Appendix — Safir v. Blackwell

Supreme Court brief1979

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Supreme Court, U.S

FILED

éO7= 1% 3 Gy |} FEB 9

a. tagf @ '

SSK, JR., CLERK

IN THE

Supreme Court of the United States

Docket No.

MARSHALL P. SAFIR,

Petitioner,

ROBERT W. BLACKWELL, Individually and as

Assistant Secretary of Commerce, AMERICAN EXPORT LINES,

LYKES BROS. S.S. CO. INC., AMERICAN PRESIDENT LINES,

FARRELL LINES INC., PRUDENTIAL LINES INC., P.S.S.

STEAMSHIP CO. INC., UNITED STATES LINES INC.,

MOORE McCORMACK LINES INC.,

Respondents.

Appendix to Petition for Writ of Certiorari

MARSHALL P. SAFIR,

Pro Se,

41 Flatbush Avenue,

Brooklyn, New York 11217

(212) 858-2700

N.J. Appellate Printing Co., Inc., South Plainfield, New Jersey (201) 753-0200

1979

TABLE OF CONTENTS TO APPENDIX

Letter from Michael Rodak, Jr., Re:

Time for Filing Writ, dated

September 18, ee PUR ane ee ee 6 bob 0.8%

Corrected Copy of Denial of Petition

for Rehearing en Banc......eeeeee

Corrected Copy of Denial of Petition

for Rehearing by Original Panel..

Suoplerental Memorandum to Petition

for Rehearing en Banc.......eeeee

Letter to Chief Judge Wm. P. Bryant,

U.S.D.J., District of Columbia...

Opinion of Second Circuit Court of

Appeals of June 27, 1978.........

Memorandum Order and Annex A of

United States District Court, for

the Eastern District of New York,

Judge John F. Dooling, Jr., filed

DOGSNNSE 20,19 FT Paws sce esreeseces

Transcript of Hearing before Judge

Dooling on October 28, 1977......

Affidavit and Complaint, Marshall P.

Safir, Pro Se, and on Behalf of

The United States of America.....

Notice of Pendencyv Letter to Hon.

Griffen Bell, Attorney General,

Gated May 26, LOTT. cccccccseceses

lla

66a

79a

86a

Table of Contents to Appendix

Page

Order of Secretary of Commerce,

Frederick Dent, dated September 9,

1974 eC 2 Oo C2 2.8 2 e 2 ae. @ ee eeeeee#ese# @ **e @etee#e 89a

*Excerpt* of Opinion & Order of the

Maritime Subsidy Board, dated

fg SME Pe of A eT ene a 93a

Memorandum and Order of Judge Dooling,

JUNG ©, L972. cccses eeeeetoesseceeoes 96a

Injunction pendente lite, Judge

Dooling, dated June 23, 1971...... 103a

Opinion of Second Circuit Court of

Appeals on Carrier Defendants

Petition for Rehearing, June 18,

SUS 46S Gee Nw owe s*eeeeesee eeeeese 109a

Amended Complaint in United States,

ex rel Marshall P. Safir ard

Marshall P. Safir, Plaintiffs v.

Blackwell, American Export et al,

dated September 13, 1977.......... ll3a

Affidavit of Marshall P. Safir, Re:

Amended Complaint, September 13,

SPEEA SOOO 494 4O-CEVERSSOA CORO WE és JABRR

Petitioners' Reply Brief in Pet #388-

70, Supreme Court, September 28,

AP UO thececcneewse vad Terror ery, ree 140a

Original Complaint, Docket #68C643,

United States District Court,

Eastern District of New York...... 143a

Table of Contents to Appendix

Notice of Motion for Nixon Tapes,

United States District Court,

District of Columbia, Civil

Action No. 74-1474... cece eee cees 150a

Affidavit and Motion for Nixon Tapes

in The United States District

Court, District of Columbia,

Docket No. 74-1474, Chief Judge

Bryant. .ceeeeeceeecers eeeeee2e#8t ee @

Letter of Department of Commerce,

May 29, 1970, establishing

Amounts of Subsidies Paid dur-

ing Period of Law Violation...... 162a

Merchant Marine Act, 1936, 46 U.S.C.

tl, yee Pree: es ae er mee

False Claims Act - 3l U.S.C. 232,

233, 235; Procedure, Duties of

U.S. Attorney, Statute of ca

LimitationS.-ccccccccacccscssscccs

SUPREME COURT OF THE UNITED STATES

OFFICE OF THE CLERK

WASHINGTON, D.C. 20543

September 18, 1978

Mr. Marshall P. Safir

41 Flatbush Avenue

Brooklyn, New York 11217

Re: Marshall P. Safir v. Juanita Kreps,

Secretary of Commerce, et al.

Marshall P. Safir v. American Export

Lines, Inc., et al.

Dear Mr. Safir:

Your applications for extensions of

time to file a petition for a writ of certio-

rari in each of the above cases, received

September 14, 1978, are herewith returned.

Under the Rules of this Court, if

you have made a timely petition for a rehear-

ing, the ninety days allowed for filing a

petition for a writ of certiorari do not begin

to run until the rehearing has been acted upon.

After conferring with the Court of

Appeals for the Second Circuit, I have found

that you have made such a timely petition in

these cases, which have not yet been acted

upon. As such, an application for an exten-

tion of time is presently premature.

Very truly yours,

MICHAEL RODAK, JR., Clerk

/s/ Francis J. Lorson

Francis J. Lorson

Devuty Cle

th y rk

Enc.

cc: Hon. Wade H. McCree, Jr.

Kominers, Fort, Schlefer & Boyer

Kirlin, Campbell & Keating

Foley, Hoag & Elliot

Barrett, Smith, Schapiro & Simon

Shea & Gardner

CORRECTED COPY

UNITED STATES COURT OF APPEALS

SECOND CIRCUIT

At a stated term of the United States

Court of Appeals, in and for the Second Cir-

cuit, held at the United States Court House,

in the City of New York, on the twenty-eighth

day of November, one thousand nine hundred

and seventy-eight.

Marshall P. Safir and Sapphire

Steamship Lines Inc.,

Plaintiff

Marshall P. Safir, 77-6219

Plaintiff-Appellant, 77-7626

Vv.

Robert J. Blackwell, Assistant

Secretary for Maritime Affairs,

United States Department of

Commerce, Successor to and Sub-

sitituted for James W. Gulick

and Andrew Gibson, etc. et.al.,

Defendants

American Export Isbrandtsen Lines

Inc. et. al.,

Defendants-Appellees.

A petition for rehearing containing a

suggestion that the action be reheard in banc

having been filed herein by the appellant pro

se, and no active judge or judge who was a

member of the panel having requested that a

vote be taken on said suggestion,

r 4a

Upon consideration thereof, it is

Ordered that said petition be and it hereby

1S DENIED.

Jf/s/ Irving ®. Kaufman

Chief Judge

IRVING R. KAUFMAN

ead

——

CORRECTED COPY

UNITED STATES COURT OF APPEALS

Second Circuit

At a Stated Term of the United States

Court of Appeals, in and for the Second Cir-

cuit, held at the United States Court House,

in the City of New York, on the twenty-eighth

day of November, one thousand nine hundred

and seventy-eight.

Present: HON. HENRY J. FRIENDLY

HON. WILLIAM H. TIMBERS

Circuit Judges

HON. WALTER E. HOFFMAN

District Judge

Marshall P. Safir, and Sapphire

Steamship Lines, Inc.,

Plaintiff

Marshall P. Safir,

Plaintiff-Appellant 77-6219

V. 77-7626

Robert J. Blackwell, Assistant Secre-

tary for Maritime Affairs, et.al.

Defendants

American Export Isbrandtsen Lines Inc.,

et. al.,

Defendants-Appellees.

A petition for a rehearing having been

filed herein by the appellant pro se

Upon consideration thereof, it is i UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Ordered that said petition be and it

is hereby OUNEER. ea Nad > tS ieee eecacewewn nc ncwwoweweccennce= 4

° MARSHALL P. SAFIR, Docket No.

Plaintiff-Appellant, 171-6219

/s/ A. Daniel Fusaro -against- ches

A. DANIEL FUSARO, er 9

‘

ROBERT J. BLACKWELL, Assistant

Secretary for Maritime Affairs,

United States Department of

Commerce, et al,

Defendant-Appellees.

and

UNITED STATES OF AMERICA, ex rel.

MARSHALL P. SAFIR and MARSHALL P.

SAFIR,

Plaintiffs-Appellants,

and

AMERICAN EXPORT LINES, INC., et al,

Defendants~-Appellees.

ON APPEAL FROM THE UNITED STATES DISTRICT

COURT FOR THE EASTERN DISTRICT OF NEW YORK

Supplemental Meflorandum to Petition for

Rehearing en Banc.

MARSHALL P. SAFIR

Pro Se

41 Flatbush Avenue

Brooklyn, N.Y. 11217

Supplemental Memorandum to Petition for

Rehearing en Banc.

Petitioner respectfully requests

this Court to take judicial notice of the

annexed Thirty-Second Report by the Committee

on Government Operations, together with Addi-

tional Views submitted to the second session

of the 95th Congress and transmitted by the

Chairman to the Speaker on October 2, 1978.

The report no. 95-1680 on pages one

through sixteen set forth the relacionships

between Assistant Secretaries for Maritime

Affairs Gibson (1971) and his successor RBlack-

well (1972) to the present date in an "out-

rageous'” conflict of interest when they and

their General Counsel H. Clayton Cook, Jr.

(cf pp. 12-15) sat on the Maritime Subsidy

Board concurrently in the hearing mandated by

this Circuit in its decisions in Safir I and

Safir II while they were initiating the es-

tablishment of a trade association. They sat

on the Board of Directors of this trade asso-

ciation whose purpose was to protect the in-

terests of ODS contractors and whose predomin-

ant members were the named carriers under in-

vestigation for the violation of section 810

MMA 1936.

In docket 77-7626, appellant has alleged

not only that the claims were false, but also

that there was corruption upon the part of

1 See views of Rep. Paul McCloskey, pp. 31-34

of the report.

government in dealing with them. This House

report bears out this corruptive conflict of

interest on the part of the government offi-

cers charged with the responsibility by this

Circuit to decide whether to seek prosecution.

As stated in U.S. et al. v. Rippe-

toe et al, 178 F.2d at 736, as follows:

",.-(3) In the second place, we do

not think that knowledge on the part of

a government official who is implicated

in the fraud precludes suit by the in-

former. The whole history of the provi-

sion shows that its ourpose was, not to

bar bona fide suits by informers merely

because corrupt officials of the govern-

ment might have participated in the fraud

or refused to prosecute it, but to pre-

vent the bringing of parasitical actions

by those who sought to profit from go-

vernmental investigations or prosecu-

tions by using the evidence which these

had developed, as occurred in United

States ex rel. Marcus v. Hess, 317 U.S.

537,63 S.Ct. 379,87 L.Ed. 443, the de-

cision in which led directly to the leg-

islation of which the provision here is

a part ...". (Emphasis added.)

Contrary to involving the government with

the Xfull expense of the prosecution" (see

Petition for Rehearing, Attachment A, Slip

opinion, at p. 3674), the mandate of the

Second Circuit in Safir II was converted into

a defense for the government and industry

acting in concert to insure against the re-

quirement of the Department of Commerce to ©

seek prosecution. No moneys were expended in

Safir's behalf to the end of his reentry into

business by the Department of Commerce in what

i ili

10a

the Report terms as "outrageous" and "blatant"

conflict of interest. Appellant Safir should

not be disqualified and foreclosed from a

false claim act remedy when the improper re-

lationship caused the Department of Commerce

to share with these violating carriers the

Full expense not of the prosecution, but of

the defense. The cost of the prosecution

during the entire period from 1971 to 1974

when the litigation was in the administrative

process mandated by this Circuit in Safir I

and II, was, on the basis of the revelations

in the House Report, alwasy the burden of

this petitioner.

Attached hereto is a copy of peti-

tioner's letter to Chief Judge William T.

Bryant of the U. S. District Court for the

District of Columbia, covering the same sub-

ject matter as it pertains to the continuing

review action under the Administrative Pro-

cedure Act.

Respectfully submitted,

/s/ Marshall P. Safir

Marshall P. Safir

Pro Se,

Petitioner

Dated: October 13th, 1978

lla

MARSHALL P. SAFIR

41 Flatbush Avenue

Brooklyn, N. Y. 11217

October 12th, 1978

The Honorable William P. Bryant

Chief Judge United States District Court

for the District of Columbia

Washington, D. C.

Re: Dockets 74-1474 Safir v. Kreps et al.

74-1788

75-0055

Dear Judge Bryant:

On October 2nd, 1978, the Committee on

Government Operations of the House of PRepre-

sentatives submitted to the Speaker its House

Report No. 95-1680 Union Calendar No. 908.

This report by the Commerce, Consumer and

Monetary Affairs Subcommittee is entitled,

Report on Problems in the Relationships Be-

tween the Commerce Department's Maritime Ad-

ministration and the National Maritime Council,

A Private Trade Organization.

The report contains additional views of

Rep. Paul McCloskey, a member of the Committee

and also of the House Merchant Marine and

Fisheries Committee.

While the report initially was inspired

by "grass roots lobbying" aspects of the re-

lationships in 1977 and 1978, the Committee

found, as follows: |

12a

"(a) The relationships between the

Maritime Administration, a subsidy and

regulatory agency, and the National Mar-

itime Council, a private trade organi-

zation, was a blatantly improper one

from its inception in 1971 and demon-

Strated an utter disregard for conflict-

of-interest requirements and consider-

ations.”

I am enclosing six copies of the House

Report with this letter, Att. I, and hereby

request that judicial notice be taken of the

adjudicative facts therein as the period

during which this illicit liason was counten-

anced by Secretaries Stans, Peterson, Dent,

Richardson and Kreps spans all the years of

the Safir litigation and indeed the Assistant

Secretaries for Maritime Affairs Andrew Gib-

son (in 1971) and Robert J. Blackwell, who

with their General Counsel H. Clayton Cook

(in 1972, 1973) initiated the establishment

of this trade association with voting rights

for the government members.

These men also sat in judgment and voted

for the mitigation theories expanded in the

MSB decision in Docket S-243. These formed

the basis for the final decision by Secretary

Dent in 1974.

The Report, and in particular pages l

through 16, and the additional view of Repre-

sentative McCloskey, effectively destroy any

facade of impartiality or good faith. Any

presumption of the validity of a "mitigation"

theory in this case which I addressed in my

appeal brief in the Court above on July 17,

1978 (dismissed without prejudice on July 27,

1978) must also be seen in the light of this

Report.

13a

Your order of March 29, denying my

motion for the Nixon tapes at that time evi-

denced your need to be convinced by a

stronger showing of the bad faith on the part

of the government officials responsible for

the decision before you would allow supple-

mentation of the record in an "Overton" type

hearing. Plaintiff herewith submits that

this Report is the “smoking gun".

My brief on appeal from your March de-

cision is now part of the record before you

by your fiat of Sept. 9, 1978. I respect-

fully offer pages 9-14 as sufficient support

for the subpoena of the relevant tapes and

other discovery documents regarding gift of

material value given to these officials by

the subsidized carriers which were alluded to

in the transcript of the hearing before the

Subcommittee.

I have apprised the Second Circuit Court

of Appeals of this Report, since as of this

date no action has been taken on my Petition

for Rehearing en Banc of the False Claims

Amendment to the original complaint I filed

in 1968 or to the dismissal of the action

under 31 USC231,232 that I filed in 1977 in

the USDC EDNY Docket 77-1093. I submit here-

with as Attachment II my supplemental memo-

randum to the Second Circuit about House Re-

port No. 95-1680 Union Calendar 908.

Under these circumstances, I request

that the pretrial hearing be convened so that

a renewed motion for relevant Nixon tapes and

other evidence can be heard before this Court.

The House Report represents "one of those

future events" which would trigger the renewal

of such motion and which formed the basis of

the United States Court of Appeals for the

15a

a UNITED STATE

, ‘ , = 4 NITED STATES COU YF ALS

District of Columbia's decision per curiam in TES COURT OF APPEALS

Safir v. Kreps on July 27th, 1978. For tHe Secoxp Circvit

Respectfully yours,

Nos. 770, 840—September Term, 1977.

/s/ Marshall P. Safir (Arcued May 31, 1978 Decided June 27, 1978.)

— P. Safir Docket Nos. 77-6219, 77-7626

Copeee Gene Sot MarsHaut P. Sarin

Clerk U.S. Court of Appeals for the Second Re

Circuit Plaintiff-Appellant,

J. Franklin Fort, Esq. %

T.S.L. Perlman, Esq.

James N. Jacobi, Esq. Roser? J. Blackwe ti, Assistant Secretary

Elmer C. Maddy, ESq. of Commeree. of al

Robert T. Basseches, ESq. sata aga

Verne W. Vance, Jr., Esq. Defendants-A ppellees.

Allen van Emmerick, Esq. ae

Daniel H. Margolis, Esq. —

MarsuHatu P. S.rir,

Plaintiff- Appellant.

American Export Lixes, Inc., et al..

Defendants-Appellees.

Before:

Friexpty and Timers, Circuit Judges,

and Horrman, District Judge.*

—

Of the District Court for the Eastern District of Virginia, <ittirg |v

designation.

3665

l6a

Appeals from orders of the District Court for the East-

ern District of New York, Jobu F. Dooling, Judge. One

order denied plaintiffs motion to amend a complaint filed

in 1°68 against United States government officials to com-

pel them to take action to recover subsidies alleged to

have been illegally paid under ‘810 of the Merehant Ma-

rine Act, 1936, 46 U.S.C. * 1227, see Safir v. Gibson, 417

F.2d 972 (2 Cir. 1969), cert. denied. 400 U.S. S50 (1979),

so as to state a claim against the intervening subsidy

recipients under the False Claims Act, 31 U.S.C. ¢* 231

and 232. The other order dismissed an action brought in

1977 against the subsidy recipients under said Act.

Affirmed.

ore

Marsaatt P. Sarm. Brooklyn, N.Y., Pro Se.

Gitscrt S. Fretscner. Esq., Department of

Justice, New York, N.Y. (Barbara Allen

Bahbeock, Assistant Attorney General, and

David G. Trager, United States Attorneyr

for the Eastern District of New York. of

Counsel), for Defendants-Appellees Pt bert

J. Blackwell, et al.

Ecmer C. Mappy, Esq., New York, N.Y. (Kir-

lin, Campbell & Keating. Esqs.. for Di fen-

dant-Appellee United States Lines, Ine.:

James N. Jacobi, Esq., ant Kurrus, Dver,

Jacobi & Mooers, Esqs., for Det. naut-

alppellee American Export Lines, lwue.;

J. Franklin Fort, Esq., T.S.L. Perlman,

Esq., William H. Fort, Esq., and Kominers,

Fort, Schlefer & Boyer, for Defendauts-

Appellees Lykes Bros. Steamship Company,

Inc. and Movore-McCormack Lines, lne., of

Counsel).

