What's the best way for a shipowner to avoid having a ship hijacked by pirates?

Reroute the ship even if it means a huge diversion
Stay within recommended safe limits and patrolled areas
Hire an on-board security team
Just hope for the best

October 1, 2008

Shipping ex-execs plead guilty in Jones Act antitrust case

Four former U.S. shipping company executives have agreed to plead guilty and serve jail sentences for their roles in what the U.S. Department of Justice describes as "a wide-ranging conspiracy to rig bids, fix prices and allocate market shares for customers transporting goods between the continental United States and Puerto Rico by ocean vesse."

The Department also announced that a fifth shipping executive has agreed to plead guilty to destroying evidence of the shipping conspiracy.

The Department says these are "the first charges in the Antitrust DivisionŐs ongoing investigation into collusion in the coastal shipping industry."

The antitrust investigation of the Jones Act domestic carriers first hit the headlines last April when federal agents raided offices of Horizon, Sea Star and Crowley and subpoenaed information from Trailer Bridge and Matson.

A one-count felony antitrust charge was filed today in U.S. District Court in Jacksonville, Fla., against each of the four shipping executives: Peter Baci of Jacksonville; Kevin Gill and Gregory Glova of Charlotte, N.C.; and Gabriel Serra of San Juan, Puerto Rico.

Under the terms of their plea agreements, each of the four executives has agreed to serve a jail term that will be determined by the court, pay a $20,000 criminal fine and cooperate fully in the DepartmentŐs ongoing antitrust investigation. The pleas, fines and jail sentences are subject to court approval.

Baci is a former Senior VP of Sea Star Line; Gill, Glova and Sera are former Horizon Lines managers.

A one-count felony obstruction of justice charge also was filed against a fifth shipping executive, Alexander Chisholm, of Jacksonville, a former Sea Star employee, who has agreed to plead guilty and serve jail time, subject to court approval.

"We are committed to prosecuting executives who violate U.S. antitrust laws and harm consumers and competition in the United States," said Thomas O. Barnett, Assistant Attorney General in charge of the DepartmentŐs Antitrust Division. "Acts of obstruction of justice threaten the ability of the Department to fully uncover and prosecute antitrust crimes, and we will pursue individuals who engage in obstruction with the same vigor as we pursue those who engage in the underlying criminal violations."

The five executives charged today worked for large U.S. companies that provide freight shipping services to customers transporting goods between the continental U.S. and Puerto Rico, a shipping lane governed by the Jones Act.

The four individuals charged with violating the federal antitrust laws have agreed to plead guilty for their roles in what the Department describes as "a conspiracy that began at least as early as May 2002 and continued until as late as April 2008, the object of which was to eliminate competition and raise prices for the movement of goods in the U.S. to Puerto Rico shipping lane. The Department charged that the executives sought to eliminate competition and raise prices by agreeing not to compete for one anotherŐs customers; agreeing to rig bids submitted to government and commercial buyers; and agreeing to fix the prices of rates, surcharges and other fees charged to customers."

Baci, Gill, Glova and Serra are each charged with violating the Sherman Act, which carries a maximum sentence of 10 years imprisonment and fines of $1 million 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.

Chisholm has agreed to plead guilty for his conduct in obstructing the Department of JusticeŐs investigation of the shipping conspiracy. The charge alleges he destroyed documents on a computer server that were material to the coastal shipping grand jury investigation and responsive to a grand jury subpoena. He faces a maximum sentence of 20 years imprisonment and a fine of $250,000.

Horizon said in a statement that it Ňintends to continue to cooperate fullyÓ with the investigation.

The investigation is being conducted by the National Criminal Enforcement Section of the Antitrust Division and the Jacksonville Field Office of the Federal Bureau of Investigation (FBI).

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