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Shipping Act which were not known at that time to the Maritime Commission.
Now, they could come up in that variety, they could come up through disgruntled employees, they could come up even through the Maritime Commission itself, where they detect a pattern of aggravated conduct, and for one reason or another they are unable to attack it, and they come to the Justice Department and they might say we feel our investigations indicate that x company is doing this sort of thing, and we really cannot prove it. We are asking your help. We are asking you to utilize immunity statutes, and other techniques, such as grand jury interrogation, in order to get behind this situation.
Those are a variety of situations in which this might arise, Mr. Chairman.
The CHAIRMAN. Mr. Kyros?
Mr. Kyros. Mr. Keeney, you have not yet identified your position for the record, sir. What is your exact position?
Mr. KEENEY. My name is John Keeney. I am Deputy Assistant Attorney General, Criminal Division, Department of Justice.
Mr. Kyros. One of the reasons you are here, with Mr. Taylor, your colleague, is we have had considerable colloquies concerning just what the limited use of immunity meant.
It was my understanding, and I thought it was Mr. Taylor's at the time of his testimony, that it meant that all conspiracy that was included in 18 U.S.C. 371 was included within the limited use immunity. Subsequently, he has advised me we did not avert to the section concerning conspiracy to defraud the United States.
Mr. Taylor and I have discussed this. I studied this section just lately, and it seems to me it is an enormous net, because “to defraud the United States,” the section seems to me broad enough to include any act which interferes with or hampers the United States in the successful prosecution of any policy established by law.
Mr. KEENEY. That is right, Mr. Kyros. It is a broad statute. That is why I emphasized, in my earlier remarks, the fact that we recognize the Congress has a well planned out program for administering the Shipping Act. Because of that we would reserve the use of this statute, the second part of 18 U.S.C. 371, to aggravated situations where there was a real frustration of the congressionally mandated program in the Federal Maritime Commission.
It would have, I would anticipate, limited use.
Mr. Kyros. I think your testimony is going to be very helpful to the committee in this particular respect.
One of the issues that has come up, Mr. Keeney, is that there are 18 foreign-flag carriers, and nine U.S.-flag carriers that are under direct investigation by the FMC for allegations of rebating under violations of sections 16 and 18 of the Shipping Act. There has been discussion about attempting to bring them all in with some kind of limited use immunity so they would settle the cases and sign up with the Federal Maritime Commission, or on the other hand, there have been discussions about proceeding on a case-by-case basis by the FMC.
We have also had information and evidence to indicate that no foreign-flag carrier, since this whole matter surfaced with the SeaLand case back in the fall of 1976, no foreign-flag carrier has yet come forward to give their records to the Federal Maritime Commission. They may well exercise certain blocking statutes so that their records may not be obtained.
All negotiations going on, as evidenced by Mr. Bank's testimony, with the State Department-well, the issue comes down to something like this. What foreign-flag would come forward and offer its documents to the FMC, if it were going to be subject to the Department of
Justice going ahead with as broad a conspiracy theory under 18 U.S.C. 371 to defraud the United States, then look to your tender mercies to tell them, and you are a foreign government to them, whether their case was aggravated.
The fact is that they have withheld documents from the FMC for at least a year. They have been asked, under a factfinding investigation, to produce documents. They know about the factfinding investigation. So any prosecutor can sit back and say, you have been sitting on your hands for a year and you come forward now, therefore, you are an aggravated case and we will proceed against you. Does that sound rational?
Mr. KEENEY. Mr. Kyros, a foreign-flag carrier that came in under those circumstances voluntarily and made disclosure to the Federal Maritime Commission, where neither they nor we had any investigation going on, would be entitled to receive consideration from us. That would be a considerable factor being weighed when the prosecutive judgment is made.
Mr. KYROS. Bargain with you first, and get immunity from 18 U.S.C. 371, or do they get it after they sign up?
Mr. KEENEY. I think their original discussion should be with the Maritime Commission in that connection, and the Maritime Commission and the Department of Justice would discuss whether or immunity should be promised in advance.