3666

17a

Rosert T. Bassecues, Esq., Washington, D.C.

(Shea & Gardner, Esqs., Daniel H. Mar-

golis, Esq., Warren L. Lewis, Esq., and

Bergson, Borkland, Margolis & Adler, for

Defendants-Appellees American President

Lines, Ltd.. Prudential Lines, Iuc., and PSS

Steamship Company, Inc.; Verne W. Vance,

Jr. Esq., Arthur G. Telegen, Esq., and

Foley, Hoag & Eliot, Esqs., for Defendants-

Appellees Farrell Lines; Barrett. Smith,

Sehapiro, Simon & Armstrong, Esqs., for

Defendants-Appellees American President

Lines. Ltd.. Prudential Lines, Inc.. PSS

Steamship Company, In... and Farrell

Lines, Inc., of Counsel.)

Frrexpiy, Circuit Judae:

Plaintiff-appellant Marshall P. Safir has been laboring

for more than a deeade to obtain a recovery for the United

States of subsidies alleged to have been illegally paid to

members of the Atlantic and Gulf American Flag Berth

Operators (AGAFBO). The Federal Maritime Commis-

sion (FMC) held, on December 8, 1967, that in 1965

AGAFBO, with the purpose of eliminating Mr. Safir’s com-

pany, Sapphire Steamship Lines, Inc. (Sapphire), from

competing with the conference lines, had promulgated

rates for Government cargoes in the North Atlantic trade

which were so unreasonably low as to be detrimental to the

commerce of the United States, contrary to the public

interest, and, in consequence, violative of $$ 15 and 18(b)5

of the Shipping Act, 1916, 46 U.S.C. ‘§ 814, 817(b) (5).

Rates on U. S. Government Carqoes, Docket No. 65-13, 11

F.M.C. 263, 287. Safir then requested the appropriate

3667

18a

government officials to recover subs‘dies allegedly paid

illegally to AGAFBO members, on the grounds that these

same discriminatorily low rates constituted a violation of

) 810, Merchant Marine Act, 1936, 46 U.S.C. § 1227. These

efforts proving unsuccessful, be brought a suit in 1968

‘in the District Court for the Eastern District of New York

to prod the officials into action. Safir was rebuffed by the

district court, but met with success here, Safir v. Gibson.

417 F.2d 972 (1969), cert. denied. 400 U.S. 850 (1970)

(Safir 1).

However, the Maritime Subsidy Board decided to follow

an expensive and time-consuming course which would have

required relitigation of the issues of violation already de-

termined by the FMC, When Safir sought the aid of the

district court in avoiding such duplicative proceedings,

the law officers of the Government Opposed him and the

district court agreed, Again we tonk a different view, both

when the appeal was first heard with only the Government

as appellee, and later when the subsidy recipients, who had

previously abstained from participating, see 417 F.2d at

976 n. 4. intervened in the action for the purpose of seek-

ing a rehearing. Saffr y. Gibson, 432 F.2d 137, 145 (9 Cir.),

cert. denied, 400 U.S, 949 (1970) (Safir IT), Following

another resort by Safir to the Eastern District and to this

court, this time unsuccessful. see Safir v. Blackwell. 469

F.2d 1061 (1972), cert. denied, 414 U.S, 975 (1973), (Saffr

IIT), the Maritime Subsidy Board directed in 1973 that a

total of #2.388.463.16 should he recovered from five

AGAFBO lines that had heen in direct competition with

Sapphire. Investigation of Alleged Section 810 Violation,

Maritime Suhsidy Board S-243, 14 P&F Shipping Regul.

Reptr. 77, 78 (1973). On a diseretionary appeal to the

Sceretarvy of Commerce pursuant to 46 C.FLR. $9094

3668

19a

duced the amounts to a total of $1,126,522.26. The basis

for this slash was what the Court of Appeals for the Dis-

trict of Columbia Circuit has called a “preemptory an-

nouncement” by the Secretary that “the record indicates

that the United States Government actively induced the

rate reductions here in issue,” see Safir v, Kreps, 551 F.2d

447, 455 (D.C. Cir.), cert, denied, 46 U.S.L.W. 3215 (1977)

(Safir IV)... When Safir complained to the courts of the

inadequacy of the recovery, he was again opposed by the

law officers of the Government. He was unsuccessful in

the District Court for the District of Columbia, but the

Court of Appeals, taking a different view, reversed and

remanded with a direction that “the trial court should care-

fully serutinize the evidentiary support for the Secre-

tary’s ruling and should, if necessary, remand the record

to the Secretary for clarification of his reasons for inter-

preting the evidence as he has.” 551 F.2d at 455.

With this frustrating background it is understandable

that Safir should have decided the time had come to place

the controversy in a posture where he, rather than Gov-

ernment officials, would control the prosecution. The in-

strument he chose was the “qui tam” statute which em-

powers any person to bring and carry on a suit on behalf

of the government against anyone who has presented a

claim against the United States for payment or approval,

“knowing such claim to he false, fictitious. or fraudulent,”

31 U.S.C, §¢§ 231 and 232.2 His theory was that the steam-

ship lines had submitted claims for subsidy, knowing that

_——

1 Tt should he made clear that the Secretary who directed the reduction

was Secretary Dent, not Secretary Kreps.

2 Safir had adverted to possible resort to a qui tam action in the 1972

Proceedings before both the district court and this court, and had spe-

cifically mentioned the possibility of a later False Claims Act claim in

an affidavit, see also Safir III, supra, 469 F.2d at 1063, but had not

pursued this.

3669

> $10 of the Merchant Marine Act, 46 U.S.C). § 1227, ana

the corresponding clauses iy their subsidy contracts made

them ineligible for subsidies while they were charging

rates which violated © 15 of the Shipping Act. Safir souglit

to invoke the qui tam statute in two ways: First, be filed

an action against the steamship companies on May 25,

1977. After Safir had complied with the requirements of

31 U.S.C. § 232(C) with respect to advising the Attorney

reneral of the pending action, the United States declined

to enter the suit. Second, he moved to amend his 1968

complaint against government officials in which, as hereto-

fore stated, the steamship lines had later intervened, so

as to state a claim under the false claims statute? and

moved to consolidate the two actions. The steamship lines

opposed the motion for leave to amend the 1968 complaint

and moved for suinmary judgment with respect to the 1977

action. Judge Dooling denied Safir’s motion for leave to

amend and granted the defendants’ motion for summary

judgment. and these appeals followed.

The jndge stated] his reasons for denying leave to amend

as follows:

While, as it would be amended, the complaint would

in ultimate substance add a False Claims Act Connt.

that count does not arise out of the matter of original

3 The advantage of this course lay in the possibility of “relation lak.”

F. R. Civ. P. Mle). and renseqnent avoeidaree of eerinve iffientries

With respect to the statute of limitations.

4 Defendants have not raised the claim that. as held in Muited spor, .

V. Onan, 19%) P.2a 1. 6 (8 Cir.), cert. denied, 342 U.S. 869 (1951), a

I:tigant cannot prosecute a que tam action under 31 U.S.C. $232 pro se.

If we assume that such a claim would be well founded, the remedy Would

not be outright dismissal but a direction that the action he dismizee:)

unless an attorney is retained. Compare Phillips y. Tobin, 548 F.2.)

$08. 415 (2 Cir. 2976) (stockholder’s derivative action). At argnment

Mr. Safir expressed willingness to retain an attorney if either of the

orders were reversed.

5670

2la

complaint. The original complaint sought to compel

public officers to do what plaintiff contended that it

was their duty to do. The claim rested on the contrast

between the FMC decision that the AGAFBO rates

Were unjustly discriminatory and the failure of the

Maritime Administration, Maritime Subsidy Board, to

take appropriate action in the light of 46 U.S.C. § 1227.

The new matter would add a completely new claim

both as to substantive content and as to the identity

of the persons against whom relief was sought. Noth-

ing in the original case turned on the knowing pre-

sentation of a false, fictitious or fraudulent claim.

There is no basis for authorizing an amendment that

would transform the case, in effect dismiss the orig-

inal defendants, and pursue a completely different

claim. Cf. Rosenberg v. Martin, 2d Cir. 1973, 478 F.2d

920, 526-27; United States vy. Templeton, E.D. Tenn.

1961, 199 F.Supp. 179, 183-84.

We can find no sound basis for disagreeing with this

analysis.

The grant of summary judgment for the defendants on

the 1977 complaint was based on the clause in 31 U.S.C.

* 232, added by the Act of December 23, 1943, 57 Stat. GOs,

which reads:

The court shall have no jurisdiction to proceed with

any [qui tam] suit whenever it shall be made to appear

that such suit was based upon evidence or information

in the possession of the United States, or any agency.

officer or employee thereof, at the time such suit was

brought.

The judge concluded that the information which Safir had

already furnished to Congressional committees, to the FMC.

and to the Maritime Administrator in the course of his

3671

22a

long fight to have AGAFBO’s predatory rates declared w-

lawful and to cause the government officials to recover

illegally paid subsidies constituted the very evidence on

Which the action under the False Claims Act would depend.®

Thus he had no need to consider the defendants’ additional

contentions that the 1977 action was time-barred and that

their submission of subsidy claims could not be viewed as

“talse, fictitious or fraudulent” within the meaning of 31

U.S.C. § 231.

It is established that the “whenever it shall be made to

appear” defense to a qui tam suit being prosecuted by the

relator may be made not only by the United States but

hy a defendant. United States ex rel. Leslie v. Potomac

Electric Power Co., 208 F.2q 39, 41 (D.C. Cir. 1953):

United States vy. Pittman, 151 F.2d 851, 853 (5 Cir. 1945)

(dictum), cert. denied, 328 U.S. 843 (1946). The leading

court of appeals decision construing the clause, [wited

States and Aloff v, Aster, 275 F.2d 281, 283 (3 Cir.). cert.

denied, 364 U.S. 894 (1960), gives it a liters! reading whieh

supports the ruling by the district judge that knowledge

by the government prior to suit bars tho action, even if

the plaintiff is the source of that knowledge. We, like

others, see United States ex rel, Vance y. Wi stinghouse

Electric Corp., 863 F.Supp. 1038, 1041-42 (W.D. Pa. 1973

United States ex rel. Davis vy. Lona’s Druas, Tue.. 411:

F.Supp, 1144. 1150-52 (S.D. Cal. 1976) (dictum), are not

5 The judge stated that the only new evidence alleged hy Safir, ex

verpts from which were attached to his Opinion, “related to a rors t

arrangement to frustrate plaintiff's endeavor to vindicate his eluims”

hy nu “deal" and concluded that this “is heither germane to the False

Claims Act case nor to the Government's claims under 46 PSC. 6 1229,

hor os it material that was not in the Possession of the Government

“te it professedly came from ‘leaks’ from the Watergate Special Pros

ecutor’s office.” Since we agree that the matter was not germane ty

the False Claims Act claim, we have no occasion to consider the cor.

reetness of the judye's two other Propositions,

8672

23a

wiogether happy with this approach, which extends the

clause considerably beyond the evil sought to be remedied

and gives it a broader effect than would be indicated by

the legislative history reviewed hy Judge Hastie in the

district court decision, 176 F.Supp. 208, 209-10 (E.D, Pa.

159), affirmed in Aster. and by Judge Knox in lance,

supra, 363 F.Supp. at 1041-42. Safir js at an opposite

pole from the “mere busyhody who copies a Government’s

indietment as his own complaint and who brings to light

no frauds not already disclosed and no injury to the

Treasury not already in process of vindication”, described

in the dissent of Mr. Jnstice Jackson in United States ex

rl Marens v. Hess, 317 U.S. 937, 558 (1943). the ease

Which inspired the 1942 amendments to the qui tam stat-

ute. Moreover, it seems rather curious that an informer

Who makes only a partial or merely conclusory disclosure

to the United States before filing suit, should he free to

carry ona qu? toi action or to receive an award, 381 U.S.C,

282° E)(1), if the Tnited States elects to take over the

prosecution, whereas the informer who has already fur-

nished complete information should be barred from either.

We have wondered whether some argument could he made

for the plaintiff on the basis that no one in the Goyern-

ment hod entertained any thought of pursuing the steam-

~hip companies under 31 U.S.C. £221) whieh hermits

recovery not simply of anv subsidies illegally paid but

of “the sum of $2,000, and. in addition, double the amount

of damages whieh the United States may have sustained

hy reason of the doing or committing such act, together

with the costs of suit.” However, this would he trne in

almost any false claims suit which was not duplicative of

ene already filed or in course of preparation by the Gov-

ernment. Moreover, such an argument would still con-

front the obstacle that the. false claims suit would be

3673

24a

“based upon evidence or information” already in the pos-

session of the Government. and would have to face our

decision in United States ex rel. Greevherg v. Burmah

Oil Ca,, 558 F.2d 43, 45-46 (2 Cir.). cert. denied, 46 U.S.

L.W. 3357 (1977), see also United States er rel. Bayarsky

v. Brooks, 110 F.Supp. 175, 180 (D.N.T, 1953). and 210

F.2d 257 (3 Cir. IM4): Muited States cx rel. MeCans vy.

-Lrmour & Co. 146 F.Supp. 546, 549 (D.D.C 1956), afd

254 F.2d 90 (D.C. Cir.) cert, denied. 958 U.S. 834 (1958),

While a case may arise when the literalism of ifster

would be so offensive to the intention of Congress as to

demand a more liberal approach, we do not think this

to be one. Despite his years of valiant effort, when all is

said and done, Mr. Safir had three choices available to

him in the late 1960's, He could have instituted a treble

Camage action on behalf of hinself and his company for

injury to business or property under the precise terms of

"S810 of the Merehant Marine Act, 1996, 46 T.S.C, * 1297;

he could. if he had thought of it. hare withheld at least

some information from the Government and broneht a

qui tam action wider 21 U.S.C. £* 231.299: or he eould

have done what he did. namely, endeavor to force the

Maritime Administrator to take action to recover subsi-

dies illegally paid. Under either of the first two courses,

he would have been required to incur the eonplete bur-

den of the expense of prosecution unless the Government!

elected to take over the qui tam action. Havine opted for

the third course and thereby involved the Government with

the full expense of prosecution, he mav not now bring a

qu tam action on the basis of the same information he

has already furnished.

The orders are affirmed.

3674

25a

UNITED STATFS DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

MARSHALL P. SAFIR, ’

Plaintiff, :;

Vv. 77 C 1093

AMERICAN EXPORT LINES, :

et al.,

Defendants.

MARSHALL P. SAFIR, :

Plaintiff, : 68 C 643

Vv.

ROBERT W. BLACKWELL, >: MEMORANDUM

et al., and

Defendants. : ORDER

9 ee ea a Se ee cae tes ei as ad xX

Appearances:

MARSHALL P. SAFIR, pro se

ELMER C. MADDY and KIRLIN CAMPBELL &

KEATING, KOMINERS FORT, SCRHLEFFER

& BOYER, and KURRUS & ASH for

American Export Lines, Lykes Bros.

S.S. Co. and United States Lines

ROBERT T, BASSECHES and BARRETT, SMITH

SCHAPIRO SIMON ¢& ARMSTRONG, BERGSON,

BORKLAND, MARGOLIS & ADLER, SHEA &

GARDNER and FOLEY, HOAG & ELIOT for

American President Lines, Farrell

Lines, Prudential Lines, and Pss

Steamship Co.

26a

CILBERT S. FLEISHER and DAVID cG,. TRACCR,

United States Attorney

DOOLING, D.J.

The 1977 action was commenced on

May 26, 1977, against the ocean carriers

to enforce their alleged liability

under 31 U.S.C. § 23] to the United

States. The ground of liability assertea

is that the carrier defendants, by

reason of their participation in a

practice discriminatory against Sapphire

Steamship Lines, Inc., were not entitled

tO payment of any construction or opera-

ting differential Subsidy (46 u.S.c. §

1227) but have nevertheless filed claims

for and received Payment of such Subsidy

amounts from the United States, and that

those subsidy claims must be held to be

false, fictitious or fraudulent. Plain-

tiff sues in reliance On Clause (B) of

31 U.S.C. § 232: that Clause authorizes

any person to bring a suite to recover

the fraud damages and forfeiture provided

in Section 231 "as well for himself as

for the United States". Plaintiff has

given to the United States the notice

required by Section 232 (C), by Ssupply-

ing it with a copy of plaintiff's peti-

tion for a Writ of Certiorari and Appen-

dix in Safir v. Kreps as comprising

Plaintiff's "disclosure in writing of

Substantially all evidence and informa-

tion in his Possession material to the

effective Prosecution of such suit."

(The petition for writ was one of three

addressed to the decision of the Court

Of Appeals for the District of Columbia

oe ee

27a

Circuit, reported 55] F.2d 447. The

petitions were denied October 3, 1977.)

The United States within Sixty days

thereafter declined in writing to enter

the suit, Saying that it had concluded

from plaintiff's Submission that the

central issue of plaintiff's allegations

in the present 1977 action "is Presently

being litigated in the United States

District Court for the District of

Columbia in an action Styled" Marshall

P. Safir, plaintiff, v. Juanita M. Kreps,

et al, defendants, Civil Action No, 74-

1474, Plaintiff, then, is free under

Section 232(C) to Pursue the suit unless

there is a defect in the court's authority

to proceed, for Section 232(C) provides,

in part, that

"The court shall have no

jurisdiction to Proceed with

any such suit brought under

clause (B) of this section

whenever it shall be made to

appear that such suit was

based upon evidence or infor-

mation in t!e possession of

the United States, or any

agency, officer or employee

thereof, at the time such

Suit was brought."

Section 235 provides that Suits to

enforce liability under Section 231

28a

",.eShall be commenced within

six years of the commission of

the act, and not afterward."

