin, executives for Infineon Technologies, had a felony filed against them yesterday in the U.S. District Court in San Francisco. Each executive could spend up to six months in prison and will have to pay a $250,000 fine. Under the plea agreement, they must also assist the government in its DRAM investigation. Infineon agreed in October to pay a $160 million fine for its role in the conspiracy, according to the Justice Department."

Comments

An honest question..

[lordsilence]

If there has been a widespread "price-fixing", will there be any refund for those who has bought these overpriced memory devices?

Re:An honest question..

[hajihill]

And if so, how will they determine whom should be recompensed???

My understanding is this has been going on for a long time. How would we determine what market rates should be?

Re:An honest question..

[Anonymous Coward]

I'm sure a class-action lawsuit will be along soon. Just wait; you'll recieve a check for 3 cents within the year! Just don't ask what the lawyers got.

Re:An honest question..

[mog007]

Where is the logic behind this judgement? Ignore that it'll get appealed, and focus on this. A 250,000 dollar fine?! That's insane. These companies make upwards of millions of dollars and you fine them a quarter of a million? $250,000 is what the MPAA has established as fair for uploading a movie through bittorrent.

Re:An honest question..

[mcc]

Not quite. It's a $250,000 fine (and in some cases some short jail terms) for each of the executives and a $1.6 million fine for the company, and it would be awfully weird for any of this to be appealed as it all appears to be part of plea agreements. Unfortunately, this is still quite probably not enough to realistically undo the gains that either the executives (how much did Ulrich Schumacher make a year?) or the company made off of the price fixing action. In fact as far as I can tell it appears that the company fine may not have even been as large as the litigation costs Infineon spent in the court cases that preceded the fine.

But this just appears to be the model being pioneered for widescale use by the Bush Department of Justice: Corporate crime, defrauding investors and consumers, using a company on which other peoples' livelihoods rest as a device to line your own pockets, antitrust violations, and similar things aren't illegal anymore, exactly; they're just taxed.

Of course, for whatever reason, we call them fines instead of taxes-- and go through the formality of preceding them with a court case-- but this really isn't much of a meaningful difference. Even if you get caught doing such things it is increasingly rare that the penalty for breaking the law really exceeds the benefits of having broken the law; in some cases, such as the Microsoft antitrust actions of the late 90s, breaking the law and then simply paying the fine for having done so appears to have been the best long-term business decision available. In this sort of context the fines really cease to have any punitive nature and criminality just becomes another potential strategy in the playbook of a discerning executive. The risk is there that you will be made an example, Martha Stewart style, and meaningful jail time will occur and families and careers will be ruined; but the risk is acceptable, and it may turn out to be worth it in the long run even in the worst case scenario.

As for the government's point of view, the upshot, it seems, at this point is that the government doesn't object in any form to white collar crime, antitrust violations or executive malfeasance; it just wants a cut of the crime's profits.

Meanwhile, Infineon isn't quite off the hook yet; this fine is just the U.S. response. As far as I know Infineon is facing similar charges in Europe which have not gone through yet...

Re:An honest question..

[One Blue Ninja]

Well wait a minute, what about the 6 months of jail time? That seems like a real punishment, if they actually end up serving it. And if they all serve it at once, it won't be too good for business!

I hope you're right. But this *IS* America, so rich white corporate execs don't suffer prison time quite the same way everyone else does. Remind me again which cell block Ken Lay, Jeff Skilling, and Bernard Ebbers are in?

Between shady deals with prosecutors, early parole, and the favors their money can buy, I don't think he'll actually be in for 6 months. If he iis, I'm sure it will NOT be in a hard-core prison.

Young black male convicted of $1,000 robbery: 20 years hard time.

Rich white exec, convicted of robbing millions of people out of billions of dollars: a few months in minimum-security.

And they have the gall to call themselves the "Justice Department".

Re:An honest question..

[drinkypoo]

But this just appears to be the model being pioneered for widescale use by the Bush Department of Justice: Corporate crime, defrauding investors and consumers, using a company on which other peoples' livelihoods rest as a device to line your own pockets, antitrust violations, and similar things aren't illegal anymore, exactly; they're just taxed.

I dislike President Bush the Chimpanzee (thank god he's not black or I couldn't get away with saying that no matter how much he looked like a monkey) as much as the next guy and often more (around here you see a lot more bush bumper stickers than any other kind of political affiliation) but claiming that this is the fault of the Bush administration is like saying that people who bought an SUV this year are solely responsible for global warming.

