The Jordan Harbinger Show - 739: Matthew Campbell | Examining Global Shipping’s Grim Underbelly

Episode Date: October 18, 2022

Matthew Campbell (@MattCampbell) is an award-winning reporter and editor for Bloomberg Businessweek magazine and the co-author, with Kit Chellel, of Dead in the Water: A True Story of Hijacking, Murder, and a Global Maritime Conspiracy. What We Discuss with Matthew Campbell: The International Chamber of Shipping estimates about 90 percent of world trade is carried by the international shipping industry to the tune of around $14 trillion (about 2/3rds of the US GDP) per year. Piracy persists in places along these lucrative shipping lines because people who have nothing to lose are willing to risk their lives for potentially big payouts. Why insurance surveyor David Mockett didn't quite buy the story that Somali pirates had attacked oil tanker Brillante Virtuoso when he investigated the site — and how it led to his murder. Insurance fraud is one of the world's oldest rackets, with instances documented as far back as ancient Greece. Why rogue ship owners will fly "flags of convenience" — flags of countries with fewer regulations than the ones from which their ships are actually owned. And much more... Full show notes and resources can be found here: jordanharbinger.com/739 Sign up for Six-Minute Networking -- our free networking and relationship development mini course -- at jordanharbinger.com/course! Did you hear our conversation with Paul Holes, the former investigator known for his contributions to solving the Golden State Killer case using advanced methods of identification with DNA and genealogy technology? Catch up with episode 725: Paul Holes | Solving America’s Cold Cases here! Like this show? Please leave us a review here -- even one sentence helps! Consider including your Twitter handle so we can thank you personally!See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Coming up next on the Jordan Harbinger Show. Shipping has no real overarching global regulation in the way that, say, the airline industry does. And in those shadows, all kinds of bad behavior can thrive. Welcome to the show. I'm Jordan Harbinger. On the Jordan Harbinger show, we decode the stories, secrets, and skills of the world's most fascinating people. We have in-depth conversations with scientists and entrepreneurs, spies and psychologists, even the occasional organized crime figure Russian spy or extreme athlete. Each episode turns our guest's wisdom into practical advice that you can use to build a deeper

understanding of how the world works and become a better thinker. If you're new to the show or you're looking for a handy way to tell your friends about it, our episode starter packs are a great place to begin. These are collections of our favorite episodes organized by topic to help new listeners get a taste of everything that we do here on the show. Topics like persuasion and influence, disinformation and cyber warfare, negotiation and communication, crime and cults, and more. Just visit jordanharbinger.com slash start or search for us in your Spotify app to get started.

Today, an interesting look in an industry that plays a major role in our lives, but that most of us never even get a glimpse of. We're talking about shipping, but I'm not just talking about how things are sent in containers from China to the United States. I mean, that might be a show on its own, but I wanted to really get into some of the dark side of things. Surprise, surprise. Today we're going to talk stolen oil, sanctions busting, crime on the high seas, as well as why ships have what appear to be totally random flags, sometimes from landlocked countries on the back of the ship, what those mean.

They're called flags of convenience. There's a whole kind of crazy, grifty story going on there as well. The initial story from the author, who's our guest today, Matthew Campbell, the initial story is about an oil tanker that catches fire on the open seas. Now, it looks like an accident. turns out it looks more and more like insurance fraud, but they need proof. There's a murder that happens, and then a mysterious informant comes forward and wants like $10 million to give evidence. But in this conversation, we discuss not only this insurance fraud case, but some types of

crime that occur on the high season, the crazy, crazy characters that are involved in these crimes as well, and the criminal underworld and its overlap with shipping in general. So if you are the curious mind sort of person, probably like many of you are who listen to this show, you're interested in learning more about things you just might never even think about. I think this episode is going to scratch that edge for you. And on that note, here we go with Matthew Campbell. Well, man, this show's going to have everything. Pirates, murder, fraud. We got the trifecta today. I'm looking forward to it. You know, ships and shipping, it's kind of in the background. It's like water pipes or power lines or the sewer system. Yet this system is largely

responsible for much of, I guess you could say modern convenience, at least because I I want my cheap crap and I want it now, and me being sort of the universal consumer, maybe I don't necessarily want to know about the human cost involved in this. Yeah, exactly. Shipping is just part of the infrastructure that we never have to think about anymore. And that's by design. That's how the industry has put itself together over the last 60 or 70 years. And part of it is how the nature of the business has changed.

So the big innovation after the Second World War was the container. And there's a great book actually called The Box, which is all about the invention and the rollout of the container. And one of the consequence of the container was the ships got massively bigger. And when ships got massively bigger, they could no longer service the old ports. So, you know, New York City, Manhattan used to be a huge port. There used to be a huge cargo port in London where Canary Wharf is now. but the container ships were way too big. And so the ports got moved way out of town,

and one of the results of that was most people never saw ships anymore, never met sailors, never thought about it. And that helped the industry, first of all, made the industry a lot more efficient, but it also made the industry a lot more invisible. Is the South Street Seaport in Manhattan? Is that where they used to bring all the goods in? Because that is not even close to,

I mean, you can barely fit a large fishing trawler in that thing. All of those peers up and down Manhattan used to be, you know, both passenger and goods spears. Wow. And that's how small commercial vessels used to be. And actually, in this book of the box, there are some incredible descriptions of what it used to take to load and unload ships

because, you know, a bulk carrier might have like 50 different kinds of cargo on board. Yeah, like chickens, hay, oranges, frankincense. Exactly. I guess not electronics, but mechanical things. So weird. And all unloaded by hand, too, which is just crazy.

I assume that that's in there. Yeah, no, exactly. And that's actually one of the reasons that the port unions were so powerful, the Longshoremen and the stevedores. One of Longshoremen work on shore and the other work in the belly of the ships, and I'm going to get wrong, which it is,

but they were really powerful. And actually one of the consequences of containerization, and this was a very happy consequence for ship owners, not so happy for the workers, was it allowed them to break the port unions because the maritime unions weren't as necessary anymore because you didn't need all these guys. Do you happen to know the global volume or the amount of trade that's done by ship each year? How many dollars are we talking about here?

So there are different estimates out there. There are obviously a lot of different ways to calculate it. One stat from the International Chamber of Shipping, which is an industry group, puts it at 14 trillion U.S. dollars per year. Oh, wow. So that's something like two-thirds of U.S. GDP. So it's a hell of a lot of stuff. And actually, if you think about what's in any room you're in at any given time, really most of what's in that room came to you on a boat at some stage in its journey. They're just air freight is for, you know, live lobsters or semiconductors, stuff that's valuable and light. But furniture, electronics, cars, that all goes by sea. And of course, oil, which is the real heart of the shipping industry, oil and gas. I'm looking around, and the only thing I can think of that did not come on a ship is this hardwood

desk that I used that was made by my friend in a suburb of L.A. out of a tree. That's the only thing that didn't come by boat for sure. Everything else, I'm reasonably sure, is from another country and it came over on a container. Maybe this glass bottle that's supposed to be like hand-blown, but even that I'm not sure. That's really an incredible way to look at it. The computer you're using, the device you're listening to this on right now, the microphone I'm talking into, every single thing that's on your body, probably anyway, came in by ship. Yeah. And the central effect of that is it made possible the industrial booms that we've seen in Asia,

you know, China, now South East Asia, places like Vietnam and Thailand, that all would have been impossible if you didn't have very cheap, very reliable, very efficient shipping. The rise in the middle class in Asia. and conversely, the consumer bounty you can get at a Target or Walmart in the U.S. is totally a result of advances in long haul shipping. So my question is, this might be a little outside your wheelhouse here, but when I think pirates, or when I used to think pirates, I should say, I'm thinking corsairs and, you know, the Lego set pirates, right?

I patch and Peg Leg, and that's what, and like the 14. Johnny Depp pirates. Yeah, Johnny DeV Pirates of the Caribbean type thing. that's what I'm normally thinking of. How did that go out if shipping is on the rise, right? Then wouldn't, in theory, there just be more piracy everywhere, as opposed to that having taken a lull and then it would have come back in force? I know we have it off the coast of Somalia.