In the period from March 29, 1965,

until March 1, 1966, the Atlantic and

Gulf American Flag Berth Operators (a

“conference") had in effect rates for

certain United States military cargoes

which the Federal Maritime Commission

(FMC) on December 12, 1967, held had

been designed for the sole purpose of

eliminating Sapphire Steamship from the

carriage of military cargo by unfair

competition; these rates the FMC charac-

terized as so unreasonably low as to be

detrimental to the commerce of the

United States, contrary to the public

interest, and, in consequence, violative

of 46 U.S.C. § 814.* Counsel for plain-

tiff and Sapphire promptly drew the

attention of the Federal Maritime Admini-

Stration, Maritime Subsidy Board to the

FMC decision and to the provisions of 46

U.S.C. § 1227, and demanded that action

be taken to recover all subsidy payments

made after March 29, 1965, and to cease

making subsidy payments currently. No

action having been taken by the Maritime

Administration plaintiff, Sapphire

Steamship Lines and Arnold Weissberger

commenced an action in the Eastern

District of New York , 68 C 643, on June

24, 1968, to compel the Maritime Admini-

Stration, Maritime Subsidy Board and the

Secretary of Commerce to cease making

*The decision was not appealed.

29a

Subsidy payments to AGAFBO members and

to initiate suits to recover from them

subsidy payments therefore made. The

district court dismissed the complaint,

but on appeal the Court of Appeals held

that the Maritime Administrator could

not refuse to proceed against the AGAFBO

members without at least considering the

interest of the victim and was at least

required to make a considered decision

whether to recover the subsidies paid in

the past, and that plaintiff had standing

to question the Administrator's failure

to seek recovery of the subsidies paid

during the period of violation. Safir

v. Gibson, 2d Cir. 1969, 417 F.2d 972

(Safir I). A second appeal settled

that, although current subsidies to the

AGAFBO members would not be enjoined in

the absence of a showing of violation of

46 U.S.C. §§ 814, 1227, the Maritime

Administration was not to redetermine

the issue whether the AGAFBO carriers'

concerted action in reducing their rates

to an unreasonably low level and holding

them there for eleven months was un-

justly discriminatory or unfair to

Sapphire but was to give the FMC's

determination the effect of collateral

estoppel; the court noted that the

Maritime Administration could investigate

the nature and extent of individual

carriers' participation in the illegal

action if it found that relevant to its

ultimate decision on whether to seek

recovery of subsidies paid during the

violation, and, if so, how much and from

whom. Safir v. Gibson, 2d Cir. 1970,

432 F.2d 137 (Safir IT).

30a

The Maritime Administration, Maritime

Subsidy Boa.d, conducted a proceeding

(No.S-243) before its Chief Hearing

Examiner and a Recommended Decision

rendered on April 24, 1972, would have

fixed liabilities as follows:

American Export Isbrandtsen

Lines 169,000.

Moore=-McCormack Lines, Inc. 1,135,000.

United States Lines, Inc. 3,452,000.

Plaintiff was dissatisfied with the

decision, and after an unrelated injunc-

tion matter had been disposed of (2d

Cir. 1972, 469 F.2d 1061), the Maritime

Subsidy Board of decisions of April 9

and October 10, 1973, fixed the liabili-

ties at the following amounts.

American Export $ 38,050.25

Bloomfield 121,893.67

Lykes 762,891.99

Mormac 386,776.56

United States Lines 1,061,704.76

Plaintiff sought to review the April

1973 decision of the Maritime Subsidy

Board in. the Court of Appeals for the

Second Circuit, but by order of May 16,

1973, the application was denied. An

appeal by the carriers to the Secretary

of Commerce resulted in an order of

September 9, 1974, adjusting the liabili-

ty amounts "to reflect the effect of the

United States Government action" in

actively inducing the rate reductions in

issue to its substantial financial

benefit. The adjusted liabilities were:

3la

American Export $ 18,160.82

Bloomfield 46,346.54

Lykes 381,446.00

Mormac 193,276.76

United States Lines 487,292.14

Plaintiff sought review of the

liability determinations in the United

States District Court for the District

of Columbia; that action was dismissed

but, On appeal to the Court of Appeals

for the District of Columbia Circuit,

the dismissal was reversed and the case

remanded to the District Court to try

the issues, which the Court of Appeals

outlined as including the propriety of

the administrative action in mitigating

the penalties assessed and reducing the

subsidy recovery to reflect the propor-

tion of military cargo carried "by the

predatory lines", and as extending to

the arbitrariness of the precise action

taken, determining whether the various

factors other than those cited as just-

ifying mitigation can properly be con-

sidered and whether in light of all

factors appropriate for consideration,

the administrative action was arbi-

trary, capricious, or an abuse of dis-

cretion on all the facts developed in

the hearing before the Administrative

Law Judge (Chief Hearing Examiner); the

Court, of Appeals left determination of

the applicable standards of review

qualifiedly open for the district court

to determine on remand but indicated

the view that the Secretary's decision

to mitigate on the basis he expressed

appeared to reflect a failure to come to

32a

grips with the difficulties in the

evidence in the record, gave little

assurance that his order resulted from a

reasoned decisionmaking and might, upon

the District Court's scrutiny of the

record, show the necessity of a remand

to the Secretary for a clarification of

reasons. Safir v. Kreps, D.C.Cir. 1977,

551 F.2d 447. bi

1. Plaintiff moved on September

13, 1977, to amend the complaint in 68 C

643, which, as noted, sought to compel

the Federal Maritime Administration,

Maritime Subsidy Board, to stop paying

subsidies to AGAFBO members and to

recover from them any subsidies paid to

them after March 25, 1965. The amend-

ment would add a claim under 31 U.S.C.

§§ 231 et seq., alleging, in addition to

the earlier allegations of violations of

46 U.S.C. §§ 814, 817(b)(5) and 1227,

and of consequent liability by virtue of

46 U.S.C.§1227 to refund past subsidies ~

to the United States,

that during the eleven months

period of violation the carriers

received over 3 227,000,000 of

subsidies that in May 1971

after defendants were advised

that a prima facie case of

violation of Section 1227 had

been made out, defendants

continued to submit vouchers

supporting claims for subsidies

allocable to the eleven month

period of violation knowing

them to be false in that

defendants, to their knowledge,

33a

were not entitled to subsidy

payments while in violation of

the provision of their subsidy

agreements by which they

agreed not to be parties to

any agreement among carriers

which is unjustly discriminatory

or unfair to another American

flag carrier, and defendants

signed and submitted affidavits

in support of their vouchers

Stating that they had fully

complied with the subsidy

agreement and regulations and

were entitled to the payments

requested, and submitted

annual accountings asserting

that they had complied with

the terms of the subsidy

agreement knowing that they

had not done so,

Plaintiff argues that the amendment

is proper and should relate back to the

date the action was filed. Under Rule

15(a) plaintiff may amend only by leave

of court, a leave that is to be freely

granted when justice so requires; where

amendment is allowable, the claim asser-

ted relates back to the date of the

Original pleading provided that

".,.. the claim ... arose out

of the conduct, transaction,

Or occurrence set forth or

attempted to be set forth in

the original pleading ..."

34a

There is no reason to allow this

closed case to be revived by amendment.

The original complaint made no claim

against any of the defendants. It did,

however, clearly pray an adjudication

that the making of any subsidy payments

to the AGAFBO carriers during the viola-

tion morths was illegal under 46 U.S.C.

§ 1227, that continuing subsidy payments

to the AGAFBO carriers should be forbidden,

and that the public officer defendants

should be directed to sue the AGAFBO

members to recover the subsidy payments

illegally made to them. However, the

AGAFBO parties intervened some time

before June 18, 1970, after the decision

of the Court of Appeals in Safir II, in

order to petition for a rehearing (432

F.2d at 145), and after that date were

heard in the further district court

proceedings in 68 C 643. Plaintiff

raised in the case as well as before the

Chief Hearing Examiner his point that

the United States should recover all the

subsidies, and that, on some basis, he

should participate in or benefit by the

recovery, and in connection with plain-

tiff's motion by order to show cause of

May 4, 1972, and the related appeal,

there was discussion during oral argument

on May 31, 1972, of plaintiff's possible

qui tam interest and reference was made

to the “False Claims Act" (31 U.S.C. §§

2311 et seq.) in the context of Connecticut

Action Now, Inc. v. Roberts Plating Co.,

Inc., 2d Cir. 1972, 457 F.2d 81; plain-

tifE's affidavit of August 21, 1972,

submitted in the Court of Appeals

plaintiff, asserted that he had been

35a

actively concerned that the public

officials take proper safeguards to

protect the interest of the United

States

",.. and his (plaintiff's) own

in later action under 3l

U.S.C. Sec. 231, 232, 233 &

235 after extent of these

recovered are decided on."

Plaintiff presented, as an issue for the

Court of Appeals to decide, the question

of his “statutory interest under 31

U.S.C. Sec. 231-233, 235 in any forfeiture

mandated by the violation of 46 U.S.C.

Sec. 1227, Sec. 810 by the offending

ocean carriers as Sec. 819 has been

interpreted by (the Court of Appeals)

decisions in Safir v. Gibson". Plaintiff

argued in the affidavit, after quoting

language from the brief before the Chief

Hearing Examiner concerning the AGAFBO

carriers' making the offending rate

agreement despite the Section 810 compli-

ance clause in the subsidy contracts,

that

"The deceit is obvious. The

respondents unlawful behavior

during that period violated both a

clear provision in the subsidy

agreement as well as an explicit

statute and in presenting their

claims for subsidy payments corres-

ponding to that period the respon-

dents received government monies to

which they were not entitled.

3fa

Moreover, in presenting the

claims, the respondents were

holding out that the provisions

of Sec. 810 which are incorpo-

rated in the subsidy agreement

had been complied with, in

effect misrepresenting their

compliance with its terms.

Appellant in fact far exceeds

the requirements of the doctrine

in Marcus ... to justify his

gui tam interest."

On this point, the Court of Appeals was

clear (469 F.2d at 1963):

"Plaintiff complains of a

statement by the district judge

that he would have no interest in

any recovery by the Government.

This statement was unnecessary to

the decision and we have no oc-

casion either to approve or to

disapprove it."

The statement complained of was

"Plaintiff argues that he may

have an individual right to parti-

cipate in any ultimate recovery by

the Government under qui tam legis-

lation. No statute authorizing a

qui tam recovery or gui tam pro-

ceedings has been pointed to and

the decision in Connecticut Action

Now, Inc. v. Roberts Plating Company,

Inc. ... makes it reasonably clear

that the plaintiff has no gui tam

interest in the Government's recovery

37a

under Section 810 of the

Merchant Marine Act, 1936 as

amended (46 U.S.C. § 1227)."

The motion to amend the complaint

in 68 C 643 and to consolidate that

action with 77 C 1093 must be denied.

While, as it would be amended, the com-

plaint would in ultimate substance add a

False Claims Act Count, that count does

not arise out of the matter of original

complaint. The original complaint

sought to compel public officers to do

what plaintiff contended that it was

their duty to do. The claim rested on

the contrast between the FMC decision

that the AGAFBO rates were unjustly

discriminatory and the failure of the

Maritime Administration, Maritime Sub-

Sidy Board, to take appropriate action

in the light of 46 U.S.C. § 1227. The

new matter would add a completely new

Claim both as to substantive content and

as to the identity of the persons against

whom relief was sought. Nothing in the

Original case turned on the knowing

presentation of a false, fictitious or

fraudulent claim. There is no basis for

authorizing an amendment that would trans-

form the case, in effect dismiss the

Original defendants, and pursue a com-

pletely different claim. Cf. Rosenberg

v. Martin, 2d Cir. 1973, 478 F.2d 520,

526-527; United States v. Templeton,

E.D. Tenn. 1961, 199 F.Supp. 179, 183-

184.

38a

2. By motions for summary judgment

defendants challenge the False Claims_

Act complaint of 77 C 1093 on its merits.

Plaintiff's testimony was taken on

September 28, 1977, with a view to

determining what evidence or information

he had communicated to the United States

that was not already in its possession

at the time of suit. He testified that

he made available to the Government

through the Maritime Administration

Public Counsel in 1971 all the informa-

tion that he then had to support the

False Claims Act suit, 77 C 1093, and

that he had not transmitted or offered

any Government representative any new

information since that time, none having

been requested of him. Plaintiff said

he did have information to bring forward

at the present time, based on the fact

that the case, 77 C 1093, had been

filed. Annex A sets forth the relevant

parts of the testimony that he then gave

about the content of the new disclosures

to him. The new material, related to a

corrupt arrangement to frustrate plain-

tiff's endeavor to vindicate his claims,

is neither germane to the Flase Claims

Act case nor to the Government's claims

under 46 U.S.C. § 1227, nor is it material

that was not in the possession of the

Government since it professedly came

from “leaks" from the Watergate Special

Prosecutor's office.

39a

It is unanswerably clear that the

Government had in its possession all the

evidence and information upon which

plaintiff's False Claims Act suit is

based at the time such suit was brought.

Within ten days after the offending

rates were put in effect plaintiff made

a twelve page statement to the Joint

Economic Committee, Subcommittee on

Federal Procurement and Regulation, in

the course of its hearing on Discriminatory

Ocean Freight Rates and Balance of

Payments, describing in considerable

detail, under the questioning of Senator

Douglas, the AGAFBO "fighting rates"

adopted "in an effort to drive non-

AGAFBO members out of business." Speci-

fic reference was made to the fact that

certain AGAFBO carriers were subsidized

and Sapphire was not; the subcommittee

was advised that “the Managing Director

has been in touch with Sapphire on the

matter and is attempting to collect data

on this rate with a view toward possible

investigation of it." In a May 1966

communication to the same sub-committee

plaintiff asserted that "American sub-

sidized lines should be denied sub- sidy

on that portion of their cargoes for

which no foreign flag competition exists."

In March 1971 plaintiff presented to the

Merchant Marine Subcommittee considering

S.1220 (a bill that would have authorized

certain appropriations) that it should

not authorize appropriations to be

disbursed without the considered decision

mandated by the decisions of the Court

of Appeals for the Second Circuit and

provoked Senator Hatfield to inquire

40a

whether it would not be more appropriate

to bring court action on the question of

the disbursement of the funds.

These disclosures, to which must be

added those incident to the proceedings

before the Maritime Subsidy Board, the

present district court, the Courts of

Appeals of the Second and of the District

of Columbia Circuits and the United

States District Court for the District

of Columbia, and the material underlying

the original Federal Maritime Commission

decision on the rates, presented to the

Government all the information and

evidence bearing on the issues save for

the matter of directing the Government

to the contention that for the AGAFBO

members to have filed claims for sub-

sidy payments while they were operating

in violation of Section 810 (46 U.S.C. §

1227) or in respect of the period during

which they were operating in violation

of the section was arguably to have

filed claims "knowing such claim(s) to

be false, fictitious or fradulent" or

claims which were supported by vouchers

known “to contain any fradulent or

fictitious statement or entry." But

even that very contention was laid

before the Government with explicit

reference to the False Claims Act in the

August 21, 1972, affidavit in the Court

of Appeals.

4la

The Government, then, was on May

26, 1977, when suit was started, in

possession of the evidence and information

upon which the suit is based. It is

equally probat‘e that a great deal of

the information and evidence possessed

by the Government, and much of the

impetus to action, derived from plain-

tiff.

That plaintiff is the source of a

substantial part of the evidence and

information that was in the Government's

possession does not authorize continuance

of the action. United States and Aloff

v. Aster, 3rd Cir. 1960, 275 F.2d 281,

affirming Judge Hastie's decision,

E.D.Pa. 1959, 176 F. Supp. 208, make

clear that Section 232 prohibits “any

qui tam action based on information

already in the possession of the United

States, regardless of the source from

which that information has come." The

present case, one in which plaintiff in

substance directs the Government's

attention to its possible riahts under

Section 231 as applied to the facts

brought out in the Federal Maritime

Commissicn and the Maritime Subsidy

Board proceedings, resembles United

States v. Armour & Co., L.C. 1956, 146

F. Sapp. 546, aff'd, D.C. Cir. 1958, 254

F.2d 90. The Aster case was followed in

United States ex rel. Vance v. Westing-

house Flectric Corp., W.D.Pa. 1973, 363

F.Supp. 1038, 1042, with an intimation

of reluctance. United States ex rel.

Cavis v. Long's DBruqgs, inc., S.D. Cal.

1976, 411 F.Supp. 1144, hela that Medicaid

42a

claims presented to the states were

within the False Claims Act, but that

the facts in the possession of the state

in question should not be considered

facts in the possession of the United

States for Section 232 (C) purposes.

However, the court in Long's Drugs

expressed “serious reservations" about

the validity of Aster. The court con-

sidered that the clause in Section

232(C) was intended to deny the right to

sue only to parasitical suitors who had

derived their facts from the public

record of the Government's own investi-

gations and was not meant to exclude

those who voluntarily furnished informa-

tion to the Government before starting

Suit upon the Government's failure to do

so. That, the court considered, flowed

from the liberal interpretation of the

Act adopted in United States v. Neifert-

White Co., 1968, 390 U. S. 228. But

Neifert-White was liberal in reading the

Statute as embracing a wide range of

Government interests, and throws no

light on the Court's attitude toward the

clause in Section 232(C). And the

Statute itself answers the serious

reservation of Long's Drugs about the

validity of Aster. Under Section 232(E)(2)

if the United States rejects the suit

and the plaintiff presses it to a conclu-

sion, the plaintiff may receive up to

one-fourth of the recovery as "fair and

reasonable compensation ... for the

collection of any forfeiture and damages",

plus the reasonable costs and expenses

of suit. If the United States comes in

and takes the suit over, however, then

43a

under Section 232(E)(1) the court may

award the original suitor “an amount

which in the judgment of the court is

fair and reasonable compensation to such

person for disclosure of the informa-

tion or evidence not in the possession

of the United States when such suit was

brought." The award may not exceed one-

tenth of the recovery. These provisions

have taken the place of the older pro-

vision, Section 6 of the Act of March 2,

1763,2 Stat. 698, (Revised Statutes §

3493) which gave the private suitor one-

half the damages and forfeitures that he

should "recover and collect" as well as

the costs of the suit. The older statute

gave the United States neither a right

to notice of the suit's pendency, nor a

right of intervention in it; its sole

right was to one-half the recovery and

the power to veto a withdrawal or dis-

continuance of the suit. See Bush v.

United States, C.C. Oreg. 1882, 13 Fed.

625, 629; United States v. Griswold,

D.Oreg., 1885, 24 Fed. 361,366, aff'd,

C.C.Oreg. 1887, 30 Fed. 762. In United

States ex rel. Marcus v. Hess, 1943, 317

U.S. 537, the United States appeared

only as amicus curiae, at the request of

the Court (317 U.S. at 545). Under the

present statue the United States is

given control of the suit at its option,

and it may altogether exclude the private

Suitor from participation in the conduct

of the case. The emphasis is on limiting

the informer's award precisely to what

he adds to the store of information and

evidence that was in the Government's

possession when the suit was started.

