Horizon Lines agreed to plead guilty and will pay $45 million in fines for antitrust violations in the Puerto Rico trade. The carrier also announced management changes, including the retirement of longtime CEO Charles G. Raymond, and said it is asking lenders to waive a default judgment arising from the guilty plea.
The plea agreement with the Justice Department states that Horizon won't face additional charges related to the Puerto Rico trade and will not be charged with antitrust violations in the Alaska trade. The Justice Department indicated Horizon, the largest U.S. domestic ocean carrier, is not the subject or target of any DOJ investigation in the Hawaii or Guam trades.
Horizon said the Justice Department also agreed not to bring criminal charges against any current director or officer of Horizon, but that the agreement did not extend to Raymond or John V. Keenan, executive vice president.
Raymond, 67, is retiring after 45 years with Horizon and its predecessor company Sea-Land Service. Keenan has been granted a leave of absence, Horizon said.
Alex J. Mandl, a former chairman and CEO of Sea-Land, will become chairman. Stephen H. Frazer will become interim president and CEO. Brian W. Taylor, currently chief commercial officer, will take on the additional duties of chief operating officer. Michael T. Avara will be promoted from senior vice president and chief financial officer to executive vice president and chief financial officer. The changes are effective March 11.
"Chuck Raymond and John Keenan are highly regarded veterans of the industry and have made tremendous contributions to our company over their decades of services," said William J. Flynn, the Horizon board's lead independent director. "Both have been instrumental in the growth of the company and steered it through recent challenges presented by the global economic recession and the Department of Justice investigation."
Three former officials of Horizon and two from Sea Star Line pleaded guilty in 2008 to charges related to a federal investigation of antitrust violations in the Puerto Rico trade. The criminal investigation was followed by dozens of shippers' civil antitrust lawsuits that later were consolidated into a class action in San Juan. Horizon, Sea Star and Crowley Maritime agreed to settle the civil cases for a total of $53.25 million.
"We have taken major steps to put the issues in the Puerto Rico trade lane behind us and are working diligently to resolve the civil litigation arising out of the DOJ investigation as it relates to Puerto Rico," Avara said. "These steps include reaching a settlement with the plaintiffs in the direct-purchaser Puerto Rico class-action antitrust cases. As part of this process, Wal-Mart recently released us from antitrust claims related to the Puerto Rico trade lane."
Wal-Mart was one of numerous shippers who opted out of the class-action settlement, a move that freed them to pursue their own settlements with the carriers.
In a separate case, Horizon said it entered a $1.8 million settlement with the Commonwealth of Puerto Rico and attorneys representing indirect purchasers of goods carried by shippers who allegedly paid inflated prices for goods moved by carriers that engaged in price-fixing between 2002 and 2008.
The carrier said it was trying to amend its current credit agreement to overcome a default triggered by the $45 million judgment in the antitrust case. "The company also is requesting, by early March, relief from anticipated future financial covenant noncompliance, as it seeks new long-term financing," Avara said.
"Horizon Lines and its advisors are engaging in constructive discussions with lenders to identify the best refinancing options for our company," Avara said. "We are working closely with our lenders and targeting completion of the refinancing process in the second or third quarter."
Horizon's $45 million fine is payable over five years: $1 million within 30 days of court sentencing, $1 million a year later, $3 million on the second anniversary, $5 million on the third anniversary, $15 million on the fourth anniversary and $20 million on the fifth anniversary.
-- Contact Joseph Bonney at email@example.com.