Southern Railway Co. yesterday was fined $1.9 million for providing customers with use of resort facilities in violation of federal anti-rebating law.
The fine, levied by U.S District Judge Robert Hemphill in a South Carolina court, is the largest penalty in the history of the Elkins Act, which bans rebates and concessions by regulated freight carriers.
Southern pleaded guilty to a one-count violation of the statute and no contest to 94 other charges contained in an information filed by the Interstate Commerce Commission and the Department of Justice after a 22-month probe.
Under the plea agreement, the names of the companies were not disclosed, although names of the shippers' employes are cited in each of the counts covering a period from 1974 until March 1978.
Each of the 94 "no contest" counts alleges that Southern gave dozens of shippers "free and discounted use and enjoyment" of resort and recreational facilities, although the guilty plea involves transportation to the company resort.
Southern, which is based in Washington and operates a 10,000-mile freight system across the Southeast, said it settled the case to avoid a costly court trial.
The company, in a prepared statement, also said its employes acted in "the best of faith in thinking their activities . . . were completely proper."
Southern said it discontinued the practices of providing customers with free lodging and entertainment at its three resort facilities in South Carolina and Florida shortly after a federal court ruled in February 1978 that such acts were illegal under the law, which dates back to the turn of the century.
Southern also said that the ICC, which initiated the investigation, "for years has been aware" of the activities, but has not taken actions to enforce the law.
Peter Shannon, director of the ICC's Bureau of Investigations and Enforcement, said the violations are "based not on regulations of the commission but on laws which have been in effect some 75 years.
"It appears to be disengenuous for officials of Southern Railway or their attorneys to hide behind what they claim to be mere technical violations of the law when they know or should have known that a regulated carrier, also has certain obligations," Shannon said.
"One such obligation is not to grant concessions or rebates to shippers, but rather to treat all shippers alike."
Southern operates three resorts, including a 15,000-acre timber forest and recreational facility in Dorchester, S.C. The other resorts are in Holmes Beach, and Palatka, Fla.
Most of the allegations in the information involve the South Carolina resort, Brosnan Forest, which is used by Southern officials for meetings and is regularly made available to company employes for family vacations, a spokesman said.
Southern pleaded guilty to a charge of providing A. K. Pentilla, an employe of a shipper, with free transportation from the lodge in South Carolina to Washington, on the company's jet plane.
Under the agreement, Southern was fined the maximum $20,000 for each of the 95 counts, a penalty to be paid in 30 days.
The agreement also calls for Southern to maintain separate files on entertainment and gift-giving for three years and allow ICC investigators access to those files. In addition, ICC officials will be able to visit Southern's resorts during that time period, the agreement said.
The pact also ends a grand jury investigation of the entertainment practices, but does not preclude other federal probes of the company's practices if new information is brought to the government's attention.
The Southern investigation is part of a continuing ICC probe of rebating and gift giving by regulated rail and trucking companies.