ATA and FTC money mess - how much it cost, why it happened
Radovan Pletka
AND SUBSEQUENT INVESTIGATION BY
THE FEDERAL TRADE COMMISSION (FTC)
A FINANCIAL PICTURE
SUMMARY BACKGROUND:
In very late 1986, ATA Board member Steven Sachs proposed the idea
of establishing a program that would recommend minimum rates to be
charged principally by freelance translators. The program was
warmly received by a majority of the Board members. The Board
discussed the program at some length during its February 1987
meeting. The minutes of that Board meeting disclosed certain
information that would eventually come to haunt the Association,
and also revealed the attitude and state of thinking of ATA
officials of the time. These Board minutes described the
deliberations surrounding the adoption of the rate guidelines
program, excerpted below:
"As to the question of the legality of the rate guidelines, an
attorney would probably charge $200-300 for an opinion in the
matter. He might also help with the policy wording so that ATA
would not be in violation of antitrust laws.
"(William) Bertsche said that (Steven) Sachs seemed to be saying
that legal advice is not necessary, but until we decide if we are
going to go along with them and publish the guidelines, there is
little risk. At this stage he (Bertsche) was opposed to consulting
an attorney.
"(Kurt) Gingold noted that in the past ATA had published rate
guidelines and had had no legal problems. Therefore, it was moved
that ATA refrain from action regarding the attorney at this point.
The motion was seconded.
"(Steven) Sachs said that assuming ATA went ahead and adopted the
guidelines, could the Association be held liable? Even though the
evidence suggests that what we are trying to do is legal, there is
some evidence that it is not. Bertsche noted that if an objection
were made, ATA would be told to stop and prosecution would only be
if ATA did not follow these instructions. Therefore, the Board
agreed that legal advice was not needed at this point." [Emphasis
added]
In mid-March of 1987, I had dinner with Steven Sachs in Washington.
He told me about the rate guidelines program. I recommended to him
that he and/or his colleagues research the legal ramifications very
carefully, since despite my scanty knowledge of antitrust matters,
I still felt that there could be some major risks in any rate or
price recommendation program. I followed up my suggestion in a
letter to him dated April 1, 1987.
The program was subsequently implemented without benefit of legal
advice/opinion, and recommended rates were published in the ATA
Chronicle between the latter part of 1987 and the end of 1989.
In the latter part of 1987, I, Robert Addis and Marc Masurovsky
became more convinced that the program was in violation of Federal
(and State) antitrust laws. Requests made by us of ATA officials
to get professional legal counsel were in vain.
In December of 1989, the three of us retained the services of one
Brian Moran, an attorney specializing in antitrust matters. Mr.
Moran presented us with a report which conclusively indicated that
the ATA's rate guidelines program was indeed afoul of antitrust
laws. Mr. Moran gave us a release to submit his report to the ATA,
which was done in February 1990. The report was submitted by the
ATA to its attorney, Frank Patton, Jr., who just previous to the
Board meeting held in Chicago in March 1990, recommended that the
program be immediately terminated. Shortly thereafter, Mr. Moran
was retained by the Association through Mr. Patton to formulate a
strong antitrust policy to be implemented by the Association.
At the Board meeting in March 1990, the Board formally resolved to
terminate the program and adopt the antitrust policy statement.
That policy statement was subsequently published on several
occasions in the ATA Chronicle.
In December 1990, the ATA received word from the Federal Trade
Commission that it was the subject of a "non-public investigation"
regarding its now-defunct rate guidelines. That investigation was
not completed until May 1994.
COSTS OF THE INVESTIGATION FROM FEBRUARY 1990 TO MARCH 1994:
Although the FTC investigation did not begin until December 1990,
one must view the matter of costs as beginning in February 1990,
when ATA finally chose to retain legal counsel to undo what it had
done without benefit of such counsel. Indeed, using the February
1990 as the inception date is of vital importance, since the fact
that the Association aborted the program prior to the inception of
the FTC investigation and took pains to publicize its antitrust
policy, was a consideration to which the FTC gave great weight,
thereby diminishing the possibility of the Association having to
sign a consent decree at best, and of risking prosecution at worst.
This fact of prior termination was used by ATA lawyers as a major
defense argument.
