Appendix — O'CALLAGHAN v. AMBROSIO AND ASSOCIATES (Nos. 78-79, 78-1248)
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Supreme Court, U. &
FILED
FEB 23 1979
MIBHABL @ODAK, JR., CLERK
IN THE
Supreme Court of the United States
Docket No.
78-] Pe
UNITED STATES EX REL. MARSHALL P. SAFIR and
MARSHALL P. SAFIR,
Petitioners,
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
TABLE OF CONTENTS TO APPENDIX
Letter from Michael Rodak, Jr., Re:
Time for Filing Writ, dated
September 18, 1978......ceeeeeeee
Corrected Copy of Denial of Petition
for Rehearing en Banc.......-eee-
Corrected Copy of Denial of Petition
for Rehearing by Original Panel..
Suvplerental Memorandum to Petition
for Rehearing en Banc.........-e-
Letter to Chief Judge Wm. P. Bryant,
U.S.D.J., District of Columbia...
Opinion of Second Circuit Court of
Avpeals 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
ED ee
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 Pendencv Letter to Hon.
Griffen Bell, Attorney General,
ee Es ree
la
3a
5a
Ja
lla
15a
25a
66a
79a
86a
Table of Contents to Appendix
Order of Secretary of Commerce,
Frederick Dent, dated September 9,
Ly! Sarre Pee eT ee ee ee eer ee ee 89a
*Excerpt* of Opinion & Order of the
Maritime Subsidy Board, dated
pe & RR | SP eee ee ee ere 93a
Memorandum and Order of Judge Dooling,
‘i ae > ere a ee ee ee ee 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,
oy, Preys Pere e Se ee ee er ee eee 109a
Amended Complaint in United States,
ex rel Marshall P. Safir and
Marshall P. Safir, PlaintiffS v.
Blackwell, American Export et al,
dated September 13, 1977........6. 1ll3a
Affidavit of Marshall P. Safir, Re:
Amended Complaint, September 13,
pgs ge See Pa ere ee Sere aaa gor ae a ee l3la
Petitioners' Reply Brief in Pet #388-
70, Supreme Court, September 28,
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—1l474. cccccccccceces
Affidavit and Motion for Nixon Tapes
in The United States District
Court, District of Columbia,
Docket No. 74-1474, Chief Judge
Bryant. ccccccccccccccccccscccces
Letter of Department of Commerce,
May 29, 1970, establishing
Amounts of Subsidies Paid dur-
ing Period of Law Violation.....
Merchant Marine Act, 1936, 46 U.S.C.
i> y POOCCETEREEEE TEP
False Claims Act - 31 U.S.C. 232,
233, 235; Procedure, Duties of
U.S. Attorney, Statute of
LAME CACIORR sc ccc dc es cbavesesasse
150a
153a
162a
164a
165a
la
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 conferrina 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
2a
By
/s/ Francis J. Lorson
Francis J. Lorson
Devuty Clerk
th
Enc.
cc: Hon. Wade H. McCree, Jr.
Kominers, Fort, Schlefer & Boyer
Kirlin, Campbell & Keating
Foley, Hoag & Elliot
Barrett, Smith, Schapiro & Simon
Shea & Gardner |
3a
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,
4a
Upon consideration thereof, it is
Ordered that said petition be and it hereby
is DENIED.
f/s/ Irving ®. Kaufman
Chief Judge
IRVING R. KAUFMAN
5a
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
Vv. 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
6a
Upon consideration thereof, it is
Ordered that said petition be and it
is hereby DENIED.
A. Daniel Fusaro
A. DANTEL FUSARO, Clerk
7a
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
oo OS Ne Oe a a ate OP AD he Se a ae aD Ns ee eh eas es en ee X
MARSHALL P. SAFIR, Docket No.
Plaintiff-Appellant, teoen
77-7626
-against-
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 Memorandum to Petition for
Rehearing en Banc.
