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From Antitrust Law Daily, October 15, 2015

Freight executive’s conviction, prison sentence affirmed in price fixing suit

By Greg Hammond, J.D.

A former executive for Sea Star Line LLC, a Puerto Rico freight carrier, could not overturn a 60 month prison sentence and $25,000 criminal fine for his participation in a conspiracy to fix prices for maritime freight services between the continental United States and Puerto Rico. The U.S. Court of Appeals in Boston affirmed the conviction and sentence, finding that the federal district court in San Juan, Puerto Rico, made no errors and “marshaled this trial in a commendable manner” (U.S. v. Peake, October 14, 2015, Torruella, J.).

The November 2011 indictment charged that the former chief operating officer and president of Sea Star Line, Frank Peake, conspired to suppress and eliminate competition by agreeing to fix rates and surcharges for Puerto Rico freight services. To execute the scheme, according to the indictment, conspirators attended meetings and engaged in conversations and communications to (1) fix, stabilize, and maintain rates and surcharges for Puerto Rico freight services; (2) allocate customers of Puerto Rico freight services among the conspirators; and (3) rig bids submitted to customers of Puerto Rico freight services.

On appeal, Peake raised a number of errors concerning the trial and sentencing, including challenges to: (1) the validity of his indictment; (2) the scope of the search warrant executed by the United States; (3) the district court’s denial of his pre-trial motion to change venue; (4) improper remarks made by the prosecutor during trial; (5) the lower court’s ruling allowing prejudicial testimony; (6) the lower court’s denial of Peake’s request for a theory-of-defense instruction; (7) the lower court’s denial of Peake’s request for a mistrial during jury deliberations; and (8) the length of his sentence, which was based on the amount of commerce affected by the conspiracy, and which Peake argued the court incorrectly computed.

Pre-trial challenges. The appellate court rejected each of Peake’s arguments, first finding the indictment proper and that Peake was correctly charged because Puerto Rico is “to be treated like a state and not like a territory” for purposes of the Sherman Act. The commerce affected by the conspiracy was consequently between “states,” and Section 1 of the Sherman Act fully applied.

Peake’s motion to suppress the government’s search of his personal electronics was also properly denied, the court next decided. In particular, the court was not required to determine whether the second warrant was invalid or whether the good faith exception applied, because the seized and imaged evidence Peake sought to suppress was within the scope of the first warrant.

The lower court also did not abuse its discretion in denying Peake’s motion for change of venue from Puerto Rico to Florida because Peake never alleged any outside influence or publicity that could have affected, from the outset of trial, the jury’s consideration of the evidence presented.

Trial challenges. Peake next argued that the lower court should have granted him a new trial on grounds that the government’s opening statement “poisoned the well” by implying the conspiracy impacted consumers, and consequently the jurors. Although the prosecutor’s remarks were deemed improper by the appellate court, the effects of the misconduct did not poison the well given: (1) the extent and the level of detail the lower court included in its curative instruction; (2) the fact the district court judge intervened repeatedly in the examination of witnesses to avoid any reference to end consumers; and (3) the “overwhelming amount of corroborating documentary evidence” tying Peake to the conspiracy.

The appellate court also concluded that the lower court: (1) did not abuse its discretion in allowing the testimony of representatives from businesses affected by the conspiracy, because the conspiracy’s effect on interstate commerce was an element of the offense, and the government’s examination was limited to establishing that element; (2) did not improperly deny Peake’s requested theory-of-defense jury instruction because the court offered essentially the same instruction, but in its own words; and (3) did not err when instructing the jury to “rest and come back in the morning to continue deliberations” after the jury sent two notes to the judge on the first day of deliberations stating that they were unable to reach a unanimous verdict.

Sentencing. Lastly, the lower court did not incorrectly calculate the volume of commerce affected by the conspiracy, thereby improperly applying a twelve-level enhancement under 2R1.1 of the U.S. Sentencing Guidelines. Rather, the record demonstrated: (1) the court would have reached its more-than-$500 million number for the volume of affected commerce even without including commerce that may have occurred before 2005, when Peake was charged with joining the conspiracy; and (2) the data produced by Sea Star indicated that its total revenue between 2005 and 2008 amounted to more than $565 million, which was correctly used by the court to conclude that the twelve-level enhancement applied.

The case number is 14-1088.

Attorneys: David Oscar Markus (Markus & Markus, PLLC) for Frank Peake. Shana M. Wallace, U.S. Department of Justice, Antitrust Division.

Companies: Sea Star Line LLC

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