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dismissed from their positions. For some, there are also penal sanctions for the disclosure of confidential information.

officials interviewed state that cash rebates cannot be traced. This is a negative position. Ruses for hiding the allocation of funds for rebates are no more complex than those used, for example, by taxpayers in siphoning off business receipts for their own use. Sophistry in fraud is not cornered by shipping industry officials and the self-policing systems now in being should consider expanding their expertise to the auditing/investigative area. IRS Special Agents do not throw in the towel when confronted with garment industry tax fraud. Neither should neutral body investigators looking for cash rebates. The personnel required to uncover the varied, intricate gambits used for malpractices must be trained in the pursuit of fraud, which is what a cash rebate is. They should have the auditing/ investigative acumen which is present in those investigators trained to accept challenges in devising methods of uncovering fraud.

The ideal, then, is to continue the present methods of uncovering misratings and the other malpractices, and to improve upon these methods. Auditor-type investigators should be used to pursue the developed leads which indicate rebates, as well as to analyze prior cash rebates and the financial structures of shipping companies so that they can explore the ways of conducting financial audits which will be practicable and fruitful. Finally, the lines should not lose sight of the deterrent factor the above type of self-policing would have on those lines which would tend towards malpractices of the cash rebate type.

If the concept agreed upon is worthy of pursuit, there are a few possible ways of financing the additional costs involved, even if it were to be done only on a pilot program basis. The obvious way to finance the costs is to assess the members. The monies would come from the cash rebates they no longer have to pay. Cargo inspection stopped some lines from colluding with shippers on misdeclarations and gave the carriers an easy out which resulted in additional revenues for them. The expressed fear of being caught by the financially oriented type of investigators and being fined heavily (200,000 dollars) could serve as the basis for the lines discouraging cash rebate liaisons, present or future.

Another possibility would be the earmarking of fines which result from cash rebate cases. There is general agreement that the cash rebate is the most serious type of malpractice. The fine for such activity should be high so that it would represent a real deterrent to malpractices. The fines should be not less than 200,000 dollars and should be treated separately from other fines. Specifically, these fines should revert to the neutral body for the sole purpose of continuing the financial investigator concept. The additional benefit of this proposal would be that the investigators would have the self-interest motivation to prove the cash rebate malpractices.

There has also been noted the fact that intelligence gathering does not receive the attention an investigative body should devote to the art. Liaison with fellow neutral bodies, the Treasury Department's Bureau of Customs, foreign investigatory agencies, and the FMC, should be used as a device to improve investigative techniques. As an intelligence technique, it should be used to exchange information, on a confidential basis, as to what lines are committing what types of malpractices and which shippers are susceptible to or are receiving rebates. A free exchange of intelligence data makes the policing more effective. Mutual problem areas, such as records in Switzerland, should be discussed.

The neutral bodies and the Commission are interested in stopping malpractices on the part of lines as well as shippers. The neutral bodies and the Commission have reputations for respecting confidentiality of sources. For each to hold to itself valuable information on malpractices is self-defeating. Possible improvement in liaison and intelligence gathering techniques should be discussed with the responsible officials so that these avenues can be opened. In this area, the paranoia of government intervention is self-defeating.

There was mentioned in Part IV (E) that IATA licensed agents. If shipping industry neutral bodies were to license the agents and freight forwarders so that they were authorized to do business with conference members, the bodies would have more control over possible malpractices by the latter groups

and perhaps more access to records. This possibility should be considered in the future, as well as how computer technology can be brought into play in assisting inspection and misrating programs.

Finally, in Part VI, many other areas were mentioned as possible improvements for self-policing. These should be pursued further with the lines and conferences, as should be any unforeseen difficulties arising from the implementation of the Recommendations in Part II.


In Part v, above, the Commission's present oversight role was discussed. What is clear is that those reporting procedures now being used are completely inadequate. This finding is true if one imposes the requirements for a routine supervision, and is especially obvious if the requirements of supervision, as contemplated by the Congress, were imposed by the Commission (see Part III (A)). In Recommendations, Part II, the conference chairman selfpolicing system was recommended, provided specific conditions were met and a report was submitted annually to the Commission. Recognizing the sterility of reports, it was suggested that some sort of follow-up plan of interviews be employed so that there could be a more accurate appraisal of the statements made to the Commission.

