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April 8, 2014 False Claims Act Legal News

Shipping Companies Sea Star and Horizon Settle False Claims Act Allegations Involving Anti-Competitive Price-Fixing

In today’s case, we explore a unique False Claims Act settlement alleging unlawful collaboration between several competitors in the maritime shipping business. Specifically, a qui tam lawsuit alleges a private business relationship between two cargo companies for purposes of driving up bids for work with both the U.S. Postal Service and the U.S. Department of Agriculture. While neither company admitted any wrongdoing as part of its settlement agreement, both have faced criminal culpability for the violations under the federal Sherman Act – a statute designed to punish anti-competitive conduct in the private marketplace.

Details of U.S. ex rel. Stallings v. Sea Star Line, LLC

The case against Sea Star Line and its competitor Horizon Lines, LLC, began with the filing of a qui tam lawsuit by a former executive of the Sea Star Line in the federal District Court located in Jacksonville, Florida. According to the allegations, Sea Star Line and Horizon Lines, LLC, companies typically in competition with one another for various oceanic shipping contracts, began to secretly work together to strategize which bids to make in order to maximize profits. More specifically, private emails exchanged between executives of both lines reveal a course of conduct wherein the companies divided up the available government contracts and agreed on comparable bid amounts. By doing this, the companies were able to divide up the available work and basically set their own rates for the contract.

This type of arrangement is prohibited by the False Claims Act because it unlawfully drives up costs for taxpayers paying for the shipment of international mail and food products by the two involved agencies. As a result, plaintiff Stallings filed his complaint under the qui tam provisions of the False Claims Act and the government intervened shortly thereafter.

The whistleblower in this case is set to receive just over $512,000 for his role in bringing the injustice to light. Sea Star Line has agreed to pay $1.9 million, while Horizon Lines is set to pay $1.5 million.

Government’s Response

The investigation and eventual settlement between the government and these defendants was facilitated by concerted efforts between the Department of Justice and the U.S. Postal Service’s Office of Inspector General. According to Special Agent in Charge of the Major Fraud Investigations Division with the USPS:

“Postal Service contractors must understand and know that actions that undermine the contracting process, such as conspiring to suppress and eliminate competition, will not be tolerated and will be aggressively investigated….MFID will continue to work with DOJ, both criminally and civilly, to bring those individuals and companies to justice.”

The settlement is just part of a broader investigative probe into alleged price-fixing schemes occurring with regard to government freight contracts between the U.S. and other nations. Assistant U.S. Attorney Stuart Delery said in a statement:

“Today’s civil settlements demonstrate our continuing vigilance to ensure that those doing business with the government do not engage in anti-competitive conduct….Government contractors who seek to profit at the expense of taxpayers will face serious consequences.”

Contact Us to Learn More

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