MARSHALL P. SAFIR
Pro Se
41 Flatbush Avenue
Brooklyn, N.Y. 11217
8a
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.
hp The report no. 95-1680 on pages one
through sixteen set forth the relationships
between Assistant Secretaries for Maritime
Affairs Gibson (1971) and his successor Black-
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.
9a
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 "full 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
10a e
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 pvrosecution, 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 Pepre-
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 1
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
l4a
District of Columbia's decision per curiam in
Safir v. Kreps on July 27th, 1978.
Respectfully yours,
/s/ Marshall P. Safir
Marshall P. Safir
Pro Se
Copies sent to:
Clerk U.S. Court of Appeals for the Second
Circuit
J. Franklin Fort, Esq.
T.S.L. Perlman, Esq.
James N. Jacobi, Esq.
Elmer C. Maddy, ESq.
Robert T. Basseches, ESq.
Verne W. Vance, Jr., Esq.
Allen van Emmerick, Esq.
Daniel H. Margolis, Esq.
15a
UNITED STATES COURT OF APPEALS
For THE SEcoND CirRcvUIT
=—_or
Nos. 770, S40—September Term, 1977.
(Arcued May 31, 1978 Decided June 27, 1978.)
Docket Nos, 77-6219, 77-7626
a>
_—
ry
MarsHauu, P. Sarir,
Plaintiff-Appellant,
tOBERT J. BLACKWELL, Assistant Secretary
of Commerce, et al.,
Defendants-A ppellees,
——
MarsuHatu P. Sarir,
Plantiff- Appellant,
v.
American Export Lines, Inc., et al.
Defendants-Appellees.
4
}
Before:
Frienpty and Timbers, Circuit Judges,
and Hlorrman, District Judge.*
ws
ow
Of the District Court for the Eastern District of Virginia, sitting ly
designation,
3665
l6a
Appeals from orders of the District Court for the East-
ern District of New York, Jobn F. Dooling, Judge. One
order denied plaintiff's 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 Merchant Ma-
rine Act, 1936, 46 U.S.C. £1227, see Safr vy. Gibson, 417
F.2d 972 (2 Cir, 1969), cert. denied, 400 U.S. S50 (1970),
so as to state a claim against the intervening subsidy
recipients under the False Claims Act, 31 U.S.C. ¢* 231
and 252. The other order dismissed an action brought in
1977 against the subsidy reeipients under said Act.
Affirmed
a
ie ca
MarsHatt P. Sarm, Brooklyn, N.Y., Pro Se.
Ginsert S, Fretscner. Esq., Department of
Justice, New York, N.Y. (Barbara Allen
Babcock, Assistant Attorney General, and
David G. Trager, United States Attorney
for the Eastern District of New York. of
Counsel), for Defendants-Appellees P hert
J. Blackwell, et al.
Eimer C. Mappy, Esq., New York, N.Y, (Kir-
lin, Campbell & Keating, Esqs.. for Di fen-
dant-Appellee United States Lines, Tne.:
James N. Jacobi, Esq., and Kurrus, Dyer,
Jacohi & Mooers, Esqs., for Det nlayt-
alppellee American Export) Lines, Twe.;
J. Franklin Fort, Esq., T.S.L. Perlman,
Esq., William H. Fort, Esq., and Kominers,
Fort, Schlefer & Bover, for Defendants-
Appellees Lykes Bros, Steamship Company,
Inc, and Mvore-McCormack Lines, Ine. 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, Inec., 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,
Schapiro, Simon & Armstrong, Esqs., for
Defendants-Appellees American President
Lines. Ltd.. Prudential Lines, Inc.. PSS
Steamship Company, Inv. and Farrell
Lines, Inc., of Counsel.)
—
errr
Frienpiy, Circuit Judqe:
Plaintiff-appellant Marshall P. Safir has been laboring
for more than a decade 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 he 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. Ԥ 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
goverument 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 I).
