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UNITED STATES COURT OF FEDERAL CLAIMS

SEALIFT, INC., Plaintiff, v. UNITED STATES, Defendant.

) ) ) ) ) ) ) ) )

Docket No. 07-627C

Pages: Place: Date:

1 through 124 Washington, D.C. June 9, 2008

HERITAGE REPORTING CORPORATION Official Reporters 1220 L Street, N.W., Suite 600 Washington, D.C. 20005-4018 (202) 628-4888 [email protected]

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1 IN THE UNITED STATES COURT ) ) ) ) ) ) ) ) ) OF FEDERAL CLAIMS

SEALIFT, INC., Plaintiff, v. UNITED STATES, Defendant.

Docket No. 07-627C

Courtroom 6, Room 507 National Courts Building 717 Madison Place NW Washington, D.C. Monday, June 9, 2008 The parties met, pursuant to notice of the Court, at 9:58 a.m. BEFORE: HONORABLE SUSAN G. BRADEN Judge

APPEARANCES: For the Plaintiff: TIMOTHY B. SHEA, Esquire Nemirow Hu & Shea 1629 K Street, N.W., Suite 500 Washington, D.C. 20006 (202) 835-0300 For the Defendant: CHRISTOPHER L. KRAFCHECK, Esquire U.S. Department of Justice Civil Division Commercial Litigation Branch 1100 L Street, N.W. Washington, D.C. 20530 (202) 305-0041

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2 APPEARANCES: (Cont'd)

Also for the Defendant: CARA R. CONLIN, Esquire JOEL A. WEGER, Esquire Military Sealift Command 914 Charles Morris Court, S.E. Washington Navy Yard, Building 210 Washington, D.C. 20398 (202) 685-5178 / 685-5174

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3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 are. MR. SHEA: Timothy Shea. Good morning, Your Honor. I'm And I water? off. THE CLERK: All rise. P R O C E E D I N G S (9:58 a.m.) The United States

Court of Federal Claims session, the Honorable Susan G. Braden presiding. THE COURT: MR. SHEA: Good morning. Good morning, Your Honor. Good morning, Your Honor. Is everybody I don't

MR. KRAFCHECK: THE COURT:

Sit down.

comfortable enough to take their jackets off? want to lose anybody here. morning.

It's actually cool this

Sometimes this courtroom is unbearably hot. I'm very serious, you can take your jackets

There is no point, unless you're -- well, keep

them on, then. (Laughter.) THE COURT: Okay. Okay. Plaintiff, I'm ready whenever you See if I care. Do you all have

I'm here on behalf of Sealift.

would propose to speak in support of our motion for judgment on the administrative record. I don't know whether Your Honor has a time Heritage Reporting Corporation (202) 628-4888

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4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 kindly. As you know, Sealift is a vessel owner and operator based in New York. They have had this the time. Okay? MR. SHEA: Very well, Your Honor. Thank you limit, but what I propose to do is speak to the four particular issues, the sort of major errors that we assign in this activity. And then I would like to

speak to the standard of review with respect to those. And if that's all right, I'd like to proceed. THE COURT: That's fine. And my law clerk I'm

said you wanted to sit down; that's fine with me. real easy-going. MR. SHEA:

Your Honor, I would be pleased to

stand up, but if I find myself wanting to refer to things, then -THE COURT: I am very informal. Make

yourself as comfortable as you wish. MR. SHEA: THE COURT: Thank you, Your Honor. And I don't really care about

You take what time you feel you need.

contract for the carriage of, a time charter contract for which they carry fuel for the military, for perhaps a couple decades. Up until the time of the award that's in Heritage Reporting Corporation (202) 628-4888

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5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 controversy here, they had been providing the service with a vessel called the Montauk. There was a first MSC solicited In May of

iteration for this award in mid-2005. for a time charter for, in early 2005.

2005, MSC made an award to Sealift for the Montauk. And intervenor, TransAtlantic Lines -- and I'll refer to them as TAL -- protested that award. And in

connection with that award, first of all MSC -THE COURT: MR. SHEA: THE COURT: MR. SHEA: It was protested at the GAO? Yes, it was, Your Honor. Okay. In connection with that protest,

MSC inadvertently, in response to some questions that came up at a debriefing, MSC provided to TAL some financial, an analysis of their offer. At the same

time they provided the very same analysis of the Sealift offer. And so at that time they had disclosed Sealift numbers, Sealift numbers to TAL. And MSC then

decided, first of all, that they were going to reopen the negotiations on that particular contract activity. And they also made a decision, and that was dated July 7, 2005, to disclose to Sealift TAL's numbers, as well, on the vessel they had offered, which at that time was the Mercury, in order to equalize, as a Heritage Reporting Corporation (202) 628-4888

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6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that. that. MR. SHEA: THE COURT: MR. SHEA: Well, not necessarily, no. What did you do about it? Well, we haven't done anything And I suppose we recognition, first of all, that they had disadvantaged Sealift, and in an attempt to equalize the posture of the two competing parties. THE COURT: And you were satisfied with

about that at this time, Your Honor. might.

But at the time, at the time we were extremely dissatisfied about it for a couple reasons. THE COURT: not before me. You see, that matter is really

It may be that what they did was

wrong, but there's nothing -- that's your problem at this point, not mine. MR. SHEA: I understand that. I understand

And the reason why we raise that really is two. First of all, it shows, frankly, a history

of something that I might describe as every-soslightly cavalier, number one. And number two, it also reflects the fact that, you know, in the particular solicitation we have here, we are reoffering the same vessel. all of our numbers for that. Heritage Reporting Corporation (202) 628-4888 And TAL knew

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7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: MR. SHEA: But what's the cure? Well, I'm saying that, first of

all, that leads to an inquiry about our challenge to the way MSC viewed the fuel consumption numbers. On the particular, on the matter before Your Honor, the difference between their time -- the biggest number in this whole, it was like a $25 million procurement, the biggest number in there was the time charter rate, which is the rate that covers all of the, you know, the crewing, the insurance, the vessel, the amortization, the overhead and all that. The difference between that, Sealift's number and TAL's number was less than one percent. Our view is that didn't come from nowhere. That came

because of the education that TAL got compliments of the MSC staff. And that backs into the issue of well, okay, we're talking about, and the first substantive issue I will take up is the fuel consumption rate. Now, as we explained, the government, like any time charter, when they charter a vessel, they agree, you know, they pay out these certain amounts. One thing, they purchase the fuel. And the

government, of course, has the option of either purchasing it or supplying it on their own, and for Heritage Reporting Corporation (202) 628-4888