We'll talk about that in a bit, but why isn't there piracy just about everywhere? Well, there are a few reasons why we don't have, you know, Johnny Depp with eyeliner marauding, marauding vessels in the Gulf of Mexico and the Caribbean. And the really simple one is pirates need a land base. They can't live at sea forever. When you don't have a place that is hospitable to pirates hanging out between their pirating, then it gets much harder for them. In the kind of golden age of old school piracy,

there were islands in the Caribbean where pirates had kind of strongholds and they could retreat to when they were on the job, so to speak. obviously those don't exist anymore. And if they did exist, you know, the U.S. and other governments would have a pretty big problem with them. And so the result is that where you do get piracy today, it's in kind of lawless spaces. So it's the reason Somalia has been such a hub for piracy over the last couple of decades is there's very little effective government in Somalia. And so pirates can operate from land with relative impunity. And similarly, another hot spot for piracy, probably right now as big a hotspot as the waters off Somalia, is West Africa, where you have a series of fairly weak governments.

And as a result, areas of the coastline where pirates can do their thing without getting into too much trouble. The land base idea makes a ton of sense. Anywhere where you can kind of control the coastline, or at least a part of the coastline, and you can keep governments from taking over your land base, allows you to go back, refuel, or keep food or grow food or extort people, and giving you food and supplies on land and lock up and repair your ship and all that of those stuff. That actually makes a whole hell of a lot of sense. Shout out to Mrs. Perrin who embarrassed me in front of the whole class

by telling me that pirates didn't exist anymore, and they hadn't for hundreds of years. I still remember the laughter burns a little. She also told me dwarves were not real, because she confused them with elves, so she was not the sharpest knife in the drawer. But anyway, it was shocking. My uncle worked for Chevron for a long time,

and he used to tell me that there were pirates, and that's why I talked about it in fourth grade with Mrs. Parent. It blew my mind that there were pirates on stolen yachts. They would launch little skiffs and jet skis and stuff like that, and they would climb up the sides of these huge oil tankers, and then they would try and get the money that I guess they used to, in the 80s, at least in the 90s, they would keep cash on board to pay the sailors

because they needed to do that for some reason. I don't know if that was a union thing or what. I really have no idea. But also now, as I researched this, I learned that they wanted to hijack the boats, take them back to Somalia, and ransom them, right? Yeah, that's the game, basically. In a kind of classic example of modern piracy in the waters off Somalia, Gulf of Aden, the goal is you get on warship any way you can, and actually Captain Phillips with a great Tom Hanks movie.

I mean, is there any not great Tom Hanks movie? Yeah. We can leave the grade. The grade is just redundant. Captain Phillips depicts the chase pretty accurately, where pirates turn up in these little speedboats. They want to catch up to these huge vessels, which are hundreds of times their size, get up onto the hull anyway they can. So they'll use grappling hooks. They'll use these long, hooked ladders and try and clamber up the sides.

The shipping industry has various ways of dealing with this. Kind of old school one, it's just fire hoses. Yeah, that's what my uncle said. They blast them off the side with fire hoses, which seems incredibly dangerous. For everyone involved. Oh, absolutely. You might get shot or you might get shot from a fire hose into the ocean while your friends leave you there because they want the boat.

Well, and these guys are taking a lot of risk, these pirates, but they're taking a lot of risk because the financial rewards are significant. And the other thing is once they get on board, it's a different game because then you have the advantage that the commercial ship has during the chase period suddenly disappears when these guys are on board because the pirates have the guns. and for the most part, commercial vessel crews do not. The whole goal is to get on board, take control once you are on board, and from there the idea is get the ship to Somalia,

hold it for ransom, demand millions of dollars for the release of the vessel, its cargo, and its crew, from the owners or actually often the insurers. And generally they pay. That's why piracy works and did work for a long time, although it's come down dramatically in Somalia over the last several years. Yeah, we did an episode of a while, several years ago about a guy, Michael Scott Moore, is episode 1,15. He was abducted by pirates, and they kept him for years. They kept him for years and

years on the boat and then eventually on land. And I want to say he was eventually ransomed. It's been a while. I think he was eventually ransomed by bankrupting his family and friends. And it turned out the FBI kind of knew where he was for a bunch of years. They just couldn't do anything. And we did another episode about the economics of kidnap for ransom, especially piracy, and this Lloyds of London insurance thing. That was Anya Shortland, right? Anya Shortland, yeah, exactly. This is fascinating as well. The Lloyds of London kind of old boys drinking, at least the way I visualize it, dudes and bow ties sitting around in a place that smells of rich mahogany drinking at 2 p.m. and signing contracts and then leaving for home or for a pub. You're not so far off. I'm not so far off, right? I mean,

it really does seem like from your description. Tell me about this place, because we talked about Lloyds of London with Anya, but we talked about the economics. The way you describe it, it really sounds like the Legion of Extraordinary Gentleman type of place, except maybe less extraordinary. Well, there's a slight class distinction, though, and this is like, this is when you live in the UK, these things become very important. Lloyd's is not posh, right? It's wealthy. It's money, but it's not sort of guys who were all at Oxford in the best colleges and come from ERISO families. It's a bit more of a striving place for kind of middle class and upper middle class achievers to do very well. So what Lloyd's is, most people have a vague sense that it has to do with insurance, which it does.

It does not sell insurance. Lloyd's is not an insurer, which is a big misconception that people have. What Lloyd's is a market. And the way Kit, my co-author and I describe it in the book, is it's like a stock exchange for risk, which is a kind of slightly an elegant metaphor, but gets the idea. It is a place where actual insurers, you know, Prudential, AIG, all the brand names we know come to chop up exposure. So if I have a $100 million ocean vessel, no one insurer wants to be on the hook for that. And the way the Lloyd's market works, it allows dozens of insurers to each take a little piece of that liability so that if my $100 million ocean liner goes down, they're each exposed only to maybe a couple million dollars, which they can easily afford to lose. So that's Lloyd's function. Lloyd's history is fascinating. It's over 300 years old, which makes it easily one of the oldest existing financial institutions in the world. It actually takes its name from a coffee house.

So in 17th and 18th century London, the area around bank in the city for those who know London well was full of these things called coffee houses. Coffee was a new arrival in those days that had just come to Europe from the new world. People were like, this is awesome. So everyone spent a lot of time drinking coffee. And gradually, certain coffee houses had a sort of industry identity. So there would be a coffee house for publishers or printers. there'd be a coffee house for traders,

and Lloyd's ultimately, over time, evolved into the coffee house for shipowners. And then gradually, these ship owners who need insurance because shipping is a dangerous business would attract investors who were willing to give them that insurance. So this coffee house, over a long period into the 18th and 19th century, became a formal financial institution with a real office.

It was no longer a coffee house after a while. and was the hub for initially marine insurance, insuring ships and voyages, and then eventually insurance of all kinds. So now it's probably the single most important piece of real estate in the global insurance industry. I know they insure weird stuff because I've actually looked into this. They insure like, is it David Beckham's legs? All kinds of stuff like that. Yeah. It was a singer's voice like Mariah Carey, but maybe not her. It was somebody along those lines. The well-known one is Bruce Springsteen. Not sure how I confused him with Mariah Carey, but whatever. some, so it's common mistake. And then I was like, well, what about my, what about these sweet dulcet tones?

Like, what about if I lose this, I'm out of the job? How do I insure this? Turns out there's regular disability insurance that you can get pretty much anywhere. But if you want a crap load of insurance, like you need $100 million because your legs are scoring FIFA goals, you can't just go on the regular insurance that you get in America from State Farm or whatever. They're going to top you off at a reasonable annual income for a normal person. But if you want to still have the money you would have made in professional soccer, baseball singing, you got to go to Lloyds because no one's going to put that money down on you. You get hit by a bus, and it's just not worth the risk. Okay, so they're insuring ships, and in your book, this particular ship gets boarded by pirates, except they don't

just take it to Somalia and ransom it. They set the thing on fire, and they burn it into this husk, basically, and it's got like a hundred thousand tons of oil on it that doesn't burn. It stays in the bottom, I guess. This is not what usually happens when pirates grab a ship, right? Usually they take it back. It's more valuable with everybody on it in one piece in a serviceable condition, right? So this confused everyone. Am I getting this right? Right. So the central incident of the book and the event that drives everything that comes after is an attack on this ship called the Burlante Virtuoso, which was a pretty big oil tanker, 274 meters long, which actually does not make it one of the very largest oil tankers. That's merely a, that's a regularly large oil tanker. These ships are

