Maersk Line Limited to pay $31.9 million to settle overcharging allegations

The Justice Department announced today that Maersk Line Limited, Norfolk, VA, has agreed to pay the government $31.9 million to resolve allegations that it submitted false claims to the United States in connection with contracts to transport cargo in shipping containers to support U.S. troops in Afghanistan and Iraq. The government alleges that Maersk, a wholly-owned American subsidiary of Danish based A.P. Moller Maersk, knowingly overcharged the Department of Defense to transport thousands of containers from ports to inland delivery destinations in Iraq and Afghanistan.

The government contends that Maersk inflated its invoices in various ways. For example, Maersk allegedly billed in excess of the contractual rate to maintain the operation of refrigerated containers holding perishable cargo at a port in Karachi, Pakistan, and at U.S. military bases in Afghanistan; allegedly billed excessive detention charges (or late fees) by failing to account for cargo transit times and a contractual grace period; allegedly billed for container delivery delays improperly attributed to the U.S. government; allegedly billed for container GPS-tracking and security services that were not provided or only partially provided; and allegedly failed to credit the government for rebates of container storage fees received by Maersk’s subcontractor at a Kuwaiti port. 

The settlement resolves allegations against Maersk that were filed in San Francisco by Jerry H. Brown II, described by the Justice Department as “a former industry insider.” The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals called “relators” to bring lawsuits on behalf of the United States and receive a portion of the proceeds of a settlement or judgment awarded against a defendant. The relator in this action will receive $3.6 million as his statutory share of the proceeds of this settlement. In 2009, the United States resolved allegations by Mr. Brown against his employer, shipping company APL Limited, and its parent company for $26.3 million. As the relator in that action, Mr. Brown, received $5.2 million as his statutory share of the proceeds

“Contractors that submit false claims for monies they are not owed cost the government millions of dollars every year,” said Melinda Haag, U.S. Attorney for the Northern District of California. “This settlement should send a strong signal that the government is committed to safeguarding taxpayer funds by ensuring that contractors operate ethically and responsibly.”

The settlement with Maersk was the result of a coordinated effort among the Commercial Litigation Branch of the Justice Department’s Civil Division; the U.S. Attorney’s Office for the Northern District of California; the Defense Criminal Investigative Service of the Department of Defense; the Army’s Criminal Investigation Command; and the Defense Contract Audit Agency of the Department of Defense.

January 3, 2011