Allowing executives to get away with negligence leading to the deaths of thousands has been business as usual for ages. Allowing execs to get away with defrauding people and companies in order to take their money seems like small potatoes by comparison - and it's a lot older than America, let alone Bush. Not, mind you, that I approve of what's going on... But Bush is a symptom of the system, not a cause.

6 months?

[_w00d_]

We need stiffer penalties against crimes like this. 6 months and $250,000? These execs stand to make tons more conducting illegal business than what they'll have to give up if they get caught. There has to be many more companies using illegal business practices in the US to get ahead, they just haven't been caught yet. This sentencing doesn't seem like it will be a real deterrent for that kind of behavior either.

Re:6 months?

[drinkypoo]

I agree the financial fine needs to be a bit stiffer but so does the prison situation - specifically, we need to send these people to federal pound me in the ass prison, not some cushy place where they get their own room and they get to play croquet with their fellow white-collar inmates on the weekends.

As I said in a comment over in the bhopal disaster revisited story, the threat of prison sentences and other punishment can actually be effective with these people because they have something to lose. It's not like they're an impoverished mother of three with a crack habit who wishes it would all just stop. They're rich white men with a good standing in society, whose car probably costs about ten times as much as someone who lives below the poverty line makes in a year. Take away their ill-gotten gains and throw them in a prison where they'll get cornholed and infected with an STD when they pull this kind of shit, and I guarantee things will change - not the least of which will be our judicial and corrections systems. There are people who have been thrown in prison under three strikes laws for stupid shit like drug posession offenses, who are now subject to prison rape. HIV is a serious problem among our prison population, and it's possible to get incarcerated and infected because you're a careless pot smoker. Is this our kinder, gentler America?

I only rant on like that because shit like that would not continue if rich white men were being thrown into those prisons. No one with money (thus power) cares about the situation (or, they're making money on it, and therefore they want to maintain the current system) and it won't change until they do. The system is broken from top to bottom, and the damage is all due to greed.

YRO?

[bobbagum]

Why exactly is this in your rights online? Maybe we need a legal section, or perhaps evil companies section

Sometimes this sort of behaviour may not be so bad

[Anonymous Coward]

I can't help but remember the time when there was a glut of RAM, too many factories were built and RAM was cheap. Yes, that was good, in the short term, but the problem was that the low price lead to manufacturers going out of business and prices shot up.

The RAM industry is harsh. It's a commodity, and there's probably little profit in it. Little enough to make starting up a RAM factory, or updating the tech, a big financial risk. Above all we need stability in it.

Yes, market economies are good, but not perfect. Maybe this is an example where some amount of regulation is required to assure a steady supply of quality RAM? In a sense, price fixing can be compared to regulation. It's usually illegal and often undesirable, but maybe sometimes it serves a purpose?

Yes, I'd like to get cheap RAM, but not at the expense of quality, innovation or stability. It may be bad for us in the long run that Infineon is going out of business. As I understand it, the market is dominated by four major players. Will there be three now? Will it eventually become even more of a monopoly? I hope not. It would be to our detriment.

Off topic - I wonder when DDR2 is going to ramp up to the point where it's actually better than DDR. From what I've seen, the extra latency kills any performance gains it might have with current chipsets and clock speeds.

Still a lot of bad business out there

[SwedeGeek]

Anyone think the Infineon execs will take this as badly as the CEO of CyberNET (see this article)??

It somewhat still amazes me that these people think because they are supposedly good at business that they are going to be good at breaking the law. At what point does making an amazingly fat paycheck stop a person from wanting more? As incidences like these continue to happen, I get closer and closer to believing it never ends... and that's not even mentioning the big ones like Enron and MCI.

Here's a vote to salary caps in the corporate world!!!

Re:Now why couldn't the DOJ have

[One Blue Ninja]

Because MS is an American company, so the DOJ/US Gov't make money off MS. Infineon is an "evil company" because they're "foreign", and taking advantage of us poor Americans. If it's the other way around, the DOJ doesn't give a damn. Plus, the DOJ is currently too worried about porn.

Re:Flash: Greed comes to Man Kind

[sploxx]

Your obesity comparison is a bit funny... but
to add something to this:

IMHO such things are the reason why there are no free markets and why there never will be really "free markets". Good that they got caught doing this, but this is only the tip of the iceberg.