huge. Okay. And it's carrying about $100 million of oil, fuel oil, actually. And it's boarded by pirates in the Gulf of Aden, which is the waterway between Somalia and Yemen, which in 2011, when these events occurred was just about the most dangerous place in the world. There were pirate attacks virtually every day. But in the course of this attack and this hijacking, the pirates take control of the ship, there is an explosion and a fire, and that guts the vessel. The oil does not end up going up in flames to everyone's relief and there's no spill, but the vessel itself is really totaled. And the crew flee in lifeboats, the pirates disappear, the crew are rescued by a U.S. cruiser, the Philippine Sea that was passing nearby. And this does make a lot of people in the

maritime world, in the insurance world, in the anti-piracy world, a little confused, because, as we were saying, the whole game in piracy is you're holding a ship and its crew and its cargo for ransom. So the last thing you want is to do anything that would diminish the value. And a fire obviously diminishes the value. And also abandoning the ship, as these pirates appear to have done, is a very bad idea because once you're on board, you want. The whole goal is to get on board. So once you're on, you don't get off for anything unless that anything is a hell of a lot of money. So pretty much from day one, when the Berlante was attacked and largely destroyed, there are people in London where it was insured and elsewhere in the maritime industry,

kind of scratching their heads, not in a suspicious way, but in a confused way. What happens when a supertanker is on fire like this? I mean, this is a ship that's almost a thousand feet long, which it's hard to even wrap your head around this, but if you think of a street, a block you're on that has 10 houses, it's longer than that, right? I mean, it's insane how big this. It's like the size of a neighborhood where I live. It's just full of oil. You got to be worried about oil spills and, of course, the crew and just the sheer value of this multimillion dollar vessel, right? You said $100 million plus dollars, but mostly the potential for what I would assume is a multi-billion dollar oil spill. This is a very delicate situation when this thing is burning like that. Yeah? One of the things that's really fun about this book, in my view, is it takes us into some hidden worlds. And one of those hidden worlds is what happens when a giant commercial vessel gets into

trouble. There's this whole infrastructure of people who, certainly before doing this research, I'd never heard of, whose job it is to respond in situations like this. So the very first thing that happens is every commercial vessel has something called a ship security reporting system alarm, which is like a silent alarm on the bridge. It's a very high-tech version of what's behind the counter at 7-11. That distress signal gets beamed out to various stakeholders in the maritime industry. One of the most important is called UKMTO, United Kingdom Maritime Trade Operations, which is a British government office in Dubai, actually. And this is kind of a

legacy of when the Royal Navy ruled the waves, that the UK has a lead role in this. And UKMTO coordinates between private sector, shipping companies, navies, coast guards, environmental authorities to allow responses to marine incidents. So that's what happened in the case the Burlante attack. This distress call goes to UKMTO. They start coordinating between international naval forces in the area, trying to get the Yemeni government. This has happened off the coast of Yemen, trying to get the Yemeni government involved and to make sure that the Yemenis understand they have this big problem,

ascertain the damage, make sure there hasn't been a spill or no risk of a spill. And then from there, the circle keeps getting wider, going to the ship owners, obviously, but also insurers various third-party service providers, salvage firms who become very important, and we'll talk about later. So this whole ecosystem swings into action,

like instantly in the middle of the night, 24-7, because this huge, very, very, valuable piece of asset is suddenly at risk and at risk in a way that could lose a lot of money for a lot of people. That was why my next question is, hey, the oil's still in there, it's not burning, they got to get it out because the thing could sink, right? The sides could be destroyed. I mean, you can't just leave this thing floating full of oil. It's a ticking time bomb. And not to mention, there's still a ton of metal. I mean, there's a huge fire, but there's a ton of metal, actually quite several tons, maybe even hundreds or thousands of tons of metal

still left in this floating trash heap now full of oil. So who goes out there and one puts the fire out? And two is like, this is mine now. I'm going to do something with this. So when a ship gets in trouble at sea anywhere, these guys called Salhors come into the frame. And while we don't have Jack Sparrow-type pirates anymore, salvage crews are kind of their modern heirs.

or certainly Jack Sparrow would recognize Salavage crews as kind of his kind of people. The way salvage works is these very, very tough, very experienced sailors are on call 24-7. Every port in the world has a core of salvage crews, and they're just waiting for accidents to happen. And the elite salvers, the guys who, and they are all guys, I mean, I'm sorry to use gendered language, but it really is, this is a very male business with few exceptions. they swing into action. And the good ones can make rock star money. Because the way the business model works is salvage crews receive a percentage of the value

they protect. Oh, wow. Let's stick with the example of a vessel worth $100 million just to go with round numbers. And if that vessel sinks, its nominal value is zero, right? Right. But if a salvage crew succeeds in putting out a fire, stopping an oil spill, keeping it off the rocks, whatever, in a way that the cargo can be sold, the ship can be scrapped, that value can be extracted. The salvage crew gets a percentage, and the percentage varies by job, but it can be

10, 20, 30 percent in some cases. Wow. So you're talking about a ship worth 100 million full of how much is 100,000 tons of oil worth approximately? Any idea? Not a fuck. Although it depends on the product and depends right now that would be worth a hell of a lot. you'd have to convert it to barrels, which depends on what kind of oil we're talking about, the ton to barrel ratio. I'm going to do that right now. BP has a chart. 100,000 tons, metric tons to U.S. barrels, not even that hard to do.

Okay, convert. So, 100,000 tons. So 715,000 barrels, approximately. Okay, yeah, so that oil itself is worth, give or take a few hundred thousand dollars, $73 million. So it's worth about. three quarters of the worth of the vessel. So if you're adding that to the price of the vessel, and the vessel price is $100 million, it's $173 million. So if you're getting 30% of that,

you're talking about $52 million. And if you're talking about 10% of that, you're talking a mere $17.4 or so million. So between $17 and $50 million, that's worth getting out of bed for kind of no matter where you are, flying to getting on your job. jet and then a helicopter and then another boat somewhere in Yemen and going into the danger zone and trying to do it you can do best, right? This is like the marine version of a smoke jumper, except you're right. They're literally, they're making rock star money, but it's like metallic a rockstar money, not just, we're not talking about Hootie and the Blowfish money. This is real rockstar, rock star money. You were not kidding. That's how these guys live. So there's a character in the book

called Nick Sloan, who's one of three or four really truly elite salvage professionals. And Nick, he's South African. He lives in a beautiful house in the Cape wine country, and he plays golf and rides horses and has a very pleasant life. But his phone might ring at three in the morning to tell him, you know, there's an oil tanker on the road that's about to go on to the rocks in Chile. And he has a go bag and he's straight out the door, straight to the airport, onto the next flight. And later that day, he's maybe helicoptering and then climbing down a ladder on. onto the deck of this foundering vessel in the South Pacific. So, yeah, that's the life. And it's a good life, although it's a very dangerous one. A lot of these guys get killed, as you can imagine. Sure. In the case of the Burlante of our tanker, salvage crews were on the scene very quickly.

The goal there, of course, was to put out this huge fire to secure the vessel and make sure it doesn't sink. And ultimately, to prepare it to offload all the oil, because the oil was intact, and that means it can be sold. It seems like any business with this amount of action taking place in international waters with adrenaline junkies and a crazy, ridiculous amount of money at stake, it seems like there's always a little bit of room in there for some corruption and maybe some shady shenanigans.

That is an understatement in the case of shipping, to say the least. I don't think anyone in the shipping industry will be too offended if I say it is at times a pretty dirty business. And that's true at every level. Certainly among salvage crews, you know, there are, it's long been assumed, for example, that these salvage awards we were talking about where the salvage crew gets 30% of the value, that some salvage crews kick part of that back to ship owners, basically in exchange for being the favored salvage crew next time. There is all kinds of, of course, more pedestrian bribery and kind of standard level corruption. Yeah, this is a dirty business.

It attracts a lot of criminals. There's very little oversight. Shipping has no real overarching global regulation in the way that, say, the airline industry does. And in those shadows, all kinds of bad behavior can thrive. You're listening to the Jordan Harbinger Show with our guest Matthew Campbell. We'll be right back. If you're wondering how I managed to book all these great authors, thinkers, and creators every single week, that's because of my network, and I'm teaching you how to build

your network for free over at Jordan Harbinger.com slash course. I just taught this to a bunch of insurance folks, but I've also taught it to MI6 Secret Service. This course is about improving your networking and your connection skills, but also about inspiring others to develop a personal and professional relationship with you. It'll make you a better networker, a better connector, and most importantly, a better thinker. That's all for free over at Jordan Harbinger.com slash course and many of the guests you hear on our show. Subscribe and contribute to that course. So come join us.