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 took 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. Safir v. Gibson, 432 F.2d 137, 145 (2 Cir.),
cert. denied, 400 U.S. 942 (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), (Safir
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
* NSapphire. 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
Secretary of Commerce pursuant to 46 C.F.R. $209.1
(© 6.01), the latter, by order dated September 9, 1974, re-
3668
19%a
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).1. 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-
tarv’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 be 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 It 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 im 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
2a
‘S10 of the Merchant Marine Act, 46 U.S.C. § 1227, and
the corresponding clauses in their subsidy contracts made
them ineligible for subsidies while they were charging
rates which violated {15 of the Shipping Act. Safir sought
to invoke the qui tam statute in two ways: First, he filed
an action against the steamship companies on May 25,
1977. After Safir had complied with the requirements of
8L U.S.C. § 252(C) with respect to advising the Attorney
General 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 summary 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 Count.
that count does not arise out of the matter of original
3 The advantage of this course lay in the possibility of “relation lack.”
FLOR. Civ, PL oie}. and consequent aveidarce of serions Uitienlties
With respect to the statute of limitations.
4 Defendants have not raised the claim that. as held in Musted Stet.
Vv. Onan, 190 Pd 1, 6 (8 Cir.), cert. denied, 342 U.S. 869 (1951). a
htigant cannot prosecute a qui tam action under 31 U.S.C. § 222 pro se.
If we ussume that such a claim would be well founded, the remedy would
not be outright dismissal but a direction that the action he dismissed
unless an attorney is retained. Compare Phillips v. Tobin, 548 F.2:1
#98. 415 (2 Cir. 1976) (stockholder’s derivative action). At argument
Mr. Safir expressed willingness to retain an attorney if either of the
orders were reversed.
670
21a
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
520, 526-27; United States v. 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.
* 932, added by the Act of December 23, 1943, 57 Stat. 60s.
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 wa-
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 wn-
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
“false, fictitious or fraudulent” within the meaning of 3
U.S.C. § 231.
It is established that the “whenever it shall be made to
appear” defense to a qui fam suit being prosecuted by the
relator may be made not only by the United States but
hv a defendant. United States ex rel. Leslie v. Potomac
Electric Power Co., 208 F.2d 39, 41 (D.C. Cir. 1953):
United States v. Pittman, 151 F.2d 851, 853 (5 Cir. 1945)
(dictum), cert. dented, 328 U.S. 843 (1946). The leading
court of appeals decision construing the clanse. [wited
States an] Aloff v, Aster, 275 F.2d 281, 283 (3 Cir.). cert.
denied, 364 U.S, 894 (1960), gives it a liters! reading which
supports the ruling by the district judge that knowledge
hy the government prior to suit bars the action, even if
the plaintiff is the source of that knowledee. “We. like
others, see United States ex rel. Vaner v. Westinghouse
Llectriec Corp., 863 F.Supp. 1038, 1041-42 (WD. Pa. 1973
United States ex rel. Davis v. Lona’s Druas, Tue.. 411
F.Supp. 1144. 1150-52 (S.D. Cal. 1976) (dietum), are not
5 The jndge stated that the only new evidence alleged by Safir. ex
eerpts from whieh were attached to his opinion, “related to a cor +
arrangement to frustrate plaintiff's endeavor to vindicate his claims”
by a “deal’ and coneluded that this “is neither germane to the False
Claims Act case nor to the Government's claims under 46 U.S. 6 1227.
nor os it material that was not in the possession of the Government
ste it professedly came from ‘leaks’ from the Watergate Special Pros
evutor’s offee.” Sinve we agree that the matter was not germane to
the False Claims Act claim, we have no occasion to consider the cor-
reetness of the judge's two other propositions.
3672
23a
altogether happy with this approach, which extends the
clause considerably beyond the evil sought to be remedied
aud gives it a broader effect than would be indicated by
the legislative history reviewed by Judge Hastie in the
district court decision, 176 F.Supp. 208, 209-10 (B.D. Pa.