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8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 assume. MR. SHEA: THE COURT: looking at right now. MR. SHEA: That was for one year, with a The options, I think, end So one year of service Yes, it is done. The one that we have, that I'm the most part they supply it. They purchase it from

third parties, and then they provide it to the vessel. So it's in that context, and Your Honor is correct, we haven't sought any remedy from this Court for that particular error -- particular, and frankly egregious, error; that is, the giving away of Sealift's information on the vessel. it's relevant in that respect. Anyway, eventually, if I may, the government terminated for convenience the existing contract award that it had made to Sealift. It issued a new But we do think

solicitation for short term, for a nine-month period. And it was during that nine-month period then that they began the procurement process for the matter that's before this Court. THE COURT: MR. SHEA: THE COURT: When does that contract expire? The nine-month contract? Well, that one is done, I

series of one-year options.

around November 1, Your Honor.

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9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 begin. happens? MR. SHEA: That's when option year 2 would option. Honor. 2006. MR. SHEA: THE COURT: Correct. And you didn't get over to our was provided by TAL. The government exercised the

option for the second year. THE COURT: The contract was awarded in July

Court until a year later. MR. SHEA: Well, Your Honor, we spent some

time in the U.S. District Court, and that was regrettable. But we, that's the reason for the -I understand that. But I'm

THE COURT:

trying to say so where are we now in the contract? They are in option year 1? MR. SHEA: They have exercised the first

They're still in that option year, Your And that, the exact timing I believe is around

the 1st of November. THE COURT: That's when option year 2

Now, they would exercise that option, I

believe -- and perhaps the government can give this with more particularity -- I think they would ordinarily exercise that option something like 60 days prior to that, 60 to 90 days. Heritage Reporting Corporation (202) 628-4888

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10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: MR. SHEA: Okay. And the government, in its last It had, the

reply, notes that it likes the rates.

rates that were submitted by TAL are fairly tiered. They differ by year. So the government has a lower rate this year than it did last year. So it likes the contract

better this year even than it might have liked it last year. THE COURT: Well, I'm concerned. Let me

just fast-forward here.

Let's assume for the moment

that, just for the sake of argument, that I decide to set aside the protest. How can it be, if the fuel consumption rate information or whatever else TransAtlantic learned in the 2005 solicitation is there, how will it ever be that you could possibly win a contract? MR. SHEA: THE COURT: I'm sorry, Your Honor, I don't -You said that, you told the

Court that the 2005 solicitation, okay, the government essentially provided your business information, perhaps proprietary information, basically to the other bidder. MR. SHEA: THE COURT: Yes. Okay. So how can it be that you

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11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 any more. Heritage Reporting Corporation (202) 628-4888 can ever achieve a contract, since they have that information embedded in their knowledge? can it be that you can ever -MR. SHEA: If Your Honor, first of all, if I mean, how

Your Honor were to set aside the -- then there would be a resolicitation, and Sealift would be in the market looking for a different vessel. THE COURT: Oh, I see. So what you would do

is you wouldn't use the same vessel again. MR. SHEA: THE COURT: vessel again. MR. SHEA: THE COURT: Yes, Your Honor. Okay, all right. That's how No, no. Yes, you would not use the same

you'd do it, because you've got more than one vessel that can do this work. MR. SHEA: No. I mean, the answer is no.

Like in most cases, I expected, and Sealift certainly would basically go into the market and have to find another vessel. So they wouldn't be offering the

Montauk, they would be offering some other vessel. THE COURT: What's the status? Where is it? What's going

on with the Montauk now? MR. SHEA:

Sealift doesn't own the Montauk

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12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 around. MR. SHEA: That's correct. Sealift actually THE COURT: MR. SHEA: Oh, I see. We couldn't. There is no market

for this kind of ship. high U.S. flag rates.

It's a fairly small ship with The market for that kind of

vessel, even though the Department of Defense has, from time to time, you know, indicates it has needs for smaller tankers, there is no consistent market for a vessel of this size. So after a certain period of time, if you remember, of course, there was a delay between when these awards were and when TAL was able to appear. So, but after this, after Sealift was terminated, they had to make a decision about what to do with the vessel. And so they had to sell the vessel. THE COURT: MR. SHEA: their own crew. THE COURT: other boats now? MR. SHEA: THE COURT: Yes. Sealift -All right. And you operate But you owned it at the time. Yes. And they operated with

Just not one that carries fuel

does a lot of contracting for the Department of Defense. They have vessels at Diego Garcia. Heritage Reporting Corporation (202) 628-4888 They

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13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 you. MR. SHEA: I'd like to jump, if I may then, have, they do individual time charters for them. Sealift has at least 12 vessels, and there are probably four of them that are on charter to the government at any one time. THE COURT: or is it private? MR. SHEA: THE COURT: It's privately held, Your Honor. Okay. I'm sorry I interrupted Is it a publicly held company,

to the issue of -- and I will only deal with really the four major challenges we have here. I can deal

with the issue of misrepresentation of fuel consumption. As I indicated in my background discussion, Your Honor, the difference between the Sealift award and the TAL, the Sealift offer and the TAL offer was, and this was a number that was something, I don't know what, tens of millions of dollars. The difference

between the two offers for their time charter rate was less than $2,000, which is less than a one-percent different on their offers. so slightly lower. The figure that drove the cost evaluation toward TAL was the government's evaluation of the fuel Heritage Reporting Corporation (202) 628-4888 The Sealift offer was ever

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14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 a day. consumption. Now, the government evaluation of the

fuel consumption was based on a rate that the TAL vessel consumed 20 barrels a day less than the Sealift vessel. Sealift has submitted information showing that the, that that can't possibly be true; and that that delta, the difference between approximately 76 tons, which is the accurate figure, and the 56 tons, which is the figure that TAL gave to MSC, was inaccurate, was materially inaccurate. certainly drove the award to TAL. Now, the basis for that -THE COURT: MR. SHEA: THE COURT: MR. SHEA: THE COURT: I've got 57.4 barrels. That's correct, Your Honor. If the boat is going 12 knots. That is correct. Okay. And that's 77.52 barrels And it

I'm assuming, is that right? MR. SHEA: The 77 is the accurate figure.

