By Dan Levine
SAN FRANCISCO (Reuters) - As the Department of Justice gears up for a rare criminal trial against a publicly traded company, the Taiwanese defendant wants to argue that prosecutors just don't get Asian business culture.
AU Optronics, one of Taiwan's largest firms, was indicted last year in Northern California for fixing prices of liquid crystal display panels. Several other companies, including LG Electronics, have already pleaded guilty in the LCD probe, while Samsung Electronics cut an early deal to avoid prosecution.
However, AU Optronics and a handful of its current and former executives -- including the company's chief executive Lai-Juh Chen -- pleaded not guilty and have vowed to fight. If convicted the executives could face prison, while the company could be subject to hundreds of millions of dollars in fines.
AU's market capitalization is nearly $4 billion.
U.S. District Judge Susan Illston is scheduled to hold a hearing on Tuesday in San Francisco on what evidence can be admitted at trial, which is set for January. Prosecutors contend that AU executives attended a series of regularly scheduled meetings in Taiwan with their counterparts at other companies, where they all agreed to hike or lower LCD prices.
Since prosecutors must prove the executives knowingly joined the conspiracy, defense attorneys want jurors to hear from two cultural experts about the nature of East-Asian business culture -- and how business people in Taiwan conduct themselves in meetings, according to a recent court filing.
One expert would say that business people in Taiwan "have a tendency not to object or disagree in order to avoid conflict," the filing said.
In addition, "an individual's non-objection or silence to a point raised by another (in a business meeting) should not be construed as an agreement on that issue."
Prosecutors have asked Illston to exclude this evidence, calling it "cultural stereotyping" that will mislead the jury. Company lawyers say the government filed its objections too late.
While not all individuals follow cultural norms, the average degree of assertiveness is quite different in East Asian and American contexts, said Rochelle Kopp, managing principal at Japan Intercultural Consulting who is not involved in the case.
Individuals in Confucian societies like Japan, China and Taiwan generally have a strong sense of conflict aversion, Kopp said, especially in settings where they might inwardly disagree with group sentiment.
"Americans will come away from a business meeting and conversation and think they had agreement," Kopp said, "where the Asian side was just nodding their head and saying, 'Yes they understood,' and not that they agreed."
Regardless of the dispute over cultural evidence, prosecutors argue that the law does not require them to prove an explicit exchange of words - just that the company and its executives adhered to the scheme, and participated in it.
John Connor, an antitrust expert who recently retired from Purdue University, said the last instance he could recall of a company accused of price fixing taking DOJ to trial came in 2001, in a case about graphite electrodes used to make steel.
The U.S. government's LCD probe netted fines totaling more than $890 million so far, DOJ has said.
Prosecutors also want to introduce evidence showing that AU employees destroyed evidence after the FBI executed a search warrant in 2006, among other facts. Lawyers for Chen, meanwhile, want to be able to call his older brother, L.C. Chen, to the stand as a character witness.
L.C. Chen is vice president of Gallant Precision Machining in Taiwan.
The case in U.S. District Court, Northern District of California is United States v. Hsuan Bin Chen et al, 09-cr-00110.
(Reporting by Dan Levine, editing by Bernard Orr)