1950), affirmed in wfster. and by Judge Knox in Vance,
supra, 363 F.Supp. at 1041-42. Safir is at an opposite
pole from the “mere busyhody who copies a Government’s
indictment 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
rel Marcus v. Hess, 317 U.S. 537, 558 (1945), the case
Which inspired the 1943 amendments to the qu tim stat-
ute. Moreover, it seems rather curious that an informer
who makes only a partial or merely conelu-ory diselosure
to the United States before filing suit, should he free to
earry ona gu? fas action or to receive an award, 31 U.S.C.
Tone. )(1). if the United 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 Govern-
ment hed entertained any thought of pursuing the steam-
~hip companies under 31 U.S.C. £281) which vermits
recovery not simply of anv subsidies illegally paid but
of “the sum of $2,000, and, in addition, double the amount
of damages which 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
one 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
“hased upen 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. Burimah
Oil Co.. 558 F.2d 48, 45-46 (2 Cir.). cert. denied, 46 U.S.
L.W. 3357 (1977), see also United States er rel. Bayarsku
v. Brooks, 110 F.Supp. 175, 180) (DLN... 1955). afd 210
F.2d 257 (3 Cir. 1954): Cuited States cc vel, WeCans vy.
rmour & Co. 146 F.Supp. 546, 549 (D.D.C. 1956), afd
254 F.2d 90 (D.C. Cir.). cert, dent da. 358 TLS, 834 (1958),
While a case may arise when the literalism of cfster
would he so offensive to the intention of Congress as to
demand a more liberal approach, we do not think this
to be one. Despite his vears of valiant effort, when all is
said and done, Mr. Safir had three choices available to
lim in the late 1960's, He could have instituted a treble
Camege action on behalf of himself and his company for
injury to business or property under the precise terms of
* 810 of the Merchant Marine Act, 1996, 46 U.S.C. * 1227:
he could. if he had thought of it, have withheld at least
some information from the Gevernment and broneht a
qui fam action under 31 U.S.C. 6° 231-252: or he could
have done what he did, namely, endeavor to force the
Maritime Administrator to take action to recover sub-i-
dies illegally paid. Under either of the first two courses.
he would have been required to incur the complete bur-
den of the expense of prosecution unless the Government
elected to take over the qui tam action. Having opted for
tle third course and thereby involved the Government with
the full expense of prosecution, he may not now bring a
qui tam action on the basis of the same information he
has already furnished.
The orders are affirmed.
3674
25a
UNITED STATES DISTRICT COURT
FASTERN DISTRICT OF NEW YORK
MARSHALL P. SAFIR, ;
Plaintiff, :
Vv. 77 C 1093
AMERICAN EXPORT LINES, :
et al.,
Defendants.
MARSHALL P. SAFIR, j
Plaintiff, : 68 C 643
Vv.
ROBERT W. BLACKWELL, : MEMORANDUM
et al., and
Defendants. : CRDER
see ees © &@ © © = «© «= «= xX
Appearances:
MARSHALL P. SAFIR, pro se
ELMER C. MADDY and KIRLIN CAMPBELL &
KEATING, KOMINERS FORT, SCKLFEFFER
& 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 DAVIC G. 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. § 231 to the United
States. The ground of liability asserted
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 sunply-
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 Pistrict of Columbia
27a
Circuit, reported 551 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 the 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
"...Shall 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 II).
30a
The Maritime Administration, Maritime
Subsidy Board, 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. ke
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 $ 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 nct 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
agreenent 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
"ee the cleaia .«.. erosee 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 months 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. See. 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 3]
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 1063):
"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 qui 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 qui tam tam
interest in the Government 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 conm-
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
§.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 probable 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 olaintiff 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
Commission and the Maritime Subsidy
Board proceedings, resembles United
States v. Armour & Co., L.C. 1956, 146
F. Supp. 546, @&t"a, D.C. Cie. 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 Drugs, inc., S.D. Cal.
1976, 411 F.Supp. 1144, held 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 2U, 1977. /s/ D.J. Dooling
U. Ss D. J.
46a
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.