The submitted figure was the 56 or 57. THE COURT: MR. SHEA: THE COURT: MR. SHEA: Okay. Right. Okay. The difference, the 20 barrels, I've got 57.4.

those 20 barrels per day in consumption amount to Heritage Reporting Corporation (202) 628-4888

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15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 about a million, $1,200,000, which far exceeded the difference in the -- so that was a savings that was assigned to TAL, which is entirely illusionary. based on their misrepresentation of the fuel consumption. Now, we have a very straightforward line between what our believe, the basis for our assertion is this. THE COURT: consumption? government? MR. SHEA: No. The government procures it And it's a Who bears the brunt of the fuel It is

They're buying the fuel from the

on its own, so the government buys it.

specified rate that says how much it's buying it at. And then it supplies it to the vessel. So the vessel is just around navigating, and whenever it needs it, it gets fuel. THE COURT: Well, I don't understand that.

Does the government buy for them 57.4 barrels, and that's all they give them? MR. SHEA: No. Actually, they give them In other words, it

fuel as and when needed, okay?

would be just as if anybody sort of, you know, you're renting a car, and you say okay, what's the fuel consumption. And so somebody tells you whatever the

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16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 be. number is, you know, they say the number is 30 miles per gallon. If, at the end of the day, the real consumption -- and you're driving the car, and you're just buying the gas. At the end of the day, if the

real consumption was 50 miles per gallon, then you would have paid more than you anticipated. THE COURT: Well, given the increased rate

in fuel, one would think that the government would be really upset about this. MR. SHEA: Well, perhaps, maybe they should

But Your Honor, I'm not here to explain why the

government -- the government I think will have to speak for itself. But the government should be. And the

government does have an answer, which is that their, I think their explanation is that they might have some rights against TAL for basically giving them a vessel with a misrepresented fuel consumption rate. And we have cited to you, there's a perfectly substantial body of commercial law that deals with fuel, speed and consumption cases on vessels, whereby if a vessel owner offers -- and we cite in our case a 1931 case from the Second Circuit called the Denholm case, in which the government makes Heritage Reporting Corporation (202) 628-4888

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17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 a certain amount of play, with the notion that -- let me just back up for a moment. The government's answer, when we raised this issue the government says wait a minute, the basis for your assertion, Sealift, is some information that somebody got from a third-party website -- which is on page 5 of their last submission -- from a third-party website, estimating that the Bonito consumes 77.52 barrels of fuel per day. Well, that website actually was the website of the then-current owner and operator. THE COURT: Well, I understand that. But

their point is it doesn't make it any more, you know, trustworthy, necessarily. statement on a website. MR. SHEA: Well, actually, Your Honor, first It's just somebody's

of all, TAL didn't own or -- they knew nothing about the ship. When TAL submitted that offer, TAL had TAL knew as much All they had

never operated that ship.

information as anybody in this room.

ever done was simply look -- they had done the same thing that we described. So they had no, TAL, who is, you know, the notion is there's something more reliable about that. I would think in the scheme of things the number Heritage Reporting Corporation (202) 628-4888

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18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 assigned by the then-current owner and operator of the vessel to the maritime trade about the fuel consumption of the vessel, made so that people who are, the commercial people like Exxon and Mobil and anybody else, any other charter, when they're offering their vessel to the trade, the data provided by them to the maritime trade is more reliable than someone who has never owned the vessel, never operated it, and for that matter had never owned or operated a tanker. It's that simple. So hence, they're not third party. were first party. They

They were the, they had more

information than anybody else, certainly anybody else at that time. THE COURT: MR. SHEA: All right. But perhaps I lost my thread.

The government's response then in that regard is that well, there is some notion that this is just information on a website. And we said well, look, as

I started out, there is a well-established body of law in maritime cases whereby charters, who feel that the fuel consumption that they have relied on in chartering a vessel was inaccurate, they can seek recourse against the vessel owner. along the lines. Heritage Reporting Corporation (202) 628-4888 And we cite cases

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19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Perhaps the most basic one that we cite is the 1931 Second Circuit Denholm case in which the Second Circuit, the argument was essentially along the same lines. It said the vessel is capable of doing a

certain speed and consuming a certain amount of coal, of course at that time. Second, and the argument the ship owner resisted the claim on the very same sort of notion that the government is urging here, and that is well, it really wasn't stated as a warranty. it's capable of doing this. And the Second Circuit says look, that's what you, they relied -- there's no dispute that the charters relied on that when they chartered the vessel. That's good enough. They're bound, that is, It just said

the owner is bound by that advertised consumption rate. And so, and hence the Second Circuit decided that the charterer can prevail because the vessel consumed more coal, in that case, than the advertised rate. It's that simple. And in a commercial context, and we cite some other arbitrations and judicial decisions, in which people make claims along those lines all the time. Heritage Reporting Corporation (202) 628-4888

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20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Now, then the government, of course, responds, the government responds to this. And I

think perhaps with this, I don't need to add any more. But the government's opposition says there is no evidence to support the accuracy or explain the motives of the owner, the current owner and operator in May and June of 2006, about why they might possibly be overstating their fuel consumption. Well, you know, it seems to me, first of all, that is, on its own, facially speculative. And

the idea that the current owner and operator advice to the trade is trying to drive away business so that it won't expose itself to risks of fuel consumption claims is taking things pretty far field; and frankly, is nonsensical. Anyway, that is all I have on the fuel consumption matter, if I may, Your Honor, unless the Court has any further questions. THE COURT: What we have in the record --

and I need to go back on this, and the government can correct me if I'm wrong. MR. SHEA: THE COURT: We have Mr. Raggio's --

Mr. Raggio's, yes. Mr. Raggio's, okay, declaration,

which is based on the website. MR. SHEA: Correct.