You'll be in smart company where you belong. Now, back to Matthew Campbell. Investigating and frustrating piracy alone has to be really tough because you can't really, first of all, even if you could arrest them, you can't really prosecute them. Or even file a lawsuit against a Somali pirate or somebody in Yemen. You can't really do anything about it. You can't reach them by law. and you can't reach them at all anyway with law enforcement. So what can actually be done about any of this?

It seems like somewhere between the guys jumping on the boats and the money, the millions of dollars, whatever, coming from the Greek or U.S.-based shipping company, somewhere in between there, that's where you've got to do the enforcement, right? Maybe with the bank involved or the transfer of funds somewhere. Well, there were various ideas to tackle this problem over the years. One was the slightly farcical effort by the U.S. and other countries to prosecute individual pirates. And there were a couple of incidents where the U.S. Navy picked up, you know, these sort of tank-top.

Somali guys, you know, with a Kalashnikov and mesh shorts and a tank top, arrested them, brought them to New York to go on trial at SDNY, you know, under piracy statutes, going, dating back probably to the early 19th century. I don't think anyone has ever thought that's a really scalable, strategy. So there were other ideas. Like you have to go after the facilitators because piracy's business. The money has to be laundered. There are investors who are backing piracy enterprises so you can go after them. And that was tried to some extent. But what ended up working ultimately and what is really largely put a stop to piracy, at least in the Gulf of aid and or made it much more

difficult, is putting armed guards on ships. That seems like the most obvious freaking solution. And I was like, what am I missing where you can't just put a couple of soldiers with the long-range rifles? And as soon as it skiff pulls up, take out as many of the guys as possible. And they will turn around and go the other way, theoretically. Yeah, there was a lot of resistance to it, believe it or not. First of all, because it's expensive. And shipping is all about cutting costs. Fine.

Ship owners are nervous about having guns on ships, probably for good reason. And so that prevented it. There were regulatory obstacles, you know, kind of wondering if you were a big, shipping company based in Europe, and you think, well, can we just start killing Somali pirates? Like, is that allowed? Are we going to be prosecuted? They were legal questions. So it actually took a while to figure out exactly how to do this. But ultimately, that is the solution the industry arrived at. And piracy today has come down quite a bit. It seems so obvious, right? Because, yes, it's expensive. But you know what else is expensive? Ransoming an oil tanker or paying out

for dead crew after four years of captivity, whatever it is. So it just, But I understand the legality of not wanting to roll your ship in from China and then have it land in Taiwan and then have it land in Spain. And then maybe you've just broken laws everywhere that you just were with your rifles on board and your soldiers and stuff like that. And it seems like the kind of thing you have to be delicate with the treaty because you don't want it to then result in arms trafficking or all kinds of other knock on effects that wouldn't work well.

But yeah, with this much money at stake, it seems like the most obvious thing to do is say, even insurers should have said, hey, put some armed guards on this ship, because it's lowering our chances of having to pay out $500 million if you've got three armed guys on there that have reasonable marksmanship. Ah, but if you're an insurer and Somali piracy is rife, you can charge higher premiums. Okay, now the truth comes out, right? So your incentives don't always exclusively run in the direction of wanting safer seats. Tell me more about that, because that seems if I just thought of that solution just now, other people had considered it before and went, no, I'm making more money doing it this other way, even if it's more dangerous for somebody else.

I'm certainly not suggesting that the insurance industry, you know, loves piracy or loves ships getting into trouble. We would never do such thing. But look, it is a fact, and there's a history of this at Lloyd's, particularly, that dangerous times can, up to a point, be good for business, because you can charge more for the insurance if people need it more. Now, I say up to a point because obviously, if you have a lot of big payouts, that's a problem. And one of the funny things about Lloyd's is this has changed now, but historically, the people who funded Lloyds, the investors whose capital underwrote these huge insurance policies,

were largely wealthy individuals. And actually, if you were a very aristocratic Brit or even just a celebrity who wanted a place to park their money, you would become what was called a Lloyd's name. and that would mean you pledged, not you didn't actually have to hand it over, but you sort of reserved a certain amount of capital for Lloyd's policies. And if the policies that you were invested in ended up having to pay out, there would be a call on your capital. And this was particularly unusual because they had a limited liability.

So as they would say, if things went really bad, you were on the hook down to the last cufflink. That was the expression they used. But the way the market had evolved, that never happened. You know, no one, almost everyone made money. It was they'd set it up in a very efficient way. And so it was seen as like a safe bet. And there were various tax advantages too.

But in the 80s, there were a number of disasters all at once. And then Hurricane Andrew also in 1992 compounded it. And suddenly there wasn't enough money in the Lloyd's market. And all these names who thought they'd made this incredibly safe investment in a kind of, you know, come on, old chap sort of way. Yeah. We're like, holy shit, they need all my assets. and there were a lot of lawsuits. It was really ugly. It resulted in a big restructuring of the way Lloyds operates. And the names kind of died out, actually. People, individuals stopped being the main backers of Lloyd's policies. It's now, you know, big companies.

It sounds like you would want, yeah, you'd want some limit on that liability. Like you could pledge all the assets that Jordan Harbinger LLC has, but you're not taking my house and my kids college fund. That's a little bit too much, even if you're giving me good returns. It's funny that people were doing that because when I think insure David Beckham's legs or Bruce Springsteen's voice and then you say individuals can do this, it reminds me of, have you heard, they sponsored this show, so I got to be careful what I say, but have you heard of this company called Masterworks where you can like buy a share and a Picasso painting? You don't get the painting, but it's like an investment. This is what it's what it sounds like, do you want to, have you always wanted to purchase David Beckham's legs what you couldn't afford to? Now's your chance to own a piece. of history, right? Athletic history. You always wanted to meet Springs thing? You can't, but you can own his vocal cords, or at least a tiny share thereof, by joining the Lloyds of London marketplace. That's really what this sounds like, and it's really funny that that used to work like that. I can imagine the limit on liability generally a good idea, but of course, you know, greed always has a good way. Greed's always a great way to get people to throw caution completely out the window.

Public service announcement, your listeners, do not sign up to any partnership with unlimited liability. It is a bad idea. Exactly, if that even exists anywhere now. So how do you get the oil then off a boat that is nothing more than a burned out husk with tanks full of oil floating someplace off the coast of Yemen? Well, in this case, first you have to get it out of Yemen because these are not waters where you want to do what's called a ship-to-ship transfer, which is this very very. very delicate, slow operation to essentially pump the oil from a full tanker to an empty tanker. That's basically what it is. So the first thing you have to do is you need to tow the vessel because in this case, the Brilante was not going anywhere under its own power. You need to tow it

somewhere safe. And they decided ultimately the insurers and ship owners that it would go up to the Persian Gulf off the United Arab Emirates, which is a much safer part of the world. But before that, One of the things that needs to happen is you need to get what are called surveyors on board who are essentially kind of like claims adjusters. Like if you have a tree fall in your garage and you make an insurance claim on your home policy, State Farm or whoever are going to send someone around to take a look and make sure, A, that the tree actually fell in your garage, that the damage is, as you described it, come up with an estimate for what they'll pay out, that kind of thing.

The insurance industry employs people just like this, but on sort of elite scale, what are called marine surveyors who go in for these really complicated cases. And in the case of Burlante, there was a marine surveyor who happened to live in Yemen, a British guy, David Mockett, who was hired by the insurance companies who covered that vessel and asked to go and get on board. and that decision ended up being a very faithful one for David. Yeah, he ended up dying, but being targeted, right? He's blown up by a car bomb, and this plot twist is either terrorism or something else more insidious going on as we find out in the book. It turns into this absolutely ridiculous, and I mean that in a positive way, kind of tale of these salvage crews and this owner of the ship.

