Infineon Executives Guilty of DRAM Price-Fixing

Four executives at German memory vendor Infineon Technologies AG and its U.S. subsidiary have pled guilty to charges of illegally setting prices for PC memory chips, the U.S. Department of Justice announced Thursday.

The sales executives admitted to a scheme to artificially set prices for DRAM (dynamic RAM) with other co-conspirators, who were not named in a Justice Department press release Thursday. Their sentences include jail time and hefty fines, the Justice Department said.

Two of the executives worked at Infineon's headquarters in Munich. Heinrich Florian, Infineon's vice president for sales, marketing, and logistics and vice president for marketing and logistics during 2001 and 2002, will serve a six-month prison sentence and pay a $250,000 fine. Gunter Hefner, vice president of sales for memory products, will spend five months in prison and pay a $250,000 fine for his role in the scheme during that period.

The other two executives worked at Infineon North America's San Jose, California, office. Peter Schaefer was vice president of marketing, sales, and logistics in San Jose during 2001 and 2002, and will serve a four-month prison sentence for his role in the conspiracy. T. Rudd Corwin was vice president for customer marketing and sales of memory products from 1999 to 2002, and will serve a four-month sentence for price-fixing activities during those years. Both Schaefer and Corwin will also pay a $250,000 fine.

Two of the four executives left Infineon or are in the process of doing so, said Christoph Liedtke, an Infineon spokesperson in the United States. The other two executives have been assigned to other positions. Infineon will not comment on which executives have left the company, he said.

Long-Term Investigation

The Justice Department has been investigating allegations of DRAM price-fixing since 2002. Earlier this year, Infineon pled guilty to corporate price-fixing charges and agreed to pay a $160 million fine.

"These four executives are the first to plead guilty to a charge of fixing prices in what is still a very active and far-reaching investigation into antitrust violations in the DRAM industry," said Scott Hammond, the Justice Department's director of criminal enforcement in the antitrust division, in the release. "We will continue in our efforts to bring to justice other domestic and foreign-based executives who were involved in fixing DRAM prices."

The four executives admitted to participating in meetings with co-conspirators to discuss the prices of DRAM, exchange information about DRAM sales to PC customers, and agree upon prices for DRAM chips, according to court documents filed with the U.S. District Court for the Northern District of California in San Francisco. The PC customers affected by the price-fixing activities included Apple Computer, Compaq, Dell, Gateway, Hewlett-Packard, and IBM, according to the documents.

Background

An executive at DRAM vendor Micron Technology in Boise, Idaho, pled guilty in January to obstruction of justice with regard to the Justice Department's investigation of price-fixing allegations. Court documents filed as part of a separate dispute between the DRAM vendors and memory designer Rambus indicated that Samsung Electronics and Hynix Semiconductor were also involved in price-fixing activities along with Micron and Infineon, but as of yet no action has been taken against those companies or individuals within those companies.

"Infineon has taken aggressive steps to clarify compliance requirements with the U.S. antitrust law and to strengthen our global training programs in order to ensure that issues like these do not arise again. We continue to fully cooperate with the ongoing DOJ investigation," the company said in a statement.

Infineon's stock (IFX) price fell $0.08, or about 1 percent, to $11.10 in Thursday afternoon trading on the New York Stock Exchange.