48a
Safir
A I have no documents, but I have --
that my information came from -- I will
put it this way. It came in 1973, about
October of 1973, by a telephone call
from a newspaper reporter who asked me
whether I knew anything about a deal
involving approximately $7,000,000 in
which --
49a
Safir
and he mentioned by name one Spyros
Skouras, Senior, had through someone in
the Republican Party -- and I am not
Sure whether it was Mr. Stans that he
mentioned by name or not -- had arranged
for this $7,000,000 to be paid over,
over a period of time, to parties with-
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.
@) 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.
Q 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 the
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?
A 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.
Q 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.
i
52a 9 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."
33
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
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
34
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.
Q 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
35
56a
Safir
said, of course I remember you.
Q Could you give us the rest of
the conversation as you remember it?
A 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 aqo, so
there is some license or liberty involved.
57a 35 cont.
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
36
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,
37
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?
6%a 38
Safir
A No, he did not.
@) 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.
9 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.
a) 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.
9 Did he tell you when Mr. Skouras
had been in contact with Mr. Nixon?
38 cont.
6la
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
-—
50
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.
50 cont.
63a
Safir
He had nothing much to say. He
looked like he was unhappy with the
whole conversation, and perhaps he
shouldn't have called me in the first
place.
So at that point I decided that
was the end
51
64a
Safir
of it, at least for then, and I certainly
-- I had nothing further to go on.
Everybody and his broth.r 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
F6a
UNITED STATES DISTRICT COURT
EASTERN DISTPICT OF NEW YORK
Plaintiff,
-against-
AMERICAN EXPOPT LINES,
Cefendant.
Plaintiff,
-against-
BLACKWELL,
Defendant.
77-C-1093
68-C-643
United States Courthouse
Erooklyn, New York
October 28,
1977
5:00 o'clock P.M.
Before:
HONORABLE JOHN F. DOOLING,
JR., U.S.D.J.
PERRY AUERBACH
ACTING OFFICIAL COURT REPORTER
que eee
——
67a ¥. é.
Appearances:
MR. MARSHALL SAFIR, PRO SE
GILBERT FLEISCHER, ESQ.
U. S. Government
ELMER MADDY, ESC.
Attorney for Trade-Line Defendants
ROBERT T. BASSECHES, ESQ.
Attorney for Non-Trade-Line
Defendants, et al. ;
6Ra CP. BS
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 34->S
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-3G
Safir-2, which was the one where the
collateral estoppel effect was decided by the
Court, further impaired that 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,
and 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 cepted this pro-
posal, the second prop and it was approv-
ed by the District Cou of the District of
Columbia in the antitrust case.
eer
Jla 3G -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 “ommerce, 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.
73a 38-39-40
Second, I would need any record of White
House calls to the home of Marshall Sapphire (se)
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 40-4 \
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, “a critical anal-
ysis" by one Martin B. Lewy,”%and on page 767,
and in answer to Mr. Basseches', there is an
Uw\42
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 requested.
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.
ee Seen
3.4 ub
77a
If in attempting to decide this I find
that it cannot fairly be decided one way or
the other without 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.
uu
78a
MR. BASSECHES: Right. That is cited
in the briefs. That does address the issue
of fraudulent concealment with respect to
the Statute of Limitations.
THE COURT: Thank you, gentlemen,
(Whereupon Court stood in recess for
the day.)
7%a
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NEW YORK
ee rr 4
MARSHALL P. SAFIR, Pro Se, and :
on Behalf of the United States
of America,
Plaintiff : Affidavit
and
-against- Complaint
AMERICAN EXPORT LINES ¢ 1093
AMERICAN PRESIDENT LINLS
LYKES BROS. STEAMSHIP CO., INC. :
MOORE McCORMACK LINES, Incorporated
UNITED STATES LINES, INC.
