Commission was the authority to recommend legislation on regulatory matters. Accordingly, independent authority from § 212(g) was unnecessary. Furthermore, the "purpose and policy" of the 1936 Act, to which § 212(g) is restricted, does not contemplate regulatory matters. As clearly expressed in § 101, Congress intended by the 1936 Act "to foster the development and encourage the maintenance" of a United States merchant marine. The purpose of the Shipping Act, on the other hand, is to regulate U.S. and foreign shipping engaged in the U.S. foreign commerce for the benefit of the general public. The two laws arose out of different circumstances and, accordingly, seek to accomplish vastly different objectives. In recognition of the intended scope of the 1936 Act, Congress itself removed all references to regulation from § 101 and relegated to a single subsection the provision for the transfer of the regulatory functions, which had originally been accorded a separate title. With respect to § 101 in particular, the House of Representatives sent a bill to the Senate stating, in pertinent part, that the U.S. should have a merchant marine **** (c) owned and operated under the United States-flag by citizens of the United States and so regulated by the Government as to secure to the shipper and receiver of products in the domestic and foreign water-borne commerce of the United States adequate service and equitable rates, * * This latter statement regarding regulation was ultimately stricken from § 101 in order to be consistent with the intended scope of the Act. The question of the Secretary's authority under § 212(g) must also be viewed in the context of Reorganization Plan No. 7 of 1961 and Reorganization Plan No. 21 of 1950. The clear and unequivocal intent behind both reorganizations, on the part of each President involved and the Congress, was to separate into two distinct and independent entities the regulatory activities under the various regulatory acts and the promotional activities under the 1936 Act. These two functions were recognized by many members of Congress as inherently inconsistent. For example, during the floor debate related to the disapproval resolution, the Honorable Emanuel Celler, whose Antitrust Subcommittee's three-year investigation provided much of the impetus for the 1961 reorganization, stated that the dismal record of the Federal Maritime Board (the predecessor to the FMC) was largely due to the Board's "two completely different and basically conflicting responsibilities." 107 Cong. Rec. 13087-8 (1961). Furthermore, during hearings before the Merchant Marine and Fisheries Committee on the 1961 plan, Mr. Thomas Stakem, Maritime Administrator and Chairman of the Federal Maritime Board, stated in response to a question raising the issue of overlapping responsibilities between the two agencies that, "No; there will be no overlapping." Hearings on Reorganization Plan No. 7 of 1961 Before the House Comm. on Merchant Marine and Fisheries, 87th Cong., 1st Sess., at p. 32 (1961). It is evident, therefore, that the purpose of Reorganization Plan No. 7 was to vest complete authority over regulatory matters in the FMC, including the authority to make legislative recommendations. Consequently, assuming for the sake of argument that the Secretary of Commerce at some time had the authority under § 212(g) to recommend legislation on regulatory matters, such authority could no longer exist in view of Reorganization Plan No. 7. However, as I have demonstrated, § 212(g) was, in fact, never intended to encompass regulatory matters. I must stress that this conclusion does not mean that the Maritime Administration or the Department of Commerce has no interest in regulatory matters. Let me assure you not only that we do have such an interest, but that we also intend to cooperate to the fullest extent with your Committee and with the other concerned agencies in an effort to resolve the rebating problem. In addition, as I agreed to do during the hearings, I will undertake to develop some possible legislative solutions to the rebating problem. However, two things should be understood. First, the Maritime Administration, in general, has no expertise in the regulatory area. Second, any such recommendations must be reviewed by the other concerned government agencies prior to submission to your Committee. With these limitations in mind, I will endeavor to provide your Committee with our recommendations. If I may be of further assistance in this matter, please contact me. Sincerely, ROBERT J. BLACKWELL. Hon. JOHN M. MURPHY, DEPARTMENT OF JUSTICE, Washington, D.C., November 25, 1977. Chairman, Committee on Merchant Marine and Fisheries, DEAR MR. CHAIRMAN: This responds to the request of Mr. Peter