Mr. KYROS. Mr. Keeney, we are discussing criminal conspiracy. They would discuss with the Maritime Commission not the criminal portion, the Maritime Commission defers to you in that area
Mr. KEENEY. We would consult with the Maritime Commission in situations of this nature, Mr. Kyros. But I would reiterate what I said though, that the voluntariness of the foreign-flag carrier coming in would have to be given great weight when we are making a prosecutive judgment.
Mr. KYROB. Is it voluntariness now that a year has elapsed, and none of them have yet come in, and apparently none of them are going to come in, until we struggle
and sweat at it for months on end. No foreign-flag has yet come in. They are fully aware of this testimony. It is public testimony this morning.
Mr. KEENEY. The fact that they come in, and if they do come in, what impels them to come in, how long it has taken them to come in, what inducements it took to bring them in, these are all factors which would have to be considered.
Mr. Kyros. Suppose this committee enacted a law that closed entry of the ports of the United States to shipping lines of foreign nations who fail to comply with the discovery process, would that be an aggravating circumstance, if they came in under that circumstance?
Mr. KEENEY. If the committee, in effect, compelled them to disclose ? I am not sure I understand your question. If the committee and Congress enacted legislation that imposed penalties in the form of keeping them out of U.S. ports?
Mr. KYROS. Yes.
Mr. KEENEY. That would not be a very voluntary coming in, in my judgment, Mr. Counsel.
Mr. Kyros. Mr. Keeney, you are not in a position now to answer questions whether the behavior-I am dealing with foreign-flags for a moment, foreign-flag carriers, in cooperating with the FMC on their investigation on rebating violations, has become aggravated or not. You are not in a position to make that judgment now, are you?
Mr. KEENEY. That is correct.
Mr. Kyros. I was just trying to figure out what kind of criteria within your prosecutor's bag you would use to decide whether they were aggravated or not. Although it does seem to me that since the Sea-Land settlement, when rebating surfaced in the fall of 1976 and we are now in 1978, everyone has been perfectly aware, and the FMC hampered by a modest size staff, has not been able to get all these documents in, and we have had the State Department repeatedly asserting that they are negotiating with foreign nations.
So everybody knows about this matter, but no one has come forward. Does not that make it prima facie aggravated behavior?
Mr. KEENEY. It is a fact we have to consider. They have been holding back for a long period of time.
Mr. KYROS. Surely.
So, if I were a foreign-flag carrier, and I knew you were even thinking of criminal penalty for aggravated behavior, why should I ever come forward to the Federal Maritime Commission and give them documents, if I knew that my cooperation, and my corporate office and foreign nationals were going to be subject to U.S. criminal laws of conspiracy, which means they might also go to jail?
Mr. KEENEY. If we are going to have a new starting point, if the législation presently before the committee becomes law, and we have a new starting point commencing with the effective date of the legislation, and they want a year to come in, and that I think, for the first. time, puts everybody on notice with respect to the congressional intent, and gives them an opportunity to come in.
And if they come in as a response to this legislation, it is a factor we are going to have to give great weight to.
Mr. KYROS. You assume the committee would consider enacting a limited use immunity, you say give them a year to come in. That is limited use immunity. Come in, confess, provide your records, settle with the Federal Maritime Commission within a year of enactment, and then there is no penalty for civil violations of rebating, and no penalty for the purely conspiracy portion of 18 U.S.C. 371, but you are faced with the question of defrauding the United States in 18 U.S.C. 371, is that right?
Mr. KEENEY. Mr. Kyros, yes. I was directing my comments to one of the proposals that is before the committee that would give that amnesty if they came in within a year of the enactment of the legislation. I was dealing on that hypothetical basis.
Mr. Kyros. Let me inquire on that point. As you sit there, would you favor that kind of immunity, limited use, namely, limited only to sections 16 and 18 Shipping Act violations for rebating, conspiracy to rebate, and not include the rest of 18 U.S.C. 371, namely the defraud section, IRS problems, transfer of foreign currency, and SEC violations?
Mr. KEENEY. We do not object to that type of violation if the exceptions are included that you suggest, Mr. Kyros.