44a

That the private suitor, in the pursuit

of his own interest and to secure a

relief that he could obtain only through

the Government, may have disclosed facts

and evidence to the Government that

arguably might also arm it to pursue a

Section 231 claim against the defendants,

does not create an exception to the pro-

visions of Section 232(C), no in principle

should it. Plaintiff's submissions of

evidence to the Federal Maritime Commission,

to the Maritime Subsidy Board and to the

Senate Subcommittees were directed to

specific substantive reliefs to which

plaintiff claimed entitlement for Sapphire

and for himself by reason of his interest

in Sapphire and its business. But the

submissions were thereafter in the

Government's possession for all purposes,

including its determining from them the

measure Of its own rights, and what

relief it would seek in its own considered

judgment.

Since so much of Section 232(C) as

deals with the effect of the Government's

prior possession of the evidence and

information on which the suit is based

is treated as strictly jurisdictional,

United States (by Greenberg) v. The Burmah

Oil Co. Ltd., 2d Cir. I977, 558 F. 2a

43, 46, it follows that the action must

be dismissed. In the circumstances it

would not be proper to pass on the

questions of fraud and of limitations

presented by defendants.

45a

It is

ORDERED that the motions of defen-

dants for summary judgment in 77 C 1093

are granted, and the motion of plaintiff

to amend the complaint in 68 C 643 and

to consolidate that action with 77 C

1093 is denied; and it is further

ORDERED that the Clerk enter judgment

that plaintiff take nothing in 77 C 1093

and that the action is dismissed for

want of jurisdiction.

Brooklyn, New York

December 20, 1977. /s/D.J. Dooling

U. es D. Je

ANNEX A

47a 6

Safir

employee or representative of the govern-

ment?

A I have offered it. It has not

been requested of me.

Q Will you tell us what you have

offered to them?

A Well, I haven't offered anything

specific to them. I have information

which now based on the fact that this

case is filed will be brought forward.

Q I now ask you to give us the

information which you intend to bring

forward.

A Well, upon information and

belief, at some time in 1968 an arrange-

ment was made between members of this

group and the then Republican Party for

the consideration of a considerable sum

of money, to see to it that the subsidies

which formed the basis of a complaint

filed in 1968, in June that that case,

if the Republican Party was elected to

office, would be made difficult for the

plaintiff to succeed.

Q May I ask you whether you have

any documents to support this arrangement

that the Republican Party had?

6 cont. 5

48a 49a

Safir Safir

A I have no documents, but I have -- and he mentioned by name one Spyros

that my information came from -- I will Skouras, Senior, had through someone in

put it this way. It came in 1973, about the Republican Party -- and I am not

October of 1973, by a telephone call sure whether it was Mr. Stans that he

from a newspaper reporter who asked me mentioned by name or not -- had arranged

whether I knew anything about a deal for this $7,000,000 to be paid over,

involving approximately $7,000,000 in over a period of time, to parties with-

which -- in the Republican Party for the purpose

of settling or disposing of the anti-

trust case which was then filed by the

Trustee in Bankruptcy of Safir Steamship

Lines, and also my case, which at that

time was in the nature of mandamus and

which was the original action that I

filed in 1968.

Q Could you tell me the name of

the newspaper reporter?

A The name of the newSpaper re-

porter was -- his name was Louis Kohlmeyer,

and I understand that he is a Pulitzer

prize winning reporter who worked for

the Wall Street Journal at the time I

first knew him, and at the time he

called to inquire about my information,

about this information, was working for

the Chicago Sun Times syndicate in

Washington.

I told him at that time that

like a husband whose wife was cheatina,

I would be the last to know the answer

to his question, as to whether I had any

information on the subject. My answer

to him was no, but from that point on I

knew that there would be a point in

this

50a

Safir

litigation when under a False Claims Act

amendment, in one case or in a new case

filed as this one is here, that we are

here today, filed last May, that new

information would be supplied to the

government in order to firm up the

specific intent to defraud, which I felt

as far as my case was concerned, this

form of contribution would represent.

9) You say this inquiry was in

1973?

A Yes, Sir.

Q Did you ever tell anyone in the

government about the inquiry?

A No.

9 Why didn't you tell them?

A Because at that time I had no

proof, and I had no basis on which to

act, except and distinct from perhaps a

Special Prosecutor's office and others

who were interested at that time.

Mr. Kohlmeyer mentioned, however,

if this will be helpful to you, Mr.

Fort, and it might be, that certain of

this information that he was basing his

call to me on was based on leaks from

the Special Prosecutor's investigation

in the Nixon impeachment case. Make

the most of it.

Q So that what you are saying is

that che

5la

Safir

information in essence was in the possess-

ion of the government at the time he

called you, because he had heard about

it through leaks from the Special

Prosecutor?

NX If you think so. As I said,

make the most of it. I don't think so.

I don't think that that could be consi-

dered in the hands of the Attorney

General, Department of Justice, since

they were not involved in the Special

Prosecutor's office.

Q Were any other companies men-

tioned by this reporter?

A Not by name.

Q Now, return to the affidavit,

Mr. Safir.

A Yes.

9) Paragraph 5, Page 7.

A I seem to have a problem there,

Mr. Fort. Paragraph 5?

Q Five begins on Page 6 and it

goes on to Page 7.

A I beg your pardon. Go right

ahead, sir.

52a > cont. .

Safir

0 I would like to read you a

sentence from that paragraph, starting

off with "Thus, the conduct and trans-

actions which were in issue before the

Maritime Subsidy Roard, as a result of

the 1968 comolaint and are now res

judicata, are the same as which formed

the basis for the proposed amended

complaint."

53a

Safir

I did, and there was no answer and then

he called me back at home.

Q Mr. Kohlmeyer?

A Yes. Now, I think I tried to

get him back at the Wall Street Journal,

but he wasn't there and then he called

me and he told me that he was no longer

with the Journal, but with the Sun Times

Syndicate.

Q Do you remember what time of

day you were called by Mr. Kohlmeyer?

A I think it was late afternoon.

Q Where was your office at this

time?

A No, he called me back at home.

Q What office did he call?

A He called the office at 41

Flatbush Avenue, Brooklyn.

Q And where were you living at

that time?

A I was living in 8 Southview

Lane in Kingspoint, New York. So there

was a relay of calls from my office to

my home.

33 cont.

54a

Safir

Q What are you using to place --

what information are you using to place

the date of the call some time in Sep-

tember or October of 1973?

A My- own memory. Just my recall

because of the nature of what was going

on at that time, the events

55a

Safir

of the time and the timing of his state-

ment that leaks are coming out of the

Watergate Hearings and he went further,

he went further on this thing, I haven't

told you all that he told me.

Q Before we get into the actual

conversation, I am just going for informa-

tion that -- the information which you

base your memory of the date of the

conversation.

A I did not quite finish that

question. I based it on the fact that

the Watergate Hearings were on, that as

a special prosecutor -- no, I wasn't

even sure of that, that the Maritime,

the head of the Maritime Commission had

been called by the Watergate Committee.

He said at that time or a few

days prior to that, Helen Bentley by

name had been called by the Watergate

Committee, so I placed the timing to be

more accurate, perhaps others can too,

to place it about the time that she was

called before the Watergate Hearings.

2) So the conversation was after

she had testified?

A After she testified and certain

newspaper type leaks had emanated.

Q How did the conversation begin,

who spoke first?

A He did. He said, do you remember

me, I ;

56a

Safir

said, of course I remember you.

Q Could you give us the rest of

the conversation as you remember it?

aA Then he started to ask me

questions. In fact, he said, have you

felt that you are having a very difficult

time in making progress on your case and

I said, I sure have felt it.

Q What was your understanding of

what he meant by your case?

A The case that I was pursuing in

the Maritime Subsidy Board, S 243, which

was the outcome of my initial action in

68 C 643 in the Eastern District of New

York.

Q He asked you a question and you

responded. Was that your only response

to the question?

A Yes. I said, why do you ask.

That was my next question.

Q What was his response?

A He said, well, we are getting

words and I am quoting now on the basis

of a conversation of six years aaqo, so

there is some license or liberty involved.

35 cont.

57a

Safir

Q Is it six years or four years

ago?

A Excuse me, '73 is four years

ago. I was thinking of the first one.

Anyway, in connection with the one of

four years ago, I asked him, why do you

ask

58a

Safir

and he said, because there are cer- tain

things emanating from the Watergate

Hearings that show a relationship between

your case and certain things that have

happened in regard to campaign contribu-

tions and things like that.

He said, do you know of a

payoff to Nixon at that time, he said,

in the neighborhood of five and a half

million dollars. I said, unheard of and

I said, I would be the last to know if

that were the case, because I mentioned

in connection with being like a cuckolded

husband, always being the last to know.

He said, did I see any relation-

ship between the City of Baltimore and

the problems I was having. I said, no.

I said, why do you bring that up. He

said, well, isn't it interesting to you

that Andrew Gibson and Helen Bentley and

also the Vice President of the United

States comes from Baltimore.

I said, well, I cannot see what

the relationship is. He said, well,

there is evidence involved which we are

hearing about that connects a payoff of

this five and a half million dollars on

your case, to the relationship of Andrew

Gibson, who was a vice president of

Prudential Grace Lines, and an employee

of Skouras coming into the administration

as the Maritime Administrator. A relation-

ship between Helen Bentley,

59a

Safir

a Baltimore reporter, becoming the head

of the Federal Maritime Commission and

the vice president.

So, I said, I still cannot see

the relationship between the vice president

and these people. He said, well, Skouras

is a Greek. I said, that is right, or

Greek extraction. He said, well, we

hear it down here and this is what he

said, that for the money that he paid

into the Nixon administration to buy

your case and the problems that you are

having, he additionally recommended to

Nixon at the time that he would like if

his Greek-American compatriot becomes

the vice president of the United States

for the same five and a half million

dollars.

I said, I find that very hard

to believe, but that is a lot and if the

next time I am in Washington, I will be

very glad to discuss this thing further

and I did. I came down to Washington

soon thereafter. I came down, I called

him up and I met him in his office at

this National Press Building.

Q Are we going onto another

conversation?

A Yes. We are going onto another

conversation.

Q All right. Let's go back to

the telephone call to you. Did Mr.

Kohlmeyer tell you where he had gotten

this information?

69a 38

Safir

A No, he did not.

Q Did he indicate that he had

gotten it from the testimony at the

hearings?

A No, he did not. He indicated

that it came in the form of a leak.

a) From --

A From one of the bureaus, appa-

rently some agency, apparently the

special prosecutor or the Ervin Committe

at the time. I don't know, but it was a

kind of a leak thing that he was trying

to check out, as to whether I knew

anything about it.

Q You mentioned that he was using

the pronoun, we have gotten this informa-

tion.

Co you know if he was working

with anyone else in this investigation?

A I don't know.

Q Did he mention any other re-

porter's name?

A He did not.

fe) Did he tell you when Mr. Skouras

had been in contact with Mr. Nixon?

38 cont.

fla

Safir

A He did not.

Q Did he mention any dates --

A Well, there is a determining

factor in that, because Mr. Skouras died

soon after Nixon came

62a

Safir

magnificant sum out in order to presumably

settle the antitrust case, and see to it

that the subsidies not be withheld from

the lines, from the steamship lines, who

were then receiving them and who were

apparently guilty of the violation.

Q Have you had any contacts with

Mr. Kohlmeyer since your October or

September, 1973 telephone conversation?

A Yes. I mentioned the fact that

I visited with him a month or two or

three thereafter.

Q Do you remember if it was in

1973 or 1974?

A It might have been in early

"74. I told him, I told you that he had

an office, he was in this little office

all by himself in that building.

Q What building is that?

A National Press Building.

Apparently he was a pipe smoker, because

the room smelled like a gas bin. You

could not breathe in it.

I said, look, I am prepared to

cooperate and help you on this thing, if

you want some help. I am surprised that

you hadn't gotten back to me earlier.

63a

Safir

He had nothing much to

looked like he was unhappy with

whole conversation, and perhaps

shouldn't have called me in the

place.

50 cont.

Say. He

the

first

So at that point I decided that

was the end

64a

Safir

of it, at least for then, and I certainly

-- I had nothing further to go on.

Everybody and his brother was investigating

everybody else at that particular time,

and I had my own problems, most of which

were based on the ongoing fight with you

people.

So I did nothing further about

it.

Q Had you initiated this meeting?

A The second meeting, yes, it was

me.

Q And do you remember what Mr.

Kohlmeyer said?

A He said he would think about

going further with it, and that he would

get in touch with me, which he never

did.

Q Did he ask you any additional

questions?

A Not a one,

Q Did he give you any additional

information?

A I don't recall.

Q Did he give you any documents?

51 cont.

65a

Safir

A No.

9) Do you remember him giving you

any more details or mentioning any

names?

A I said no. He was reluctant

to, from being practically garrulous in

the telephone conversation, he was very

reluctant to do any talking on that

visit.

Q Do you remember how long this

second meeting

66a

UNITED STATES DISTRICT COURT

EASTERN DISTPICT OF NEW YORK

owes en ewenw ew emeocow ese eewoocwne xX

SAFIR,

Plaintiff,

-against- : 77-C-1093

AMERICAN EXPORT LINES, $

Cefendant.

Oe ee ee ee ee ee ce ee lL lL Le LLL x

SAFIR,

Plaintiff, :

-against- : 68-C-643

BLACKWELL, $

Defendant. :

United States Courthouse

Brooklyn, New York

October 28, 1977

5:00 o'clock P.M.

anaes &

HONORABLE JOHN F. DOOLING, JR., U.S.D.J.

PERRY AUERBACH

ACTING OFFICIAL COURT REPORTER

67a Fe.

Appearances:

MR. MARSHALL SAFIR, PRO SE

GILBERT FLEISCHER, ESO.

U. S. Government

ELMER MADDY, ESC.

Attorney for Trade-Line Defendants

ROBERT T. BASSECHES, ESQ.

Attorney for Non-Trade-Line

Defendants, et al.

68a ?. BA

would hope that if, as I hope in the case you

rule in our favor, that that would be dispos-

itive of that element of the case as well.

Thank you, your Honor.

MR. SAFIR: Your Honor, in Paragraph ll

of Trade Defendant's statement of material

facts as to which there could be no issue --

THE COURT: Trade Defendants?

MR. SAFIR: Trade, and I'll say non-

trade as well -- (Pause.) All the trade

defendants

THE COURT: I have a separate stating.

MR. SAFIR: Let's take the trade first.

In Paragraph 11 of the Trade Defendant's

Statement of material facts, as to which

there could be no issue, there is a misstate-

ment of facts, of paramount significance.

This affiant never admitted that the subject

matter of the Colemire conversations is impro-

bable in its judgment. What the transcript

States, Page 40, Line 13 is as follows: "I

felt the whole conversation --

THE COURT: Let me turn to it.

(Pause.) All right.

MR. SAFIR: "I felt the whole conversa-

tion at the time was bizarre anyway, and it

was highly improbable. It still does."

69a B4->8

A re-hearing of the tape made during

the deposition further clarifies the sen-

tence, wherein I clearly stated that it

"sounded highly improbable." Not that it was

highly improbable.

I have a copy of the tape with me, your

Honor, and as it happens it fits this little

machine here, so that I could leave it with

the Court rather than try to figure out the

exact point in the tape where this comes for-

ward. But on oath, the word "sounded" is

in there. In other words, the purpose of

bringing this to the Court's attention is to

inform the Court that I believe that the

Colemire information was factual. I believe

that the Defendants entered into an agreement

with Richard Nixon and certain officials of

his campaign in 1968 prior to the election;

that in the event of an election Nixon would,

for the gross contribiton of 7 million dol-

lars, protect and defend the interests of the

subsidized line defendants, the first by pro-

tecting the lines from jeopardy of a 250

million dollar subsidy recovery; and second,

by ordering the Justice Department to agree

to a settlement of the case of Safir Steam-

ship Lines versus AGAFBO, for the Government

creditors' obligations alone, and that was the

sum of approximately 1 million 600 thousand

dollars. Whether the remainder of the 7

million dollars would go to the campaign cof-

fers of the 1972 election or be siphoned off

for other purposes is not yet known. That

the Court of Appeals decision, and this I be-

lieve, too, in Safir-l, the 1969 decision,

seriously compromised the original plan that

these people had; and

0a 3S-36

Safir-2, which was the one where the

collateral estoppel effect was decided by the

Court, further impaired thet scheme's viabil-

ity. That when the procurium decision in

Safir--we'll call Safir-2a took place, this

opened the door to investigation of quote,

ang this was the quote in the decision,

"that the Government had a right to deter-

mination in S-243 whether a wider conspiracy

existed."

But this was used by the Nixon Adminis-

tration through Secretary Stans in the De-

partment of Commerce for a multi-year delay

in the investigation to protect these lines

from the finding of violation, and to protect

the ability of the lines to accrue the 5.6

million dollar obligations that they took on

with Nixon by their continued collection of

Government subsidy payments;

That when the anti-trust -- Safir Anti-

trust Case as a result of the Second Cir-

cuit's decision in Safir's 2 and 2a, the

creditors of the bankrupt opposed the million

six settlement offer which would have denied

any recovery to them. The Department of

Justice reduced, and this was -- this is in

the record -- to $795 thousand dollars, the

amount that would be acceptable to the cred-

itor, United States, if the creditors, the

Trade creditors would settle for a new offer

which would give all creditors and the trus-

tees and -- as counsel -- the sum of two mil-

lion four. The referee accepted this pro-

posal, the second proposal, and it was approv-

ed by the District Court of the District of

Columbia in the antitrust case.

7la 34-37

The Department of Justice since Nixon's

resignation disowned the Nixon Administration

agreement to reduce its claim. The 2.4 mil-

lion settlement leaves open the question of

the collection and disposal of the remaining

4.6 million dollar payoff, since the 2.4 mil-

lion dollars is undoubtedly traceable, to

appropriate entries on the books of these

defendants. It is in the area of this re-

maining fund that investigation and discov-

ery will be helpful in '77 C 1093.

MR. SAFIR: (continuing) Now that the

recent Supreme Court decision on the Nixon

tapes for civil actions becomes -- I'll put

it this way -- the recent decision makes the

ability to get --

THE COURT: Makes them available.