And we'll get into this in a second. Before we get there, though, I'm still curious about getting the oil off the boat. You mentioned ship to ship transfers. I've heard of North Korea, you know, they're under sanction from just about everybody. I've heard that North Korea will take oil from, let's say a tanker that comes from Taiwan, but they can't have the boat from Taiwan go dock in North Korea, get picked up by a satellite. So they, North Korea sends a tanker into international waters, Taiwan sends a tanker or Singapore or whatever into international waters, China, whatever it is. And then they do a ship to ship transfer. And then the ship does another sort of fake

stop, so it looks like it went to Singapore to Taiwan or whatever, but it really, the whole point of that journey was to give oil to North Korea or other goods. Have you heard about this at all? Because it seems like this is kind of a common sanctions evading trick. Yeah, I've looked into that issue quite a lot, actually, of these ship-to-ship transfers to get around sanctions. North Korea is a very common user of this tactic. The basic idea is oil is movable. You can get it from one tank or to another. You have to find a quiet place to do it, and you have to turn off both vessels, transponders, what are called the automatic identification system, which essentially, if you go on marine traffic or another of these ship tracking websites that are at least partly free, you can see the location of just about

every commercial vessel in the world, which is because they all have these transponders that are squawking at all times. But you can just switch them off. And you certainly would switch them off when you're doing a illegal ship-to-ship transfer of oil destined for North Korea. The physical way you do it is quite tricky. So, you know, if you want to start with the real basics, the empty tanker is sitting high in the water, and the laden tanker is sitting low in the water. And as the process goes on, those positions will switch. And you have to make sure that that happens without either vessel being destabilized. It gets more complicated still when, in the cases of Rolante, our tanker that was attacked, one of the ships is heavily damaged. So if these ships are

right up next to each other, there could be pressure on the side walls of the hull. You need to make sure that those are not going to be too weak to sustain a bump. You know, another thing is you need to inert the oil. I mean, we can keep going if you want. No, this is interesting. I mean, look, maybe I'm the only one who finds it interesting, but it seems like you could, if this oil is sitting in there, it could be off-gassing. Couldn't that explode? What if there's a spill, that could explode, right? Well, exactly. So oil in a tanker produces flammable vapors.

And so what you need to do to keep it stable, you need to inert it. That's the verb that you use. You need to pump in an inert gas, which is low oxygen content, to make sure that a fire can't get going from these fumes. But in the case of a damaged chip, the inert gas system probably doesn't work. So you then need another source of inert gas from another vessel to pump in and keep pumping it in so that you don't have an explosion. And then on and on and on. You know, Nick Sloan, who's this master salver who appears in the book, around the ship-to-ship transfer,

involving the Burlante's oil, has done a lot of these, probably hundreds of ship-to-ships over the years. But even he would say, everyone is different. You have to be careful. This is a tricky and potentially dangerous procedure. If he's done hundreds of these, that dude's a billionaire by now. Got to be, right? Maybe not a billionaire, but he's done very well. Yeah, good for him. Okay, so the man investigating this fire slash piracy is blown up by a car bomb in Yemen. It's not just random terrorism. It looks like he's targeted. And he was targeted because he thought something about this shipfire was fishy.

No pun intended, right? I'm trying to stay away from nautical puns, but it's just, it's not possible here, especially around this poor guy because he was like this incorruptible guy wouldn't just lie on the form. It sounds like he had integrity in a business that didn't necessarily want him to have integrity around matters like this, especially this one. So David Mockett is, yeah, this elite marine surveyor. He's very good at his job. He lives in Yemen.

He's British, although he's lived in the Middle East most of his career. He had a reputation for being totally by the book. He's not someone who would ever fudge the numbers a little bit or, you know, give a little on a claim because someone was his friend that was just not his way at all. And he went on board the Brilante to inspect the vessel after this pirate. attack and fire and concluded that the story didn't stack up. He didn't really have any idea or none that he articulated that I saw of what had actually occurred, but he was quite confident that there was something more going on here. And he articulated those doubts in emails, in phone calls

to, in documents that ended up being circulated around the marine world to all the many people who at a stake in this accident. And yeah, on July 20th, 2011, exactly two weeks after the attack on the Burlante, David climbed into his car outside his office in Aden, support city in southern Yemen, drove maybe 100 or 200 meters, and was killed by a car bomb that had been placed directly under the driver's seat, clearly targeted at him. And ultimately, a lot of people involved in this case would conclude that he had been targeted because he had articulated. those doubts and was seen to be in the way of something bigger than him. Now, you know, I should stress, no one's ever been charged with his murder. There has never been a conclusive legal

determination of who killed him and why. But there were certainly suspicions from the start that this was not some random act of terrorism that he was targeted because of his role in this case. So he gets the idea, or at least it sounds like, he gets the idea that this ship was deliberately, like you said, the story doesn't stack up. Something went wrong, but it wasn't just the piracy. In fact, those guys didn't even stay on the boat. It looks like maybe there's an inside job. Tell me about scuttling what this is and why people do it. So when I first learned about this in the course of researching first a magazine article about this case and then the book, I was like, what? The notion of scuttling just completely blew in my mind. Scuttling is intentionally

sinking a ship. And it's called scuttling because there are these hatches called scuttles on the sides of ships. And if you want to sink a vessel, the easiest way is you open up the scuttles, you let water come in and down it goes. And there are historical examples of military scuttling, for example. So after the First World War, this is probably something a lot of people remember from history class. The German fleet was scuttled at Scapa flow so that the Royal Navy couldn't take possession of these vessels and convert them into British service. So that's a military reason. However, over time, and really this goes back a long way, it goes back even to the ancient Greeks. One of the reasons ships have been scuttled is for insurance fraud, because there are

cases where, as my co-author Kit and I say in the book, some ships are worth more on the bottom than they are afloat. And there can be various reasons for that. You know, sometimes a rust bucket vessel is insured for more than it's actually worth. Maybe it's losing money. You know, the owner needs cash and a way to get it is to sink your ship. And it turns out this has been going on forever. It is as old as shipping itself just about. And it remains a big problem today. And if you talk to anyone in the Marine insurance business quietly, this is not something they advertise. They will say, yeah, this is a big problem. And it's something that we have to contend with all the time that not all nautical accidents are really accidents. Did you say that there was

insurance fraud even in ancient Greece, or were you talking about military scuttling even in ancient Greece? Because it would surprise me if there was insurance fraud in ancient Greece, but now I realize it probably could have been. Oh, there was. Absolutely. This is one of the reasons that insurance fraud is among the oldest white-collar crimes. That's funny. I had no idea. The ancient Greeks had something called bottom reek, which was a kind of primitive form of insurance, and it similarly created opportunities for fraud. So actually, the earliest case of insurance fraud that we know of comes from the ancient Greeks, and we know about it because Demosthenes talked about it, and that was then recorded. This is something that's been going on, really, since time and

memorial. It's as old as finance, let's say that. That's fascinating, and it makes sense, though, right? The rewards are huge. Ships are super expensive. They're expensive to maintain. You can't just sort of, like, take it out of service, because you still got to keep it in a port and pay the people to keep the thing floating, right? It's not like a, it's not something you can just sort of abandoned. It's not a car you can park in a forest and walk away from and just cancel the insurance, right? It's a massive floating factory or palace or whatever it is. The problem, I would imagine, with scuttling is the crew is on the boat and the owner is sitting somewhere in Athens or New York, and he's not necessarily going to have a problem if the thing hits the bottom of the Mediterranean

sea because he's not on it. He's not there. Yeah, crews are an issue. There are ways around that. Ideally, you don't want to kill them because I think most ship owners would have some qualms about that. So the easiest thing is to just pay them off and say you didn't see anything. If anyone asks, you hit that rock by accident or that fire started by accident. And compared to the amounts you can gain by large-scale marine insurance fraud, paying a bit to each sailor is not such a big deal, particularly nowadays because sailors are paid very, very, very little. Yeah, I've heard that most of the crew now are from like India, the Philippines, Sri Lanka, Vietnam, whatever it is. And there's almost no, a lot of times there's almost no Western crew on there,

or maybe there's a couple Dutch guys in the bridge of the boat or Norwegian guys. So if you pay those guys a couple million and they retire and then you pay the rest of the crew a million divided up 20 ways, they're all never going to need to work again. So they're certainly going to be quiet about something that they couldn't stop even if they wanted to, right? Yeah. So even the two Dutch guys on the bridge are probably gone now. Shipping is an industry that is staffed overwhelmingly from the developing world. Overwhelmingly, I mean like 90% plus. The exception is there are some Russians and Ukrainians, so sort of less wealthy, semi-developed countries in those cases, but yeah, Philippines is the number one source of sailors, India, Indonesia. And this is part of this huge transformation of the shipping

industry that has occurred over the last 60 or 70 years, where containers met bigger ships. They also meant you didn't need as many people to load and unload, which means you didn't need big staff in ports like New York and London. So you would fire all those people. And then you had flags of convenience. This is this practice of, you know, registering under the flag, Panama or Liberia. And that means you have no rules on minimum wage, for example, that are comparable to those in the West.