Kyros, Counsel to the Subcommittee on Merchant Marine, at the hearing on H.R. 9518 held before the Subcommittee on November 1, 1977, that the Department of Justice provide certain information. Specifically, we were asked (1) to provide a list of criminal actions filed for violations by carriers of the Shipping Act, 1916, similar to that previously supplied to the Subcommittee on Merchant Marine and Tourism of the Senate Committee on Commerce, Science and Transportation, such list also to include the years in which the actions were filed and the sentences imposed, and (2) to propose language replacing the immunity or amnesty provisions of Section 3 of H.R. 9518 with a provision limited to violations of the rebating provisions of the Shipping Act, 1916, and conspiracy to commit those violations. In compliance with your request, we suggest the following language as a substitute for proposed new subsection (d)(1) of section 32 of the Shipping Act. 1916: "(d) (1) Subject to the provisions of paragraph (2), no penalty shall be imposed under section 16 for any act in foreign commerce which constitutes a rebate or refund by any unjust or unfair device or means in violation of the initial paragraph or paragraph Second of section 16, or under section 18(b) for any act which constitutes a rebate or refund in violation of subsection 18(b) (3), or for conspiracy under Title 18, United States Code, Section 371, to rebate or refund in violation of the aforesaid provisions of this Act if"(A) such act occurred before the date of enactment of this subsection; and "(B) during the period beginning on the date of enactment and ending one year thereafter, the person who commited such act has made a good faith disclosure to the Commission without knowledge that it was the subject of an investigation relating to such act by any agency of the Federal Government." The requested list of criminal actions for Shipping Act violations by carriers is attached. We are taking the liberty of sending a copy of this letter and the list of cases to the Senate Subcommittee on Merchant Marine and Tourism. If we can be of further assistance, please do not hesitate to call upon us. Sincerely, Enclosure. PATRICIA M. WALD, Assistant Attorney General. CRIMINAL ACTIONS FILED BY CRIMINAL DIVISION FOR SHIPPING ACT VIOLATIONS Hon. JOHN M. MURPHY, DEPARTMENT OF JUSTICE, Washington, D.C., January 31, 1978. Chairman, Committee on Merchant Marine and Fisheries, DEAR MR. CHAIRMAN: This responds to the request of Congressman McCloskey at the hearing on H.R. 9518 held on January 27, 1978, that the Department of Justice (1) propose language specifically including conspiracy to defraud under Title 18, United States Code, Section 371, within a limited immunity provision, and (2) comment on the necessity or desirability of conditioning immunity on good faith disclosure without knowledge that the one disclosing was the subject of an investigation relating to the act disclosed by any agency of the Federal Government. By letter of November 25, 1977, at the request of Mr. Peter Kyros, Council to the Subcommittee on Merchant Marine, we submitted an immunity provision limited to violations of the rebating provisions of the Shipping Act, 1916, and conspiracies to commit those violations, as well as a list of criminal actions filed for violations by carriers of the Shipping Act. For your convenience, a copy of that letter is attached. We suggest that the immunity provision set forth in our letter of November 25, 1977, can be expanded as follows to embrace conspiracies to defraud (added language underscored): "(d) (1) Subject to the provisions of paragraph (2), no penalty shall be imposed under section 16 for any act in foreign commerce which constitutes a rebate or refund by any unjust or unfair device or means in violation of the initial paragraph or paragraph Second of section 16, or under section 18(b) for any act which constitutes a rebate or refund in violation of subsection 18(b) (3), or for conspiracy under Title 18, United States Code, Section 371, to rebate or refund in violation of the aforesaid provisions of this Act or to defraud the Federal Maritime Commission by concealment in any manner of such rebates or refunds if "(A) such act occurred before the date of enactment of this subsection; and "(B) during the period beginning on the date of enactment and ending one year thereafter, the person who committed such act has made a good faith disclosure to the Commission without knowledge that it was the subject of an investigation relating to such act by any agency of the Federal Government." We note that language conditioning immunity on good faith disclosure without knowledge (or actual notice) of an investigation relating to the act disclosed