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21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 away. THE COURT: Okay. And the government

doesn't contest that, other than to say that the website is not necessarily reliable. event, we have a remedy on our own. MR. SHEA: That's correct. And, well, And in any

actually they said it wasn't really a warrant -THE COURT: They're just saying to you go

You know, if we think this is a problem, we'll

deal with it on our own. MR. SHEA: That is correct. And our answer,

the ultimate answer to that, Your Honor, is they're saying look, we have a right of action against them if we decide that this vessel consumes more fuel than they've represented. THE COURT: MR. SHEA: Right. And the answer, we say look, that

is not just, it may well be an argument between TAL and the government at some point. But as well, it is

an offense to the bidding system, insofar as they've submitted a number that was entirely, that simply had nothing to do with the operation of the vessel now. THE COURT: Right. But the planning

research case in our Circuit basically don't talk about the government's other remedies. MR. SHEA: Right.

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22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: They talk about the fact that if

there's a material misrepresentation, on which it was false and on which the government relied, then the procurement should be set aside. is, okay. Now, what is your second argument? MR. SHEA: My second argument, Your Honor, This was a small That's what the law

is subcontracting limitation.

business award that was a requirement in the solicitation, that at least 50 percent of the cost of contract performance would be incurred by personnel who are personnel of the concern. the awardee, TAL. We submitted information to the effect that TAL would be relying on an organization called Vessel Management Services, which would basically be a subcontractor who would provide the crew for the vessel. And -THE COURT: But they don't, these people are They're ultimately Which is basically

not employed by that entity. employed by TAL. MR. SHEA:

Well, TAL hires, there's no

question that TAL hires Vessel Management Services. There's no dispute about that. THE COURT: Right, right. They're like a

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23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 cook. MR. SHEA: Well, that's once they started company. has said. finder. They go out and say I'm looking for sailors. MR. SHEA: Well, that's what the government

But in fact, we, and we cite -- the

government appreciated early on that in the initial staff review of the -- which was in May of 2006 -when they looked at the TAL proposal, the MSC staff put together a list of issues that they had concerns about with respect to other TAL offer. Now, keep in mind TAL is a very small They had never offered, and the concern is

expressed everywhere throughout the, throughout the pre-contracting reviews. They had no people who had

worked on, they had one or two engineers who had worked on tankers. Nobody else -Right, as well as a Filipino

THE COURT:

operating they started using foreigners, Your Honor. But they had nobody who, at the time of submission of offer -- first of all, they didn't offer any tankers. THE COURT: Well, the legal issue, it seems

to me, is who did these individuals work for, ultimately? And I take it that that's TAL. No, Your Honor. I don't --

MR. SHEA: THE COURT:

How do you know that's not true?

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24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. SHEA: Well, first of all, if Your Honor

is saying it is sufficient that if those crewmen, if their immediate employer is Vessel Management Services, then they are a subcontractor. mind -THE COURT: MR. SHEA: Their immediate employer. Right. And then he provides -And keep in

what happens was this. Management Services.

They work for Vessel

Now, Vessel Management Services says to TAL I'm going to provide the crew for your ship, and I'm going to crew them. And the reason why we raise that

is, Your Honor, when these guys, these guys from time to time fall off, they get hurt. they sue their employer and TAL. Vessel Management Services. THE COURT: Do we have anything, a document They don't sue TAL; Their employer is

that shows that employee relationship? MR. SHEA: Well, Your Honor, it is not in In fact, there are -- and

the administrative record.

I could tell you in other cases -- the reason why this came up is because TAL Vessel Management Services employees sue Vessel Management when they're on TAL's ships, and identify Vessel Management as their employer. That's the reason why this really came up. Heritage Reporting Corporation (202) 628-4888

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25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 But if we look, I think the question is, you're really asking me what is in the record to reflect that. Here, and I note on page 8 of our last

submission, which is our reply, the initial analysis, dated May -- of the TAL offer. ships at the time. their own. And they said TAL should describe the crew qualifications necessary, and how the manning agent will hire and train the crew. Well, the manning agent, this doesn't say they're finding crewmen and having TAL hire them. The TAL submitted two

They had two competing offers of

manning agent is finding them, and the manning agent is hiring them. And they work for the manning agent It's that simple.

when they're on the ship.

Now, I might add, and we note -THE COURT: All right, but what you're I'm saying is there

giving me is an argument.

anything in the -- I mean, the government has the same problem. If there's nothing in the administrative

record that basically shows the employment relationship. MR. SHEA: Well, no. Well, we have cited,

Your Honor, there is no question -- let me just, if you'll bear with me a moment. Heritage Reporting Corporation (202) 628-4888

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26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 is. THE COURT: It seems to me there's an answer

to this, it's not all that difficult, which is someplace. There's a document that says who these And it may or may not be in the I'm going to come back to talk

people worked for.

administrative record.

to the government about that. MR. SHEA: Well, Your Honor, all I know is

that, I know that Vessel Management Services provides crewing not to just these people, to other people. THE COURT: That may all be true. But

unless it's here in the record, that's not something I'm confident to take judicial notice of. MR. SHEA: Well, I understand, Your Honor.

If I may say, we set out, and we provided some proposition of fact based on the record where they identify Vessel Management Services, TAL, to the government. They say Vessel Management Services is

our crewing company. THE COURT: MR. SHEA: And that may be. I think they are. I think that

And I think, are you're right.

