Maersk to Settle False Claims Suit on Shipping Costs for $31.9M

January 5, 2012 by Elizabeth Parker|Penalties and Courts

On January 3, 2012, the Justice Department announced that Maersk Line Limited has agreed to pay the government $31.9 million to resolve allegations that it submitted false claims to the U.S. in connection with overcharging for transporting cargo in shipping containers for U.S. troops in Afghanistan and Iraq. This lawsuit was filed under the whistleblower provisions of the False Claims Act.

Gov't Alleges Maersk Knowingly Overcharged DoD to Transport Containers

The government alleges that Maersk, a wholly-owned U.S. subsidiary of Denmark-based A.P. Moller Maersk, knowingly overcharged the Department of Defense to transport thousands of containers from ports to inland delivery destinations in Iraq and Afghanistan.

Allegedly Billed in Excess for Refrigerated Containers, Storage Fees, Etc.

The government contends that Maersk inflated its invoices in various ways. For example, Maersk allegedly billed in excess of the contractual rate to maintain the operation of refrigerated containers holding perishable cargo at a port in Karachi, Pakistan, and at U.S. military bases in Afghanistan. Additionally, Maersk allegedly billed excessive detention charges (or late fees) by failing to account for cargo transit times and a contractual grace period. Maersk also allegedly billed for container delivery delays improperly attributed to the U.S. government, container GPS-tracking and security services that were not or only partially provided; and allegedly failed to credit the government for rebates of container storage fees received by Maersk’s subcontractor at a Kuwaiti port.

Whistleblower to Receive $3.6M from Settlement

The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals called "relators" to bring lawsuits on behalf of the U.S. and receive a portion of the proceeds of a settlement or judgment awarded against a defendant. The relator in this action will receive $3.6 million as his statutory share of the proceeds of this settlement.

In 2009, the U.S. resolved the relator’s allegations against shipping company APL Limited and its parent company for $26.3 million. (See ITT's Online Archives 09021899 #4 for summary.)

(See ITT's Online Archives 11081213 for summary of the Securities and Exchange Commission's June 2011 final rule creating a whistleblower incentives and protection program.)