FARRELL LINES, INC. g
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.
ee
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 11, 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 exception, 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-
c Docket 65-13 Rates on Government Cargo
11FMC263-287 (1967)
18loomfield Steamship Company discontinued
operations in 1966
a eee
8la
time Administration in April 19732 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
appropriated 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
é See Attachment B, page 104a to 1l76a.
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 generally 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
following the period of violation in 1965 and
1966.
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
—————S—S ee
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
paragraph 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 the 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 1971 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 RB 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 pe riod
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 x
UNITED STATES ex rel.
MARSHALL P. SAFIR, :
Plaintiffs $ DECLINATION OF
APPEARANCE
ay * Civil Action
AMERICAN EXPORT LINES, No. 77 C 1093
et al., :
Defendants. :
-—=—eee ee oO OOO OO Oe oO ee Oe ee 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:
1. 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. In 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 No. 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. S-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, Inc.,
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 suppports 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 been 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
2 oe
MARSHALL P. SAFIR,
Plaintiff,
—
FREDERICK DENT, individually and as
Secretary of Commerce,
Defendant,
AMERICAN PRESIDENT LINES, LTD., et al.,
Intervening Defendants.
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.
9la
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
So #8 ee CB ae © OOS © e.46 69 6:4 OS OH 4.8 S
Secretary of Commerce
Date: September 9, 1974
92a
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93a
Opinion and Order of the Maritime Subsidy Board,
Dated April 16th, 1973
U.S. DEPARTMENT OF COMMERCE
MARITIME ADMINISTRATION
MARITIME SUBSIDY BOARD
————— -
Docket No. 8-243
Investigation of Alleged Section 810 Violation
In the matter of the complaint of Sapphire Steamship Lines,
Inc. re Alleged Violation by Atlantic and Gulf American
Flag Berth Operators (AGAFBO) of Section 810 of the
Merchant Marine Act, 1936, as amended.
A
Chairman, Robert J. Blackwell; Member, H. Clayton
Cook, Jr.; Alternate Mem»er, James S. Dawson, Jr.
Ge
Served Upon:
Marshall P. Safir, 41 Flatbush Avenue, Brooklyn, New
York 11217 pro se.
James N. Jacobi, Esq., Kurrus & Jacobi, 2000 K Street,
N. W., Washington, D. C. 20006 for American Ex-
port Lines, Inc.
J. Franklin Fort, Esq. and Richard S. Salzman, Esq.,
Kominers, Fort, Schlefer & Boyer, 1401 K Street,
N. W., Washington, D. C. 20005 for Lykes Bros.
Steamship Co., Inc. and Moore-McCormack Lines,
Incorporated.
John Williams, Esq., Kirlin, Campbell & Keating, 120
Broadway, New York, New York 10005 for United
States Lines, Inc.
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 3ist 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 Post Office Square,
Boston, Massachusetts 02109 for Farrell Lines, Ine.
Michael J. McMorrow, Esq., Maritime Administration,
Washington, D. C. 20235, as Public Counsel.
Docket No. 8-243 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 I’. Safir and
Arnold Weissberger, who along with others,’ had petitioned
246 U.S.C. § 1227 (1970).
?These 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,
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
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;
(c) Respondent AEL about $38,036 to be account-
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
or
MARSHALL P. SAFIR,
Plaintiff,
—against—
ANDREW Gibson, Acting Maritime Administrator, Maritime
Administration, U.S. Department of Commerce, et al.,
Defendants.
$$$
DooLine, Dw.:
Plaintiff moves for an order requiring the Secretary of
Commerce to pay the purchase price of the 8.8. 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 8.8.