You're asking the

question what is, where is the characterization of the employment relationship. I read that into some of the

materials we have here, but there's no doubt something more direct somewhere. Heritage Reporting Corporation (202) 628-4888

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27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the issue. THE COURT: that documentation? MR. SHEA: not, Your Honor. Well, I guess, I guess I have Did you ask the government for

I would suggest to you that what we

have cited here, where they describe the manning agent as, you know, it notes that they have been crewing our vessels for 12 years. THE COURT: And so what? The crewing is not

The issue is who is -- the solicitation

says that the crew shall be appointed or hired by the owner, and shall be deemed the servants and agents of the owner at all times. MR. SHEA: THE COURT: Well, that's true. And --

If you have an argument, it has

to be a violation of solicitation. MR. SHEA: THE COURT: MR. SHEA: Well, that's correct. Okay. And I think that was the response

that originally was offered, and I think that's why the government -- if they're employees, and I think this really is a legal question, which is -THE COURT: MR. SHEA: Well, yes, it is, isn't it? If they're employees of Vessel

Management Services, is that a breach of the subcontracting limitation? And we have cited, among

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28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 other things, a case involving TAL, in which TAL challenged another, another solicitation award. And

one of the things they challenged it on was the issue about subcontracting. And the Court there said first, and foremost, at that time also there was some confusion there -- and in this case, before GAO, MSC denied, said the subcontracting limitations don't apply. counsel said that. They never corrected that. Now,

In this Court, counsel looked with perhaps a little more care and said yes, subcontracting limitations do indeed apply. And so we have said, first of all, and there's nothing in the record whereby MSC verified compliance with that. And we think there is ample

information there at a minimum to show that Vessel Management Services was the employer of these people. And yes, they were a contractor to TAL, but those people were employed by Vessel Management. direct employer of the crew was Vessel Management Services. And we suggest the initial assessment, The

which is at page 1893 of the administrative record, really to say the manning agent will hire and train the crew. If that person is a headhunter, headhunters Heritage Reporting Corporation (202) 628-4888

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29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 don't hire people. Headhunters find people, but they

don't hire people, and they don't train people. THE COURT: Well, another way of looking at

this is the solicitation itself may establish the relationship, because the solicitation says that the crew of the vessel shall be appointed and hired by the owner, and shall be deemed to be the servants and agents of the owner. So the government basically may be establishing the legal relationship, saying if you are awarded this contract, then I, the government, I'm setting up this relationship by virtue of your acceptance of this award. MR. SHEA: Your Honor, I think, first of And I think

all, that deals -- I understand that.

that may have been the reason why the government made the position. The attorney that made that

representation -THE COURT: The government didn't want to be

responsible for these people. MR. SHEA: THE COURT: What's that? The government didn't want to be

responsible for these people falling off the ship. MR. SHEA: I'm not arguing that. The

subcontracting limitation has nothing to do with the Heritage Reporting Corporation (202) 628-4888

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30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 correct. THE COURT: MR. SHEA: And do you? With not an intermediate issue of legal responsibility in the case of, you know, that the ship runs aground, or it dumps, you know, it dumps something over the side. absolutely nothing to do with that. THE COURT: So you're saying that this This has

company had to have all those people in their employment. MR. SHEA: In their direct employment,

contractor between them. THE COURT: MR. SHEA: THE COURT: contractor. people. MR. SHEA: THE COURT: Well, first of all -They say, you know, put it in And do you? Yes. But there's not an intermediate

They basically go out and find the

the newspaper, wanted, sailors who do not fall off ships. MR. SHEA: THE COURT: MR. SHEA: Right, okay. Okay. But in this case, in this case There may be a

there is no direct relationship.

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31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 there. making. direct, in certain terms of responsibility, to third parties. The third-party argument is not one we're In other words, if something happens to the Because this is a

ship, that's not an issue for us.

small business requirement, and a small business requirement is that you can't contract out for services. You can't basically have a small

businessperson show up and say okay, here, I'm going to provide the service. Except then they will

subcontract out all the people to some non-smallbusiness activity. That's what's going on. That's

what the purpose of this, of the small business rule and application here. maritime statutes. So I'm not making a maritime point here. I'm making a point of the contractual relationship. THE COURT: MR. SHEA: Okay. And that's what TAL prevailed on It has nothing to do with the

in this Court, on the matter that they brought. THE COURT: I don't know what the facts were And it's

I know it was in the record here.

not precedential, in any event. MR. SHEA: If I may, then, I'd like to

return then to what is my sort of fourth issue, which Heritage Reporting Corporation (202) 628-4888

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32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 is reflagging and repair work in the United States. And this -THE COURT: MR. SHEA: THE COURT: MR. SHEA: This is the Singapore issue. This is the trip to Singapore. Okay. Now, as Your Honor knows, there

is, of course, a statute that the military, a preference statute, which requires that all reflagging and repair work be done in the United States. solicitation had a cost implementing that. And This

there's a DFARs provision that says that a vessel cannot be accepted that has, you know, any vessel accepted for a time charter has to comply with that. Further, I might add that the statute provides that the Secretary of -- waivers of this provision may only be given by the Secretary of Defense after determination of such waiver is critical to the national security of the United States. And I might add, Your Honor, this really didn't happen in a vacuum. strict requirement. I think there's a very

And as I sit here now, I can't

think of any other procurement statute in which the, let's say the issue of waivers is, can only be given by the Secretary of Defense, and then certain notice of Congress has to be given after the Secretary makes Heritage Reporting Corporation (202) 628-4888

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33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that? MR. SHEA: Well, first of all, Your Honor, First, even if the such a defense, makes such a waiver. So the statute

is deliberately, and really very, very specifically strict. I'd like to, if I may, then speak to what happened here briefly. THE COURT: You took pictures that you sent

to the contracting officer, the MSC, of the boat being -- we went through all those at the hearing, and adding those to the administrative record. investigated it. And they

And they seemed to be satisfied that

the statute had been complied with. Now, why is it that you take issue with

our view is that, on two levels.

