SEA BOX, Inc., a corporation specializing in the design, modification, and manufacturing of shipping containers headquartered in Cinnaminson, New Jersey, has entered into a settlement agreement with the United States resolving allegations that it violated the Cargo Preference Act and its contracts with the Department of War by using foreign-flagged vessels to transport shipping containers manufactured for the Department of the Army, Department of the Air Force, and Defense Logistics Agency, Senior Counsel Philip Lamparello announced.

According to the contentions of the United States contained in the settlement agreement, since approximately 1904, any supplies bought for any Department of War agency may only be transported by sea in a vessel of the United States.  This requirement is found both in the Cargo Preference Act and in the Defense Federal Acquisition Regulations, and it is incorporated into defense contracts. The requirements protect American shipping and ensure that the United States has a merchant marine capable of commercial and military use.

Between late 2017 and late 2021, SEA BOX was awarded approximately 35 contracts to provide shipping containers consistent with International Organization for Standardization (ISO) standards for the Department of the Army and Department of the Air Force, primarily through the Defense Logistics Agency. Notwithstanding the legal prohibitions on doing so, SEA BOX arranged to have these containers delivered on less expensive, foreign-flagged vessels.  In so doing, SEA BOX not only deprived U.S.-flagged shipping of revenue, but it also reduced the cost of its own bids, undercutting competition that followed the statutory and contractual requirements.  When confronted by military authorities about the issue, SEA BOX presented inaccurate, misleading information about its actions.  SEA BOX has agreed to settle claims under the civil False Claims Act for a payment of $2.6 million, plus interest, over a three-year schedule.

“Protecting American business is a critical part of the mission of the Department of Justice and of the United States military. We support American shipping through contracting and enforcement, and this Office will prosecute any entity that takes from American business in order to win contracts with the United States government.”

– Senior Counsel Philip Lamparello

“Ensuring companies follow statutory and contractual requirements is an important part of protecting the Department of Defense procurement process,” said Christopher M. Silvestro, Special Agent in Charge, DCIS Northeast Field Office, the law enforcement arm of the Department of Defense’s Office of Inspector General.  “DCIS will continue to work with the Department of Justice and our law enforcement partners to pursue those companies that try to corrupt and compromise the integrity of the system.”

“This settlement sends a clear message: AFOSI will not tolerate those who prioritize profit over the integrity of the federal procurement process,” said Special Agent in Charge William W. Richards of the Air Force Office of Special Investigations (AFOSI). “We, alongside our law enforcement and prosecutorial partners, will work tirelessly to combat fraud threatening the Department of the Air Force.”

Senior Counsel Lamparello credits special agents of the Defense Criminal Investigative Service, the Department of the Army’s Criminal Investigative Division, the Department of the Air Force’s Office of Special Investigations, and members of the Defense Contract Audit Agency, Defense Logistics Agency, and U.S. Department of Transportation Maritime Administration, with the investigation.

The government is represented by Assistant U.S. Attorney Paul W. Kaufman of the Healthcare Fraud and Opioid Enforcement Unit.
Source: U.S. Attorney’s Office, District of New Jersey