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Whistleblower Exposes Shipping Price-Fixing

Price-fixing. It sounds so old fashioned and so blatantly illegal it’s hard to believe people still engage in the practice. Didn’t price-fixing go out with the Anti-Trust actions that split up Standard Oil? OK, Microsoft got hit for it a while back, but I haven’t heard of a case like this in a long time. In any case, if a couple of executives were to email each other using their private personal accounts to keep shipping costs similar and to divide up the business, how would anyone ever find out about it?

A False Claims Act Whistleblower is how. The government is rewarding William Stallings with more than $500,000 for his role in exposing exactly this kind of fraud. He worked for one shipping company and learned they were fixing prices with another, according to the Marine Log:

“Sea Star Line’s former VP of Sales, William Stallings, is to collect a $512,719 whistleblower award after Sea Star Line LLC and Horizon Lines LLC agreed a civil settlement in a price-fixing case.”

The executives apparently tried to sneak around to set shipping prices.  But, you may ask, how does this involve the False Claims Act? Price-fixing is illegal under a bunch of laws, so why is Mr. Stallings colleting reward money? Because the shipping lines are accused of costing the U.S. Postal Service money by fixing prices, and the ability to sue under the False Claims Act’s extends to cases in which U.S. Government money is lost. Mr. Stallings’ case was taken over the by the government and the government:

“…alleged that former executives of the defendant ocean shippers used personal email accounts to communicate confidential bidding information, thereby enabling each of the shippers to know the transportation rates that its competitor intended to submit to federal agencies for specific routes. This information allowed the shippers to allocate specific routes between themselves at predetermined rates. Among the contracts affected were U.S. Postal Service contracts to transport mail and Department of Agriculture contracts to ship food. Both Sea Star Line and Horizon Lines previously pleaded guilty, in related criminal proceedings, to anticompetitive conduct in violation of the Sherman Act.”

You can read more about this issue at the Marine Log’s website here, and at the U.S. Department of Justice’s website.

That’s what makes the False Claims Act so great and so powerful. Here it helped to fight price-fixing when a plain old Sherman Act violation might never have come to light. The fact that the two shipping companies engaged in price-fixing, which implicated U.S. government funds, gave Mr. Stallings the opportunity to file his case.  It made the case worthwhile for the Department of Justice to pursue, and so they did.

So, the illegal practices are exposed and the government can act, and even collect money it is owed.  Private party shippers on these lines would also seem to gain a little protection from the fact that the anti-competitive practices are exposed. Of course, everyone benefits when a whistleblower helps the government stop unscrupulous businesses from ripping off taxpayers’ money.  The whistleblower and the False Claims Act worked exactly as they are supposed to in this case.