MR. SAFIR: Makes them available. This

is a significant development. Plaintiffs

contend in passing that Nixon lived down (up

to) his obligation to these defendants as

long as he was in office. It was not until

after Nixon resigned in August 1974 that on

September 5, 1974, just a month later, the

Secretary of Commerce, then Dent by name, was

free to file his order confirming the viola-

tion itself. Even then, the order was tainted

by the unsupported charge that Federal offic-

ials of the Department of Defense induced the

illegal action to attempt to apply the doctrine

of collateral estoppel -- excuse me, not the

doctrine of collateral estoppel -- the doc-

trine of estoppel to the Government's recov-

ery under Section 810, or alternatively under

the False Claims Act, and handicapped the

Department of Justice under a new administra-

tion from providing, under the False Claims

72a 37-38

Act, the ability to pursue False Claims action,

because the Government's hands were not clean.

By the way, this last approach that took

place in the order of the Secretary in 1974,

that the blaming the Department of Defense

officials in 1965, was rejected by Judge

Wright in his decision last February. There-

fore, either on a denial of the defendant's

motion for summary judgment or on a grant of

a continuance to this plaintiff to complete

his basic discovery prior to taking on, on

your part, the decision on the motion for

Summary judgment, I'll require several sub-

poenas:

A subpoena to the General Service Admin-

istration for those Nixon tapes during the

period, May 15th to June 15th, 1969; the time

at or about the first Safir decision in the

Court of Appeals, wherein, to be specific,

the name S-A-P-P-H-I-R-E or Sapphire, my name,

Or William Sapphire, my borhter's name or

Skouras, S-K-O-R-A-S or Spiros Skouras or

Spiros or the word "Fair Star" or Gem Stone

would appear.

THE COURT: Those were the vessels?

MR. SAFIR: There was a vessel called

the S.S. FAIR STAR that was not one of my

vessels, but it was a vessel which may have a

bearing on this case.

The name Arthur Becker might also be

added to the subpeona. The Nixon tape list,

if such a name appears in connection with a

Maritime conversation.

13a 38-54-40

Second, I would need any record of White

House calls to the home of Marshall Sapphire :s:c¢)

by John Erlichmann, collect or paid, for the

months of June and July of 1970 and 1971; and

those Nixon tapes immediately preceding and

following such calls.

Four, I would need a subpeona duces tecum

for one Arthur Becker, Esquire, of Washington,

D.C., with his diary for the dates of June

lst, 2nd and 3rd, 1969, and all records in

his possession of a transaction concerning

the refurbishing of the troop ship S.S. FAIR

STAR in September and October 1968.

Number five, a subpoena for the quest

record for the Regency Hotel of New York for

the dates of June lst, 2nd and 3rd, 1969;

and paragraph six, a subpoena duces tecum

for Spiros Skouras, president of Prudential

Lines, with his diaries of August through

October 1968. The records of Prudential

Lines are either travel arrangements for Mr.

Skouras or his late father during that per-

iod, and diary and appointment records of

his late father for that period, if such

were available, if such are in existence,

rather.

I would also need the cash disbursements

and accounts payable records of Prudential

Lines for the years 1968, '69, '70, ;71 and

‘72 and also those for the Prudential Grace

Lines (pause) for a start. The records for

the other lines would follow.

74a 40 -~% \

Now, the reason I asked for such an in

depth and for such a serious thing, your

Honor, is that most normal people, most Amer-

icans would consider it bizarre. They would

have considered it bizarre until 1973 in

Watergate for any person, lawyer or layman,

to get up and make such statements and say

he believes them about the President of the

United States. And so, it was bizarre when

I heard this conversation of Colemire to me.

But it's no longer bizarre, and it's no

longer improbable.

When you look at the history of this, the

clients at this table -- the clients of these

people at this table, and the recent history

as to the bribes, payoffs, indictments of

Federal officials that have been involved in

the last few months, the general smelly aura

of this whole industry, there has to be a

time when somebody who has a stake, as I have,

and not just'an ordinary citizen's desire to

do good, but a monetary stake, takes the pos-

ition and goes all the way, and am prepared

to go all the way on this case.

A dismissal of 77-C-1093 at this stage,

and prior to discovery would be a miscarriage

of justice.

MR. SAFIR: (continuing) What little

law I know, and I pick up occasionally from

my son who went to Yale Law School, he's in

Washington, and I still get the Yale Law

School books at my home where he used to get

them, so I avidly read as I go along, and in

March '74 there was an article on Federal

Summary Judgment Doctrine, ae critical anal-

ysis" by one Martin B. Lewy,”%and on page 767,

and in answer to Mr. Basseches', there is an

UV be

75a

article about excusing an insufficient re-

sponse, and it has to do with sometimes the

opposing party cannot make a sufficient re-

sponse because the affidavits and other

supporting materials available to him do not

represent a realistic preview of the evidence

you will be able to present at trial. I don't

have to read any more to you. You probably

wrote it.

Anyway, my feelings about it are, that I

must be given the opportunity to pursue this

to its conclusion. The tools are available

now. The Supreme Court has put them in our

hands. I ask that the motion to dismiss or

for summary judgment be denied, and that the

subpoenas issued that I've reguested.

Thank you.

MR. MADDY: Mr. Safir seems to be sug-

gesting or is suggesting that he be given

the chance to do further discovery before

your Honor rules on the motion for summary

judgment, or he be given this opportunity,

but I don't think that's appropriate under --

when he files his qui-tam's action.

The basis of the claim is that there was

a false claim filed, and all of these other

suspicions that Mr. Safir may have for

various reasons is unsupported. He didn't

have any information when we took his deposi-

tion. I don't think he should be given leave

to go out and just take all these depositions.

There's no -- there doesn't seem to be any

possible relevance of those matters to the

question of whether or not a false claim was

filed with respect to thses particular

subsidy vouchers. They may have interest for

U2-43

76a

other reasons, but they have no bearing on the

question on filing a false claim.

Also, with respect to the way the deposi-

tion reads, I think we fairly quoted or re-

ferred to what the deposition said, and Mr.

Safir signed it and swore to it. So we rest

upon what's in that deposition, and not what

Mr. Safir may say now when he seems to, in

effect, seems to be changing his testimony

given on that day.

THE COURT: No, he said he had it on tape.

MR. MADDY: Yes, your Honor. I must say

we were basing it upon his sworn -- signed

and sworn to deposition.

MR. SAFIR: I have the tape, your Honor,

if I may interject, and to put it in the

custody of the Court, where on side number 2,

halfway through, the word "sounded" is the

word, the word that was in the sentence. Can

I leave this with Mr. Bachman?

THE COURT: Yes.

MR. SAFIR: Thank you.

THE COURT: Well, I will reserve decision

on it. I don't think that I could at this

time authorize the taking of depositions on

the scale indicated before dealing with the

papers that are now before me, because in a

way, that taking would be more formidable

than the case itself.

3. U uk

77a

If in attempting to decide this I find

that it cannot fairly be decided one way or

the other withcut such further discovery,

then I will act at that time.

MR. MADDY: Your Honor, we received Mr.

Safir's papers yesterday. Could we have a

short period of time to file a response

thereto?

THE COURT: You received some of his

papers yesterday?

MR. MADDY: Well, we got his latest

version.

THE COURT: All right, yes, I see it is

October 27th. Very well.

MR. MADDY: By next Friday then?

THE COURT: Yes.

MR. MADDY: Thank you.

MR. BASSECHES: Excuse me, your Honor,

I mentioned a case which my colleague,

Mr. Lewis, cautioned me to -- I don't know

whether it's relevant or not, but let me

put it in the record. The case is United

States v. Borin, B-O-R-I-N.

THE COURT: That's in the briefs.

78a *

MR. BASSECHES: Right. That is cited iste

in the briefs. That does address the issue | UNITED STATES DISTRICT COURT

of fraudulent concealment with respect to FOR THE EASTERN DISTRICT OF NEW YORK

the Statute of Limitations.

THE COURT: Thank you, gentlemen.

MARSHALL P. SAFIR, Pro Se, and :

(Whereupon Court stood in recess for on Behalf of the United States

the day.) of America,

Plaintiff : Affidavit

and

-against- Complaint

AMERICAN EXPORT LINES ¢ 1094

AMERICAN PRESIDENT LINES

LYKES BROS. STEAMSHIP CO., INC. :

MOORE MCCORMACK LINES, Incorporated

UNITED STATES LINES, INC.

FARRELL LINES, INC. :

BLOOMFIELD STEAMSHIP CO.

PRUDENTIAL GRACE LINES, INC.

PRUDENTIAL STEAMSHIP CO., INC.,

Defendants

MARSHALL P. SAFIR, Plaintiff, Pro

Se, on this 26th day of May, 1977, having

been duly sworn, deposes and says:

I. I am a citizen of the United States

and of the State of New York who, in the year

1965, brought to the attention of the Joint

Economic Committee of the Congress certain il-

legal concerted actions by these defendants.

The Chairman, Senator Paul Douglas, after an

open hearing then referred the matter to the

Federal Maritime Commission for investigation.

80a

The FMC then instituted a lengthy investiga-

tion (Docket 65-13)*, which culminated in a

finding that these subsidized ocean carriers,

acting in concert with others, violated Sec.

15 of the Shipping Act of 1916. This find-

ing, inter alia, was incorporated in the FMC

decision dated December 1l, 1967.

Soon thereafter, this plaintiff

filed an action in the nature of mandamus in

this District (68c643) to compel the Secretary

of Commerce to cease subsidy payments to the

violators of Sec. 15 of the Shipping Act and

to recover payments made to the violators

Since the violation on the theory that colla-

teral estoppel existed between Sec. 15 of

the Shipping Act and Sec. 810 of the Merchant

Marine Act of 1936 in regard to the subsi-

dized carriers. The history of the case from

1968 to 1977 is spelled out in detail in at-

tachments A and B.

The seminal action, however, was

brought in this District. All of the defend-

ant violators intervened as defendants here

before the learned Judge Dooling ang all of

these carriers, with one exc2ption, continue

to transact business here.

Briefly, these ocean carriers were

found to have violated Sec. 810 of the Mer-

chant Marine Act (46 USC 1227) by the Mari-

: Docket 65-13 Rates on Government Cargo

L1FMC263-287 (1967)

Bloomfield Steamship Company discontinued

operations in 1966

8la

time Administration in April 19737 and later

on review by the Secretary of Commerce in

September 1974~> in hearings mandated by the

Court of Appeals of this Second Circuit. The

plaintiff alleges that this finding is now

res judicata.

II. This Court has jurisdiction under

28 USC 1331, 1337 and 1651 and 31 USC 232.

Venue is proper, pursuant to 28 USC Sec. 1391.

III. The statutes involved here are Title

46 USC 1227 and Title 31 USC 23l, 232, 233,

235.

IV. On May 26, 1971, the Congress of the

United States appropriated under the Second

Supplemental Appropriation Act 1971 (PL92-18)

the sum of $80,000,000 to liquidate past due

obligations and about half $40,300,000 was

appropriateu to liquidate, in final part, un-

paid ship operation subsidies for the calendar

year 1968 and earlier years, the payment of

which had been delayed by disagreements over

subsidy amounts due the carriers. The sum of

$43,150,521.84 was disbursed on and between

May 27, 1971 and June 11, 1971 when disburse-

ment was arrested pending decision on a motion

by this plaintiff for an injuction against

payment of these funds.

Vv. On June, 1971, Judge John Dooling

of this Court, issued an order enjoining the

payment of operating differential subsidy

2 See Attachment B, page 104a to 176a.

3 See Attachment B, page 56a to 58a.

82a

funds to the above-named defendants pending

the outcome of a fact-finding investigation by

the Department of Commerce as to whether Sec.

810 of the Merchant Marine Act of 1936 had

been violated by these defendants. (See Memo-

randum Incorporating Finding of Fact and Order

dated June 23, 1971, page 184A of Attachment

B herein.)

The significance of the dates com-

mencing with May 27, 1971 in regard to subsidy

payments made for the offending period in 1965-

1966 must be emphasized here. The payments in

May and June of 1971 were explained by Judge

Dooling, as follows:

"The entire $40,300,000 appropria-

ted to pay past-accrued but unliquidated

subsidies is made up not of basic cur-

rent operating differential subsidies,

which are generaily disbursed as earned

more or less currently to the extent of

about 90% to 95% of the amount ultimate-

ly determined to be due, but with the

held back amounts consisting of balance

amounts due only when finally determined

and agreed on between the carrier and

the administration."

In short, the statute of limitations

on those obligations finally settled in 1971]

and paid out in May-June of that year has not

tolled as of this date in 1977 and the bal-

ances (5% to 10%) are inseparable segments of

the false claims which were filed during and

aoe the period of violation in 1965 and

VI. The issues involved in the complaint

herein are now before the United States Su-

preme Court in Docket 76-1505, a copy of which

83a

is enclosed as Attachment A. However, pend-

ing the outcome of that petitign and an amend-

ed complaint in Docket 68c643, a technical

statute of limitations deadline may be argued

in extremis by the defendants herein, if this

complaint was not filed within the six-year

statute of limitations for the anniversay

dates of the final false claims disbursement.

Hence, this complaint at this time. (See last

peragraph page 20, attachment A and footnote.)

VII. This is a civil action for a judge-

ment declaring the defendants liable for penal-

ties and for the refund of double the sums

paid out to the lines found in violation of

Sec. 810 of the Merchant Marine Act 1936 as a

consequence of the collateral estoppel effect

of this violation on 31 USC 231, and for an

order implementing such recovery on behalf

of the plaintiff herein and the United States

of America.

VIII. Plaintiff alleges that the illegal

behavior was in violation of the operating

differential subsidy contract signed between

the government and the contractors incorpor-

ating the wording of Sec. 810, and that the

clear provisions of the statute and subsidy

contracts, both binding on the defendants,

were deceitfully violated when without any

overture to the Department of Commerce they

4 The U.S. District Court for tne District of

Columbia is also open as a forum for amend-

ed complaint incorporating 31 USC 231 et

seq. covering construction differential

subsidies paid during the offending period

where no residual balances were paid out in

1971. See Attachment B, page 17a.

84a

acted in concert to destroy an unsubsidized

American Flag competitor.

IX. That these actions were inimicable

to the interests of the United States in that

the weight and leverage cf subsidy funding

was to hurt an American competitor without

the knowledge of the contracting agency

charged with the responsibility for promoting

the welfare of the American Merchant Marine.

X. That, simulataneous with the filing

of this complaint, a notice of pendency is

being served on the U. S. Attorney for the

Eastern District and the Attorney General of

the United States. That, because of require-

ments of 31 USC 232(c), plaintiff Safir is

stayed from proceeding with this action during

the time reserved to the Government to decide

whether to proceed with the prosecution, that

he pleads pro se pending prosecution by the

Attorney General, or waiver. That, in the

event of waiver, plaintiff Safir will engage

licensed counsel to proceed as set forth in

31 USC 232(e)(2).

WHEREFORE, Plaintiff Prays:

(1) That all moneys paid out

during the period of violation or reasonably

allocable thereto for operating differential

subsidies, as set forth in the schedule on

page 208A of Attachment B annexed hereto, ~

(and which schedule is subject to final ad-

justment) be refunded to the United States,

as they were falsely claimed and illegally

paid out.

(2) That, the provisions of Title

31 USC 231 for penalty plus double the amount

of false claims finalized by the payments in

85a

May and June of 19/1 be assessed on the final

audited amounts paid to each in dividual

carrier plus the statutory amount for each

false voucher submitted.

Respectfully submitted,

/s/ Marshall P. Safir

Marshall P. Safir, Pro Se

41 Flatbush Avenue

Brooklyn, New York 11217

Tel. No.: 212 - 858 - 2700

May 26th, 1977

86a

Marshall P. Safir

41 Flatbush Avenue

Brooklyn, New York 11217

May 26, 1977

Honorable Griffen Bell

Attorney General of the United States

Department of Justice

Washington, D.C. 20530

Dear Sir:

This is to notify you of the pendency of

an action filed this day in the Federal Dis-

trict Court for the Eastern District of New

York under Title 31USC Sec. 232(b) on behalf

of the undersigned and the United States of

America against certain subsidized ocean

carriers.

Enclosed herewith in accordance with

Title 31USC Sec. 232(c) is a copy of the

complaint with attachments A and B comprising

substantially all of the pertinent evidence

and information material to the effective

prosecution if this suit. If additional in-

formation is needed the undersigned is pre-

pared to cooperate fully.

In accordance with this section of the

law, if the United States shall fail, or

decline in writing to the.court after a period

of sixty days after service to enter this

suit the undersigned will proceed to engage

licensed counsel to prosecute the case on be-

half of the United States of America and

himself.

Respectfully yours,

/s/ Marshall P. Safir

MPS:rl Marshall P. Safir

;

87a

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

— ee ee ee ee ee ee ee ee ee ee ree re re re re ee ee ee ee ee ee ee ee x

UNITED STATES ex rel.

MARSHALL P. SAFIR, :

Plaintiffs ae DECLINATION OF

APPEARANCE

sla * Civil Action

AMERICAN EXPORT LINES, No. 77 C 1093

et al., :

Defendants. :

ee ee x

The United States of America, by David

G. Trager, United States Attorney for the

Eastern District of New York, pursuant to the

provisions of the False Claims Act, 31 U.S.C.

§§231-235, hereby states as follows:

l. This is a qui tam action brought by

plaintiff, Marshall P. Safir on behalf of the

United States of America, as well as for him-

self pursuant to 31 U.S.C. §232(B).

2. The United States of America, pursu-

ant to 31 U.S.C. §232(C), hereby declines to

enter this action.

3. Im commencing this action, plaintiff

Safir has provided the Department of Justice

with a copy of his Petition for Writ of Cer-

tiorari to the United States Court of Appeals

for the District of Columbia, and a copy of

the Appendix thereto, which he has stated com-

prises his disclosure, pursuant to 31 U.S.C.

§232(C), of substantially all the pertinent

88a

evidence and information material to the

effective prosecution of this suit.

4. Based upon an examination of this

material, the United States has concluded

that the central issue of plaintiff Safir's

allegations in this action is presently

being litigated in the United States District

Court for the District of Columbia in an

action styled Marshall P. Safir, plaintiff v.

Juanita M. Kreps, et al., defendants, Civil

Action Now 74-1474. See Safir v. Kreps,

551 F.2d 447 (D.C. Cir. 1977), petition for

cert. filed, 45 U.S.L.W. 3733 (U.S. May 10,

1977) (No. 76-1505).

Dated: Brooklyn, New York

June 21, 1977

Respectfully submitted,

DAVID G. TRAGER

United States Attorney

Eastern District of New

York

225 Cadman Plaza East

Brooklyn, New York 11201

By: _/s/ Elaine Buck

ELAINE BUCK

Assistant U. S. Attorney

89a

THE SECRETARY OF COMMERCE

Washington, D.C. 20230

ORDER

In the Matter of:

Subsidy Board Docket No. 8-243 Investigation

of Alleged Violations of Section 810 of the

Merchant Marine Act, 1936, as amended.

