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At prior hearings you were asked, I believe, by Mr. McCloskey, about setting up a meeting that might be helpful in the future, some time perhaps in February or March. What have you done about that meeting, sir?
Mr. BANK. Mr. Kyros, this is part of what I discussed in the beginning. We have also sent a written response to Congressman McCloskey in regard to international meetings. We mentioned that quiet diplomacy, perhaps even of a bilateral or multilateral nature, is better than an international conference. We feel that an international conference which does not succeed would put us in a worse position than if we do not even try it at all.
We are, however, working very closely to create a meeting. It would not be an international conference, like a plenipotentiary that would draft a treaty or international agreement. But it would be a meeting with a majority of those countries currently involved.
We have, as I stated, proposed terms of reference to the Europeans and Japanese for those meetings. I believe specific discussion the agendas of those meetings would not be appropriate at this time, but I can generalize and indicate that there would be discussion of: Comparisons of national remedies; consideration of possible multilateral or bilateral solutions; regular exchanges of information; possible waivers of national laws; and certain provision for summary documentation which might be satisfactory on both sides. We will also discuss the tightening of existing national laws in other countries against certain malpractices, and of course, we will attempt to specify proposals by European and Japanese Governments involved to try to implement a method which would resolve the problem on a regular, ongoing basis, not on a crisis to crisis basis.
This is the first attempt to do this. I have to keep pointing back at the relationship between the FMC and the Department in this attempt. I do not decry earlier attempts of the Federal Maritime Commission. They were operating under the law as it was presented to them. They attempted through the Commission itself to achieve results by seeking documents from the companies which were subject, and we believe rightfully so,, to their jurisdiction. They were unsuccessful in that method. This is why we are now trying this new method, and we hope it will be successful.
Mr. KYROS. One of the possibilities may well be, and I think it should concern you as well as it concerns the committee, is that if the FMC proceeds, as it probably should, against U.S.-flag carriers, and is able to complete its cases against them, and conclude settlements that I assume would be as strict settlements that we have seen them use before in these rebating cases, then the Americans would be all tied up at sea, but foreign-flags would still be free to conduct their operations in, let us say, a "more competitive" manner which would probably include rebates.
I think that would be rankest discrimination towards U.S.-flag, do you not agree?
Mr. BANK. I could not agree more.
Mr. Kyros. So it becomes enormously important not only to do what you are doing very properly about consultation and negotiation, but
at the same time it becomes enormously important to insure that equal treatment is accorded.
In this light I again bring to your attention, I am not so sure that you have averted to this thoroughly, but if the foreign-flags do come forward, they do face the possibility, in fact, the probability of criminal action by the Justice Department.
I am not so sure in your negotiations whether you have considered that, and what cast does that put on the negotiations? Does that compel this committee to go down the route of opposing entry, compelling production of documents, in a more, as you call it, draconian fashion?
Mr. Bank. I am sorry, Mr. Kyros, I really do not understand your question.
The CHAIRMAN. Will you yield to Mr. McCloskey?
Mr. McCLOSKEY. Mr. Bank, I wanted to defer my questions, because I thought without a clear exposition of the Justice Department view point, we had no way to gage the propriety of the timing that you are describing.
I had the privilege of going to both England and Germany during the congressional recess. I found a tremendous degree of concern that their privileges of sovereignty be reserved and that rebating, which is not illegal in their countries, but which might expose them to criminal prosecution here, should be protected by their governments in the name of sovereignty.
The question that has bothered me from the inception of these hearings is not the propriety of what the State Department is seeking with this tempered diplomacy, but whether or not the conflicting interests among our various government agencies have ever resolved in light of what U.S. policy should be.
You are conducting State Department policy. Has there been any effort, since October 12 when these hearings were initiated, to get together with the Justice Department and reach a common agreement as to what U.S. foreign policy would be?
Mr. BANK. Yes, I have had a meeting, it was a general meeting, with a Justice Department official on December 30, on a general overall view of policy direction.