The following figures are taken from ATA financial statements and
reports and other pertinent documents. The figures relate only to
the costs of legal counsel; they do not include allied costs, such
as for example, the photocopying of every ATA Chronicle from 1984
to 1989, the photocopying of every ATA Chapter newsletter for that
period, the photocopying of hundreds and hundreds of pages of ATA
Board minutes, memoranda, letters, etc. These costs directly
related to the investigation were never detailed by the
Association; rather, they were included in its general
administrative expenses.
Furthermore, the legal expenses shown in the descriptions which
follow are total legal expenses. For its public financial
statements the Association did not break them down by subject
category, i.e., FTC investigation, by-laws revision, etc. It would
take a painstaking search through the attorney bills to determine
the precise allocation of these legal expenses. Therefore, I have
chosen to go with liberal estimates of allocation to non-FTC
matters. The figures on the right side, which represent FTC-
related legal expenses, could be even greater.
For the period February 1990 to August 1990: $19,747
(According to the Board minutes for 1990, Frank
Patton, the ATA attorney, also rendered legal
services in connection with researching the
question of converting ATA from a 501(c)(6)
corporation to a 501(c)(3) corporation. Ac-
cording to ATA's financial statement for the
(fiscal year) period running from 9/1/89 to
8/31/90, total legal expenses came to $24,747.
I have estimated that 20% of those expenses were
connected with the work done on the conversion
question).
For the period September 1990 to August 1991: 46.960
During period Mr. Patton was involved in re-
vising the ATA by-laws. I have therefore
used a figure of 15% as allocation to the work
done in connection with such revision. Total
legal expenses for the period 9/1/90 to 8/31/92
came to $55,246.
For the period September 1991 to August 1992: 115,136
During this period, the ATA required the services
of both Mr. Patton and a trademark attorney in
relation to a dispute with American Translators
International of California regarding the ATA
name. Mr. Patton also rendered service in con-
nection with a problem that arose with the IRS
over the Association's 1991 tax return. I have
therefore allocated 20% of the total legal
fees to these particular services. Total legal
fees for the period 9/1/91 to 8/31/92 came to
$143,920.
[Following is a quotation from the minutes of
the Board meeting of November 7, 1992: "A deficit
of more than $40,000 was incurred, due exclusively
to expenditures of about $145,000 for legal services,
including over $100,000 spent for the FTC matter
alone."]
For the period September 1992 to December 1992: 6,215
(According to Board minutes, all legal services
during this period related to the FTC matter.)
For the period January 1993 to December 1993: 23,895
(According to Board minutes, all legal services
during this period related to the FTC matter.)
For the period January 1994 to May 1994: not available
_____________
TOTAL APPROXIMATE LEGAL EXPENSES CONNECTED WITH
TERMINATION OF RATE GUIDELINES, FORMULATION OF
ANTITRUST POLICY AND FTC INVESTIGATION, BUT
NOT INCLUDING EXPENSES FOR THE PERIOD JANUARY
1994 TO MAY 1994: $211,953
========
One may add to the above figure, ca. 10% for
other administrative expenses (as indicated
above) connected with the 3.5-year FTC in-
vestigation. If such 10% is added, then the
total approximate cost comes to $233,148
========
Further verification of the total amount expended for the FTC
investigation can be had by referring to two items in the ATA
financial statements: (1) The actual operating losses incurred for
the periods in question and the depletion of the Association's
reserve funds.
Should you desire these figures, please let me know and I'll be
glad to furnish them to you.
I trust that you will see from all of the foregoing that Mr.
Bokor's statement that the ATA spent only ca. $100,000 on the FTC
matter is totally false, and this, even if we allow him to deduct
the legal expenses incurred (ca. $19,747) prior to the inception of
the actual investigation.
Please feel free to contact me should you desire any further
clarification.
Sincerely yours,
Bernard Bierman
TO: Radovan Pletka
FROM: Bernie Bierman
DATE: July 20, 1995.
In accordance with your request, enclosed please find a memorandum
detailing the legal expenses incurred by the American Translators
Association in connection with the Federal Trade Commission
investigation into alleged antitrust practices of the Association,
and events preceding it.
Sincerely yours,
Bernard Bierman
BB is one of the most respected members of U.S. translation
community. He is also a publisher of Translation News, monthly
newsletter, dealing with translation issues.
This file is posted with his permisson.
Sincerely
Radek Pletka
Czech and Slovak Service
703 323 6659 phone/fax
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