The petitions of American Export Lines, Inc., Lykes Bros.

Steamship Co., Inc., Moore-McCormack Lines, Ince.,

Bloomfield Steamship Co. and United States Lines for

review of the Maritime Subsidy Board’s decisions of April

9, 1973 and October 10, 1973 are hereby granted, solely

with respect to the mitigating circumstances and appro-

priate sanctions to be imposed on the trade respondents.

In all other respects, the petitions are denied. The peti-

tion for review of American President Lines, Ltd., Far-

rell Lines, Inc., Prudential-Grace Lines, Inc., and Pru-

dential Steamship Company, Inc. is denied.

The record before me fully presents the contentions of the

parties without need for further submissions or delay.

The record indicates that the United States Government

actively induced the rate reductions here in issue, and

received substantial financial benefit from such reduc-

tions. The record further suppperts the conclusion that,

but for the active inducement, of federal officials, rates

found by the Federal Maritime Commission previously not

to have been unreasonably high would not have heen re-

duced to noncompensating levels by respondents.

90a

Order of U.S. District Court,

District of Columbia, Dated October 21, 1975

Civil Action No. 74-1474

—_—_—_—_—ee-— eee

MARSHALL P. SAFIR,

Plaintiff,

—

FREDERICK DENT, individually and as

Secretary of Commerce,

Defendani,

AMERICAN PRESIDENT LINES, LTD., et al.,

Intervening Defendants.

rr <i

Order

Plaintiff Marshall P. Safir, having moved for sum-

mary judgment, defendant Frederick Dent, and interven-

ing defendants’ Trade Lines and Non-Trade Lines having

replied to plaintiff's motion and cross-moved for summary

judgment, the Court having considered the motions, mem-

oranda of points and authorities of all parties, it. is hereby

ORDERED that the plaintiff's motion for summary

judgment is denied, that defendant’s and intervening

defendants’ motions for summary judgment are granted

and the complaint herein is dismissed with prejudice this

21st day of October, 1975.

91a

Order of Secretary of Commerce

Dated September 9, 1974

Accordingly, having considered the total circumstances

surrounding the rate reductions in question, it is my con-

clusion that recovery from each of the trade respondents

in the October 10, 1973 Final Order on Recoveries shall

be modified by reducing the total amount of subsidy sub-

ject to recovery to $1,126,522.26 to be apportioned in ac-

cordance with the table attached hereto.

The adjustment here ordered is made to reflect the effect

of the United States Government action, notwithstanding

that the trade respondents shared in a greater or lesser

individual degree in the improper conduct that has been

determined to have occurred as charged in the petition to

the Board.

So ORDERED

Secretary of Commerce

Date: September 9, 1974

17.5%

United States

Lines

$11,082,875

53.27%

Mormac

$ 968,091

27.99%

COMPANIES

Lykes

$2,725,587.69

24.7%

TABLE

Bloomfield

$750,551.12

* 23.77%

AEL

$203,739.84

Percentage of Military Cargo

differential Subsidy paid

to Freight Revenues

Total affected operating

during relevant period

Portion of Operating Differential

92a |

uo] Q3

ge! sl «|+|%

ree) <i ai : n

=| 8] RIR12

4 es?

a | 5| 8/8 B Opinion and Order of the Maritime Subsidy Board,

« w| wlelg | Dated April 16th, 1973

3 '‘

10 1 r= U.S. DEPARTMENT OF COMMERCE

5 si £12 : MARITIME ADMINISTRATION

S S| Fle |s MARITIME SuBSIDY Boarp

. =} asa

bats od oO 1, | «

iB S| sia |s $$

wn wn aw | w# FE

z Docket No. 8-243

3 ° Investigation of Alleged Section 810 Violation

oS = na . .

% = 3 uM In the matter of the complaint of Sapphire Steamship Lines,

2 % % F Inc. re Alleged Violation by Atlantic and Gulf American

” ” w» | & Flag Berth Operators (AGAFBO) of Section 810 of the

S Merchant Marine Act, 1936, as amended.

So or >

a 5 s/8 |=

$ ba e|s | 9 Chairman, Robert J. Blackwell; Member, H. Clayton

- ~ Ee | a Fy Cook, Jr.; Alternate Member, James 8S. Dawson, Jr.

“ eo) S15

x ee el lle ee

5 Served Upon:

$s | Marshall P. Safir, 41 Flatbush Avenue, Brooklyn, New

# =| 2/8) 3¢ York 11217 pro se.

om — Ss

: < 4 “ ge James N. Jacobi, Esq., Kurrus & Jacobi, 2000 K Street,

ed a” (a N. W., Washington, D. C. 20006 for American Ex-

Z 8 port Lines, Inc.

ao)

ay J. Franklin Fort, Esq. and Richard S. Salzman, Esq.,

a2 Kominers, Fort, Schlefer & Boyer, 1401 K Street,

. Piles N. W., Washington, D. C. 20005 for Lykes Bros.

g S a8 8 32 Steamship Co., Inc. and Moore-McCormack Lines,

3 & 3 5 a | a As] Incorporated.

<c ov s

£ Ie mes le £ John Williams, Esq., Kirlin, Campbell & Keating, 120

3 & B a, a z 8 F> % Broadway, New York, New York 10005 for United

Sais. |8S\/2iae States Lines, Inc.

xo e & ae ®/2!/ © §

>Pl Seal Sslelip

SSlB8slSel\5 ls 8

2 S3'°5 | 3

sa lszelsele!] =

ne Z&s§ me & &

94a

Opinion and Order of the Maritime Subsidy Board,

Dated April 16th, 1973

Amy Scupi, Esq. and Olga Botkess, Esq., Galland,

Kharasch, Calkins & Brown, 1054 31st Street, N.

W., Washington, D. C. 20007 for Bloomfield Steam-

ship Co.

Robert T. Basseches, Esq., Shea & Gardner, 734 Fif-

teenth Street, N. W., Washington, D. C. 20005 and

Daniel H. Margolis, Esq., and Murray J. Belman,

Esq., 21 Dupont Circle, N. W., Washington, D. C.

20036 for American President Lines, Ltd., Pruden-

tial-Grace Lines, Inc. and Prudential Steamship

Company, Inc.

Verne W. Vance, Esq. and Andrew J. McElaney, Jr.,

Esq., Foley, Hoag & Eliot, 10 Port Office Square,

Boston, Massachusetts 02109 for Farrell Lines, Inc.

Michael J. McMorrow, Esq., Maritime Administration,

Washington, D. C. 20235, as Public Counsel.

Docket No. S-243 is an investigative proceeding insti-

tuted by the Maritime Subsidy Board (Board) on October

24, 1969 to determine whether Section 810 of the Merchant

Marine Act, 1936, as amended (Act), had been violated by

conduct of certain carrier members of the Atlantic and Gulf

American Flag Berth Operators (AGAFBO) and the appro-

priate action that should be taken. Named as parties to the

proceeding were petitioners Sapphire Steamship Company

(Sapphire) and its individual owners, Marshall P. Safir and

Arnold Weissberger, who along with others,’ had petitioned

146 U.S.C. § 1227 (1970).

2These were two service organizations, Pioneer Overseas

Services Corporation, a traffic management agency wholly owned

by Mr. Safir, and Liberty-Pac International Corporation, a freight

forwarder specializing in the overseas transportation of house-

hold goods wholly owned by Mr. Weissberger. They were ex-

tended the opportunity to file petition for leave to intervene in

the proceeding but never made such filing. Of all the petitioners,

SR EN “

ee ew Ee eee Ue

eee

95a

Opinion and Order of the Maritime Subsidy Board,

Dated April 16th, 1973

CONCLUSION

Based upon the foregoing discussion and findings and

after full consideration of the record compiled in this pro-

ceeding, including all arguments and presentations by all

parties and the Chief Judge’s Recommended Decision, we

find and conclude that:

1) All respondents violation Section 810 of the Mer-

chant Marine Act, 1936, as amended, and applicable

provisions of their ODS contracts by acting in con-

cert to reduce rates on selected military cargo car-

ried in U.S. Atlantic & Gulf to United Kingdom/

Bordeaux/Hamburg area and holding such rates at

such levels during the period March 29, 1965 to

March 1, 1966 (but as to respondent Bloomfield only

until and including December 31, 1965) in order to

unjustly discriminate and unfairly compete against

Sapphire Steamship Company, and

2) In consideration of pertinent mitigating circum-

stances respondents owe. Subject to documentation

by said respondents and Public Counsel, the follow-

ing for such violations of Section 810:

(a) Respondents APL, Farrell, Grace and Pruden-

tial, who did not compete with Sapphire and

whose violations are technical only, no amount;

(b) Respondent Lykes about $1,130,123 to be ac-

counted for on terms satisfactory to the Gov-

ernment ;

ed for on terms satisfactory to the Govern-

ment;

96a

Memorandum Incorporating Finding of Fact

and Order, Dated June 6, 1972

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YoRK

68 C 643

MARSHALL P. SAFIR,

Plaintiff,

—against—

ANDREW GIBSON, Acting Maritime Administrator, Maritime

Administration, U.S. Department of Commerce, et al.,

Defendants.

DooLine, DwJ.:

Plaintiff moves for an order requiring the Secretary of

Commerce to pay the purchase price of the S.S. UNITED

STATES into escrow and to establish an escrow of all

amounts payable to the present shipowners upon their sales

of the S.S. ARGENTINA, the S.S. BRAZIL, the S.S.

SANTA ROSE, the 8.8. SANTA PAULA, and the S.S.

CONSTITUTION; the amounts referred to are cxpected

to become payable under the provisions of Public Law 92-

296 effective May 17, 1972 to United States Lines, Inc. (on

the Government’s purchase of the S.S. UNITED STATES

under the public Law), to Moore-MeCormack Lines,

Incorporated (on the sale of the 8S.S. ARGENTINA and

the 8.8. BRAZIL into foreign ownership, registry, and flag

pursuant to the provisions of Public Law 92-296 and sub-

ject to its limitations), to American Export Isbrandtsen

Lines, Inc. (on the sale of the S.S. CONSTITUTION into

foreign ownership, registry, and flag pursuant to the same

public Law), and to Prudential-Grace Lines, Inc. under

the same Public Law.

oats cine

97a

Memorandum Incorporating Finding of Fact

and Order, Dated June 6, 1972 ~*

It appears that the recommended decision of the Hear-

ing Examiner, rendered April 12, 1972, would require re-

payments by Moore-McCormack of $759,704, by United

States Lines of $3,243,865 and by American Export Lines

of $22,373 and that Prudential-Grace would not be required

to make any refund payment. The Maritime Subsidy Board

of the Maritime Administration has not yet reviewed the

recommended decision of the Hearing Examiner. Excep-

tions have been taken to the Hearing Examiner’s report by

both sides and the exceptions are still undetermined.

Meanwhile and wholly separately the Congress passed

and the President approved Public Law 92-296, effective

May 17, 1972. It provides for the disposition of laid-up

passenger vessels which had been operated under operating

differential subsidy contracts with the United States. The

law provides that, except for the vessels INDEPENDENCE

and UNITED STATES, the laid-up vessels may be sold

and transferred to foreign ownership, registry and flag

with the approval of the Secretary of Commerce provided,

among other things, that the seller agrees with the Secre-

tary that an amount equal to the net proceeds received from

the sale in excess of existing obligations and incidental

expenses shall within a year of receipt be committed to and

thereafter used as equity capital to build new vessels which

the Secretary determines are built to effectuate the pur-

poses and policies of the Merchant Marine Act of 1936 as

amended. Section 2 of the same Act authorizes the Secre-

tary to purchase the UNIT D STATES at depreciated cost

less the unpaid principal and interest on the mortgage on

the vessel for lay-up in the National Defense Reserve F leet.

Plaintiff contends that since the amount ultimately pos-

sibly recoverable by the Government from the AGAFBO

steamship companies may rise as high as half a billion dol-

98a

Memorandum Incorporating Finding of Fact

and Order, Dated June 6, 1972

lars if the Examiner’s recommended decision is not adopted,

the amounts of money coming into the hands of the steam-

ship companies under the new legislation should, in effect,

be impounded to secure the payments that the steamship

companies might be required to make to the United States

under the final decision.

The motion must be in all respects denied.

The payments being made are not payments of subsidies

in respect of the periods during which the offensive conduct

was continued. The only ground on which the motion can

be made is that a sort of anticipatory execution should be

issued to assure that, if the ultimate decision directs greater

refunds of operating differential subsidy than the Examiner

recommends, funds to pay the refunds will be at hand.

llowever, there is no reason to frustrate the functioning of

the statute involved. The evidence presented does not in-

dicate that the ability of any of the steamship companies

to respond will be worsened by carrying out the new

statute according to its terms or that any of the steamship

companies will be in a position to dissipate the funds.

Only in the case of the amounts paid to the United States

Lines does it appear that refunds will pass into the un-

restricted possession of the steamship company. The evi-

dence shows that United States Lines is abundantly solvent.

Similarly the evidence is that Moore-McCormack and Ameri-

can Export Isbrandtsen Lines, Inc. are solvent and will

be able to respond to any requirement that they make re-

funds of subsidy.

No reason appears why the plaintiff should be entitled

at this time to relief which is based essentially on = the

assumption that the Examiner’s recommended decision is

wrong and that the final decision will order vastly larger

99a

Memorandum Incorporating Finding of Fact

and Order, Dated June 6, 1972

refunds. No such inference can be indulged to support an

application for the relief of preliminary injunction. If

that inference could be indulged, every other asset and

every other pending receipt of any of the steamship com-

panies could with equal plausibility be subjected to a de-

mand that it be placed in escrow or otherwise set aside

for execution in the event that large recoveries were

ordered by the Subsidy Board. The aftidavit of the As-

sistant Secretary of the Maritime Subsidy Board and the

Maritime Administration shows that withheld amounts of

operating differential subsidy of the four steamship com-

panies exceed the amounts of the Hearing Examiner's

recommended refund except in the case of United States

Lines, which according to the official records of the Mari-

time Administration has a net worth of $74,000,000.

Plaintiff argues that he may have an individual right

to participate in any ultimate recovery by the Government

under qui tam legislation. No statute authorizing a qui

tum recovery or qui tam proceedings has been pointed to

and the decision in Connecticut Action Now, Inc. y. Roberts

Plating Company, Inc., 2d Cir, 1972, Slip Opinion page

2253 makes it reasonably clear that the plaintiff has no

qui tam interest in the Government’s recovery under Sec-

tion 810 of the Merchant Marine Act, 1936 as amended

(46 U.S.C. § 1227).

It is accordingly

ORDERED that the plaintiff's motions brought on by

Orders to Show Cause dated May 4 and May 17, 1972, are

in all respects denied.

Brooklyn, New York, June 6, 1972.

JOHN F. DOOLING, JR.,

U. 8. D. J.

100a

Decision (Per Curiam)

UNITED STATES COURT OF APPEALS

FoR THE SECOND CIRCUIT

—_—_—_——— ee

No, 287—September Term, 1972.

(Argued November 27, 1972 Decided November 29, 1972.

Docket No, 72-1753

MARSHALL I’, SAFIR,

Appellant,

Ropert J. BLACKWELL, Maritime Administrator, Maritime

Administration, U.S. Department of Commerce, et al.,

Moork-McCoRMACK LINES, INC., UNITED STATES LINES,

INc., AMERICAN Export LINEs, INC., and PRUDEY \AL-

Grace LINES, INC.,

Appellees.

——- >

Before:

I’'RIENDLY, Chief Judge,

WATERMAN and Hays, Circuit Judges.

— =

Appeal from an order of the District Court for the

Eastern District of New York, John F. Dooling, Jr., Judge,

denying plaintiff's motion for aa order requiring the pay-

ment into escrow of sums expected to be received by the

ship operator defendants on the sale of certain ships.

Affirmed.

ee a

10la

Decision (Per Curiam)

PER CURIAM;

In this case, which is now here for the third time, see

Safir vy. Gibson, 417 F.2d 972 (2 Cir. 1969) ; Safir v. Gibson,

432 F.2d 137 (2 Cir.), cert. denied, 400 U.S. 850 (1970),

plaintiff Safir moved to require the ship operator defen-

dants to pay into escrow moneys expected to become pay-

able to them in consequence of the sale of certain American

flag ships authorized by Public Law 92-296, which became

effective May 17, 1972. The motion was based on plain-

tiff's fear that the defendants might not be financially

able to respond to a direction for the repayment of oper-

ating differential subsidies which may be made by the

Maritime Administration Maritime Subsidy Board in the

proceeding, Docket No. S. 243, instituted as a result of

our first decision. The Assistant Secretary of the Board

and of the Administration submitted an affidavit indicating

that the Government entertained no doubt of its ability

to recover, by set-off or otherwise, any amounts that might

ultimately be found to be repayable. Accepting this con-

clusion, the district court denied the requested relief.

The judge’s order was well within his discretion; he was

not bound to accept plaintiff's assertions that the recoveries

will run vastly beyond the sums recommended by the

Chief Hearing Examiner in respect of three of the four

ship operator defendants. We share plaintitf’s concern

over the time that the Maritime Administration has taken

to decide this matter, especially in light of the narrowing

of the issues by our 1970 decision. However, we were

advised at argument that, at long last, the matter has

now been finally submitted, and we expect it to be promptly

decided.

Plaintiff complains of a statement by the district judge

that he would have no interest in any recovery by_ the

Government. This statement was unnecgs @ deci-

102a

Decision (Per Curiam)

sion and we have no occasion either to approve or to dis-

approve it.

Affirmed.

MARSHALL TP, SAFIR, Appellant Pro-Se.

GILBERT §S. FLEISCHER, Esq., New York, N.Y.,

Attorney in Charge, New York Office, Ad-

miralty and Shipping Section, Department

of Justice (Harlington Wood, Jr., Esy.,

Assistant Attorney General, Robert A.

Morse, Esq., United States Attorney, of

Counsel), for Appellees Robert J. Black-

well, Maritime Administrator, et al.

RicHARD S. SALZMAN, Esq., Washington, D.C.

(J. Franklin Fort, Esq., Kominers, Fort,

Schlefer & Boyer, Washington, D.C., of

Counsel), for Appellee Moore-McCormack

Lines, Ince.

ELMER C. MAbpy, Esq., New York, N.Y. (Kirlin,

Campbell & Keating, New York, N.Y., of

Counsel), for Appellee United States Lines,

Ine.

