Attorney General Griffin B. Bell has informed Sen. Daniel K. Inouye, (D-Hawaii), that the Justice Department will not suspend its "ongoing prosecutive efforts" against several shipping concerns under investigation for making illegal rebate payments.
Last Friday Bell sent a letter to Inouye, responding to an Inouye request made in early December, asking Justice if it would consider holding off on prosecuting the firms until Congress has had time to pass legislation amnesty from such prosecution.
"It is our considered judgment that any such suspension of ongoing prosecutive efforts on our part would be without precedent and entirely inappropriate," Bell wrote.
Several congressmen have argued that the prosecution could unduly harm the operations of American flag shippers, because foreign shipping lines are suspected of using the same rebate practices. They, however, are not under the jurisdiction of U.S. courts.
Although Congress made rebating a civil, rather than criminal, offense in 1972 at the request of the Justice Department, U.S. Attorneys in Cleveland and Newark are pursuing criminal conspiracy indictments against several shipping concerns for the payoffs.
Justice department officials say privately that the law making rebating a civil offense actually had a reverse effect than anticipated.
Previously, the practice of rebating was a criminal misdemeanor. Under that law, if federal prosecutors sought a conspiracy conviction, the penalty could not exceed the penalty than would be imposed under the misdemanor violation.
But under the present law, even though the alleged violation is civil, a criminal conspiracy conviction is possible, and it could result in much steeper penalties - up to five years in prison and a $10,000 fine.
Six American shipping companies are under investigation by the Federal Maritime Commission for illegal rebates, congressional sources report.
Although a Justice Department official testifying at House Merchant Marine and Fisheries Committee hearings last week said indictments could be expected within 30 days, department sources now say that at least some of the companies are negotiating our-of-court settlements.
Although the FMC has levied nearly $5 million infines for rebate payments against firms tht have admitted the practice, The Washington Post has learned that federal investigators have uncovered a pattern of nealy $100 million of questionable payments.
The rebates are made on shipping rates set by the FMC and international shipping conferences. The FMC regulates rates in an effort to keep the shipping field competitive, because of fears that without regulation only a few large carriers would survive.
For years if has been common practice for carriers to solicit new business by offering "rebates" that take many forms, investigators say.
In some cases, customers would be given free warehousing or free services at the port. In other cases, outright cash payments or bearer bonds were given to many company executives, sources said.