The U.S. Department of Justice said that Sea Star Line Thursday agreed to plead guilty and to pay a $14.2 million criminal fine for its role in a conspiracy to fix prices.
Additionally, a federal grand jury in San Juan, Puerto Rico, returned an indictment against Frank Peake, the former president of Sea Star Line, for his alleged role in the same conspiracy.
Sea Star operates two combination roll-on roll-off/lift-on lift-off vessels between the Jacksonville and Port Everglades in Florida and San Juan, Puerto Rico. It is 90 percent owned by American Shipping Group, which is part of the Washington State-based Saltchuk Resources conglomerate and 10 percent owned by Taino Star, which is owned by Puerto Rico investors. Other Saltchuk maritime companies include Totem Ocean Trailer Express, Foss Maritime, Hawaiian Tug & Barge, and Young Brothers.
According to a one-count felony charge filed today in U.S. District Court for the District of Puerto Rico, Sea Star, whose principal place of business is in Jacksonville, engaged in a conspiracy to fix rates and surcharges for water transportation of freight between the continental United States and Puerto Rico from as early as May 2002, until at least April 2008.
According to a one-count indictment filed today in the same district, Peake participated in the conspiracy from at least as early as late 2005, until at least April 2008.
Court documents say Sea Star Line, Peake and co-conspirators carried out the conspiracy by agreeing during meetings and communications to allocate customers of Puerto Rico freight services and to rig bids and fix the rates and surcharges to be charged to purchasers of water transportation of freight between the continental United States and Puerto Rico.
Sea Star, Peake and co-conspirators also allegedly engaged in meetings for the purpose of monitoring and enforcing adherence to the agreed-upon rates and sold Puerto Rico freight services at collusive and noncompetitive rates.
Sea Star said it “has been cooperating fully with the governmental authorities throughout the investigation. The plea agreement, subject to the approval of the court, also provides that the DOJ will not bring criminal charges against Sea Star’s parent entities, Saltchuk Resources, Inc. and American Shipping Group, Inc.”
“The proper resolution of this matter was important to us and we are pleased to have reached an agreement with the Department of Justice,” said Anthony Chiarello, president of American Shipping Group, Inc. and manager of Sea Star. “The company remains committed to improving our operational excellence and looks to a brighter future serving our customers needs.”
He said the company has “been attentive to the resolution of the civil litigation arising out of the DOJ investigation.”
“Under antitrust law Sea Star is responsible for the acts of its employees, even though the criminal acts were committed in violation of company policies. That was the case here,” said Chiarello.
“Sea Star employees engaged in price fixing and did so despite company policies that prohibited such acts and the regular antitrust training programs designed to assure compliance with the law. The employees who engaged in this illegal conduct were no longer employed by Sea Star after the Company became aware of their behavior,” he added.
Chiarello said “we extend sincere apologies to all of our loyal customers and the consumers who were affected by this conduct. It was contrary to everything that Sea Star stands for and will not be tolerated in the future.”
The DOJ noted that in addition to today’s charges, as a result of the investigation, on April 30, 2011, Horizon Lines was sentenced to pay a $15 million criminal fine, and five former shipping executives from both Sea Star Line and Horizon Lines have been sentenced to pay a total of nearly $85,000 in criminal fines and to serve more than 11 years in prison, collectively.
One of those men, Sea Star executive Peter Baci, was sentenced to serve 48 months in prison, which is the longest jail sentence ever imposed for a single antitrust count.
Sea Star Line and Peake are charged with price fixing in violation of the Sherman Act, which carries a maximum fine of $100 million for corporations, and a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
The DOJ said the charges against Peake and Sea Star arose from an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the coastal water freight transportation industry. It is asking anyone with information concerning anticompetitive conduct in the coastal water freight transportation industry to call the Antitrust Division’s National Criminal Enforcement Section. — Chris Dupin