So you can just pay rock, rock bottom. And that means you hire Filipinos or Indians who will live away from their home. for 10 months a year, make maybe $1,000 or $2,000 a month and not ask too many questions. This is the Jordan Harbinger Show with our guest, Matthew Campbell. We'll be right back. Thank you so much for listening to and supporting the show. Supporting our advertisers is what keeps us in business. So all of those deals, all those codes, all those sometimes complicated and changing URLs

and promos, they're all in one page. The page is searchable. Jordan Harbinger.com slash deals is where you can. find it. You can also search for the sponsors using the search box on the website over at Jordan Harbinger.com as well. So we try to make it as easy as we can. Hell, if you can't find a code, email me, I will give it to you. So please consider supporting those who support this show. Now for the rest of my conversation with Matthew Campbell. What is going on with the flags of convenience? Is that why ships have these seemingly random flags on the back? I know we talked about

this kind of a few weeks ago prior to the show. That always confused me. When I lived in Panama, I would see ships with Panamanian flags, and I'm thinking, this is a bunch of Americans on here. Words are in English on the side. Everybody's yelling off at the side of the canal in English. Like, what is going on here? Why does it have a flag from Bermuda or Liberia? And there's not a single, not an African in sight. It's so confusing, right? That just drove me nuts. I never could figure it out. Flags of convenience are fascinating. And this is another example of where, when you learn about the shipping industry, it kind of breaks your brain a little bit, because it operates under such different rules from everybody else.

So time was that if a ship was owned by Americans, it was registered in the United States. It would have an American crew subject to American law and so on. And the same for the UK and France and down the line. In the 20s, some people figured out that if a ship was registered in Panama, flagged as Panamanian, it could serve booze even during prohibition. So this was a very obvious application. of a flag of convenience in that case.

And then after the war, things really got going. One of the reasons was there was some concern by the U.S. government that in the event of a conflict, the Soviet Union, American shipping would be blockaded. And so a solution to this would be to flag broadly Western vessels under some kind of neutral country. So the result of this thinking was something called the Liberian Registry. And the Liberian registry associated, of course, with the very small West African country of Liberia got going in the late 40s.

The very first vessel flagged as Liberian was owned by Stavros-Niarkos, who was a very rich, very suave Greek shipping tycoon of the post-war era, one of the richest men in the world at that time. From there, tons and tons and tons of vessels flagged themselves as Liberian, Panamanian, Bermudan, for the simple reason that, these countries had very limited rules on things like wages and working conditions. You could save a huge amount of money by flagging with those countries, even when the registries had very little to do with the countries themselves. So one of the fun things to know about the Liberian registry is that it's based in Dulles, Virginia, not Liberia. I think it has an office in Liberia, and it kicks some money back to the Liberian government, but it is a private American company that has a a license to use the flag of Liberia.

Wow. And to sell registrations to commercial vessels. Again, when I first heard that, I was like, the Liberian Registry's based where? Yeah. Not Liberia is the answer. So Panama is actually in Panama. But the, you know, you get the idea. This is a, these are legal fictions that are designed to cut costs, cut regulation,

make life easier for ship owners. And they are wildly popular. You would be crazy as a commercial shipowner not to use a flag of convenience. because you can save so much money. I've heard you can even get flags from places like Mongolia. And, of course, the first thing I did was say, Mongolia, pretty sure they have no... I had to look at a map, and I would...

to confirm that Mongolia indeed has absolutely no coastline whatsoever. And yet you can flag your ship from Mongolia, and then I guess what? Not pay taxes, pay your workers crap, serve booze in countries that don't allow booze, and I don't know, who knows what else you can get away with. Now that you tell me that the Liberian office is in Virginia, it's probably run by people who aren't even from Liberia. I would imagine the Mongolian thing is just, it's the same thing.

Who knows? Maybe that's run out of a suburb of Detroit somewhere with a bunch of French people running it. It just seems completely arbitrary in many ways. The Liberian Registry, like this is, it sounds like a joke. The Liberian Registry is based in Virginia and is run by Israelis. There you go. Because of course, right? Because of course.

And the Mongolians, you know, yeah, landlocked countries have at times sold. cheap, hassle-free ship registrations. At one point, this may be apocryphal, but it is, as they say, too good to fact-check. Supposedly, someone in Singapore set up a Cambodian registry without telling the government of Cambodia. And all of these ships were suddenly flying Cambodian flags, you know, with no involvement from actual Cambodia, and it was like run out of some office in Singapore. This is a wild, unregulated space. I would imagine Cambodia was my, at least if they have any sort of maritime presence, which I doubt they do, they would be somewhat alarmed that there's a bunch of giant ships flying their flag off of the back. I'm sure they would be irritated

by that. It seems like it would touch a nerve, yeah. I think that one eventually got shut down. But these things pop up and disappear over time. And there are, you know, the flag's convenience everyone knows, Bermuda, Liberia, Panama, Marshall Islands, another big one. And then there's a whole other tier below that that are even sketchier. Where's there room to be sketchier with this? Fewer safety requirements, fewer inspections, even lower taxes. The ITF has a blacklist of the very worst flags of convenience. You know, the Panamanian, for example, there are certainly some concerns about it,

but it is employed by, you know, big, big companies like Maersk and so on. So there is a kind of baseline level of probity that has to be followed. but the Samoan registry or something like that, you're just in a whole other world. Does North Korea have this? Because they're under sanctioned. It's probably not that useful to have your ship flagged North Korea because you can't go anywhere or do anything. Yeah, I would imagine that there would not be a lot of takers for North Korean registries. It is amazing how this industry touches every, even a remote region in the world. So even after this Greek-owned, Liberian-flagged, British-insured, Yemen-investigated,

Middle Eastern salvaged ship was done with service forever. Didn't they send it to like Pakistan to be disassembled and melted down for scrap and recycled as well? That's right. So when you have a ship that is truly at the end of its life and needs to be scrapped, you generally do not scrap it anywhere expensive with lots of annoying environmental regulations. So the place to go, there are three places to go, actually. They're Pakistan, India, and Bangladesh. And there are these communities in Pakistan, for example, right on the Arabian sea coast. There's one that's probably the most famous called Gadani. And one of the virtues of Gaddafi, it's near Karachi on the beach, is that it has a very

soft, sandy shore that rises quite quickly out of the water. So it's a steep incline out of the deep water. And that means you can bring big vessels right up onto the beach and just take these, you know, or 300 meter tankers and shove them right up on the sand. I think I've seen this. This is the one where they just, they're blasting the horn and everyone clears out of the way. And they just full speed ahead,

this massive ship just plows into the beach and comes up there. And they just start, after that, I guess it's sort of like one fourth of it is still in the water because, of course, and they just start welding pieces off of it and taking them down. I think I've seen a video about this because I was like, they're doing this on purpose, but what the hell is going on?

I couldn't figure it out. This is what's going on in that video. Exactly. So then it's an informal industry. These vessels, once they come up on the beach, and this plays out, we're describing Pakistan here, but it's exactly the same in India and in Bangladesh. They will be swarmed by workers with blow torches and saws and hammers who start ripping apart everything of value. So, you know, obviously steel, copper, those are valuable. There's lots of other smaller amounts of material that you want. Even the wood gets taken because they use the wood to build the shacks they live in. So typically these workers will live right by the beach and kind of shanty town settlements

made from wood salvaged from vessels. It's really incredible. Yeah. And it's super dangerous. The working conditions are terrible. There is a lot of concern among NGOs about these places and sort of demands that ship owners stop sending ships there and stop encouraging this very dangerous work. On the other hand, you know, there's an argument that it's providing employment for people who wouldn't otherwise

have it. But so the Berlante was ultimately sent to Pakistan to Gaddae, where it was scrapped and disappeared. It seems like if you're buying anything, you're selling anything, you're digging anything out of the ground and moving it around, or even if you're just destroying the things that you use to do those particular things, you need shipping. It's just unbelievable. It's really incredible and amazing and very cool. On the other hand, it seems like there's no real incentive to clamp down on the fraud involved, because can't the insurance companies just jack the price up for everybody else if people scuttle a ship? It's like, well, I could investigate this and then not prosecute anyone and then never get any sort of closure on this, or I can just raise

premiums by 10% for the amount of people that are defrauding us, and that's just how it's going to be. So insurers have historically been pretty hesitant to tackle fraud and to really go after. scuttling. And there are a few reasons for that. Yeah, one is they make lots of money. And if you have to pay out the odd dodgy claim here and there and you maybe also get to raise premiums to cover the cost, the impact on your bottom line is not so great. Another is it's bad for business to accuse your clients of being criminals. You know, ship owning, like this is not like car insurance where you have millions of individual customers. There are only so many large ship owners in the world. And if you say to someone who has a fleet of tankers, hey, you know, we think you're a crook.