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, Ine. (on
the Government’s purchase of the S.8S. UNITED STATES
under the public Law), to Moore-MeCormack Lines,
Incorporated (on the sale of the S.S. ARGENTINA and
the S.S. 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, Ine. under
the same Public Law.
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 UNITED STATES at depreciated cost
less the unpaid principal and interest on the mortgage on
the vessel for lay-up in the National Defense Reserve Fleet.
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 biilion 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 aflidavit 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
tam 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
rt pe
No, 237—September Term, 1972.
(Argued November 27, 1972 > Decided November 29, 1972.)
Docket No. 72-1753
>
MARSHALL I’, SAFIR,
Appellant,
V.
Roserr J. BLACKWELL, Maritime Administrator, Maritime
Administration, U.S. Department of Commerce, et al.,
MoorkE-MCCORMACK LINES, INC., UNITED STATES LINES,
INC., AMERICAN Export LINES, INC., and PRUDENTIAL-
GRACE LINES, INC.,
Appellees.
——E— ee
Before:
I'RIENDLY, Chief Judge,
WATERMAN and Hays, Circuit Judges.
, Y
a
Appeal from an order of the District Court for the
astern District of New York, John I’. Dooling, Jr., Judge,
denying plaintiff's motion for an 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.
l0la
Decision (Per Curiam)
PER CURIAM;
In this case, which is now here for the third time, see
Safir v. 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. 2438, 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 plaintiff'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 unnecessary to the deci-
102a
Decision (Per Curiam)
sion and we have no occasion either to approve or to dis-
approve it.
Affirmed.
+ Oe
MARSHALL IP, SAFIR, Appellant Pro-Se.
GILBERT S$, ILEISCHER, Esq., New York, N.Y.,
Attorney in Charge, New York Office, Ad-
miralty and Shipping Section, Department
of Justice (Harlington Wood, Jr., Esq.,
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, Ine.
ELMER C, MAppy, Esq., New York, N.Y. (Kirlin,
Campbell & Keating, New York, N.Y., of
Counsel), for Appellee United States Lines,
Ine.
JAMES N. JAcosl, Esqg., Washington, D.C.
(Kurrus and Jacobi, Washington, D.C., of
Counsel), for Appellee American Export
Lines, Ince.
MICHAEL O, FINKELSTEIN, E'sq., 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.
SE
103a
Memorandum Incorporating Findings of Fact
and Order, Dated June 23, 1971
UNITED STATES DISTRICT COURT
EASTERN District OF NBW YORK
—_————al > 6
MARSHALL P. SAFIR and SAPPHIRE STBAMSHIP LINES, INC.,
Plaintiffs,
—against—
ANpREW Ginson, Acting Maritime Administrator, Maritime
Administration, United States Department of Com-
merce, JAMES S. Dawson, Jr., Secretary, Maritime
Subsidy Board, Maritime Administration, United States
Departmént of Commerce, and MAURICE STANS, Secre-
tary of Commerce of the United States, AMERICAN
PRESIDENT LINES, LTp., PRUDENTIAL LINES, INC. and
Grace Linz, [Nc. (Now operating as “Prudential-Grace
Lines, Inc.”") and Farre.t Lines, INc., AMERICAN Ex-
PORT ISBRANDTSEN LINES, INC.,, BLOOMFIELD STEAMSHIP
Co., LyKes Bros, STEAMSHIP COMPANY, INC., MOORE
McCorMAcK LiNngEs, INc., and UNITED STATES LINEs,
ING.,
Defendants.
Doo.LinG, 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, have 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.
105a
Memorandum Incorporating Findings of lact
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” (432 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 F.2d at 140, col. 2), which,
adventitiously, are found undisbursed and which, therefore,
present afresh the, indeed, related but new question, should
the Administratien 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, 3 1227, second paragraph (“Section S10") ?
|
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, arjd 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 make, 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 Administration should
seek to recover money long since paid out and embedded in
ship operations. The right to receive subsidy paymenis
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 8, 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 8-243.