Mr. McCLOSKEY. Isn't the Justice Department's decision as to whether or not to prosecute domestic and foreign carriers by necessity become a part of our foreign policy in this case ?
Mr. BANK. It does, and it does not, Mr. McCloskey. As we have pointed out a number of times, regarding foreign individuals operating in the United States, it is our belief that these laws must be obeyed.
Mr. McCLOSKEY. I understand that. But the U.S. Justice Department has the discretion to choose whether or not to bring conspiracy charges against domestic or foreign shipping companies as a result of these article 15 violations, does it not?
Mr. Bank. That is correct.
Mr. McCLOSKEY. Whether or not the Justice Department makes the decision to criminally prosecute is a necessary element in what you say to the foreign governments when negotiating with them and probably affects whether or not they will subject themselves to our jurisdiction.
Mr. BANK. That is correct, in certain aspects.
Mr. McCLOSKEY. What is the Justice Department's position on that point ?
The CHAIRMAN. Would the gentlemen suspend at this point? I am going to ask Mr. Bank and Miss Bello to move over a chair, and ask the Justice Department, Mr. Taylor, and Mr. Keeney to come forward and speak for the Justice Department in this colloquy.
Mr. McCloskey. Mr. Chairman, before the Justice Department gets to this question, I want to finalize the testimony from Mr. Bank as to whether or not the Justice Department's decision is material to his negotiations. It seems to me that is essential.
The CHAIRMAN. He can respond to that.
Mr. Bank. Mr. McCloskey, of course it is material. Of course each case is on a case-by-case basis. In dealing with this, the Federal Maritime Commission will be in contact with the Justice Department.
As I said before, we cannot speak with the Justice Department until we find out how far we have gotten with individual governments involved.
Mr. McCloskey. On this question as to whether or not these 18 foreign shipping countries can expect to be criminally prosecuted if it turns out they have been guilty of a conspiracy to violate antirebating laws, do you find in dealing with each of the countries involved, you have to know the answer in order to negotiate?
Mr. Bank. Yes, after we have spoken with foreign governments, and after we have some idea of what kind of case we are talking about.
Mr. McCLOSKEY. How many of the foreign governments have you spoken with so far?
Mr. Bank. In deep negotiations, I would say one. We are moving toward a second one now. There has been contact, I believe, or will be contact between the Maritime Commission and the Justice Department in that one specific case.
Mr. McCLOSKEY. In effect, you have a separate foreign policy negotiation going on between the Justice Department and the foreign government as well as between you and that government. It that what you are saying?
Mr. Bank. No. There is a coordination in that regard.
Mr. McCLOSKEY. Let me understand this word "coordination." When you coordinate with the Justice Department as to whether or not our policy towards Germany will be to threaten criminal prosecution, who has the final say? You or the Justice Department ?
Mr. Bank. First of all, I do not believe that threat of criminal prosecution toward German nationals is a matter of foreign policy. One cannot really call it a foreign policy decision. We leave to the Justice Department the decision of prosecution in any particular case.
What we do, Mr. McCloskey, is bring as many facts as possible to the Justice Department's attention in regard to the foreign policy ramifications of any decision they might make.
Mr. McCloskey. Am I accurate in saving that in your negotiations with any foreign country you must tell them the ultimate decision
as to whether or not their national company will be prosecuted is a decision of the Justice Department over which you have no control?
Mr. Bank. That is correct. We have no control over the Justice Department.
Mr. McCLOSKEY. Thank you.
The CHAIRMAN. Mr. Kyros has some comments prior to the Justice Department testimony.
Mr. Kyros. Mr. Chairman, the gentlemen who have just joined the Committee are Mr. John Keeney, Deputy Assistant Attorney General from the Criminal Division, and Mr. B. Franklin Taylor, and I just want to say I had discussions with them, and had requested they appear again before the committee.
The Justice Department has been very cooperative in regard particularly to the question of limited use immunity. There is some confusion which has arisen, and these gentlemen with busy schedules have said they would appear today and I gave them very short notice.