is found in H.R. 9518 and S. 2008, both on which would only afford immunity's "so long as such disclosure is made prior to the time such person had actual notice that it was the subject of an investigation relating to such act by any agency of the Federal Government." Quite clearly, it was the intent of the drafters to restrict immunity to those whose disclosures are truly voluntary and to deny it to those who only come forth when they have reason to believe that their unlawful acts have been, or are likely to be, discovered. We think that this is a rational choice entirely appropriate to legislation intended to stimulate disclosure of undetected unlawful activity. Sincerely, PATRICIA M. WALD, Assistant Attorney General. SECURITIES AND EXCHANGE COMMISSION, Re II.R. 9819, Shipping Act Amendments of 1977. Chairman, Committee on Merchant Marine and Fisheries, DEAR MR. CHAIRMAN: This is in response to your request for the Commission's comments on H.R. 9819, (the "Bill") which would amend the Shipping Act of 1916 (the "Shipping Act"). As you may recall, on November 1, 1977, Alan Rosenblat, Assistant General Counsel of the Commission, testified before the Subcommittee on Merchant Marine on H.R. 9518, a similar bill also intended to remedy the serious problems of rebating and other malpractices facing the country's shipping industry. At that time, we expressed our support for legislation that would compel or encourage the disclosure of questionable corporate activity, but voiced concern about the provision in H.R. 9518 that would grant shippers and carriers making disclosures under that bill one year of blanket immunity from criminal prosecution under any provision of federal law. As we have previously indicated to you, the Commission has no experience with or responsibility for administering the Shipping Act. With the exception of one matter discussed below, the Bill generally deals with matters outside the Commission's jurisdiction, and our comments are limited accordingly. In brief, we support adoption of Section 6 of the Bill. Unlike H.R. 9518, H.R. 9819 does not provide for the voluntary disclosure of past rebating activity, and consequently contains no amnesty inducement provision. Rather, the Bill provides for a right of “independent action” between carrier-members of the same conference and disapproval of any conference agreement by the Federal Maritime Commission if the agreement does not require compliance with discovery procedures incident to hearings convened by that Commission under Section 2 of the Bill. Additionally, the Bill would increase the civil penalties, in the form of monetary fines, applicable for violations of relevant portions of the Shipping Act. Otherwise, the Bill is identical to those provisions of H.R. 9518 which provide for improved hearing, investigatory and enforcement procedures by the Federal Maritime Commission to assist its efforts in dealing with the rebate problem. Section 6 of the Bill provides that the Federal Maritime Commission must promulgate rules and regulations requiring the periodic certification, by officers of entities subject to the Shipping Act that those entities have not engaged in illegal rebating. Of interest to this Commission is the fact that Section 6 also provides that such certification may be made a part of documentation required by other federal agencies (including by implication, filings which are required to be made with this Commission under the federal securities laws). This Commission has broad authority to require relevant information to be included in registration statements and annual and periodic reports required to be filed under the federal securities laws. Nonetheless, we support adoption of Section 6 of the Bill because, in certain circumstances, it could clarify our authority with respect to the filing with the Commission of the certifications required by that Section. The views set forth in this letter are those of the Commission and do not necessarily reflect the views of the Administration. Copies of this correspondence have been forwarded to the Office of Management and Budget. We will, of course, inform you of any advice received from OMB concerning the relationship of our views to the programs of the Administration. If you require any further information, please let us know. Sincerely, Ms. PATRICIA WALD, PAUL GONSON, Associate General Counsel. U.S. HOUSE OF REPRESENTATIVES, Committee on Merchant Marine and Fisheries, Washington, D.C., February 6, 1978. Assistant Attorney General, Legislative Affairs, Washington, D.C. DEAR PAT: During mark-up on H.R. 9518 the Merchant Marine Subcommittee of the Merchant Marine and Fisheries Committee approved the following section: SEC. 9. Section 32 of the Shipping Act, 1916 is amended by inserting at the end thereof the following new subsections: "(d) No penalty shall be imposed on any person for criminal conspiracy: (1) to rebate or refund in violation of the initial paragraph or paragraph Second of section 16, or under section 18(b)(3) of this Act or (2) to defraud the Commission by concealment of such rebates or refunds in any manner." 