The CHAIRMAN. Will you address yourself to that question, Mr. Bank?
Mr. BANK. Mr. Chairman, we have, in the past, of course, deferred to Justice and to other agencies the question on amnesty. We can understand Justice's position on that, and we again, as I said, defer to Justice on that matter.
The CHAIRMAX. Mr. McCloskey?
Mr. McCLOSKEY. Does it make it impossible for you to tell any foreign country what the result will be of their nationals cooperating with our FMC?
Mr. Bank. No, it does not.
Mr. McCLOSKEY. How are you going to tell a foreign country what the Justice Department's decision will be in any case where their national refuses to cooperate?
Mr. Bank. It is on a case-by-case basis. It depends on the case.
Mr. McCloskey. That is not an answer. Can you possibly tell any foreign country with whom you are negotiating how the Justice Department is going to react to the facts which their national may reveal to the FMC and the Justice Department if they cooperate?
Mr. BANK. We have never said that we could tell them.
Mr. McCLOSKEY. If you cannot tell the foreign nation what is going to happen to its national; that the decision will be left to the discretion of the Justice Department and you do not know how that discretion will be exercised; do you have any real chance that a country is going to require its national to cooperate?
Mr. BANK. There are periods of time in the negotiation-well, when there is an idea of what is involved, and what might be the result of the negotiation between carriers involved and the Federal Maritime Commission. It is at that period of time when discussions will take place between the Federal Maritime Commission and the Justice Department.
In other words, Justice will receive recommendations from the Federal Maritime Commission and will get a sounding from the FMC on what has been negotiated.
Mr. McCLOSKEY. The end of what you are saying is that the State Department opposes this legislation in its present form. Does it not? Mr. BANK. Yes; for a number of reasons.
Mr. McCLOSKEY. And the Justice Department opposes this legislation in its present form. That is your testimony, Mr. Keeney, is it not?
Mr. KEENEY. Mr. McCloskey, we commented on the legislation and
Mr. McCLOSKEY. Am I correct in saying you are opposed to it in its present form?
Mr. KEENEY. That is what I am trying to make clear. As we interpret, as I interpret the legislation that is now before you, it excludes the second part of 371, conspiracy to defraud, and it excludes bank secrecy and excludes revenue violations, and to the extent that that is the legislation we are considering, we do not oppose it.
Mr. McCLOSKEY. I defer to counsel on that.
The legislation we are presently considering does not exclude conspiracy to defruad, does it?
Mr. Kyros. The legislation, as set forth in H.R. 9518, is a very general immunity, but we have discussed fashioning a limited use immunity during the hearings.
I think it is important, sir, to discuss—I believe that the Justice Department is discussing what they wrote us in their letter about their proposal for limited use immunity.
Mr. McCLOSKEY. If the right to prosecute conspiracy to defraud is maintained, do I understand you would not oppose the legislation, Mr. Keeney?
Mr. KEENEY. Mr. McCloskey, if we have the right to proceed on the conspiracy to defraud provision, we do not oppose the legislation, and if there are the other exclusions that I mentioned.
Mr. KEENEY. May I just add one thing? I am talking now about our letter to the chairman, making certain suggestions with respect to legislation.
If those are adopted by the committee, we do not oppose it.
At the present time one company, Sea-Land, has cooperated with the Federal Maritime Commission completely, certainly to the FMC's satisfaction.
May I ask the Justice Department representatives if the facts disclosed to you on the Sea-Land case justify a conspiracy to defraud action?
Mr. KEENEY. I am sorry, Mr. McCloskey, I did not get the whole question.
Mr. McCLOSKEY. One company has cooperated with the Federal Maritime Commission and entered into a settlement to the satisfaction of the Commission. Those facts have been disclosed to the Justice Department. Can you give me a legal opinion as to whether those facts are sufficient to support a criminal prosecution?
Mr. KEENEY. Mr. McCloskey, we are in the process of studying that situation to see whether it does come, whether we would prosecute or not.
Mr. McCLOSKEY. That information is absolutely material to this committee's determination about whether or not granting U.S. 371