Dead in the Water: Murder and Fraud in the World's Most Secretive Industry

by Matthew Campbell

the bulk of its laborers came from just a few low-income countries: India and Indonesia and, especially, the Philippines. Filipinos tend to be favored above all others by shipowners because of their good English, as well as their willingness to work long hours, ask few impertinent questions, and accept low wages. At least 200,000 people working at sea hail from the Southeast Asian archipelago—often serving as primary breadwinners for large extended families.

United Kingdom Maritime Trade Operations, or UKMTO, in Dubai. To this day, the UK retains an outsize role in marine affairs, a legacy of when the Royal Navy patrolled an empire on which the sun never set. Even as Britain’s influence waned after the Second World War, much of the legal and administrative machinery of modern shipping remained in British hands. In the 2000s, with piracy escalating into a severe problem, the UKMTO was made responsible for connecting military forces with the merchant ships they were supposed to protect, keeping everyone communicating during a crisis.

tanker was owned by a corporate entity in a Pacific tax haven—the Marshall Islands—which was in turn owned by a Greek family based in Piraeus, just outside Athens. It sailed under the flag of tiny Liberia, which augments its finances by selling cheap, hassle-free registrations to about one in ten of the world’s commercial vessels. Not that its regulators actually resided in that impoverished West African nation; by historical quirk, the Liberian registry was run by Israeli-American entrepreneurs operating out of a headquarters in Dulles, Virginia. Meanwhile, the oil the tanker was carrying was owned by a trading firm based in Switzerland and Monaco.

giant cargo ships had become so efficient that it cost only about $2,000 to get a container of gadgets from Shenzhen to one of the dozen or so major US ports.

Technically, the applicable law on any ship is determined by the ensign flying on its deck. In the early twentieth century, most shipowners paid to register under the jurisdiction of major marine powers like Britain and the United States, benefiting from their legal regimes and military protection. But eventually, entrepreneurial officials in countries like Panama realized they could raise revenue by offering what’s now called a flag of convenience. By registering their vessels in these places, owners could avoid developed-world rules on wages, working hours, and union membership, while also being subject to fewer inspections and a more relaxed attitude to regulation.

Today, Panama, the Marshall Islands, and Liberia serve as the ostensible homes of more than a third of the global merchant fleet, and there are even flags of convenience available from places like Mongolia and Bolivia, landlocked countries with no actual maritime industries

In every major port and waterway, there are salvage companies waiting to respond to distress calls, serving as something like a private emergency service for the open ocean. In return for the difficult and dangerous work of putting out a fire, plugging a leak, or towing an immobilized ship to safety, salvors have the right to claim a portion of the value of what they save—often around 10 percent, though the most challenging jobs can earn them far more.

There, a broker is appointed for the project, and then shops it around to Lloyd’s members, who come together in one or more “syndicates” to insure it. Each member of a syndicate takes on a piece of the liability, as much as the individual insurer can afford to lose. After all the financial exposure has been divvied up, the satellite qualifies for a bank loan, the bank knows that it will still be paid back if the satellite goes down in flames, and the insurers at Lloyd’s get a few million dollars in premiums.

Dolly Parton’s breasts were insured at Lloyd’s, as were Bruce Springsteen’s voice, David Beckham’s legs, and a distinctive mustache belonging to a famous Australian cricketer. But the market’s bread and butter has always been ships.

When the first automobile policy was sold at Lloyd’s, in 1904, the documentation described the unfamiliar conveyance as a “ship navigating on land.” The

Although the insurers at Lloyd’s generally paid claims in full, reports from surveyors like Mockett were a crucial part of the process, allowing everyone involved to declare they’d done their due diligence. Without them, the money machine didn’t work.

In the ancient world, merchants employed a primitive form of insurance called bottomry. (The Romans knew it as foenus nauticum, or maritime interest.) In simple terms, a captain borrowed money for a voyage, repaying it with interest only if the passage was successful. Otherwise, the lender wrote off the loan. The ship served as collateral.

One reason the Lloyd’s market has historically been slow to tackle maritime fraud is that there is no real financial incentive to do so. Even though it costs money to compensate owners for scuttled ships, the market has evolved to respond efficiently to marine accidents, even faked ones, by passing on the cost to someone else.

Indeed, dangerous seas are more profitable, since they mean that customers are more likely to seek the protection of Lloyd’s in the first place.

Instead, they argued, the cause of the sinking was “barratry,” an obscure term for an offense committed by a captain or crew without an owner’s knowledge.

The relationship between London’s insurance market and the Greek shipping community is complicated. On one hand, Greece is undeniably the most successful shipping nation on earth, and a vital source of business for the marine specialists at Lloyd’s.

Greek commercial fleet is the world’s largest, and mostly operated by small, family-owned firms.

Names bore unlimited liability for losses: if claims were large enough, they could be forced to give up everything they owned. But in practice, premiums usually exceeded claims by a comfortable margin, and Names received excellent returns. The group included British dukes, baronets, members of the landed gentry, banking scions such as the Rothschilds, and commercial dynasties including the Guinness family. The Lloyd’s market was, in effect, an invitation-only investment club for preserving wealth and privilege.

market adopted lawyerly euphemisms: “material non-disclosure” or “misrepresentation.” Scuttling became “willful casting away.” Claims departments, responsible for investigating fraud, were underfunded and understaffed, because big corporations have a habit of neglecting teams that don’t bring in any money.

Even when a sinking looks deliberate, Lloyd’s syndicates have understandable reasons not to challenge a claim, since the odds are stacked against them in court. It’s also bad for business to sue your biggest customers. Shipowners could just as easily get their insurance someplace else, where they might find less combative partners. So rather than fighting fraud, the underwriters normally settle, offering 50 percent of a ship’s value or less, citing “difficulties” in assessing the claim.

Piraeus, opposite the ferry terminal where he’d built much of his fortune. Centered on a hook-shaped peninsula extending southwest from central Athens, the city of 160,000 is the undisputed center of Greece’s shipping industry. Along its densely packed commercial blocks are the offices of virtually every one of the country’s maritime tycoons. That, in turn, makes Piraeus the ship-owning capital of the world. Roughly 18 percent of the worldwide merchant fleet is Greek owned, a volume wildly out of proportion to the country’s overall economy, which is barely among the twenty largest in Europe. The marine assets controlled from Piraeus dwarf those held by Japan, with 11 percent of the total, and the US, with just 3 percent.

Sixty percent of the growth in maritime trade between 1948 and 1973 was in “liquid cargo,” overwhelmingly petroleum and products related to it.

Veale and Conner had been in the investigative game long enough to know that it was critical to keep a poker face when interviewing an informant. Showing obvious surprise or enthusiasm could influence what a source said next, or give him unhelpful ideas about the value of his information.

Switzerland had other advantages. As they explained to Theodorou, who feared being detained if he left Greece, its status as a non-EU country meant it was beyond the scope of a European Arrest Warrant. British police had no power there.

how Ray Charles, the blind soul legend, insisted on being paid for gigs in $1 bills so he couldn’t be cheated.