The Securities and Exchange Commission charged yesterday that Seatrain Lines Inc. has filed false and misleading statements with the commission in connection with at least $14 million in illegal rebates paid to Seatrain shipping customers from 1969 to 1977.
In a complaint filed in the U.S. District Court, the SEC also alleged that from September 1977, Seatrain failed to disclose fully its potential financial liability in connection with leasing arrangements for an $111 million supertanker called "Stuyvesant," built by Seatrain Shipbuilding Corp.
Seatrain, in a consent decree filed simultaneously in the federal court yesterday, neither admitted nor denied the allegations of securities laws violations, but agreed to file a report with the commission within 30 days disclosing the activities described in the SEC complaint.
The shipping firm also consented to a court order, signed by Judge John Lewis Smith, which prohibits Seatrain from filing misleading commission reports or proxy statements in the future.
In September 1978, the Federal Maritime Commission reached a $2.5 million settlement with Seatrain in connection with rebate schemes, then the second largest civil penalty in FMC history.
The FMC contends that illegal secret rebates are paid by shippers to avoid equalized freight rates for all common ocean carriers set by the FMA under terms of the Shipping Act of 1916.
In the complaint filed yesterday, the SEC alleged that Seatrain made rebate payments and granted price discounts, in violation of the shipping Act, in order to maintain and promote business with shippers.
Seatrain's officers and directors were aware of the rebate practices "and considered them essential to the company's economic survival," the SEC said in court papers.
In addition to the $14 million in cash or cash equivalent rebates paid between about 1971 and mid-1976, the SEC alleged the shipping firm also provided an unknown amount of non-cash rebates to shippers at the same time, including failure to charge customers for the full weight and volume of cargo shipped.
Seatrain's books and records showed revenue from shippers that was originally intended to be returned as rebates, listed rebates as commissions or other business expenses, left unrecorded services charges paid by Seatrain and included invoices that showed less than the actual services performed by Seatrain, the SEC said.