JAMES N. JAcoBI, Esy., Washington, D.C.

(Kurrus and Jacobi, Washington, D.C., of

Counsel), for Appellee American Export

Lines, Inc.

MICHAEL QO, FINKELSTEIN, Esq., New York, N.Y.

(Barrett, Knapp, Smith, Schapiro & Simon,

‘New York, N.Y., Daniel H. Margolis, Esq.,

and Bergson, Borkland, Margolis & Adler,

Washington, D.C., of Counsel), for Appellee

Prudential-Grace Lines, Inc.

Casita dnt he vd alti et, a ln AO i sal a ee oN

ate ee ee ee Oo ee

103a

Memorandum Incorporating Findings of Fact

and Order, Dated June 23, 1971

UNITED STATES DISTRICT COURT

EASTERN DIstTricT OF New YORK

— >

MARSHALL P. SAFIR and SAPPHIRE STBAMSHIP LINEs, INC.,

Plaintiffs,

—against—

ANbREW Gisson, Acting Maritime Administrator, Maritime

Administration, United States Department of Com-

merce, JAMES 8S. Dawson, JR., Secretary, Maritime

Subsidy Board, Maritime Administration, United States

Department of Commerce, and MAURICE Stans, Secre-

tary of Commerce of the United States, AMERICAN

PRESIDENT LINES, Lrp., PRUDENTIAL LINES, INC. and

GRACE LinB, [Nc. (Now operating as “Prudential-Grace

Lines, Inc.”*) and FARRELL LINES, INC., AMERICAN Ex-

PORT ISBRANDTSEN LINES, INC.,. BLOOMFIELD STEAMSHIP

Co., LyKes Bros, STEAMSHIP COMPANY, INC., MOORE

McCorMack LINES, INC., and UNITED STATES LINES,

ING.,

Defendants

Doo.ine, D.J.:

Plaintiffs move for an injunction pendente lite, against

the Maritime Administration’s disbursing to the defendant

AGAFBO carriers any part of the $80,000,000 appropriated

by the Second Supplemental Appropriation Act, 1971, for

the fiscal year ended June 30, 1971 (PL 92-18, approved

May 26, 1971). Of the $80,000,000 about half, $40,300,000,

is appropriated to liquidate, in part, unpaid ship operation

subsidies for the calendar year 1968 and earlier years

104a

Memorandum Incorporating Findings of Fact

and Order, Dated June 23, 1971

the payment of which has been delayed by disagreements

over the subsidy amounts due the carriers. $43,150,521.94

was disbursed on and between May 27, 1971 and June 11,

1971, when disbursement was arrested pending decision of

the present motion, leaving about $36,850,000 undisbursed,

but how much of each segment comprises a part of the

$40,300,000 is not disclosed, perhaps is not quickly deter-

minable. The entire $40,300,000 appropriated to pay past-

accrued but unliquidated subsidies is made up not of basic

current-operating differential subsidies, which are gener-

ally disbursed as earned more or less currently to the ex-

tent of about 90% to 95% of the amount ultimately deter-

mined to be due, but with the held-back amounts consisting

of balance-amounts due only when finally determined and

agreed upon between carrier and Administration. The

Secretary of the Maritime Subsidy Board avers without

contradiction that of the $43,150,521.94 already disbursed

$9,819,000. is the amount paid to the defendant AGAFBO

carriers as past-accrued operating subsidies due for the

whole of the two calendar years 1965 and 1966 which, to-

gether, include the eleven months of the accused rate-

reduction. Eleven twenty-fourths of that total is somewhat

over $4,500,000. How much of the undisbursed $36,850,000

will become ascribable to past-accrued operating subsidies

of the years 1965 and 1966 is not stated. The defendant

carriers, it is said, haye unpaid vouchers, still unaudited

and unauthenticated, lodged with the Board in the aggre-

gate amount of $62,702,765, all of which, if audited and

allowed, could, self-evidently, not be paid out of the present

appropriation.

The matter is urgent because the availability of the

appropriated funds will end at June 30, 1971, and re-

newal of the appropriation would, it seems, have to await

fresh budgetary and Congressional action.

ee ae

in a ag i tl te tk I ce Oe er et ee

eee ee

105a

Memorandum Incorporating Findings of Fact

and Order, Dated June 23, 1971

Plaintiffs’ central argument is that the present funds

are not, within the meaning of the Court’s decision, “cur-

rent subsidy payments” (4382 F.2d at 140, col. 2) payment

of which ought not be enjoined, but belong to the radically

distinguishable class of “payments . .. during the viola-

tion” (417 F.2d at 977, 482 I'.2d at 140, col. 2), which,

adventitiously, are found undisbursed and which, therefore,

present afresh the, indeed, related but new question, should

the Administration be required to withhold payment of an

amount which the Administration may ultimately deter-

mine should not be paid because of the command of 46

U.S.C. § 1227, second paragraph (“Section 810")?

Most of the reasons urged for an injunction are not

matters that would warrant judicial interference with the

Adninistration’s discharge of its responsibilities under the

law as spelled out in the earlier decisions of the Court of

Appeals, and an injunction could not be granted under

the earlier decisions but for a differentiating feature here

presented. It may have lurked in earlier determinations,

but if so it was not brought forward recognizably.

Plainly enough, the issue here is differentiable from

that which the Court determined on the injunction appeal.

The dispositive difference is that before any disbursement is

made that manifestly raises a substantial question under

Section 810 there must be a specific and advertent deci-

sion by the Administration to meke, to detain pending

further review, or to refuse the payment. It is not a pay-

ment of past history presenting the question of whether in

the light of all the circumstances the Administyatfon should

seek to recover money long. cinge-peitorit and embedded in

ship operations. The right to receive subsidy payments

for the accused period is now directly in issue between the

106a

Memorandum Incorporating Findings of Fact

and Order, Dated June 23, 1971

Administration and each affected carrier. The issue is

whether, apart from the usually controlling earnings stan-

dards, ete., and in the light of the Commission’s decision

under 46 U.S.C. § 814 (“Section 15°) and the Congressional

command of Section 810, the payment is due and should

be made automatically.

There is no distinct evidence that the matter of dis-

bursement has been considered in the light of determining

before disbursement the propriety of making a payment

entitlement to which depends on the resolution of a policy

decision to be made under Section 810. The Board’s letter

of June &, 1971, to plaintiff Safir rather indicates the

contrary, in part because the plaintiff Safir’s peremptory

telegram of May 28, 1971, dealt with the whole $80,000,000

and with withholding, as offset, to secure the payment

of any recovery that might be directed in proceeding S-243.

Yet the Court of Appeals decisions plainly required that

no payment be made without a prior advertent and ade-

quate dealing with the policy matters bearing on payability.

Seen in this perspective the duty of the Administration

is forthwith to make a decision of record based on stated

grounds either to make payment (absolutely or condition-

ally), to withhold payment pending review, or to refuse

payment of so much of the undisbursed $36,849,478.06 ap-

propriated by Public Law 92-18 of May 27, 1971, as repre-

sents payments to the defendant carriers in respect of past-

accrued operating subsidies for the eleven month period

March 31, 1965, to March 1, 1966.

In this analysis, which singles out for immediate rec-

tification the apparent omission of an indispensable stage

of judgmatical administrative action, the conventional stan-

ilies conte St ate te

107a

Memorandum Incorporating Findings of lact

and Order, Dated June 23, 1971

dards for granting injunctive relief, viewed as an extraor-

dinary equitable remedy, are largely if not entirely ir-

relevant.

It is, accordingly,

ORDERED that the defendants Andrew Gibson, Acting

Maritime Administrator, Maritime Administration, United

States Department of Commerce, James 8S. Dawson, Jr.,

Secretary, Maritime Subsidy Board, Maritime Administra-

tion, United States Department of Commerce, and Maurice

Stans, Secretary of Commerce of the United States, are

enjoined from paying to American President Lines, Ltd.,

Prudential Lines, Inc. and Grace Line, Inc. (Now operating

as “Prudential-Grace Lines, Inc.) and Farrell Lines, Inc.,

American Export Isbrandtsen Lines, Inc., Bloomfield Steam-

ship Co., Lykes Bros, Steamship Company, Inc., Moore

McCormack Lines, Inc., and United States Lines, Inc., so

much of the undisbursed $36,849,478.06 appropriated by

Public Law 92-18 of May 27, 1971, as represents payments

to the defendant carriers in respect of past-accrued operat-

ing subsidies for the eleven month period March 31, 1965,

to March 1, 1966, unless after a decision of record is made

by the Maritime Administration on stated grounds to do 80

notwithstanding the determination of the Federal Maritime

Commission of December 12, 1967, in Docket -No. 65-13

under 46 U.S.C. §§ 814, 817, and the terms of 46 U.S.C.

§ 1227, or unless upon the taking of adequate stipulations

and security measures for refunding that will assure that

the issue whether the amounts should have been disbursed

is determinable after payment exactly as if the whole deci-

sion-making process preceded the payment; and it is further

108a

Memorandum Incorporating Findings of Fact

and Order, Dated June 23, 1971

OrpERED that plaintiff give security in the amount of

$5,000 conditioned as required by Rule 65; and it is further

ORDERED that the defendants’ application for a stay is

denied; and it is further

ORDERED that plaintiff's motion for injunction is in all

other respects denied; and it is further

ORDERED that the denial of injunction, as set forth in

the preceding decretal paragraph, is stayed until 2:00 P.M.

June 24, 1971, and the defendant public officers are directed

until then to continue the present voluntary stay of dis-

bursements to the defendant carriers from the appropriated

funds.

Brooklyn, New York, June 22, 1971.

JOHN F. DOOLING, JR.,

U. 8. D. J.

oe nee Te

109a

Opinion of the Court of Appeals on

Petition for Rehearing

UNITED STATES COURT OF APPEALS

For THE SEcoND CIRCUIT

No. 552—September Term, 1969.

(Decided June 18, 1970.)

Docket No. 34355

OE Oe

MARSHALL P, SAFIR, ARNOLD WEISBERGER and

SAPPHIRE STEAMSHIP LINES, INC.,

Plaintiffs-Appellants,

—_—vV.—

ANDREW GIBSON, Successor to and Substituted for JAMES

W. Gutick, Acting Maritime Administrator, Maritime

Administration, United States Department of Com-

merce, JAMES S. DAWSON, JR., Secretary, Maritime

Subsidy Board, Maritime Administration, United

States Department of Commerce, and MAURICE STANS,

Successor to and Substituted for C. R. Smiru, Secre-

tary of Commerce of the United States,

Defendants-A ppellees,

AMERICAN Export ISBRANDTSEN LINES, INC., BLOOMFIELD

STEAMSHIP Co.; LYKES Bros, STEAMSHIP COMPANY,

Ixc.; Moork-McCorMAck LINEs, INC.; UNITED STATES

LINES, INC., AMERICAN PRESIDENT LINES, LTD.; PRUDEN-

TIAL STEAMSHIP Co., INC. and PRUDENTIAL GRACE LINES,

Ixc.; and FARRELL LINES, INC.,

Intervenors.

el) - >

Defore:

LuMBARD, Chief Judge,

I°RIENDLY and FEINBERG, Circuit Judges. |

On Petitions of Intervenors for Rehearing

110a

Opinion of the Court of Appeals on Petition for Rehearing

PER CURIAM:

In our decision of February 26, 1970, — F.2d —, slip

opinions 1697, we directed the district court “to instruct

the Maritime Administration not to redetermine the issue

whether the AGAFBO carriers’ concerted action in reduc-

ing their rates to an unreasonably low level and holding

them there for eleven months was unjustly discriminatory

or unfair to Sapphire.” Shortly thereafter, the AGAFBO

lines, which, although fully aware of this action, had been

sedulously abstaining from participation, see 417 F.2d 972,

976 n. 4 (1969); — F.2d at —, sought leave to intervene

for the purpose of seeking a rehearing on that portion of

our decision. We granted such leave, received petitions

and accompanying briefs, and then called upon counsel for

the appellants and appellees to respond.’

The argument most strongly pressed by the intervenors

is that they had no sufficient incentive and, indeed, no op-

portunity to appeal the adverse findings of the FMC, see

— F.2d at —, slip opinions at 1705. The latter branch

of the argument hangs mainly on the fact that the rates

found by the FMC to give rise to a violation of § 15 of the

Shipping Act had expired and therefore could no longer be —

disapproved under § 18(b) (5). But § 15 subjects offending

lines to a penalty of $1000 per day of violation. Since the

FMC’s determination would be conclusive in a civil action

1 We requested counsel for the appellees to obtain the views of

the Federal Maritime Commission. The latter, taking no position

with respect to other issues, has advised “that its sole concern

here, in the context of its responsibilities under the Shipping

Act, is to insure that the finality of its determinations is pre-

served and that its factual findings will not be litigated long after

the statutorily prescribed time for judicial review has run and

in proceedings to which it is a stranger.” This was the precise

object of our decision.

bit tbe

seek

llla

Opinion of the Court of Appeals on Petition for Rehearing

for penalties, if was therefore clearly appealable. See

Pacific Far East Lines, Inc. v. FMC, 410 F.2d 257 (D.C. Cir.

1969). In view of the sharp tone of the FMC report and

the even sharper one of the separate opinion of two mem-

bers, the intervenors could hardly have taken lightly the

threat of the Government’s suing for a penalty; indeed, we

are informed that five of them have recently settled their

liability by paying $25,000 each. Moreover, while we relied

mainly on this point, — F.2d at —, slip opinions at

1705, we did not at all mean to suggest that the AGAFBO

lines should not have been aware of the possible effect of

the FMC determination in a proceeding under § 810 of the

Merchant Marine Act, of whose potentiality they were

apprised very shortly after the FMC decision.

The Government makes the point that if appellants

wished to have the Maritime Subsidy Board give conclu-

sive effect to the FMC decision, the Board has a procedure

enabling them to raise this matter in limine. They could

have moved for a summary disposition of the issue by the

Hearing Examiner, 46 C.F.R. 201.91, could have requested

permission from him to appeal an adverse decision to the

full Maritime Administration, 46 C.F.R. 201.93, and if that

were granted and the appeal proved unsuccessful, could

have sought further review by the Secretary of Commerce,

46 C.F.R. 202.1. Be all this as it may, we were faced with

a statement by the district judge, implying that the FMC

determination did not have binding effect, — F.2d at

—, slip opinions at 1699-1700, and, after two and a half

years, we see no point in launching appellants on the weari-

some course the Government has plotted when we are clear

that the legal issue must be decided in their favor. The

short of the matter is that nothing advanced by the inter-

venors or the Government alters our conclusion that “it

would be quite unseemly for the Maritime Administration

ll2a

Opinion of the Court of Appeals on Petition tor Rehearing

to conclude that its sister agency had been wrong in a fully

litigated issue the decision of which Congress had confided

to it.” — F.2d at —, slip opinions at 1705.

Two minor points should be mentioned. Four inter-

venors, American President Lines, Ltd., Prudential Steam-

ship Co., Inc., Prudential-Grace Lines, Inc., and Farrell

Lines, Inc., urge that they were not competing with Sap-

phire, had no interest in the rates which the FMC con-

demned and never voted on these. We see no reason for

the concern felt by these carriers. We directed only that

the issue whether the reduction of the rates was unjustly dis-

criminatory or unfair to Sapphire was not to be relied upon

before the Maritime Administration; we said nothing about

who was responsible for these and, by a footnote 2, empha-

sized that “Nothing we have said should be read as prevent-

ing the Maritime Administration from investigating the

nature and extent of the individual carriers’ participation

in the illegal action...” On the other side, the Government

is fearful lest “the tenor of the opinion and the rationale

underlying it would appear to foreclose the Maritime Sub-

sidy Board from investigating and concluding, contrary to

a majority of the FMC, that a wider conspiracy existed.”

But there was no “majority” finding on the issue of a wider

conspiracy, since the four participating members divided

two to two. The issue therefore remains open.

The intervenors’ petitions for rehearing are denied.

ll3a

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

UNITED STATES OF AMERICA,

ex rel MARSHALL P. SAFIR and

MARSHALL P. SAFIR,

Plaintiffs,

- against -

ROBERT J. BLACKWELL, Assistant

68 Civ. 643

(JFD)

Secretary for Maritime Affairs,

United States Department of

Commerce, Successor to and

Substituted for James W. Gulick

and Andrew Gibson, formerly

Acting Maritime Administrators,

James S. Dawson, Secretary,

Maritime Subsidy Board, Mari-

time Administration, United

States Department of Commerce,

JUANITA KREPS, Secretary of

Commerce of the United States,

Successor to and Substituded

for C.R. Smith and Maurice

Stans, former Secretaries of

Commerce,

Defendants,

AMERICAN EXPORT ISBRANDTSEN

LINES, INC., AMERICAN PRESI-

DENT LINES, LTD. LYKES BROS.

STEAMSHIP COMPANY, INC.,

MOORE-McCORMACK LINES,

UNITED STATES LINES, INC.,

FARRELL LINES, INC.,

AMENDED

COMPLAINT

ll4a

BLOOMFIELD STEAMSHIP CO.,

PRUDFNTIAL GRACE LINES, INC,

eae PRUDENTIAL STEAMSHIP COs

Carrier Defendants,

Plaintiffs by their att

their amended co i Ay

sc pl mplaint, allege, as

FIRST: This action aris

this Court has jurisdiction by ets ot

the following statutes: 46 U.S.C. sec

1227, (Merchant Marine Act of 1936); 5

U.S.C. sec. 702, 703, 704, 706 (the

agency generally); 28 U.S.c. sec 2201

2202 (declaratory judgment); 28 U S.c

sec. 1301 (jurisdiction) and 3] U.S.C.

sec.

ims 232, 233, 235 (False Claims

_ ._.___ SECOND: At all relevant ti

Plaintiff, Marshall Pp. Safir, has sonaeen

ln the Count of Nassau, State of New

York and in the Eastern District of New

York. Plaintiff is a citizen of the

United States and at all relevant times

was a stockholder and officer of Sapphire

Steamship Lines, Inc., and personal

guarantor of certain of its Obligations

pol i Rrra oi times, Sapphire Steam-

pe Lines, Inc. was a Delaware corpora-

tion, having its Principal of business

in the County of Kings, State of New

York and j i i

ten in the Eastern District of New

115a

THIRD: Defendant, Robert J.

Blackwell, is the Assistant Secretary

for Maritime Affairs in the United

States Department of Commerce and is the

successor to James W. Gulick and Andrew

Gibson, former acting Maritime Admini-

Strators for the Maritime Administration,

United States Department of Commerce.