The CHAIRMAN. We wanted to be sure we had State, Justice, Treasury, and FMC. Other agencies we have contacted have their clear input clearly in the area of amnesty and limited uses thereof as it affects this legislation.
I would appreciate it, Mr. Taylor, if you would proceed. STATEMENT OF JOHN C. KEENEY, DEPUTY ASSISTANT ATTORNEY
GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE, B. FRANKLIN TAYLOR, JR., DEPUTY CHIEF, CRIMINAL DIVISION, GOVERNMENT REGULATIONS AND LABOR SECTION, U.S. DEPARTMENT OF JUSTICE
Mr. KEENEY. I am John Keeney. If I may, if I might state generally the position 'of the Justice Department with respect to the legislation that is now before you.
Insofar as the conspiracy statute, 18 U.S.C. 371, is concerned, as you know. Mr. Chairman, there are two parts of the statute.' One makes it illegal to conspire to violate a statute of the United States, and that includes both a criminal statute and a civil statute, or a statute with civil sanctions such as we have here before us in the Shipping Act.
How, my understanding is that the legislation that is under consideration would grant a limited amnesty with respect to violations of the Shipping Act. That is, conspiracies to violate the civil sanctions. We think that is a matter for legislative judgment in consultation with the Federal Maritime Commission.
As a matter of public policy, we think that the second part of 18 U.S.C. 371 should be retained as a viable prosecutive option in aggravated cases, the second part being a conspiracy to defraud the United States. It would be applicable if there were a conspiracy to impede and frustrate the congressionally mandated function of the Federal Maritime Commission.
As I said, we would prefer that the Department of Justice retain the option to proceed in aggravated cases for a conspiracy to impede and frustrate the function of the Commission.
For example, we believe that the normal rebate violation should be handled by the Commission. But where there is a very aggravated situation, I might give an example. We would say a carrier has been involved in violations, and the Commission has warned the carrier about the violations, and subsequent thereto the carrier enters into some scheme whereby, for example, it uses its subsidiaries, it uses foreign secret bank accounts, for the purpose of keeping the Federal Maritime Commission from enforcing, in carrying out the function which Congress has imposed upon it, and which Congress has reiterated in the 1972 amendment that they wanted a viable enforcement policy to be carried through by the Maritime Commission, and for that reason it decriminalized certain portions of the act in 1972.
In that type of aggravated situation, which I presume would not come up very frequently, we would want an exception, so it is clear in the legislative history, that in granting a conspiracy amnesty, or conspiracy immunity there was no intention to grant immunity or amnesty with respect to this aggravated type of conduct, which is frustrating a congressionally mandated program.
The CHAIRMAN. But if the carrier had filed documents that were not correct, or fraudulent, to the FMC, he would be, in effect, conspiring to defraud the United States, and if they had done that in the past, they would not have an immunity then, because I think if they were large amounts, that probably could be considered an aggravated case, even though there was not a warning precedent to that by the FMC.
Mr. KEENEY. Mr. Chairman, I gave the warning example, and I was just trying to make a point by setting broad parameters on each side.
I would think there were situations where a warning was not given, where it might be appropriate to use the conspiracy to dafraud violation.
The real point I am trying to make is we would like to preserve that option of using it, where we are dealing with really aggravated situations. We think that violations can be handled, for the most part, by the Maritime Commission itself, through its administrative remedies, and through civil remedies in the courts, if necessary.
We would preserve the conspiracy to defraud for the very aggravated situations.
The CHAIRMAN. Who would make the judgment whether it was an aggravated case, Justice or the FMC?
Mr. KEENEY. The Justice Department would make the decision whether or not it was sufficiently aggravated to warrant criminal prosecution.
The CHAIRMAN. How would they determine whether there was a case under question?
Mr. KEENEY. Well, cases come up in a variety of ways, Mr. Murphy. We have had some, within the last year or so, where the cases have developed out of other investigations being run by the Justice Department. The other investigation is not centered on violations of the Shipping Act, and have nonetheless uncovered violations of the