1 We understand that the right of "independent action" in this context includes the right under certain circumstances to charge lower tariffs than those established by the conference. It was the Subcommittee's intent that Section 9 would accomplish several purposes. First, the Subcommittee wanted to close a loophole left open in 1972 when the Congress sought-with the support of the Justice Department-to reduce the penalties for illegal rebating from criminal to civil. Second, the Subcommittee wanted to ensure that the intent of Congress in 1972 is not frustrated through the use of conspiracy statutes to criminally prosecute past violations. of the anti-rebating laws. Third, the Subcommittee wanted to assist the Federal Maritime Commission in their investigations of illegal rebating by giving them exclusive control over the conduct of the investigations and the imposition of penalties. This exclusive control is important given the recognized lack of coordination between the Justice Department and the FMC and the adverse effect of the threat of criminal prosecution on the attempts of the FMC to obtain information and enter into settlement agreements with violators. Fourth, the Subcommittee wanted to assist the State Department in their attempts to negotiate wih foreign governmens and their nationals to obtain documents and information relating to rebating by eliminating the threat of criminal prosecution. Finally, I wanted to insure that we adhere to the principle of a rule of law not of men. When asked, Mr. Keeney could not define what "aggravated circumstances" would justify a conspiracy to defraud charge, as opposed to a simple conspiracy to illegally rebate. I remain disturbed that the conspiracy section (18 U.S.C. 371) can be used by a determined prosecutor to charge almost anything if that prosecutor deems "interference with a lawful governmental function" to be aggravated." I would like to know what criteria Justice has used in past cases in determining "aggravated circumstances," what kind of factual situations have resulted in section 371 charges and what have not. How can a citizen know when he will be charged with a crime and when he will not? By copy of this letter to the head of the Fraud Section of the Criminal Division, Mark Richard, I am asking that he be prepared to tell me how it would be most convenient for me to examine case files which have been closed in order to determine the criteria for section 371 charges in the past. Also, I would like to examine all pertinent internal memoranda which define the criteria now being used by Justice. I have heard informally that the proposed language of H.R. 9518 will prevent prosecution of one or more truly aggravated cases which will "embarrass" those of us who participate in preventing prosecutions by enacting H.R. 9518. It is not my intent to prevent any prosecutions which the facts warrant, but without Justice's willingness to describe the facts, at least in executive session, and in view of the fact that roughly two years have elapsed since Justice learned of the facts in the Sea-Land and U.S. Lines cases, and over two years since the Seatrain sentencing, it seems doubtful that Congress should wait much longer before seeking to resolve the present ambiguities in this antirebating statute and its legislative history. I do feel, however, that it is important that H.R. 9518 be suficiently narrow to cover only illegal rebating, and not other possible offenses which may have been committed at the same time. I would appreciate your views, prior to February 8, 1978, markup of H.R. 9518, on section 9 and whether our purposes are being accomplished. If our goals are not being reached, or if there are unnecessary problems, which result from the present language, I would value Justice's suggestions as to how the language can be improved. Sincerely, PAUL N. MCCLOSKEY, JR., Ranking Minority Member, Subcommittee on Merchant Marine. Hon. PAUL N. MCCLOSKEY, JR., DEPARTMENT OF JUSTICE, Washington, D.C., February 8, 1978. Ranking Minority Member, Subcommittee on Merchant Marine, House of Representatives, Washington, D.C. DEAR CONGRESSMAN MCCLOSKEY: This refers to your letter of February 6, 1978, concerning the following proposed section 9 approved by the Merchant Marine Subcommittee of the Merchant Marine and Fisheries Committee during the mark-up on H.R. 9518: 25-684-78—47 |