Jacksonville-based Sea Star Line LLC has agreed to plead guilty and pay a $14.2 million criminal fine for its role in a conspiracy to fix prices in the coastal water freight transportation industry, the Department of Justice announced Thursday.
Additionally, the department said a federal grand jury in San Juan, Puerto Rico, returned an indictment against Frank Peake, the former president of Sea Star Line, for his role in the same conspiracy.
According to a one-count felony charge filed Thursday in U.S. District Court for the District of Puerto Rico, Sea Star Line 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, said the news release from the Justice Department.
According to a one-count indictment filed Thursday in the same district, Peake participated in the conspiracy from at least as early as late 2005 until at least April 2008, it said.
Sea Star Line transports cargo shipments, such as heavy equipment, perishable food items, medicines and consumer goods, on scheduled ocean voyages between the continental United States and Puerto Rico.
According to the court documents, 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, said the release.
The department said that Sea Star Line, Peake and co-conspirators also 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.
In addition to the charges Thursday, the release said that as a result of the investigation, Horizon Lines LLC, based in Charlotte, N.C., was sentenced April 30 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.
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, said the release.
The charges Thursday arose from an ongoing federal antitrust investigation into price-fixing, bid-rigging and other anti-competitive conduct in the coastal water freight transportation industry, which is being conducted by the Antitrust Division’s National Criminal Enforcement Section; the Baltimore Resident Agency of the Department of Defense’s Office of the Inspector General, Defense Criminal Investigative Service; the Miami Field Office of the Department of Transportation’s Office of Inspector General; and the Jacksonville Field Office of the FBI.
In a statement issued Thursday afternoon, Sea Star Line confirmed the plea agreement with the Antitrust Division of the Department of Justice in which the company agreed to pay the $14.2 million fine.
Sea Star said it has been cooperating fully with the governmental authorities throughout the investigation and that the plea agreement, subject to the approval of the court, also provides that the Department of Justice 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.
“We have also 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,” he said.
“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 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,” he said.
Sea Star Line offers cargo transportation services from North America to Puerto Rico and the Caribbean Islands.