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US Attorney Eyes Possible Forfeiture Of Cocaine Container Ship

US Attorney Eyes Possible Forfeiture Of Cocaine Container Ship

A federal prosecutor filed to seize a container ship at the center of one of the largest U.S. cocaine busts in history, a first step to a possible forfeiture of the vessel.

William McSwain, United States Attorney for the Eastern District of Pennsylvania, said agents from U.S. Customs and Border Protection executed the seizure warrant for the MSC Gayane. The ship was the scene of a June 18 bust at the Port of Philadelphia where officers found nearly 20 tons of cocaine with a street value of nearly $1 billion.

The MSC Gayane is now "subject to possible forfeiture to the United States" as a result of the drug bust.

The MSC Gayane is a Libera-flagged, 2018-built container ship, capable of carrying 11,600 twenty-foot equivalent (TEU) containers. McSwain said the "seizure of a seafaring vessel this massive, roughly the size of two city blocks, is complicated and unprecedented," but was necessary due to the size of the bust.

"When a vessel brings in such an outrageous amount of deadly drugs into Philadelphia waters,  my office will pursue the most severe consequences possible," McSwain said in a statement.

As promised, here's my statement on the seizure of the shipping vessel MSC Gayane.

— US Attorney William M. McSwain (@USAttyMcSwain) July 8, 2019

Basil Karatzas, chief executive officer of valuation advisory Karatzas Marine Advisors & Co., said a newbuild container ship meeting the Gayane's specifications would cost around $150 million. In the second-hand market, the Gayane might fetch around $100 million or more, he added.

But the market for selling such a vessel is limited to only about five to 10 companies, Karatzas said.

Ship arrests and auctions are exceedingly rare by entities that do not have a direct financial stake in the vessel (such as a creditor). A North Korean vessel seized by the U.S. government now faces a claim from the family of Otto Warmbier (who died while in North Korean custody).       

The Gayane was chartered and operated by Italy's Mediteranean Shipping Company (MSC). But Karatzas said the beneficial owner is J.P. Morgan's (NYSE: JPM) maritime investment arm.

"I am sure J.P. Morgan will be going after MSC if the U.S. government arrests and auctions this vessel," Karatzas said. "The charterer is responsible for everything that occurs on the ship and returning it to its owner."

MSC is already likely on the hook for the daily costs of maintaining the ship while it is arrested. Karatzas said. He estimates that a docking fee that can cost up to $2,000 per day and insurance costs upwards of $10,000 per day would have to be covered while the ship is under arrest.

Image sourced from Pixabay

Posted-In: container ship Freight FreightwavesNews Legal Markets General Best of Benzinga


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