Fine and charge in Puerto Rico price-fixing case

November 17, 2011 - 9:25 PM

SAN JUAN, Puerto Rico (AP) — The U.S. Justice Department expanded an investigatioin into Puerto Rican shipping Thursday, announcing a $14.2 million fine for a Florida-based company and a criminal charge against its former president.

Sea Star Line LLC agreed to the fine and a guilty plea to one felony count of conspiring to fix prices on cargo moving in and out of the U.S. island territory, the Justice Department said in a statement.

A federal grand jury in San Juan indicted the company's former president and chief operating officer, Frank Peake, on a charge of conspiring to fix prices on Puerto Rico routes from late 2005 until April 2008. Peake, a New Jersey resident, is now a shipping company executive with a company affiliated with Sea Star.

Sea Star, based in Jacksonville, Florida, issued a statement apologizing to its customers, and noted the agreement provides that the Justice Department will not bring criminal charges against its parent companies, Saltchuk Resources Inc. and American Shipping Group Inc.

Sea Star employees engaged in the price-fixing scheme in violation of company policies, but the company is still responsible for the conduct under antitrust law, said Anthony Chiarello, President of American Shipping Group Inc.

"We extend sincere apologies to all of our loyal customers and the consumers who were affected by this conduct," Chiarello said in the statement. "It was contrary to everything that Sea Star stands for and will not be tolerated in the future."

He said by email that he was unable to answer questions because he was traveling.

David Oscar Markus, a lawyer for Peake, said his client denies wrongdoing and expressed confidence his client will be cleared of a charge that carries a maximum sentence of 10 years in prison.

"Frank is innocent. He is never going to do a day in jail because he didn't do the things they said he did," said Markus, based in Miami. "It's a real shame that the government is wasting its resources on something like this."

Peake is accused of meeting with unidentified others in his industry to allocate customers and set prices for freight services for government and commercial clients, according to the indictment.

As part of the agreement, which is subject to court approval, Sea Star admitted conspiring to set prices and rig bids between May 2002 and April 2008, according to court papers.

Last April, the investigation brought a $15 million fine for Horizon Lines LLC of Charlotte, North Carolina. Five former executives of Sea Star and Horizon have received fines and jail sentences stemming from the probe.