Seatrain Lines, Inc. and its California subsidiary pleaded guilty yesterday in U.S. District Court in Cleveland to paying illegal rebates to major importer in an effort to attract Pacific Coast shipping business.
Harvey Ludwig, president of Ohio-based Tenna Corp., the largest importer of automotive sound equipment and radios, also pleaded guilty to charges of accepting more than $200,000 in payments for his part in steering more than $1 million worth of Tenna shipping business to Seatrain.
The pleas are the first convictions in a two-year probe by the Justice Department, the Internal Revenue Service and the Federal Maritime Commission into an alleged $100 million of illegal payments made by U.S. shippers trying to attract business.
Because shipping rate schedules are approved by FMC, the rebates were seen by federal probers as an illegal means fo subverting the rate structure, which of regulated to ensure the survival of smaller shipping firms that the otherwise might be priced out of business.
Legislation that would exclude U.S. shipping firms from criminal sanctions for rebate violations is scheduled to be debated on the House floor next week,
But after hearing of the guilty pleas in Cleveland, Rep. Paul McClosky (R-Calif.) said would ask Merchant Marine Committee Chairman Rep. John M. Murphy (D-N.Y.) to recommit the legislation to committee for futher discussion.
"I want to allow the Justice Department to fully disclose to Congress what the circumstances of th Cleveland case were," McClosky said. "That case may very well affect this legislation."
McCloscy said he wanted to take testimony from both the prosecution and the defense in Cleveland because "we have been unable to get any details of this case from Justice until now, even though it had come to light two years ago."
McClosky pointed out, however, that even if Seatrain had been exempted from prosecution for rebating to violations of currency laws. And, he said, the bill does not seek to cover violations of financial disclosure or Internal Revenue laws.
Seatrain and its subsidiary, Ocean Equipment Corp., fine of up to $1.02 million for defrauding the FMC and violating federal currency laws by bringing more than $200,000 in beared bonds into this country from the Netherlands to pay off Ludwig.
Ludwig faces a maximum fine of $10,000 and/or five years in prison on charges that he accepted the payoffs.
Because Ludwig resigned when the charges were raised in 1976 and has cooperated with authorities ever since, he is expected to get a light sentence.
When a federal grand jury in Cleveland indicted the two shipping concerns last week. Ludwig was charged separately by Cleveland-based U.S. Attorney Herb Berkowitz.
Berkowitz said yesterday that Ludwig had made a plea agreement with the government, and has agreed to help the U.S. recover some $33,000 more of bearer bonds that were paid to himbut are presently in Switzerland.