The world's largest containerized shipping firm, Sea-Land Service Inc., yesterday waived an impending federal indictment and instead pleaded quilty in Newark to a charge of conspiring to defraud the government by paying illegal rebates.
Sea-Land thus becomes the second major domestic shipper to plead guilty in federal court to illegal rebating charges. Last month, Seatrain Lines Inc. and its California subsidiary pleaded guilty in Cleveland to charges of defrauding the Federal Maritime Commission and impeding enforcement of the Shipping Act of 1916.
According to William W. Robertson, first assistant U.S. attorney in Newark, Sea-Land, a subsidary of R.J. Reynolds Industries Inc., waived the indictment and pleaded guilty to a felony information charge brought by the U.S. attorney.
Sources close to the investigation say that more action against other shipping firms could come within 30 days.
Sea-Land was fined $5,000 by U.S. District Judge H. Curtis Meanor, who could have assessed the company $10,000. But because the firm cooperated during the probe, "It seems to me, under the circumstances, a fine of $5,000 would be more appropriate," Meanor said.
Sea-Land had been charged with making secret payments to shippers between 1969 and 1975 and hiding the transactions in its financial records.
Shipping rates are set by the Federal Maritime Commission in an effort to prevent the shipping industry from being dominated by a few large firms. But it has been common knowledge for years that more carriers have circumvented set rates by kicking back money to firms who give them business.
According to Sea-Land attorney Christopher Crowley, the company cooperated completely with the federal probe into illegal rebating practices.
The investigation by the Justice Department and FMC into rebating is more than two years old, and reportedly involves a total of some $100 million in such payoffs.
In 1976, Sea-Land admitted to the Securities and Exchange Commission that it had paid $7 million in the Far East through a Hong Kong bank and $11.5 million in Europe through a Netherlands bank for illegal rebates. The discovery of the payments came from an internal investigation performed by the company.
The firm subsequently was fined $4 million by the FMC for rebates, the largest fine ever levied by a federal regulatory agency.
Sea-Land's Crowley said that the practice has been "going on for 60 years . . . and it's perfectly clear" that rebates are not "practiced by Sea-Land alone. Sea-Land led the way in disclosing the nature of illegal rebates."
In Winston-Salem, N.C., R.J. Reynolds Chairman Colin Stokes and President J. Paul Sticht issued a statement:
"In decriminalizing rebating in 1972, it was generally assumed Congress' intent was also to decriminalize the conspiracy aspects of rebating.
"However, Sea-Land is pleading guilty because by doing so it will bring us closer to resolution of matters arising from our comprehensive self-investigation. It will spare us the time and expense of fighting the charge and will allow our executives to focus their full energies on running the business.