Court would accredit the government's view of the facts, which I would say is, I think the government's view is, they go along with an elaborate ruse. And

even if you accepted that, their interpretation, what they are -- their interpretation of the statute is that it only applies to installation. Keep in mind, if we can go back -- and I'd like to, somewhere here I have a note that I already -- let me offer, if I may, the government's view on this. And I'd like to explain sort of, sort

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34 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of unpack why this is. real sense. First of all, it doesn't make

And secondly, even if it is credited, it

is contrary to the statute. Because ultimately what they say is the statute only applies to installation. As long as we

install the stuff in the United States, we can have anything prepared, manufactured, templates made somewhere else. But as long as we install in the

United States, that's okay. The government, in their reply, describes the scenario as this. Invoices from the shipyards in

Guam, from the shipyards in Guam and Singapore demonstrate that TAL stopped in Singapore to purchase equipment to be installed in Guam for reflagging. order to determine the equipment to purchase piping from the old CO2 system was removed, so that templates for the new system could be measured. After the In

templates were measured, the old CO2 system was reinstalled as it was originally found. you know, all that is perfectly fine. First of all, the facts are that the vessel was under Swedish flag when it was purchased. It, for And all that,

reasons that are not clear to anybody, and perhaps are really irrelevant, it took a long time for the ship to get out of Europe, so it was moving from Europe to, Heritage Reporting Corporation (202) 628-4888

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35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 invoices. though. had to go to Guam, was its destination. It didn't go directly from Europe to Guam, It deviated to Singapore. And of course, it

didn't just go anywhere to Singapore; it went to a shipyard in Singapore, and it stayed there for a week. And the Sealift, the cover memo that Sealift sent to MSC with the pictures said the vessel arrived here on such-and-such a date, and it departed on such-and-such a date. It was at this shipyard. This is the address

of the shipyard.

And it had this kind of work done, And here are pictures of

and it described the work. what happened.

Then the ship was in the shipyard in Singapore for a week. Now, if all the ship were doing

was going to, saw a maritime version of WalMart, it didn't have to be in a shipyard; it could have gone anywhere to pick up supplies, number one. Number two, it didn't have to spend a week doing that; it was just picking something up. fact, it wasn't just picking something up. And in

There

were, there were laborers on the ship, there's no dispute about that. And there are -THE COURT: You have two Singapore tax We have the invoices from those.

One that I see, one that indicates a Heritage Reporting Corporation (202) 628-4888

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36 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 you about. hydrotest with nitrogen to 600 psig. I haven't the

foggiest idea what that means; we'll come back to that. And the second one showing that new logos were I don't know where

installed into funnel by welding.

the logos went, and I don't know what the funnel is. So, but those are the two pieces of evidence in the administrative record that we found. two tax invoices. MR. SHEA: Well, and there are invoices from There are

the, there are invoices, of course, from the shipyard. And they do describe -- there are invoices from the shipyard. And they do describe that sort of activity. THE COURT: say on that? MR. SHEA: Pages 2782 and following. And it What's the administrative record

showed that they manufactured -THE COURT: 2782 is the first invoice I told

That's the invoice on the hydrotest. MR. SHEA: Right. So it shows, for

instance, first of all, TAL brought in a man named Lucien Castro. THE COURT: That's all fine and good. I'm

trying to find out what is in the administrative record other than those two invoices. enough, I don't -Heritage Reporting Corporation (202) 628-4888 That may be

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37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 it is. MR. SHEA: No, I think that is, that is what

Those are the invoices. THE COURT: MR. SHEA: Okay. And it shows, it says "remove and

make templates of existing three-quarter-inch pipe from lower fabricated," et cetera. "Remove and make "Fabricate

templates of existing" some other piping. parts." parts.

So they took stuff out, they fabricated

And then, then they refurbished the ship's name, okay. So they cropped off the existing name,

Bonito, and they repainted the existing-named vessel, they claim. logos. And then they did stuff with the ship's That's the

That is correct, Your Honor.

reference. Now, the claim here, and these documents also claim, that after they took out this piping -we're talking about one-and-a-half or two-inch piping -- they took out this piping, and then reinstalled the old piping. Which I, you know, I

mean, is a completely uncommercial activity to do. THE COURT: The government says what was

done was not reflagging work, whatever that means. MR. SHEA: There is no dispute the CO2 And there's no dispute --

system was reflagging work.

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38 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 well, the government denies it. But the government

has the view that even changing the name of the vessel if not reflagging work, which is, I think if they would ask, if there was somebody from the United States Coast Guard there, I don't think they would agree. The Coast Guard regulations say change the name, if you're changing the name of a vessel, you have to change the name on the hull. And in fact,

they changed the name of the vessel; and in fact, they changed the name -- we have, one of the pictures we have, and the government sort of says well, that's right, it does say, it shows a handful of people on some scaffolding. And they, you know, they're on the

hull of a vessel, and you can see the writing T-R-A-NS-P-A-C-I-F-I-C. scaffolding. Now, the government, that's why the government responds to that well, okay, that really wasn't necessarily reflagging. And the answer to that And there are four guys on the

is the U.S. Coast Guard regulations say you have to change, you can't reflag a ship and have the wrong name, have it running around the ocean with the wrong name on it. THE COURT: Well, I'm trying to look here.

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39 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 This is the D-F-A-R-S. at, right? That's the reg you're looking

And it defines reflagging and repair work. MR. SHEA: THE COURT: Yes. And to enable the first A-1 is

to enable the vessel to meet applicable standards to become a vessel of the United States. would be the renaming? MR. SHEA: THE COURT: Certainly renaming. How do we know that? Is this to I assume that

enable to meet applicable standards? another applicable standard where? MR. SHEA: Well, okay.

So there's

First of all, we

cite on page -- the United States Coast Guard, at 46 C.F.R. § 67.120, says, "No certificate of documentation issued under this part will be deemed valid for operation of vessels until the vessel is marked in accordance with the subpart." THE COURT: got the stuff here. Let me -- I mean, I know we've I'm trying to figure out which,

give me your reference again. MR. SHEA: That's page 10 of our last

submission, Your Honor, at the bottom of my reply brief. THE COURT: MR. SHEA: Okay. And in Sec. 67.123 it says, "The

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40 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 name of the vessel must be marked on some clearly visible exterior part of the port and starboard bow and the stern of the vessel." And I must say, Your Honor, I don't know, at some point common sense must apply here, too, as well. Doesn't the ship have to be marked as it's named? And

it strikes me as a little weird that the government's case would be to come forward and say the ship could, you know, doesn't have to be marked in the way it's been named. Likewise, there is no dispute here -- and the second part of your question, Your Honor, was where is the standard. There actually is an analysis

called the GAAP analysis, which we discuss. The GAAP analysis is sort of, what I might call sort of a delta. It is the difference between

the foreign standard of classification and the U.S. standard. And the GAAP analysis is in the record. The GAAP analysis includes references. clearly says, and I don't think the government disputes, that upgrading of the CO2 system is a requirement, and is, it constitutes reflagging work. I don't think that the government disputes that. there's a clear -THE COURT: That's because U.S. vehicles And It

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41 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 myself. THE COURT: MR. SHEA: THE COURT: Okay. But I don't know. It's 2782? It says Honor? THE COURT: know what it means. MR. SHEA: Your Honor, I might not know It's to AR-2782. I just don't have to have that. MR. SHEA: And that's actually because the

U.S. standards are higher than the foreign standards. THE COURT: MR. SHEA: What does psig mean? Where is your reference, Your

2782, on that invoice.

what I mentioned before. nitrogen to 600 psig." some sort. MR. SHEA: THE COURT: MR. SHEA: THE COURT: what it means?

