KEEPING IT LEGAL James A. Calderwood, Attorney Zuckert, Scoutt & Rasenberger, LLP [email protected] 202-298-8660 (o) I. Government Traffic – Criminal and Civil Fraud Actions A. Investigations and criminal prosecutions on the increase B. Foreign TSPs may be charged if involved U.S. Government traffic C. HHGs TSPs 1. False Claims Act 2. Antitrust Laws (bid rigging) 3. Bribery of Public Officials D. Origin of Investigations 1. Competitor reports suspicious activity (TO Norfolk Naval Shipyards) 2. Disgruntled Employee a. Reports to Inspector General or FBI b. Whistleblower Suit E. Government personnel notice suspicious activity – SDDC being trained in what to spot 1. Rate submissions are similar 2. Certain TSPs seem to be acting together 3. Industry inquiries if something is “all right to do” 4. Particular TSPs only submit rates on certain lanes 5. GSA Transportation Audits 6. Audits by Defense Contract Audit Agency F. Investigations 1. U.S. Department of Justice uses the FBI 2. Grand juries a. Grand juries subpoenas for documents (including electronic documents such as emails) 3. Grants of immunity from prosecution to testify against others 4. Wire taps and body wires All of the above have been used in investigations of HHGs TSPs. G. Convictions result in imprisonment and fines. H. May result in debarment I. Whistleblower Suits (Qui Tam) 1. False Claims Act permits those with inside (non-public) knowledge of fraud on the Government to sue in the name of the Government and can collect from 15% to 30% of the proceeds plus attorneys fees 2. Statute provides for triple damages 3. Disgruntled employees most common source of such suits 4. Could also be a subcontractor, a supplier, a consultant or a competitor 5. Action filed under seal (at first defendant does not even know suit filed) 6. DOJ can take over the case (whistleblower still receives part of the recovery) 7. Employer may not retaliate against employee for reporting possible violation or instituting a suit J. Price Fixing 1. Department of Justice indicted a number of foreign freight forwarders including forwarders from Japan, Switzerland and Germany for fixing prices. These cases are based on shipments for private shippers not necessarily government traffic. To date over 20 forwarders have been criminally charged 2. Resulted in private class action suits for treble damages and attorneys fees. The forwarders have paid out millions in such damages. 3. Bid rigging is a type of price fixing – any process which results in two or more TSPs colluding on rate submissions is bid rigging. II. Federal Maritime Commission and Freight Forwarders A. Ocean Transportation Intermediaries (OTIs) 1. Non-Vessel-Operating Common Carrier (NVOCC) a. NVOCC is a common carrier but does not operate a vessel. It is a shipper in its relationship to an ocean common carrier (vessel operator). NVOCC must be licensed by the FMC but can be either U.S. based for foreign b. As NVOCC is responsible to its customer (a shipper) for loss and damages. The NVOCC may look to a vessel operator or others for reimbursement for loss or damages. c. NVOCCs must have a tariff but may negotiate a non-tariff rate with a shipper. 2. 3. B. Foreign Based NVOCCs a. May qualify with the FMC as a licensed NVOCC b. Unlicensed foreign based NVOCCs must register with the FMC and have a tariff Ocean Freight Forwarders a. Must also be licensed by the FMC, but is not a common carrier b. Dispatch shipments from the U.S. via common carrier (vessel operator or NVOCC) on behalf of shippers including document preparation. May perform tasks such as arranging for cargo insurance and cargo storage c. May also be a licensed FMCSA carrier for U.S. domestic commerce such as a motor carrier or a domestic U.S. forwarder d. Same legal entity may be licensed as both an NVOCC and a Ocean Freight Forwarder If an entity exclusively transports household goods and personal effects for DOD or other federal agencies it does not have to be licensed by the FMC THE END * JAMES A CALDERWOOD Zuckert, Scoutt & Rasenberger, LLP * Former U.S. Department of Justice Prosecutor and Special Agent with DOD’s Inspector General. Represented various household goods moving entities in criminal and civil actions as well as Federal Maritime Commission issues.