Mario’s ‘dawn raiders’ busy giving a wake-up call to a company near you

Date: 07/02/02

By Peter Chapman

THEY arrive at 9 am - not dawn - and look more like financiers than Indiana Jones.

But with cartel fines running at record levels, the European Commission's team of 25 dawn raid anti-trust watchdogs has never been more feared.

One CEO was so terrified he reputedly hid in a ladies' toilet for seven hours until his would-be inquisitors had left.

So, what actually happens when Mario Monti's henchmen come visiting?

Lawyer Tony Morris, of Linklaters & Alliance, says officials go to extreme lengths to keep their surprise inspections secret - often staying in downmarket hotels hours away from their targets to avoid suspicion.

Confidentiality is crucial - the inspection teams are barred from telling even their spouses about their exact movements during an operation.

Generally, the rule is they can have a contact number and nothing more.

Morris has represented several major clients who have been on the receiving end of one of the dreaded visits from the men in suits.

'The first we hear is when we get a phone call from someone being raided saying 'oh God, what do we do?'' he says.

The raid team normally gives the lawyers a maximum of one hour to scramble to the premises being investigated - easier said than done if that happens to be a paper mill in the middle of Lapland.

The lawyers' first job is to keep the inspectors 'busy' for as long as possible.

'You can normally keep them occupied for a while getting lists of which people are where,' says Morris.

The raids are carried out primarily to gather documentary evidence: 'It is a paper-driven exercise. They will look at files and e-mails - but normally won't cross-examine people. What they are trying to do is get as much written information as possible.'

Ironically, most of the firms being raided keep 'sensible' records of deals and transactions.

It's largely down to the lawyer to ensure officials stick to the rules and don't go on a 'fishing expedition'.

Documents protected under client-lawyer privilege are 'out of bounds' - but it often requires powerful skills of persuasion to convince the cartel police that they cannot see a file if they scent a smoking gun.

Sometimes documents will be sealed in an envelope and only opened in Brussels in the presence of the supposedly neutral Commission hearing officer, who decides whether they can be used as evidence.

Lawyers must also ensure company bosses - who have the right to remain silent - do not incriminate themselves.

'Sometimes you get a call from someone saying, 'we are being dawn raided, but don't worry - I am cooperating'.

'I say 'hold on, don't be too cooperative',' says Morris.

Tales abound of the lengths to which some company executives will go to give their inquisitors the slip: 'One chief executive was tipped off that all the dawn raiders were men so he camped out in the women's toilet while they were there.

'Apparently he was in there for seven hours until they'd left.'

Nevertheless, such 'lucky escapes' seldom last.

Officials take a dim view of firms who make it hard for them or insist that every last scrap of paper is privileged and should not be seen.

Such a stance can end up in higher penalties being imposed if the company is found guilty of price-fixing - and fines can run into millions of euro.

Morris reckons that the odds are stacked heavily against companies, especially now the Commission is set to issue a new 'leniency notice' which grants firms immunity from fines if they spill the beans on cartels.

The idea is based on a similar initiative in the US, where few cartels were detected until the immunity regime was set up. Morris forecasts: 'This will be a real whistleblowers' charter.'

It could get even worse for firms. DG Competition is soon to get more dawn raiders as a boost to its inspection teams.

That will doubtless mean more work for lawyers though, so Morris for one won't be complaining too loudly.