December 6, 2022

The Nerve

Where Government Gets Exposed

S.C. Ports Officials Embroiled in Federal Case with Ex-Employer

ShipA senior vice president and a high-level trade manager at the S.C. Ports Authority are accused by a major shipping company where they once worked of helping to orchestrate an elaborate routing scheme that cost their former employer millions, according to a case before the Federal Maritime Commission.

An administrative law judge with the Federal Maritime Commission (FMC) last month dismissed the complaint filed by Japan-based Mitsui O.S.K. Lines (MOL) Ltd., which claims to have the world’s largest shipping fleet. But the legal case, which started in 2009, appears to be far from over, as Mitsui has asked the full commission to reverse the judge’s decision.

Documents filed by Mitsui allege that Paul McClintock, who, according to the Ports Authority’s website, is the authority’s senior vice president and chief commercial officer, and previously was the vice president for North American sales for MOL (America) Inc., a Mitsui subsidiary; and Rebecca Yang, the Port Authority’s manager of trans-Pacific trade development and who formerly worked for MOL (America) Inc., according to her online Linked-In account, participated while with Mitsui in a scheme known as “split routing” in violation of the U.S. Shipping Act.

The scheme, which ran from 2004 through “at least” 2006, caused at least $4.5 million in damages to Mitsui, the complaint contends.

McClintock was the vice president and general manager of Mitsui’s operations in the South Atlantic and Gulf of Mexico from 1995 to 2006 or 2007 before becoming responsible for the company’s entire U.S. sales force, as described in last month’s ruling. He left the company in 2009, about a month before Mitsui filed its complaint with the FMC, though the circumstances of his departure were “unclear,” Administrative Law Judge Paul Lang said in his July 9 ruling.

McClintock joined the S.C. Ports Authority in 2009, according to the authority’s website. His annual salary is listed at $245,000; in comparison, Jim Newsome, who became the authority’s president and CEO on Sept. 1, 2009, receives an annual salary of $370,000, records show.

Yang began working for Mitsui about 1993 and was fired in February 2011; she said in a deposition that she was made a scapegoat for “shenanigans” in Asia and was fired after Mitsui was “fined” by the FMC, according to Lang’s ruling. Mitsui in legal papers filed last month said, citing a court finding in another case, that Yang was fired for “passing confidential information to customers.”

Yang’s Linked-In account says she joined the Ports Authority in March 2011. Her current annual salary is listed at $105,200, records show.

McClintock and Yang did not respond to written and phone messages Friday from The Nerve seeking comment.

The “split-routing” scheme, according to Mitsui’s complaint, filed May 5, 2009, and related documents, typically worked like this: Georgia-based Global Link Logistics Inc. (GLL), a federally licensed “Ocean Transportation Intermediary,” would arrange for Mitsui to transport goods from Asia to U.S. ports. Global Link would provide Mitsui with “false information” about the final inland destinations, and rates for the bogus destinations would be billed by Mitsui and paid by Global Link.

“In order to conceal the true destinations from MOL, Global Link employees created false invoices, addresses, and bills of lading,” the complaint said. “Global Link employees were often trained and reminded not to tell representatives of MOL of the true destination of goods that were diverted, and in fact, they were trained to lie if they were asked.”

Without informing Mitsui, Global Link would issue a second bill to a hired trucking company, instructing the hauler to disregard instructions about the original fake destination provided by Mitsui and instead deliver the goods to the actual destination, according to the complaint.

The rates paid to Mitsui by Global Link for deliveries to the fake destinations typically were lower than the rates set for the actual destinations, according to the complaint, which claimed that it resulted in Mitsui being underpaid by “hundreds of dollars per container for thousands of containers.”

“The purpose and result of Global Link’s false booking practice was to obtain shipping services from ocean carriers, including MOL, at rates better than the rates which Global Link was otherwise required to pay,” the complaint said.

The plan to defraud Mitsui relied on the involvement of McClintock and Yang, Mitsui alleged in documents filed with the FMC.

Mitsui in documents filed with the FMC contended that the “overwhelming evidence is that only Paul McClintock and Rebecca Yang of MOL knew about split routing.”

“McClintock and Yang had aligned themselves with GLL against the interests of MOL, and GLL knew it,” Mitsui said in its July 31 response to Lang’s ruling.

In his ruling, Lang said while at Mitsui, McClintock “interacted with major customers,” including Global Link, and that Yang was Mitsui’s “primary contact with Global Link and would handle issues involving contract negotiations and rates along with McClintock.”

“It is possible that McClintock was involved either in hiring Yang or placing her in the position of primary responsibility for the Global Link account,” according to the ruling.

“If Mitsui is to be charged with knowledge of the split routing scheme, it must be through the knowledge and actions of McClintock and, to a lesser, extent, of Yang,” Lang said, noting that the pair “set the policy (whether or not official) as well as the tone.

“McClintock’s attempt to confine knowledge of the split routing to upper level management of Mitsui and Global Link suggests that he suspected that, whether or not split routing was illegal, it was at least questionable.”

But Lang also ruled that “senior Mitsui management placed McClintock and Yang in positions which justified Global Link’s reliance on their authority to act on behalf of Mitsui,” adding, “Stated otherwise, McClintock and Yang had at least apparent authority to act on behalf of Mitsui in consenting to and encouraging the practice of split routing by Global Link.”

In dismissing Mitsui’s complaint, Lang said the “salient point is that Mitsui went into the arrangement with eyes wide open.”

“McClintock and Yang, with at least apparent authority from Mitsui, accepted the benefits to Mitsui of the arrangement, which were not inconsequential, in return for the monetary loss, if any, that Mitsui suffered,” he said.

In its initial June 17, 2009, response to Mitsui’s complaint, Global Link, which had a change in ownership in 2006, acknowledged that “historically” it had engaged in “split routing,” though the company denied defrauding MOL.

“The Complaint is barred by MOL’s unclean hands in that MOL knew of, approved, and benefited from the alleged ‘split routing,’ ‘mis-booking,’ and ‘re-routing’ practices,” Global Link said in its response. “MOL in fact sought to continue the practices even after the sale of Global Link in 2006, because they preferred not to be bothered with negotiating a multiplicity of door points.”

Global Link filed a counterclaim against Mitsui, which Lang dismissed in his ruling last month.

Efforts by The Nerve last week to reach attorneys for Mitsui were unsuccessful. Brendan Collins of GKG Law of Washington, D.C., an attorney for Global Link, declined to comment on specifics of the case when contacted Friday by The Nerve, noting, “We’ve got to file our appeal to the full (Federal Maritime) Commission.”

Asked when the commission would hear the appeal, Collins replied, “My guess is that it won’t be any time too soon.”

Reach Brundrett at (803) 254-4411 or Follow him on Twitter@thenerve_rick. Follow The Nerve on Facebook and Twitter @thenervesc.

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