The Maritime Administration has offices

at 26 Federal Plaza, New York, New York.

FOURTH: Defendant, James S.

Dawson, Jr., was during the relevant

period and still is the Secretary of the

Maritime Subsidy Board, Maritime Admin-

istration, United States Department of

Commerce. The Maritime Administration

has offices at 26 Federal Plaza, New

York, New York.

FIFTH: Defendant, Juanita

Kreps, is the Secretary of Commerce of

the United States, and is the successor

to C.R. Smith, Maurice Stans, Peter

Peterson, Frederick Dent, and Elliot

Richardson, former Secretaries of Commerce.

SIXTH: Defendants, American

Export Isbrandtsen Lines, Inc., American

President Lines, Ltd., Bloomfield Steamship

Company, Farrell Lines, Inc., Prudential

Grace Lines, Inc., Lykes Bros. Steamship

Company, Inc., Moore-McCormack Lines,

Inc., Prudential Steamship Co., Inc. and

United States Lines, Inc. ("the defendant

carriers") are contracting American Flag

common carriers which at all relevant

times herein have received and except

for Bloomfield Steamship Company and

United States Lines, Inc. are now receiving

operating differential subsidies within

ll6a

the meaning of Section 810 of the Merchant

Marine Act of 1936 (46 U.S.C. §1227).

SEVENTH: Atlantic and Gulf

American Flag Berth Operators (hereinafter

referred to as "AGAFBO") was at all

relevant times herein a conference of

American Flag Berth Operators organized

to negotiate with the Military Sea

Transport Service (hereinafter "MSTS")

of the United States Department of

Defense (hereinafter "DOD"), which has

been approved under Section 15 of the

Shipping Act of 1916, as amended (46

U.S.C. §814). Each of che defendant

carriers was, during the relevant period

herein, a member of AGAFBO.

EIGHTH: On May 6, 1965, the

Federal Maritime Commission (not to be

confused with the Maritime Administration

Or the Maritime Subsidy Board of the

Maritime Administration) instituted an

investigation of the practices Surrounding

the procurement of ocean transportation of

United States military cargoes. The Commis-

sion named as respondents AGAFBO (Atlantic

and Gulf American Flag Berth Operators),

TPAFBO (Trans-Pacific American Flag Berth

Operators), WCAFBO (West Coast American Flag

Berth Operators), their respective member

lines and Sapphire Steamship Lines, Inc.,

Liberty-Pac International Corp., and Pioneer

Overseas Service Corp. The Military Sea

Transport Service (MSTS), General Services

Administration, Household Goods Forwarders

Assn. Of America, Inc., and Toledo-Lucas

County Port Authority intervened. Beginning

September 28, 1965, Examiner C.W. Robinson

held hearings totaling 61 days in Washington,

San Francisco, and New York, and served an

initial decision on December 15, 1966. The

117a

Commission heard oral argument on exceptions

and replies to exceptions on May 3, 1967.

NINTH: On December 12, 1967, the

Federal Maritime Commission filed its deci-

sion, Docket No. 65-13, in which it found

and concluded as follows concerning the

rates of the Atlantic and Gulf American Flag

Berth Operators (AGAFBO):

l« The rates of AGAFBO, prior

to the entry of Sapphire into the

trade, and the rates of WCAFBO were

not contrary to Section 18(b)(5).

2. AGAFBO's rates, which were re-

duced to an admittedly noncompensatory

and unreasonable level in an attempt

un-fairly to compete with Sapphire,

violated Section 15 by knowingly set-

ting rates which were contrary to

Section 18(b)(5) and which were detri-

mental to commerce and contrary to the

public interest.

TENTH: The foregoing decision and

findings of the Federal Maritime Commission

are now final, no timely review having been

sought by any of the carriers involved.

ELEVENTH: At all relevant times

involved in the findings of the Federal

Maritime Commission referred to hereinabove,

Sapphire Steamship Lines, Inc. operated as a

nonsubsidized common carrier by water ex-

clusively, employing vessles registered

under the laws of the United States, on

established trade routes from and to United

States ports. It was in direct competition

with the members of AGAFBO and was harmed by

the illegal payment of subsidies to the mem-

118a

bers of AGAFBO who are not entitled to

receive them. Subsidies are provided for by

46 U.S.C. §§1171 through 1182 inclusive, and

§§1191 through 1204 inclusive, and are

referred to as operating-differential sub-

Sidies. There are also subsidies referred

to as construction differential subsidies,

provided for by 46 U.S.C. §§1151 through

1161.

TWELFTH: Section 810 of the Mer-

chant Marine Act (46 U.S.C. §1227) provides

as follows:

"SEC. 1227. AGREEMENTS WITH

OTHER CARRIERS FORBIDDEN; WITH-

HOLDING SUBSIDIES; ACTIONS BY IN-

JURED PERSONS FOR DAMAGES.

It shall be unlawful for any

contractor receiving an operating-

differential subsidy under Sections

1171-1182 of this title or for any

charterer of vessels under Sections

1191-1204 of this title to continue

as a party to or to conform to any

agreement with another carrier or

carriers by water, or to engage

in any practice in concert with

another carrier or carriers by

water, which is unjustly discrimin-

atory or unfair to any other citi-

zen of the United States who oper-

ates a common carrier by water ex-

clusively employing vessels regis-

tered under the laws of the United

States on any established trade

route from and to a United States

port or ports.

119a

No payment or subsidy of any

kind shall be paid directly or in-

directly out of funds of the United

States or any agency of the United

States to any contractor or charterer

who shall violate this section.

Any person who shall be injured in

his business or property by reason

of anything forbidden by this sec-

tion may sue therefor in any dis-

trict court of the United States

in which the defendant resides or

is found or has an agent, without

respect to the amount in controver-

sy, and shall recover threefold

the damages by him sustained, and

the cost of suit, including a rea-

sonable attorney's fee."

THIRTEENTH: In accordance with

Attachement I hereto, the members of AGAFBO

received $ 227,686.369.33 during the period of

violation.

FOURTEENTH: On December 21, 1967,

the plaintiffs requested the Maritime Adminis-

tration to desist from making any further

payments of subsidies of any kind and to take

appropriate action to recover subsidies which

had been paid from March 25, 1965 to members

of AGAFBO on the grounds that “in the specific

instance of the Sapphire findings by the

Federal Maritime Commission a violation of

Section 15 of the Shipping Act of 1916 could

be proven to be a violation of Section 810 of

the M.M.A. of 1946 as well.

FIFTEENTH: Although defendants

stated that they would take whatever action

was deemed appropriate, no action was taken

to either request documentary proof of

120a

plaintiff Safir and others filed the origi-

nal complaint in this Court to compel agency

action on the grounds that a violation of

the Shipping Act sec. 15 was in the circum-

stances of the Sapphire case, a violation

which required the invocation of sec. 810.

SEVENTEENTH: This Court dismissed

the complaint for failure to state a claim

on which relief could be granted, and was

reversed in Safir v. Gibson 417 F.2d 972.

The Court of Appeals held that the con-

struction differential and operating differ-

ential subsidy payments subject to recovery

were those paid out during a period of

eleven months in 1965-1966.

EIGHTEENTH: Immediately following

this reversal and remand, the Maritime

Administration instituted an investigation

posing the question whether sec. 810 had

been violated.

NINETEENTH: Dissatisfied with

this procedure, plaintiff Safir herein moved

this Court once again for injunctive relief,

the Court denied stating that the Court of

Appeals in Safir v. Gibson supra had not

found that a violation of sec. 15 was a

violation of sec. 810 in the Sapphire case.

TWENTIETH: On February 26th,

1970, in Safir v. Gibson 432 F.2d 137, the

Court of Appeals reversed, holding that

collateral estoppel would exist in this case

subject only to proof that the AGAFBO Lines

were receiving operating differential sub-

sidies at the time of the violation and that

the carrier adversely affected was "a citi-

zen of the United States who operates a

common carrier by water, exclusively employing

l2la

vessels registered under the laws of the

United States on any established routes from

and to a United States port or ports.

TWENTY-FIRST: The MSB hearing in

Docket 243 was reinstituted to give collater-

al estoppel effect to a finding of violation

Subject to this proof. And on February

16th, 1971, at a prehearing conference,

plaintiff Safir offered to give this proof

to the government, and on March 16th, 1971,

May 6th, 1971 and June 15th, 1971, gave

sworn testimony and documentary evidence to

prove that the criteria had been met.

TWENTY-SECOND: On May 6th, 1971,

Administrative Law Judge Paul Pfeiffer

informed the respondent lines that a prima

‘facie case for a violation of sec. 810 had

been made which would call for the recovery

of subsidies paid during or allocable to the

period of violation.

TWENTY-THIRD: In spite of the

above and immediately thereafter, commencing

on or about May 27th, 1971 and through June

12th, 1971, the violating carriers submitted

vouchers representing the balance amounts of

claims for subsidies allocable to the 1965-

66 period, and these were paid out until

this Court issued an order restraining the

Maritime Subsidy Board from such disburse-

ment unless adequate measures were taken to

protect the United States. Plaintiff al-

leges that these carriers well knew these

claims were false.

TWENTY-FOURTH: On April 16th,

1973, MSB issued its final decision that all

carrier defendants herein had violated sec.

810. It also held it had discretion to

122a

mitigate subsidy recovery. The defendant

Carriers petitioned the Secretary of Com-

merce for review and Secretary Dent affirmed

the finding of violation against all of

them. He further mitigated the penalties,

however. Neither decision included a refer-

ral to the Department of Justice for prosecu-

tion under the False Claims Act.

TWENTY-FIFTH: At all times during

S243, and since 1972 in an action to escrow

the proceeds of ship saies in this docket

68-C 643, all defendants knew that plaintiff

Safir intended to exercise his rights under

31 USC 231 et seq, if the Secretary of

Commerce sought recovery in an amount less

than demanded in the original complaint

herein.

TWENTY-SIXTH: That in the original

complaint, plaintiff Safir demanded judgment

for the following relief:

"C. That an order be issued di-

recting the defendants to commence ap-

propriate legal action to recover the

subsidy payments heretofore illegally

made...".

TWENTY-SEVENTH: That Articles II-

30 and II-31 of each operating differential

subsidy contract trigger the defaults and

termination terms upon the finding of such

violation.

TWENTY-EIGHTH: That Article II-

30(a) of the operating differential subsidy

agreement provides that the operator furnish

a bond--"...to be conditioned upon the true

and faithful performance of all and singular

covenants and agreements of the operator

123a

contained in this agreement, and particu-

larly upon the refund by the operator to the

United States of any amount by which pay-

ments on account of the operating differen-

tial subsidy, including wage subsidy, shall

exceed the amount determined to be payable

to the operator under the audits being made

pursuant to Article II-20 of this agree-

ment...". -- "The amount of such bond, or of

United States government securities fur-

nished in lieu thereof shall be adjusted

from time to time...". Plaintiff alleges

that these securities and deposits are

inadequate for the recovery sought herein.

TWENTY-NINTH: That Article II-

30(b) states as follows:

"b) In the event the operator is

unable for any reason to furnish either

the bond or pledge the securities in

accordance with Article II-30(a), the

United States shall withhold such sub-

sidy payments as it deems appropriate to

secure performance of this agreement

and provide protection against overpay-

ments of operating differential sub-

sidy."

Plaintiff alleges that this has not been

done.

THIRTIETH: That Article II-3l

specifically reserves the government's

rights to proceed to recover under the Act

(46 USC 1227) and other pertinent statutes.

Plaintiff alleges that 31 USC 231 et seq is

the pertinent statute in this instance.

124a

THIRTY-FIRST: On various dates

commencing in or about March 1965, each of

the defendant carriers submitted vouchers

for subsidy payments to the Maritime Adminis-

tration pursuant to operating-differential

subsidy agreements between such defendant

carriers and the United States.

THIRTY-SECOND: On various dates

commencing in or about March 1965, the

defendant carriers, other than Bloomfield

Steamship Company, submitted vouchers for

subsidy payments to the Maritime Administra-

tion pursuant to construction-differential

subsidy agreements under Title V of the

Merchant Marine Act and on vessels acquired

under the Merchant Ship Sales Act of 1946,

pursuant to Section 704 of the Merchant

Marine Act, between the defendant carriers

and the United States.

THIRTY-THIRD: Each of the forego-

ing agreements provided in part substantially

as follows:

II-15. Preference and Conference

Agreements

* * *

(b) The Operator agrees not to

continue as a party to or to conform to

any agreement with another carrier or

carriers by water, or to engage in any

practice in concert with another carrier

Or carriers by water, which is unjustly

discriminatory or unfair to any other

citizen of the United States who oper-

ates a common carrier by water exclus-

ively employing vessels registered under

the laws of the United States on any

125a

established trade route from and to a

United States port or ports.

* * *

II-18. (e) No payment or subsidy

of any kind shall be paid to the Operator

if it shall violate the provisions of

Article II-15(b) of this Agreement.

* * *

II-19. Limitations upon Subsidy

Payments. Notwithstanding any other

provision of this Agreement, no payment

of operating-differential subsidy shall

be made with respect to any of the

following:

* * *

Operator is for any reason ineligible

for the accrual of a subsidy under the

Act;

(d) Expenses incurred in connection

with a voyage made by any subsidized

vessel during any period when such ves-

sel is frr any reason not eligible for

a subsidy under the Act;

* * *

- II=-22 Events of Default. The

following shall constitute events of

default under this Agreement.

(a) Any material misrepresentation

wilfully or negligently made by the

Operator in connection with this Agree-

l2#a

ment whether before or after execution

hereof and whether made in an applica-

tion, report, affidavit, or otherwise,

Or any wilful or negligent failure by

the Operator to disclose material

information.

(6b) The occurrence of any event

causing the Operator to be ineligible

for an operating-differential subsidy.

THIRTY-FOURTH: Each of the vouch-

ers submitted by the defendant carriers

Pursuant to such agreements included an

affidavit which states in substance as

follows:

LT, sees sss ss esses eee e<<----- ’

,uame of company official)

being duly osworn, depose and

Say, that I am ---------------

of the ---------------- (here-

(Operator)

in referred to as the "Opera-

tor"), and as such am familiar

with (a) provisions of the

Operating-Differential Subsidy

Agreement, Contract No,

wees eee , dated as of

sme ere ceeeeses<--= as amended,

to which the Operator is a

party; and (b) the regulations

governing the payment of opera-

ting-differential subsidy for

bulk cargo vessels, Part 252,

Title 46, C.F.R.; and (c) the

operation of the vessels cov-

ered by said Agreement and

regulations; and (d) the accounts,

books, records, and disburse-

127a

ments of the Operator relating

to such operation.

Referring to the public voucher

dated <<------------- , covering

voyages terminated during the

periods commencing -------------

and ending <<<-<-<------------- and

attached submitted by said Operator

concurrently herewith for a payment

on account in the sum of

lesiesieeieeeeienbeteeeateteteetetetetnetes -under said

Aqreement. I further depose and say

that, to the best of my knowledge and

belief, the Operator has fully complied

with the terms and conditions of said

Agreement and regulations, applicable

orders, rulings and provisions of the

Merchant Marine Act, 1936, as amended, and

is entitled, under the provisions of said

Agreement and regulations, orders and rul-

ings, applicable thereto, to the amount of

the payment on account requested.

THIRTY-FIFTH: Each of the fore-

going vouchers was false in that each of the

defendant carriers well knew that it had not

complied with the paragraph designated II-

15(b) above in its agreement with the United

States, it knew that it was not entitled to

any payment or subsidy of any kind, in view

of the provisions of II-18(e) of such agree-

‘ent, and it knew that events of default had

»scurred under paragraph II-22 of such

vyreement in that it had made material

nisrepresentations, had failed to disclose

naterial information and was, in fact,

ineligible for subsidy under the express

terms of its agreement. Moreover, it well

knew that it had violated §810 of the Mer-

chant Marine Act (46 U.S.C. §1227) and,

128a

accordingly, that it was not entitled to

receive the subsidy for which it submitted

vouchers,

THIRTY-SIXTH: Pursuant to such

agreement, each of the defendant carriers

was required to submit and, upon information

and belief, did submit an annual accounting,

including an affidavit by its chief finan-

cial officer that it had fully complied with

all of the terms and conditions of its

agreement in the manner and at the times

therein required. Upon information and

belief, said defendant carriers well knew

that it had not complied with the paragraph

of such agreement designated II-15 above.

THIRTY-SEVENTH: The total amount

of subs dy payments received by these defen-

dant carriers in response to false vouchers

is presently unknown to plaintiff. The

total amount of payments paid during the

relevant period such defendant carriers were

in violation of sec. 810 of the Merchant

Marine Act (46 U.S.C. sec. 1227) is as set

forth in Attachment I, annexed hereto. The

exact amount of subsidy payments attributa-

ble to the relevant period is presently

unknown to plaintiff.

WHEREFORE, the United States ex

rel Marshall P. Safir and Plaintiff Safir

demand judgment for the following relief:

A. A judicial declaration adjudi-

cating that all carrier defendants who were

found to have violated sec. 810 of the

Merchant Marine Act of 1936 during an eleven-

month period and who filed claims for pay-

ment of both construction and operating

subsidies during that period or soon thereafter

129a

violated 31 U.S.C.231 as well by the submis-

sion of false vouchers knowing them to be

false.

B. A judicial declaration adju-

dicating that all of the carrier defendants

who were found to have violated sec. 810

during an eleven-month period in 1965-66,

and who filed final segments of those vouch-

ers for operating differential subsidies in

1971, violated 31 U.S.C.231 as well when the

United States paid false claims submitted by

the defendant carriers who knew them to be

false.

C. That the Secretary of Commerce

be ordered to declare the defendant carriers

in default of their ODS agreements.

D. That the Secretary forthwith

be ordered to protectively attach the capi-

tal construction accounts of the violating

carriers and all other bonds and sureties as

provided in Article II-30 ODSA.

E. That the Secretary be ordered

to offset all subsidies accrued but unpaid

due the defendant carriers herein.

F. That the Secretary be ordered

to withhold all current payments pending the

marshalling of funds necessary to make the

government whole for the subsidies illegally

paid.

G. That judgment be granted in

favor of the United States for twice the

amount of construction and operating differ-

ential subsidy payments received by the

defendant carriers, pursuant to false vouch-

ers as aforesaid, plus the statutory amount

139%a

of two thousand dollars ($2,000.) for each

false voucher, and that plaintiff be awarded

costs and disbursements ineluding an allow-

ance pursuant to the provisions of 31 U.S.C.

232 ¢c(2).

And for such other and further

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