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Special Feature

Controversial Liberian Shipping Registry (LISCR)

Controversial Liberian Shipping Registry (LISCR), top donor to McAuliffe gubernatorial campaign

(Culled from the Washington Post)
Virginia gubernatorial candidate: Terry McAuliffe

Washington Post, October 13, 2013

The largest in-state corporate donation to Terry McAuliffe’s gubernatorial campaign was made by a Vienna-based company whose low profile belies its influence on global trade: It runs Liberia’s shipping registry, overseeing nearly 13 percent of the world’s commercial fleet.

The Liberian International Ship and Corporate Registry (LISCR) contributed $120,000 to McAuliffe’s gubernatorial bid, placing it among the top 20 donors to his campaign . . .

Scott Bergeron, LISCR’s chief executive, said the donation was a personal gesture by its chairman, Yoram Cohen, a friend of McAuliffe’s.

McAuliffe spokesman Josh Schwerin said the candidate and Cohen “met in the last two years and have never done business together.” He declined to say how they know each other. Located in an unassuming brick office park off Leesburg Pike, LISCR operates the second-largest shipping registry in the world, certifying and inspecting nearly 4,000 vessels that fly the Liberian flag.

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The company is a frequent target of organized labor, making it an odd ally for McAuliffe, who enjoys robust union support. As an open registry — known as a “flag of convenience” — it does not require a ship’s owner or crew to be Liberian, attracting vessels seeking lower taxes and wage requirements than in their home countries. Seafarers’ unions view the system as a means for ships to skirt labor regulations and mask their true ownership.

Flags of convenience “are generally unaccountable, nontransparent, secretive, and almost never there when real action needs to be taken to protect those working on their vessels,” David Heindel, secretary-treasurer of the Seafarers International Union, the largest North American union representing merchant mariners, said in an e-mail.

LISCR also played a controversial role during the bloody regime of former Liberian president Charles Taylor, whose war crimes conviction by the U.N. Special Court for Sierra Leone was upheld last month. As a major source of revenue for Liberia when Taylor was in power, the company came under close scrutiny by both the United Nations and U.S. officials, who were concerned about how the revenue it turned over to the government was being used, according to interviews and public documents.

“We were worried about them contributing to a regime doing bad things,” said John W. Blaney, who served as U.S. ambassador to Liberia from 2002 to 2005.

Bergeron defended the company’s safety and labor standards, noting that the Liberia is on a U.S. Coast Guard list of top-quality shipping registries. “We’re a very proactive organization looking at the best interests of the public when it comes to global shipping,” he said.

Bergeron said LISCR worked closely with international and American officials when Taylor was in power and assisted with the investigation of the warlord. “We opened all the books, shared all the financial information, to ensure that we as an organization were doing all the right things,” he said.

LISCR’s two $60,000 donations to McAuliffe mark a rare foray by the company into domestic politics. Until now, LISCR had made just one political contribution in Virginia — in 2002, when it gave $5,000 to then-representative Thomas M. Davis III (R), according to the nonpartisan Virginia Public Access Project, which tracks campaign finance. LISCR’s donations to McAuliffe were first reported by the Talking Points Memo Web site.

Bergeron said the company has no business interest in the state, although he serves on the Virginia Port Authority board as an appointee of Republican Gov. Robert F. McDonnell, a post he could lose under the next governor. Bergeron said the contributions had nothing to do with his appointment, adding that Cohen made the donations without telling him.

“Mr. Cohen and Mr. McAuliffe are friends,” said Bergeron, who also said he did not know how they know each other. “Mr. Cohen decided to contribute to his campaign, and he did so through the company.” Liberia’s shipping registry has been administered by an American company since its inception after World War II, when former secretary of state Edward R. Stettinius Jr. helped set it up as a way to steer revenue to a staunch U.S. ally in Africa. A company founded by Stettinius, eventually known as International Registries Inc. (IRI), ran the registry until Taylor rose to power.

After Taylor was democratically elected in 1997, his administration hired Washington attorney Lester Hyman to be its U.S. counsel, according to foreign agent registration records filed with the Justice Department. Among Hyman’s tasks:  to replace IRI, which by then was also running the Marshall Islands shipping registry, a rival flag.

Taylor “wanted to get another group that he thought would play fair,” Hyman said.

Hyman, who was paid more than $600,000 by Liberia, ended up getting the concession himself after he formed LISCR with Cohen, a business consultant he knew through his law firm. Taylor signed off on the agreement in 1999 and LISCR took over the registry the following year.

During Taylor’s regime, the registry provided Liberia a steady source of revenue, even as the United Nations placed new sanctions on the country and evidence built that Taylor was backing a rebel group waging a vicious war in neighboring Sierra Leone.

“Shipping was a key piece of the Liberian government’s revenue at a time when there was state-sponsored military activity in Liberia and throughout the region,” said Benjamin J. Spatz, a fellow at the Truman National Security Project, who recently served as a consultant to the U.N. Panel of Experts on Liberia. In 2001, the panel reported that LISCR had wired nearly $1 million to a company tied to illegal arms dealing the previous year. The payments, made at the request of Liberian officials, were used to purchase weapons in violation of a U.N. arms embargo, according to a report to the U.N. Security Council.

LISCR officials said the company was not aware where the money was going and discovered the payments during an internal audit, which it then reported to the United Nations. The firm refused subsequent requests by Liberian officials to wire payments to nongovernmental accounts.

Still, U.S. lawmakers were concerned that revenue the company provided directly to the government was also fueling the violence. During a hearing before a House panel in 2002, then-Rep. Duncan L. Hunter (R-Calif.) asked Cohen what he made of charges that money from the registry went, in Hunter’s words, “to maim people, to kill people, to be involved in arms transactions.”

“The way we look at the situation is that we work under a very, very difficult set of circumstances,” Cohen responded. “I say you do,” replied Hunter. “Especially, if you have to think about it too long.”

In an interview, Bergeron said the company tried to find ways to monitor how the government used the revenue LISCR collected on its behalf, but concluded it had to turn over the money.“The agreement that governs our operation is a matter of Liberian law,” he said. “Options weren’t available to us.”

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