Best Way Out

Into U.S. District Court in Philadelphia last week crowded more than 80 lawyers, intent on making the best deal possible with the Government in one of the biggest antitrust suits in U.S. history.

They represented 29 manufacturers of electrical equipment--including such big names as General Electric. Westinghouse and Allis-Chalmers--and 48 present or former executives of those companies. All were charged by the Government with criminally conspiring to rig bids and fix prices in the sale of $7 billion worth of heavy electrical equipment over the last seven years.

The lawyers had taken a hard look at the evidence in the cases filed by U.S. Attorney Robert Bicks and had not liked what they were up against. The best way out, the lawyers decided, was to use a legal device--a plea of nolo contendere, or no contest. The defendants thereby would concede no guilt, although they would subject themselves to the same penalties as if they were guilty, thereby avoiding a trial.

Damaged Image. By so pleading, the companies would be able to avoid frontpage trial publicity that might severely damage their long-nurtured images in the public eye. "Everyone who went out to buy a toaster," cracked a Government lawyer, "would think he was being overcharged." Furthermore, such a plea might discourage manufacturers who had purchased the price-fixed equipment from bringing civil suits to collect the triple damages allowed under the law. Reason: a nolo plea, unlike a guilty plea, cannot be used as an admission of guilt in a civil court, and evidence would have to be gathered all over again. If the aggrieved manufacturers collected, the damages might run to tens of millions of dollars.

The possibility of a deal was suggested by stocky, wavy-haired Judge J. Cullen Ganey, who feared that otherwise the cases would drag on for years. In months of behind-the-scenes negotiations, often in Judge Ganey's chambers, both sides worked out a tentative agreement: the Government would accept nolo pleas in 13 of the cases, but would expect defendants in the other seven cases to plead guilty. Judge Ganey has indicated that, in ruling on the pleas, he intends to go along with the Government's request.

Secret Codes. In these seven cases, considered the most serious by the Government, executives of the companies were charged with meeting in hotels under assumed names to agree on prices and bids. They used an esoteric system that they called a "phase of the moon" or "light of the moon" formula, under which each company knew when it should bid high and when its turn had come to make a low bid (TIME, Feb. 29). Secret code numbers were also used in company memos and letters addressed to executives at their private homes (e.g., one for G.E., two for Westinghouse. etc.). Said Trustbuster Bicks, testifying last week: "These men and these companies have in a true sense mocked the image of that economic system which we profess to the world."

With intricate legal overlapping, many companies and individuals were included in each of the seven critical cases. Several companies--including McGraw-Edison, Allis-Chalmers and Federal Pacific --have pleaded guilty in certain of the seven cases. Nevertheless, a few firms or individuals may yet prefer to plead not guilty and force a trial.

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