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The confidentiality of neutral bodies' records and "double jeopardy" are straw men which effectively defeat the purposes of self-policing. No self-policing agreement should contain a confidentiality clause which handicaps the neutral body. No "double jeopardy" situations have been arising as a result of the Commission's seeking and using information from neutral bodies' files for imposing ⚫ penalties. Nor is there any present inclination within the Commission to have such a situation arise.

Intelligence gathering is an integral part of the investigative approach to malpractices and should not be treated as a haphazard adjunct. Each neutral body should delegate intelligence responsibility and staff oversight to an individual with the time and talent for developing intelligence information, recording it, and exchanging it with other neutral bodies and the Bureau of Enforcement. The channelling of investigative leads to the investigator group, especially auditor-investigators, will result in the ability of intelligence personnel to pinpoint areas where investigative efforts could be applied most efficiently and with the greatest likelihood of success (see also Part X (D) (2) (f), above).

D. Lines' Policy on Extent of Cooperation
with Self-Policing

Rather than passively accepting the imposition of self-policing, the lines should implement the considerations outlined below that will assist the neutral bodies in bringing about the lines' avowed goal of clean trades. The adoption of policy decisions requiring affirmative action would be an indication of the sincerity of the lines' resolve to have clean trades. Such decisions will serve as the message to each line's officials, employees, fellow lines, and to the shipping industry, the Commission and all others, that selfpolicing has come of age and is a self-regulated fact of life.

1. Adoption of a Code of Ethics

During the course of many interviews conducted in connection with this study, there was no consensus on the matter of a code of ethics. Many officials stated that this issue should be left to the individual lines. Many thought the word-of-mouth publication of a line's policy on malpractices should suffice.

The issue of corporate morality and the indoctrination of employees as to specific corporate philosophy on business ethics have been under study by corporations in many industries. The problem is not one unique to the shipping industry. Studies conducted by concerned corporations have resulted in the conclusion that there is the requirement for the impact of a formal written declaration by the corporate officials directing specific implementation of the companies' standards in doing business. However, the studies suggested that the content of the directives be left to the discretion of the individual corporations. So, for the shipping industry, each line should promulgate a written directive condemning malpractices as a matter of corporate policy and setting forth the sanctions, if any, that would be levied against employees who engage in such wrongdoing. Since the imposition of corporate sanctions depends upon various conditions, each line should resolve the issue within the framework of its policies in its other areas of business ethics.

In conjunction with the implementation of a more sophisticated investigative approach to malpractices, there should be a requirement for adoption by the lines of internal procedures designed to monitor potential areas of malpractice within each line's financial structure.

The first step in implementing this procedure would be completion of a financial questionnaire by certain responsible officials of each line subject to self-policing. The questionnaire would be completed with the view of assisting self-policing. It would be disseminated by the neutral bodies, and the responses thereto would be held in confidence. (In situations such as this, total confidentiality would be appropriate.)

The questions appearing below are extracted from the questionnaire which Internal Revenue Service agents are now posing to officials of United States corporations in the Service's quest to uncover schemes to establish funds that could be used for illicit purposes. Obviously, the reason for the questionnaire for line officials is to look for and deter cash or other types of rebate schemes. Completion of the questionnaire would also serve as evidence of good faith on the part of top officials of each line in

agreeing not to rebate, as well as serving as a reminder of their commitment to clean trades. As has been stated repeatedly, the greatest deterrent to rebates is good faith agreements of line officials to each other.

The questions which should be asked of line officials are as follow:

During the past calendar year, did your line (corporation, organization or whatever the structure is), or any third party acting on behalf of your line, make, directly or indirectly, any rebates, bribes, kickbacks or other payments, regardless of form, whether in money, property or services to any employee, person, company, or organization, or any representative of any person, company or organization, to obtain favorable treatment in securing business or to otherwise obtain special concessions, or to pay for favorable treatment for business received or for special concessions already obtained?

During the past calendar year, did any line official, or any third party acting on behalf of your line, make any bribes, kickbacks, or other payments, regardless of form, whether in money, property or services, directly or indirectly, to or for the benefit of any government official or employee, domestic or foreign, whether on the national level or a lower level such as state, county or local (in the case of a foreign government also including any level inferior to the national level) and including regulatory agencies or governmentally-controlled business, corporations, companies or societies, or for the purpose of affecting his/her action or the action of the government he/she represents to obtain favorable treatment in securing business or to obtain special concessions, or to pay for business secured or special concessions obtained in the past?

During the past calendar year, did any line official, or any third party acting on behalf of the line, have signatory or other authority or control over disbursements from foreign bank accounts?

During the past calendar year, did any line official maintain a bank account or any other

account of any kind, either domestic or foreign,
which account was not reflected on the corporate
books, records, balance sheets, or financial
statements?

During the past calendar year, did any line official, or any other person or entity acting on behalf of the line, maintant a domestic or foreign numbered account or an account in the name other than the name of the corporation?

Which other present or former line officials or other persons acting on behalf of the line may have knowledge concerning any of the above areas?

The purpose of the above questions is twofold. First, the responses would alert the lines annually as to the rebate problem and would serve as a reminder to them that there should be appropriate safeguards within their companies to prevent rebates. Secondly, the neutral body's presence in the rebate scheme area would be brought to the corporate officials' attention and, hopefully, would serve as a deterrent.

3. Agreement to Monitoring of Lines'
Financial Activities

As financial investigators begin to audit a line's finances, they may note instances of insufficient corroboration for claimed expenditures. To name a few potential trouble spots, there is the matter of executive expense accounts and agents' fees. Other trouble spots have been cited previously in Part XI (B) (2). In order to preclude the possibility of abuses, the neutral bodies should suggest improvements in internal controls where needed so that these areas could be monitored more effectively. The lines should agree beforehand that they will voluntarily implement these controls. The neutral bodies should recognize when a suggested control would become too burdensome or financially impracticable. Also, the line should have an avenue of protest to the conference if either circumstance were to occur.

If, after due notice, the financial investigator finds there is insufficient corroboration of claimed expenditures or inadequate explanation for receipts and other disbursements,

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failure to comply with required financial controls should, in and of itself, be considered a breach of the agreement. It should also be considered a breach if a line does not file the above questionnaire ((D) (2)), or if a statement is proven to be false.

4. Agreement to Encourage Intelligence Gathering

The lines' avowed cooperation with self-policing should also extend to the intelligence-gathering area. Specifically, no restraints should be placed on neutral bodies in their roles of intelligence gathering which would be looking toward the development of information showing that malpractices are being committed (see (C) (1), above).

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Additionally, carrier complaints have not been a viable source for uncovering alleged malpractices. lines should encourage their employees to be on the look-out for malpractices, and there should be a policy of referring cases of possible malpractices to the neutral bodies. Rumors should be reported; ideally, however, as many facts as possible should be obtained first (see Appendix, Article VII (B)).

5. Referral of Investigative Leads

Neutral bodies could operate a lot more efficiently and effectively if they could use each other's investigative services as well as those of reputable private investigative organizations. This concept goes hand in hand with that expressed in the intelligence gathering area, and is an extension of the agency delegation set out in the Appendix, Article XIV (B).

Oftentimes, a neutral body requires information obtainable only in an area where it has no investigator. The information required is not so sensitive that the neutral body's investigator should be the only one to obtain it. On occasion, the information needed does not appear to be very important, and, as a result, the apparently justifiable decision is made that there should not be a large expenditure of time and funds to obtain the information. Consequently, some investigative requirements are being left unfulfilled. This violates the investigative principle that an investigation should explore every possible angle. To be able to fulfill