We think you scuttled this ship intentionally to defraud us. Well, he's probably going to take his business elsewhere, and you don't want that. And the third, and this is really where we have to be quite fair to the insurers and, you know, not exactly sympathetic, but understand their position. In the admiralty courts in London, which is where these disputes have to be adjudicated, there is a very high legal bar to proving fraud when it comes to shipping. So what you have to do is not only prove that a vessel was scuttled or destroyed intentionally, but that the owner was directly responsible for doing so. And given that an owner can always blame it on the crew or blame it on somebody else,

that's really hard. So winning a scuttling case, and of course if you deny a claim, you will get sued. That's what happens. winning a scuttling case is really challenging. And as a result, insurers have over the years decided to not even try for the most part. It seems like you almost need some recorded phone call or a bunch of emails that you get during discovery that say, so what we're going to do is burn this thing and semen number one is going to plant a grenade in the engine room and seaman number three is going to spray open all the fuel valves.

There's a lifeboat waiting for them. They're going to go here. We already booked the hotels. Here's your receipts. But you really just need an open and shut case. And even then, unless there's money that you're going to save by doing this, why prosecute the person? Just tell them you're denying their claim and here's your evidence and then never bothered to bring them to justice because who cares? They're not going to show up in handcuffs or show up for the handcuffs.

Well, if you deny the claim, they'll sue you, right? There's very little criminal prosecution of this because governments just aren't interested in it. On the civil side, if I am what's called a Lloyd Syndicate, which is a group of insurers who come together to insure an asset. And I say to the owner of, you know, a hypothetical wrecked vessel, I'm not going to pay your $100 million claim because I think it's fraudulent. The owner sues me, of course, because he has a lot of money on the line. That's not a lawsuit that insurers are confident they can win. And of course, if they lose, they have to pay out. So what may occur instead is I'll say, well, we've had some difficulties assessing your claim, Mr. Greek ship owner. But of course, we value our relationship. So why don't we settle for

50% of the value? And he walks away with $50 million and the knowledge that, in this case, this kind of crime kind of does pay. Globally, this probably costs billions of dollars a year, but it just means higher prices and business goes on. Higher insurance prices, which means higher shipping and goods prices. But it's all sort of meted out over billions of people. So we don't even really necessarily notice. But yeah, it just seems so easy or quite easy. I should say, if you know what you're doing, to perpetrate and get away with it. Because even when you lose, you just lose the money that you've bet on the crime. You rarely see the inside of a jail cell.

I don't know, man. Maybe we should buy a boat, a boat and a big-ass insurance policy. What do you think? Yeah, if I could do it again, I'd be a ship-skuttling maritime tycoon. Well, they have it pretty good. It's not too late. And if you're Greek, Greek ship owners, who are the biggest group of ship owners in the world, Greeks control something like 15 or 20 percent of global shipping, which is incredible for a country with the population of Illinois.

Greek shipping concerns pay no corporate income tax. Wow. And in fact, they maintained that exemption even during the depths of the Greek financial crisis when the country was desperate for revenue. The ship owners very magnanimously agreed to make a one-time voluntary contribution. I think it was 90 million euros or something like that. to the Greek state, but they did maintain their tax-free status, even under Cipras, who was the like, firebrand socialist prime minister, even he didn't touch it. Those are the people that are really pulling the strings in Greece then. Essentially, I hate to brand someone with this. These are

the oligarchs in a way, right? They obviously have all the power. If they're going to be in a country that has a socialist government or had a socialist government and paid no taxes, even when they are making billions and billions of dollars, that's outsized punch. That's a large-sized punch. That's a outsized amount of power. Well, yeah, the oligarchs in Greece are not the olive oil tycoons. It's the shipowners, for sure. Yeah, before I let you go, I want to hear about these oligarch yachts, man. We hear about them getting seized in Italy and Spain, Portugal, whatever. And then I started looking these up and I subscribed to Yacht Watch, which I'll link in the show notes, because basically this is, I think, a former intelligence agent. And she writes all about how big the yachts are, what they have.

There are yachts that have like missile, literally missile defense systems are on the yacht talk about bond villains. And they say this one is probably Putin's, but nobody can really prove it because it's owned by other people through three different shell corporations. Can you tell me about that? This seems like the kind of thing that's right in your wheelhouse as well. So one of the fun things to know about shipping is it is entirely possible and in fact common for ships to be owned anonymously.

And this is true for yachts and commercial vessels, you know, big oil tankers or container ships alike, where the registered owner is just a shell company, which is just a brass plate in the Cayman Islands or the Marshall Islands or wherever. And that shell company, of course, is owned in turn by other shell companies. And there are many layers between the registered owner of a vessel and what's called the beneficial owner, the actual human who owns it. Yachts are a little easier because, of course, you can see who's getting on and off them, whereas a commercial ship, you know, if I'm a shipping tycoon who owns a big container vessel, it's very possible I'll never set foot on it or maybe just once. Yachts you can generally figure out who owns something by, you know, whether they're on it all the time, for example. So when the Ukraine war got started, one of the initial reactions of Western governments

was let's start seasoned yachts. You know, all these oligarchs have yachts. And in the case of most of them, it's fairly easy to know what their yachts are because they've bragged about it or they've been seen on these yachts in Mastique or wherever they take them. But there was one yacht that was a bit of a mystery. It was called the Scheherazade. This is a very opulent yacht, you know, helipad, swimming pool, dance floor, you name it, that was docked at the time in Italy. And actually, Navalny's people who resists. do a lot of research on official corruption in Russia. Alexei Navalny, opposition leader who's now in prison slash missing, I think, in Russia

for people who don't know. Right. Alexei Navalny is the extremely brave Russian opposition leader whose team have exposed a lot of very high-level corruption among senior Kremlin officials and Putin himself. They did some incredible work on the Scheherazade, incredible detective work. So like every other big yacht, it's just owned by a shell company. I think in that case it is actually in the Marshall Islands. So that doesn't tell you anything.

But this is where it gets fun. When a ship comes into an international port, it has to submit the names of all the crew because they need to get their passports, checked, customs, whatever. So they got the crew list from this ship. And curiously, the crew was entirely Russian, except for the captain who was Brit. And an all-Russian crew on a yacht, even on an oligarch owned yacht, is pretty unusual. And these weren't just any Russians because one of the real gifts to investigative journalism in Russia is that the country has incredibly bad data security and data protection. So you can get leaked data of all kinds in Russia.

You can get leaked financial documents, leaked cell phone records of people's cell phone contacts. So you can actually, with these commercially available leaked databases, do things like search names. So the team from Navalny's organization searched the names of all of these innocent Russian deckhands and chefs and the first mates on this huge yacht. And it turns out they all seem to work for what's called the FSO, which is the Putin's personal bodyguard. Oh, wow. So you have this mysterious vessel owned by a shell company whose crew are all elite Russian security personnel. Oh, and by the way, it goes to Sochi on the Black Sea every summer, which is where Putin spends his summers. So pretty good evidence that this belongs to Putin.

It's now been seized by the Italian government, so Vlad will not be enjoying it anytime soon. It's worth like $600 million or something. I mean, they can't really show the exact value, but I think that was the estimate somewhere around there or maybe $800. In that neighborhood, yeah. I mean, although I think with these things, like any kind of unique asset, it's worth what someone will pay for it. and if Russian oligarchs are all out of the yacht market for now, that probably takes a lot of the air out of that part of the boat business. So I'm not sure if they're really sellable.

Sure, yeah. I wouldn't say the resell values, $800 million or $600 million. I think that they're probably assuming the build value of the boat, just based on what Yacht Watch said. I didn't really clarify that. I haven't spoken with them. But that's really interesting. Is Sochi where Putin has that giant palace?