Self-policing reports from neutral bodies, even in their suggested revised form, suffer from the same sterility, irrespective of the amount of detail. They can never represent an accurate picture of what the true conditions are within the conferences or the adequacy of the self-policing. Neither have follow-up memoranda and discussions been proven to be successful in assessing the adequacy of the self-policing. What are needed are answers to the intent of the conferences and neutral bodies to provide self-policing, the effort the neutral body exerts on self-policing, and the effectiveness of the neutral body.

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Presently, one neutral body is levying numerous fines in large amounts. Another neutral body has minimal fining activity. Does the heavy fining indicate a dirty trade and an ineffective neutral body, or an effective neutral body which is understaffed? Does the minimal fining indicate a clean trade and an effective neutral body or a dirty trade and an ineffective neutral body? Or do we have combinations of both? A heavy backlog of complaints requires questions and answers which should indicate that either the situation is coming under control or there is inadequate self-policing. The answers to these questions cannot be found in semi-annual or annual reports irrespective of the amount of data they contain. Additionally, as each neutral body has been expanding its services, the Commission has been concerned whether the additional obligations are being met and whether they would cause a dimunition of self-policing in those conferences which are already being policed.

In this discussion there should be a clarification of terms. Inspections and audits signify a critical review of cargo and shipping documents, including verification of accounts and records, in order to determine if there is compliance with the basic agreements. Investigations entail a concentrated, thorough effort to develop evidence that an event or transaction took place. Here, it usually is initiated in response to an allegation or suspicion of a breach or violation of an agreement. A combination of inspections, audits and investigations, with fining activity, is policing.

Also, at this juncture, the philosophy of self-regulation, as set out in Part III (B) should be reemphasized. The Commission has the Congressional mandate of supervision. However, this does not require the Commission's interfering or meddling in the internal affairs of the conferences and the neutral bodies. The Commission's mandate is met if it has the information from which it can evaluate the adequacy of the self-policing. The ability to evaluate meaningfully so there can be an assurance of adequacy is the only "supervision" intended.

The operating budgets of the neutral bodies indicate to the Commission the intent of the lines to have effective self-policing. Restrictions on the self-policing body's budget are an effective, insidious method to curtail effective self-policing. The talent, quality, and experience of the neutral bodies' employees, along with their methods and

procedures, reflect the intent of the neutral bodies to bring about effective self-policing. The Recommendations of Part II assure the Commission that the neutral bodies have the requisite authorities for effective self-policing. The end products of the neutral bodies are their investigative reports and adjudication memoranda, and these contain the accurate indicators as to whether the self-policing is effective.

The answers to the degree of effort exerted by neutral bodies on self-policing cannot be found in the reports, even if they were informative. What is needed here is an analysis of each neutral body's responsibilities and manpower. What is required is information on the numbers of employees who are assigned to and/or manhours expended on: (1) cargo inspection; (2) manifest inspection; (3) audit of office documents; (4) investigations of complaints; (5) self-initiated investigations; (6) intelligence gathering; and (7) financial analysis-investigation of cash rebates.

In addition to the above information, the neutral body should be able to supply answers as to the concentration of manpower for each line of each conference and in what areas the manpower is directed. Additionally, the specific duties of each category of personnel involved in self-policing should be stated, including production figures. Then, to be weighed against these figures, by applying the usual standards of the policing business, is what allocation of personnel would be required in each of the above seven categories for the selfpolicing to be adequate.

Nevertheless, even though the conferences' and neutral bodies' intent for effective self-policing is clear, and there is visible effort by the neutral body, only from a review of the investigative reports and fining materials can a complete evaluation of a neutral body's effectiveness be made. The investigative reports should reflect an orderly and concise presentation of the evidence developed by the investigators during the course of their investigations. The evidence should be a reasonable, common sense proof to the arbiter that a malpractice has been committed. The fine imposed should be based upon the evidence established by the neutral body. Ideally, the charging letter should persuade the line officials of its culpability and the propriety of the fine. Because there has not been complete access to all the files of cases where fines have been levied, no determination can be made as to whether comparable malpractices are treated the same by the various neutral bodies or if there is a disparity in the assessment of fines.

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