TAX CONFERENCE

The recently enacted "American Jobs Creation Act" gives significant tax breaks to a number of U.S. industries--including shipping.

MARINE LOG and BLANK ROME will present a senior level seminar CHANGES IN U.S. TAXATION OF SHIPPING INCOME in Stamford, Conn. on April 5 & 6, 2004

Make sure you know how the new tax rules work!

February 21, 2005

Guilty plea in bypass pipe pollution case

The captain of a vessel that arrived at the Port of Long Beach in September equipped with pipes to bypass the oil-water separator has pleaded guilty to a felony charge of obstruction of justice for advising other crew members to destroy and conceal from Coast Guard inspectors incriminating telexes relating to the use of bypass pipes on the vessel.

Ioannis Kallikis, 65, of Athens, Greece, master of the 16,320 gt Maltese-flag bulker Katerina, pleaded guilty February 15 in Los Angeles federal court before U.S. District Judge Florence-Marie Cooper.

By pleading guilty, says a release from the U.S. Attorney for the Central District of California, Kallikis admitted that he acted corruptly and with the intent to impede a Coast Guard investigation into pollution violations on the vessel by advising other crew members that officials of the operator of the ship wanted the crew to destroy the incriminating telexes.

As a result of Kallikis' guilty plea, 13 Katerina crew members who were designated as material witnesses are no longer needed to testify at trial. Federal prosecutors asked Judge Cooper to release them from court supervision. The motion that was granted by Judge Cooper, and the Filipino crew members were expected to fly home.

"This case is important for two reasons--the owner of the Katerina knowingly allowed the ship to dump sewage and oil into the ocean, and then it tried to cover up its illegal conduct," said U.S. Attorney Debra W. Yang. "After engaging in illegal conduct, no culpable party can try to hide its responsibility, not the captain nor the owner of the ship."

The operator of the Katerina, DST Shipping, Inc., of Thessaloniki, Greece, has agreed to plead guilty to two felony charges related to this water pollution case. An official of DST is scheduled to enter guilty pleas on behalf of the company on February 28.

DST has agreed to plead guilty to obstruction of an official proceeding and failing to maintain an accurate Oil Record Book.

In its plea agreement, DST acknowledges that "on numerous occasions" during an approximately six-month period in 2004 the Katerina discharged oil-contaminated bilge water and oil sludge into the ocean. Furthermore, the company acknowledged that it directed the Katerina crew to conceal the bypass pipe from U.S. authorities.

In the plea agreement, DST agreed to pay a $1 million criminal fine, $300,000 of which will go to the Channel Islands National Park.

On January 14, Katerina Chief Engineer Edgardo Guinto, 49, pleaded guilty to one charge of obstruction of justice for concealing one of two bypass pipes from the Coast Guard and instructing other crew members to lie to inspectors about the use of the bypass pipe. On January 28, Second Engineer Rolan O. Sullesta, 42, pleaded guilty to one felony charge of obstruction of justice for concealing one of two bypass pipes used on the vessel from the Coast Guard inspectors.

The Katerina arrived at the Port of Long Beach on September 10 with a cargo of steel products. The vessel berthed on September 14. According to court documents, crew members contacted dock workers and reported that they had been directed to throw trash, as well as to discharge sewage and oil, into the ocean. A transport workers union representative contacted the Coast Guard and asked for an inspection of the vessel.

On the night of September 14, Coast Guard inspectors boarded the Katerina and saw evidence that the ship's oil-water separator was not being used.

A second inspection on September 15 revealed piping designed to bypass the oil-water separator. Inspectors also found evidence that oil had recently been discharged overboard from the ship.

Kallikis and Guinto are scheduled to be sentenced on April 4. Sullesta is scheduled to be sentenced on April 11. The obstruction charge carries a maximum possible penalty of 20 years in federal prison.

This case is the result of an investigation by the United States Coast Guard Marine Safety Office, the Coast Guard Investigative Service and the United States Environmental Protection Agency's Criminal Investigation Division.

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