(CN) – Sea Star Line’s former president must serve a five-year prison sentence for his role in a conspiracy to fix prices for shipping goods to Puerto Rico, the First Circuit ruled.
A federal judge in Puerto Rico sentenced former Sea Star Line president Frank Peake to five years in prison for his leadership role in conspiracy to fix prices charged by ocean freight companies that operate between the U.S. and Puerto Rico.
Peake’s is the longest prison sentence ever imposed for an antitrust violation.
His former employer, Sea Star, pleaded guilty to antitrust violations in 2011, and was ordered to pay a $14.2 million criminal fine. Including Sea Star’s fine, the three largest freight carriers have paid more than $46 million in penalties.
The First Circuit upheld Peake’s sentence on Wednesday, despite finding that the prosecutor made improper comments at trial. It called Peake’s crime “one of the largest antitrust conspiracies in the history of the United States.”
The prosecution told Peake’s jury that the conspiracy raised the price of goods sold to customers on Puerto Rico, including costs for the school lunch program, leaving [the government] with “less money … to buy food for school children,” according to the ruling.
However, the trial judge quickly gave the jury a curative instruction, telling them, “You are not to decide this case based on pity and sympathy to Puerto Rican businesses, to Puerto Rico, or to Puerto Rican consumers.”
A three-judge panel for the Boston-based appeals court said it was unlikely the prosecutor’s statements unfairly prejudiced Peake given the government’s strong case against him.
“The testimony of co-conspirators and direct customers of the shipping companies established that there was a conspiracy to fix prices, that Peake knowingly participated, that the conspiracy had the effect of increasing shipping rates and surcharges, and that this affected interstate commerce,” Judge Juan Torruella wrote for the panel. “The government also introduced numerous exhibits, including emails sent by Peake himself from his company email, establishing the existence of a conspiracy.”
The First Circuit also held that the trial judge did not abuse his discretion in permitting the testimony of representatives from businesses affected by the conspiracy.
“After all, the conspiracy’s effect on interstate commerce was an element of the offense the government was required to establish,” and witnesses never claimed that the higher costs of shipping were indirectly transferred to their customers, Torruella wrote.
The appeals court rejected Peake’s claim he should be resentenced.
Torruella found that the trial court correctly calculated that more than $500 million worth in commerce was affected by the conspiracy, resulting in a twelve-level enhancement.
“Testimony…presented at trial showed that the conspirators had colluded to fix the fuel surcharges, and that revenue from the fuel surcharge was therefore a part of the conspiracy. The fixed surcharges affected all cargo transported, thus affecting all sales, including revenue from non-container freight and from all customers, even if that freight and those customers had never explicitly been made a part of the conspiracy,” the judge wrote in the 40-page ruling.
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