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-
107a
Memorandum Incorporating Findings of Fact
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 8. 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 so
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
198a
Memorandum Tucorporating Findings of l’act
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
OrpverED that the defendants’ application for a stay is
denied; and it is further
ORDERED that plaintiffs motion for injunction is in all
other respects denied; and it is further
OrpereD 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. DOoLine, JR.,
U. 8. D. J.
109a
Opinion of the Court of Appeals on
Petition for Rehearing
UNITED STATES COURT OF APPEALS
Tor THE SECOND CIRCUIT
No. 552—September Term, 1969.
(Decided June 18, 1970.)
Docket No. 34355
rr
MARSHALL VP. SArir, ARNOLD WEISBERGER and
SAVPHIRE STEAMSHIP LINES, INC.,
Plaintiffs-Appellants,
—_—vV.—
Anprew Gipson, 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 Exrporr ISBRANDTSEN LINES, JNC., BLOOMFIELD
SrTeaMsuir Co.; Lykes Bros, STEAMSHIP COMPANY,
Inc.; Moork-McCorMAck LINES, INC.; UNITED STATES
LINES, INC., AMERICAN PRESIDENT LINES, LTD. ; PRUDEN-
TIAL STEAMSHIP Co., INC, and PRUDENTIAL GRACE LINES,
INc.; and FARRELL LINES, INC.,
Intervenors.
qquququ re —_ —
Before:
LuMBARD, Chief Judge,
IRIENDLY 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.
llla
Opinion of the Court of Appeals on Petition for Rehearing
for penalties, it 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. 2021. 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 for 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 Adminisiration; 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, 68 Civ. 643
(JFD)
- against -
ROBERT J. BLACKWELL, Assistant
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 AMENDED
for C.R. Smith and Maurice COMPLAINT
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.,
ll4a
BLOOMFIELD STEAMSHIP CO.,
PRUDFNTIAL GRACE LINES, INC.
and PRUDENTIAL STEAMSHIP CO.,
INC.,
Carrier Defendants,
Plaintiffs by their attorneys, for
their amended complaint, allege, as
follows:
FIRST: This action arises and
this Court has jurisdiction by virtue of
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 3l U.S.C.
sec. 231, 232, 233, 235 (False Claims
Act).
SECOND: At all relevant times,
plaintiff, Marshall P. Safir, has resided
in the County 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.
At all relevant times, Sapphire Steam-
ship Lines, Inc. was a Delaware corpora-
tion, having its principal of business
in the County of Kings, State of New
York and in the Eastern District of New
York.
;
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 the 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 aiso subsidies referred
to as construction differential subsidies,
provided for by 46 U.S.C. §§115] 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 <« ,ecific
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 ir an action to escrow
the proceeds of ship sales 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-3l 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-31
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
tne 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:
* * *
(c) Expenses incurred while the
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 for any reason not eligible for
a subsidy under the Act;
* * *
1I-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-
12a
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.
(6) 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 ajreements included an
affidavit which states in substance as
follows:
I, Se ’
,name 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.
------------- , dated as of
were ere eee ee ---- 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
os esieatentestetenientestetesieeteeeteteteteaten -under said
Agreement. 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
)2curred under paragraph II-22 of such
vyreement in that it had made material
nisrepresentations, had failed to disclose
material 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 subsidy 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
13%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 Ct2}.
And for such other and further
relief as the Court may deem just and proper.
Respectfully submitted,
/s/ “arshall P. Safir
MARSHAL P. SAFIR,
41 Flatbush Avenue
Rrooklyn N.Y. 11027
Tel. No. 858-2700
Dated: September 13th, 1977.
l3la
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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MARSHALL P. SAFIR,
Plaintiff,
- against - AFFIDAVIT
ROBERT J. BLACKWELL, 68 Civ. 643
Assistant Secretary for (JFD)
Maritime Affa
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