Maersk Given $2 Billion Military Contract Months After Record $32 Million Fine for Defrauding U.S. Military. Result Raises Doubt About Effectiveness Of USCG’s $10,000 Fine For Sexual Assault Coverups

New York, NY

In a precedent-setting Enforcement Action, the U.S. Coast Guard recently fined major U.S. defense contractor Maersk Line, Limited $10,000 in connection with coverups of shipboard sexual assaults involving cadets from the U.S. Merchant Marine Academy, as well as other crewmembers. Specifically, the U.S. Coast Guard fined Maersk for violating 46 USC § 10104, also known as the Federal Shipboard Sexual Assault Allegation Reporting Law.

U.S. Coast Guard Enforcement Action fines are designed, in part, to discourage companies like Maersk from continuing to engage in illegal conduct in the future.  But Maersk’s recent history shows that fines, even for millions of dollars, do nothing to change Maersk’s patterns of illegal and criminal business practices.

In 2012 the Department of Justice announced that Maersk Line, Limited had agreed to pay the U.S. government $31.9 million to resolve allegations that it submitted false claims to the United States government in connection with contracts to transport cargo in shipping containers to U.S. troops in Afghanistan and Iraq. The government alleged that Maersk knowingly overcharged the Department of Defense to transport thousands of containers from ports to inland delivery destinations in Iraq and Afghanistan.

In announcing the record fine, Tony West, Assistant Attorney General for the Civil Division of the Department of Justice, said “Our men and women in uniform overseas deserve the highest level of support provided by fair and honest contractors.  As the Justice Department’s continuing efforts to fight procurement fraud demonstrate, those who put profits over the welfare of members of our military will pay a hefty price.”

But only a few months after the announcement by the U.S. Department of Justice that Maersk had agreed to pay a massive and record $31.9 million fine for defrauding our men and women in uniform, the Department of Defense announced that Maersk had been awarded a fresh $2.1 BILLION contract to ship military cargo internationally on behalf of the U.S. Transportation Command (USTRANSCOM).

In shaking off the massive fine, it likely helped that Maersk Line, Limited added General Charles T. Robertson Jr. to its Board of Directors. Robertson is a retired 4 star U.S. Air Force General who previously served as Commander of USTRANSCOM where he had been responsible for awarding massive transportation contracts to Maersk.

Maersk Line, Limited has stocked its ranks with former high ranking U.S. Military and Coast Guard Officers (including Admirals and Generals), high level veterans of the Maritime Administration, and other high ranking former government employees who possess the knowledge and influence to ensure that Maersk continues to rake in huge defense contracts, cargo preference contracts, and Maritime Security Program subsidies. And these former military and government officials also help to ensure that Maersk is never seriously punished when caught defrauding the U.S. government, which appears to be a significant part of Maersk’s business model.

Less than three years after paying the record $31.9 million fine, Maersk was again in trouble for defrauding the U.S. government.  On November 5, 2014 the United States Attorney’s Office for the Southern District of Illinois announced that Maersk had agreed to pay the government $8.7 million to settle claims that it had again submitted forged documents on a Cargo Preference contract to ship cargo to military outposts in Afghanistan. The government found 277 instances in which claims verifying receipt of shipments in Afghanistan contained forged signatures.

In 2016 Maersk was again fined by the Department of Justice for fraud.  In that case, a wholly owned Maersk subsidiary was fined $3.66 million for violations of a U.S. government defense contract in which Maersk submitted 563 fraudulent billing invoices to the U.S. government.

None of these fines dented Maersk’s business or its relationship with the U.S. Department of Defense. In recent years USTRANSCOM has continued to award Maersk contracts worth hundreds of millions per year, including a recent contract worth $613,388,416 for deep sea freight transportation services.

For Americans working aboard vessels in the U.S. maritime industry, this demonstrated pattern of Maersk shaking off numerous multi-million dollar fines totaling more than $40 million only to be rewarded with more massive government contracts raises a crucial question:

If more than $40 million in fines could not change Maersk’s behavior, how will a $10,000 fine?