It says, "Hydrotest with It's a measurement standard of

Yes, it's a pressure. It's a pressure. Right. Okay. And how can I find out

What does psig stand for? I must tell you, for that

MR. SHEA:

particular one, I don't know. THE COURT: MR. SHEA: Okay. Probably pounds. And since it's

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42 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 inch. MR. SHEA: THE COURT: MR. SHEA: Right, right. Oh, okay. There you go. a foreign, since this is -THE COURT: Well, Joe was in the Air Force.

Do you know the answer? THE CLERK: It's probably pounds per square

But of course, Your Honor, I

suggest that that means that it was actually installed and they tested it. THE COURT: MR. SHEA: Right. Then this is the system I think

they say that we installed and we tested it, then we took it out, and we put the old system in. Now, anyway. THE COURT: MR. SHEA: All right. And I think what the bottom-line

point that I want to get to, Your Honor, is that this again is a very, very strict statute. That is, it It is,

says it's can't be waived by the government.

that this work has to be done in the United States. It was an amendment that was not to ancient. the basis for it. And what the government's position here is, this is a very, very fundamental, I think a very, very Heritage Reporting Corporation (202) 628-4888 We cite

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43 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 it. fundamental proposition. Because their view is that

okay, it may have been some things -- this vessel went to a foreign port and had some things fabricated. Now, keep in mind, if all it was doing was picking something up, it could have picked something up in a day. But it spent a week in a shipyard, and it got a And I

bill from the shipyard for work done there.

might add, eight of the guys who did the work there went with Lucien Castro to Guam to put the parts in, or reput them in or do whatever they did, in Guam. But they did all this work. And then we, but things were fabricated for And then they were removed. This is the theory. And I think the

But they were later reinstalled.

question is, does this statutory provision relating to reflagging and repair work, is that limited -- and the government says in this case the plain language of the statute does not incorporate the removal and reinstallation of the original piping. So they are

saying that was not work done on the vessel. First of all, that was work. the vessel. And it was reflagging work. It was done on And even if

they're right that it was later reinstalled, that it was taken off and reinstalled, the activity that was going on in Singapore was work on the vessel, and it Heritage Reporting Corporation (202) 628-4888

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44 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 was to fulfill the GAAP analysis. Which is basically,

the GAAP analysis is the punch list of things they had to do to turn this vessel from a foreign-flagged vessel to a U.S.-flagged vessel. So in our view, even if the government -the government's position still doesn't say this wasn't work on the vessel. It was, there was work

being done on the vessel in this shipyard in Singapore. There is really, I don't know how you can

make it otherwise. I might add there is a certain controversy over the status of our pictures, Your Honor. of like the pictures; I think they are very appropriate. I don't think there's -I have them in the Obviously you've got some We kind

THE COURT: administrative record. evidentiary issues. MR. SHEA:

Well, I must tell you, Your

Honor, first of all, I don't think the government -the government acknowledges, first of all, as I said, there's a lot of indicia that the Sealift says this is where the ship went in Singapore. of the shipyard. This is the address

It arrived at a certain date, it We had a guy on here, and And

left at a certain date.

here are the pictures, and this is the work done. Heritage Reporting Corporation (202) 628-4888

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45 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 here. then he described the work. Then, I don't think the government disputes the picture, at least certainly with respect to these guys on the -THE COURT: Well, I'll just help you out I've

I'm not going to rely on the pictures.

put them in the record in the event somebody else wants to take a look at them someplace else. My focus is really what's in the invoices, what's in the administrative record. MR. SHEA: well, Your Honor. THE COURT: I mean, I allowed you to put Very well, Your Honor. Very

them in; somebody else can take a look at them if they want to. But I think that would be a problem if I

relied on those. MR. SHEA: Well, they were submitted. Your

Honor, they were submitted by Sealift to the contracting officer. THE COURT: So in other words, they were -That doesn't necessarily meet

the requirements for the rules of evidence. MR. SHEA: I understand. I just wanted to

make sure you understood that they -THE COURT: MR. SHEA: Right. -- didn't just take pictures and

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46 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that, too. MR. SHEA: He did. He did. I just think put them in their files; they gave them to the contracting officer. THE COURT: And he investigated based on

they reached a wrong conclusion.

And I do suggest, in

our submission somewhere, we cite page 2823 of the record in which -- with this I'll leave this, Your Honor. I won't press this any more, I understand. But the contracting officer wrote to TAL and said we have evidence that TAL replaced parts, which is the CO2 pneumatic systems, the delay, the timing delay cylinder, the CO2 cylinder headers; we couldn't find this work. That, the evidence he's relying on in

my estimation is, that tracks exactly the titles of the pictures that were given by Sealift to the contracting officer. But with that, I will move to the vetting issue, if I may. THE COURT: MR. SHEA: Okay. There was the longstanding

requirement -- of course, this vessel would be moving around the Pacific, picking up refined petroleum products, presumably, I think, jet fuel, and moving it to various military installations throughout the Far Heritage Reporting Corporation (202) 628-4888