People lament over and over again how 'the free market will fix every problem and is the most efficient solution there is...'. Problem is that somehow the feedback of the corporations back onto the government to change the rules and/or the violation of rules (to not abandon competition in this case) removes all oversight and fairness.

In this 'no-oversight' free market, every participant has to agree to somehow
1. be very greedy in a rational way to stay competitive
but also 2. to strictly obey all rules and not to try to use money to influence those rules.

This is a highly unstable condition and mostly the experiment goes awry well before this condition is ever met.

It is an utopia and I'd be glad if more of those market-fans would recognize this and stop bashing the left for their utopias... we all have dreams.
With this I'm also not trying to say that utopias are bad. But one has to remind oneself that in reality, the best you can make are approximations.

translation

[frovingslosh]

Infineon agreed in October to pay a $160 million fine for its role in the conspiracy, according to the Justice Department

This translates into:

Infineon stole so much that they could easily pay a $160 million cut to the government, who wanted their share, even though they did nothing to deserve it. In return they let the company continue to do business as usual, and suggest that they price fix in less obvious ways next time. They also asked the company to offer up a few scape goats, who would get a token amount of time in a federal luxury prison like Camp Cupcake or Club Fed, but would be out in even less time than Martha Stewart. The people who bought the artifically high priced memory get screwed.

Re:translation

[Anonymous Coward]

if the prices were so "artificially" high, then why did people buy?

You are aware that a supply/demand graph is continuous and it's not that you hit the optimal point and everyone buys your product.. right?
So there were people willing to buy, but the point is that even though someone else *could* sell for less, they agreed to keep it artificially high. That's collusion against the free market. The point is to let the market decide what the price should be through competition, not some asshats who are already making more money than the GDP of some countries.

Re:translation

[frovingslosh]

What part of Price-Fixing is not clear?

Priorites?

[MisterSquid]

Some are just able to carry their greed to the point of complete selfishness and totally ignore the high percentage of people who have a hard time just keeping a roof over their heads.

You mean like these people

What amazes|saddens|stuns|infuriates me is that price-fixing which targets the arguably already-wealthy who can afford high technology purchases is processed relatively quickly while the at best lethal neglect of the managers and owners of Union Carbide will never see a court docket.

Dumb, stupid me. DRAM prices affect larger markets. The deaths of thousands of impoverished coolies affect no one.

6 months is a fair amount?

[CheesyPeteza]

Rob a bank and you get 25 years. Steal millions and get 6 months. :/

Re:Sometimes this sort of behaviour may not be so

[timeOday]

Yes, I'd like to get cheap RAM, but not at the expense of quality, innovation or stability.

Somehow I don't think price fixing will bolster quality and innovation. And I don't see stability in itself as a good.

As I understand it, the market is dominated by four major players. Will there be three now? Will it eventually become even more of a monopoly? I hope not. It would be to our detriment.

That's no reason to allow price fixing. Id argue price fixing is a form of monopoly, since all the producers act as one to collectively manipulate the market price - in essense forming a monopoly. I'm not worried about the number of producers. Sure the barrier to entry is high, but it's a huge market too. And as few a two competitors is enough to keep things competitive, so long as they really hate each other :) (Intel vs AMD).

Re:Flash: Greed comes to Man Kind

[h4rm0ny]

I fear that greed is a feeling as natural as hunger or love.

Greed is normally restrained by empathy. Would you take the food from your partner, or your children or your friends for yourself? Would you even steal money from casual acquaintances? Almost certainly not. In all these cases, these are people you can see and recieve feedback from.

In the business world, you seldom see your victims. In actuality, steps are taken to avoid it. Those who are rich often psychologically divorce the poor into a seperate category, denying they are people like themselves. It's a way of cutting off that feedback.

It's still a scam, just differnet players.

[pherris]

Ok, so Schaefer and Corwin have to pay 250k each and the company pays $160m to the US Govt. Like all these fines the US Govt. collects does any of it make it back to those that got burnt over the years? The company I work for buys a over a million a year in DRAM chips so we're been hit by this price fixing. Do we get anything? Of course the answer is no.

I think companies should be punished for theft and price fixing but I have a problem when the US Govt. just dumps those fines back their coffers (or for tax breaks for the rich instead of reducing the general deficit).

IMO it's still a scam and the general public is still getting screwed.