Tuesday, November 11, 2014

Container Shipping Group to Pay Millions in Damages for Road Haulage and Freight Fraud

Forged Signatures Cost Box Carrier but Huge Profit Jump Will Doubtless Make it More Palatable
Shipping News Feature

US – Maersk Line has agreed to pay the US Government $8.7 million as part of a civil settlement over allegations that the Danish container shipping giant failed to ‘fully comply with certain terms of its contract’ with the United States Transportation Command (USTranscom), after Maersk apparently submitted 277 shipping claims containing forged signatures. Under Maersk’s contract with USTranscom, Maersk had provided ocean freight and road haulage services to ship cargo from the United States to military outposts in Afghanistan, often travelling in remote areas where enemy combatants and criminal entities were active in delivering shipments.

With respect to the shipments at issue in the civil settlement, USTranscom discovered that some claims submitted by Maersk contained suspicious signatures, with further investigations apparently showing that the signatures purporting to verify receipt of shipments in Afghanistan were forged. USTranscom’s review uncovered the 277 instances in which such claims were falsely made. United States Attorney for the Southern District of Illinois, Stephen Wigginton said:

“One can clearly see that in contracts of this magnitude, even a small percentage of fraud amounts to significant loss of funds. By this and other ongoing investigations, I am putting these worldwide contractors on notice that my office will not tolerate any fraudulent, false or unwarranted billings to the United States and its client agencies.

“I would note that to its credit, Maersk was cooperative in the investigation. Aside from these containers, Maersk has successfully delivered thousands of shipments during the war effort. Maersk’s overall conduct reflects a stronger performance and greater diligence than the relatively small amount of non-compliant warzone shipments would suggest, but, as I have noted, even a small amount of overall fraud becomes a huge waste of tax dollars, and I will not tolerate any such waste.”

The case was investigated by the United States Army Criminal Investigation Command, Defense Criminal Investigative Service, Naval Criminal Investigative Service, Air Force Office of Special Investigations, and the Office of the Special Inspector General for Afghanistan Reconstruction. John Sopko, Special Inspector General for Afghanistan Reconstruction, observed:

"This $8.7 million settlement is a real win for the American taxpayer and highlights the critical importance that oversight plays in helping to protect US funds."

This of course is not the first case of the military being subjected to situations of this type. In November 2009, the US Department of Justice made public an indictment alleging that logistics supplier Agility overcharged and committed fraud in connection with its Prime Vendor contracts to supply food to US troops and contractors in Iraq and Kuwait. Maersk itself paid up a reported $31.9 million in fines and interest charges for overcharging for shipments to troops in Afghanistan and Iraq in 2012 whilst making no admission of liability. The whistleblower who reported them is said to have been entitled to $3.6 million of the penalties.

To put the fine in perspective today AP Moller Maersk upgraded its third quarter liner division profits from the predicted $1.5 billion to $2 billion, Maersk Line itself chipping in £685 million, a jump of over $130 million on last year. The improvement was put down to higher freight rates, better operational cost control and the use of the new generation larger box ships with a prediction of further improvements once the new 2M agreement with MSC starts to contribute to efficiency.

Photo: The terrain in Afghanistan has of course proved a logistical nightmare for armies over centuries.