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47 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 East. There is a requirement throughout the contract that the vessel be, have an authorization, be what is called vetted in the trade. That is, have

permission, have been inspected and approved by each of the private, these are the four major oil companies, so that they will permit the vessel to appear at their facilities. Obviously, they don't

want substandard vessels going into their facilities that would create, you know, problems of hazard either to their facility or to the environment in such a way that it would create problems for them. There was a longstanding requirement throughout this procurement that the vessel have the vetting certificates 10 days prior to delivery. We

count on the record long exchanges relating to that. In fact, and it's really quite remarkable in a way, in June -- no, in May 2006, TAL wrote to the contracting officer that the vessel must be U.S.-flagged before it's vetted. officer. Then, because of delays that, you know, for some reason or another, TAL decided to keep the vessel's Swedish flag until it got to Guam, all right. So they were not in a position to get it vetted under Heritage Reporting Corporation (202) 628-4888 And TAL says that to the contracting

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48 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 U.S. flag until after, until it appeared in Guam. Because it was not, there was not a U.S. crew, and not a U.S. flag on the vessel. And in between, as late as October 20 of 2006, the contracting officer, there had been a long series of exchanges about how do we get it done. And

even though in June of 2006, TAL had said well, you know, it's got to be a U.S. flag to be vetted; after that, they started relying on the vetting of the prior owner and operator. And of course, and we recite the

history, the contracting officer repeatedly said look, you know, vetting approvals don't apply from one to the next; and you've got to get it on your own, and it's got to be under U.S. flag. There was a subissue about is there a certificate at the end, a piece of paper. And it

appeared that well, really, there isn't a piece of paper, but you need an approval. You need one -- each

of these four companies has to tell us that your ship is approved to come to our facilities, or else you're not going to be any good for us, you know, upon delivery. As late as October 20, contracting officer wrote to TAL that TAL had to demonstrate that the vessel was vetted by the four oil companies. Heritage Reporting Corporation (202) 628-4888 And as

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49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 late as October 27, contracting officer says gee, you haven't submitted to us evidence of those vetting approvals. Now, I might add, on October 23 the MSC staff says that TAL has not requested vetting, but is trying to rely on prior-owner vettings. So even as

late as October 23, they're trying to shift to say well, the prior, approvals for the prior vessel owners is, ought to be good enough. resisted that. And there is -- so as far as I'm concerned, and no vetting approval from the four majors. There's MSC consistently

no email -- there's not only no certificate, there's no email. There's no confirmation. There's no

acknowledgement from the four majors that this vessel was vetted; that is, passed their vetting standards. The government's position is that an inspection that was done -- and I might add, of course, this is really quite fundamental, because of course they, there was no assurance that the vessel would be permitted to call at these other facilities. Now, the government claims that MSC allowed TAL to demonstrate that its vessel, while owned and crewed by TAL, was vetted by the four oil companies, in lieu of vetting certificates that no longer Heritage Reporting Corporation (202) 628-4888

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50 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 grew up. existed. And they specifically point to a paper

produced by a guy named Captain Tom, who was a consultant for Korea, from Korea. independent consultant, though. work for any oil company. that he, that -THE COURT: Captain Tom? MR. SHEA: Well, Captain Tom. Captain Tom It was always Captain Bob when I Captain Tom is an Captain Tom doesn't

And there is an indication

writes, "Inspected the vessel on a Sunday, October 27." And he sent his report on a Monday, October 28,

saying the ship is in really very good condition. Now, the government says that he was an agent for I think SK, two of the four oil majors: SK

and what I recall as Samyung, but I'm not sure that's the right pronunciation. But first of all, there's no pretense anywhere that he is a representative for an agent of Cal-Tex. First of all, there's nothing from Samyung

or SK, and there's nothing from the other two, which is Cal-Tex, a major one that is Cal-Tex. Cal-Tex

appears to be the contractor that the Navy was using to procure, to procure its jet fuel at the time. Now, what happened was that another Navy activity wrote to, wrote an email to Cal-Tex. Heritage Reporting Corporation (202) 628-4888 And

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51 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 they say we have this new ship, and we'd really like it to call there. And we cite this at page 17 of our But I believe it's a

reply, we do it elsewhere, too.

woman named Linda Barksdale, who I think actually works for the activity that purchases this jet fuel. But she says our military sealift command office has been discussing vetting with Chevron, and they have indicated the above vessel would not be accepted due to a total change and new ownership, new crew, and new name. We want to make sure that you understand the above information before we show up and find that CalTex may have problems with the above issues. Somebody

from Cal-Tex, Mr. Kim, on behalf of the Cal-Tex facility in Korea, wrote, back on November 1, "We accept this vessel on condition of the crew's utmost attention and carefulness, since her first time to our refinery." So that, I think that line is the vetting. He said well, we'll trust you. Now, let me even back up with respect to Captain Tom. The date that Captain Tom did his

inspection on the vessel, which was Sunday, the 27th, the vessel was still under Swedish flag. The U.S.

crew, who presumably were on the, you know, in the Heritage Reporting Corporation (202) 628-4888

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52 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 movie. MR. SHEA: Really. Anyway, so the very day area somewhere, but they were not in control of the vessel -- I think at the time the vessel, as you recall, the vessel was arrested. took the vessel to Guam. Guam's shipyard. Once it went to, TAL

They owed some money to

Guam's shipyard arrested the vessel, A week of those And it was --

so it was in Guam for about 10 days. 10 days it was in custodial aegis. THE COURT:

Sounds like a Humphrey Bogart

that the attachment, the very day that the government lifted the judicial attachment, the vessel left. That

was the day it was flagged U.S., on Monday, the 28th. Well, the day Captain Tom did his work, the vessel was still under Swedish flag. The idea that he

could have done a vetting, and there's a whole history and description, if you go back and we recite on the record, vetting typically looks, actually watches a crew doing, working the vessel. Well, the vessel, Captain Tom wasn't in a position to see that happen, first of all. you know, the vessel wasn't working. It was in,

On that Sunday

it was still in custodial aegis, and it was still under foreign flag. place. Heritage Reporting Corporation (202) 628-4888 There was no genuine vetting took

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53 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 What happened was, at the end Mr. Kim said well, it's your first time, we'll trust you. that's all there is to that story, Your Honor. THE COURT: MR. SHEA: Okay. Now, let me then talk briefly And

about one of the issues of standard of review. In our estimation, the matter of the fuel consumption misrepresentation and the subcontracting are matters that go directly to the award itself. And

I don't think the gover