Exactly. Okay. So Navalny did a video that we can link in the show notes, where he exposes this palace that has vineyards and a hockey rink, and it's absolutely enormous, and it has coastline. You can't fly over it at all. You can't get anywhere near it with boats because it's considered Russian state military waters, but there's this big house there visible on satellite, and nobody's claiming ownership of it,

so it's pretty damn obvious that it's Vladimir Putin's summer palace. Yeah, exactly. You can't freaking hide anything like that anymore with satellites and open source, And especially, like you said, all that data, that leaked data. That's what you get when you live in a super corrupt society, I guess, right? Everybody is, everything's for sale, even if nothing is allowed. Crazy. Although there's still huge secrecy in shipping.

So in the Russian case, these sanctions in the UK early on, the UK said, we don't want Russian vessels, Russian-owned vessels coming into British ports. Sounds like a nice idea. Yeah. How do you know what a Russian-owned vessel is? Because, as I was saying, every commercial vessel basically, anywhere is now owned by an anonymous shell company. Right, with a Liberian flag on the back.

So unless it's like I got a huge-ass Russian flag and they're saying, please ban us. They're singing the national anthem when they pull in, you have no idea. And the answer from the UK government was, oh, well, we expect port authorities to figure it out. And the port authorities were like, like with Google? Like, how are we supposed to do that? So it's very, the standards for K.C, you know, for know your customer that, for example,

the financial industry has been put under for the last 20-odd years, you know, for reasons of money laundering, counterterrorism. Those really just don't exist in the shipping world. There is very little KYC, and people do not own. You do not know who owns a very large number of commercial vessels out there on the oceans. Crazy. So basically, it sounds like what you're telling me is if you have the money, it's easier to get a ship off the books and hide the ownership than it is to get a freaking coin base account

and put Bitcoin in there under a, name that's not yours? Oh, completely. Yeah. No, Coinbase would require quite a bit more KYC than a lot of service providers in the maritime industry would. And even at Lloyd's, Lloyd's insurers, and I keep saying this, but as I learned more about the shipping industry for this book, my head just kept exploding. Lloyd's insurers do not necessarily know the identities of the people they are insuring. They know the name of the shell company, but they do not know the beneficial owner in many, many cases. It's easier that way, probably, right? The less liability, the fewer questions they have to answer on the back end if something ends up shady. Crazy black box. Well, you don't need a huge

compliance staff. You know, banks have whole towers of people who just do compliance all day. Lloyd's insurers don't need that in the same way. It allows the business to move much quicker. Oh, man. Like I said, let me know when you want to buy a ship and an insurance policy. We're in the wrong business, man. Exactly. Yeah, unbelievable. So fascinating, man. Thank you so much for coming on the show. There's a lot more in the book about how Greece and Greek people became the center of shipping, the investigation, and how these are all done. Really appreciate you coming on. Fascinating stuff. I know we sort of talked on a lot of different topics, but I find this stuff so interesting because it's a world that we just absolutely never get to

see. And most of us, we don't even know what we'd be thinking about. In most people's mind, I order something, and it ships here from Amazon, and for all I know, that's a warehouse in Ohio. Yeah, exactly, but everything comes from somewhere. And there's a fun book, which is a, obviously everyone should buy my book. But another book they should buy if they're interested in shipping is called 90% of everything by Rose George, which is a really interesting introduction to the business. And the title kind of says it all, that shipping is responsible for 90% of everything you buy, everything you consume. And yet, most of us don't think about it, don't know about it, certainly don't know any sailors. You know, that's long gone because the sailors,

all come from villages in the Philippines now. So it's this industry that has kind of disappeared, even while being more important than ever, which I think is a really weird and fascinating dynamic. Fascinating look inside. Matthew, thank you very much. Thank you. You're about to hear a preview of the Jordan Harbinger Show

with the investigator who solved a serial killer case that had gone cold for decades. There was a definite spike in serial predator crime in the 1970s. Part of it was the ready victim pools that don't exist today. Houses generally didn't have alarm systems. We don't see women hitchhiking much today. Joe DiAngelo was a full-time law enforcement officer.

He's breaking into houses in the middle of the night, raping women or girls that are home alone that he's binding up and sexually assaulting. He ended up committing 50 of these attacks in Northern California between 1970. 1976, 1979, and just disappeared. I started working that case in 1994. As a cold case investigator, even though the case is 30 years old, it's like, no, you know, this is still a public safety issue. We need to remove this offender from society.

And in 2001, 10 people had been killed across six cases. I'm seeing this woman's body laying inside her house and the photos of her alive on the shelf above her body. She battled for her life and I could see this combat go throughout that entire room. After the Golden State Killer raped some of his victims, he would crouch in the corner and cry. They said he was sobbing, you know, it was like genuine. In fact, one victim, he was sobbing while he was raping her. The last thing I did in my career before I retired was I drove up and parked in front of his house. I debated, should I just go knock on his door? I didn't know he was a golden state killer, but this was such a brazen, brutal predator.

He absolutely had to be caught. To learn more about how Paul Holes puts himself inside the minds of serial killers, check out episode 725 of the Jordan Harbinger Show. Like I said, folks, a really interesting look at something that personally I've never paid attention to. You know, of course, I've seen the Discovery Channel documentaries on how they load container ships, and I've seen how ports work. That stuff's interesting, but what goes on between ports, I never just never thought about it.

And it totally makes sense how you can commit pretty much any sort of crime out on the seas and get away with it. I'm actually going to do another show on this, what goes on in the open seas, because it's not just these kinds of crimes. There's slavery and drug and human trafficking and wildlife poaching and all kinds of sort of depressing but really interesting stuff is going on. I also find it quite insightful that Greece and Greek people are just, they're always seemingly at the center of shipping.

I'm not saying they're shady. I just mean it's the national industry. It's really, they have an outsized punch in terms of the percentage of the Greek GDP. A lot of that, of course, has to do with geography, the Greek islands and everything, the diaspora around the world, but also the rise of China, no harm done to Greek shipping, the fall of the Soviet Union, no harm to Greek shipping, COVID, nothing to trip their game up in terms of shipping. It's really impressive.

I mean, this is a very resilient industry from the look of it. If you want more from Matthew Campbell, the book, focuses quite a bit on the difficulty at trial of proving the fraud and that the owner had planned it, etc. It's quite an interesting little thriller he's got going there. And I applaud him for investigating this murder. I mean, that cannot have been easy. The idea that this happens in the middle of nowhere on the open seas, nobody wants to talk. And then solving a case like this is really something. Links to all things Matthew Campbell, including the book, will be linked up in the show notes at Jordan Harbinger.com.

transcripts, send the show notes, videos on YouTube, advertisers, deals, and discount codes, all at jordanharbinger.com slash deals. Please do consider supporting those who support this show. I'm at Jordan Harbinger on both Twitter and Instagram. You can also connect with me on LinkedIn. I like hearing from most of you there. I'm teaching you how to connect with great people, manage relationships, using systems, software, tiny habits, the same stuff I use every single day.

That's our six-minute networking course. That course is free. It's at Jordan Harbinger.com. slash course. Dig that well before you get thirsty folks. Many of the guests on the show, subscribe and contribute to the course. So hey, come join us. You'll be in smart company where you belong. This show is created in association with Podcast One. My team is Jen Harbinger, Jace Sanderson, Robert Fogart, Millie Ocampo, Ian Baird, Josh Ballard, and Gabriel Mizrahi. Remember, we rise by lifting others. The fee for this show is you share it with friends

when you find something useful or interesting. If you know somebody who's interested in shipping high-seas crime and hijinks insurance fraud. I don't know. Somebody who's got a curious mind. Share this episode with him. The greatest compliment you can give us is to share the show with those you care about. In the meantime, do your best to apply what you hear on this show so you can live what you listen. And we'll see you next time. This episode is sponsored in part by Something You Should Know podcast. Finding a new great podcast shouldn't be this hard, so let me save you some time. If you like the Jordan Harbinger show, you'll probably like Something You Should Know with Mike Carruthers. It's one of those shows that makes you smarter in a podcast. practical, useful way. Same curiosity vibe we go for here, just in a fast-focused format.

Mike brings on top experts and asks the exact questions that you'd want to ask, and the topics are all over the place in the best way. Recently, they've covered things like why we care so much what other people think, the benefits of laughter, why sports fans get so invested, and what makes people like you or not. The through line is always the same. Smart ideas you can actually use in real life. Something you should know has been featured in Apple's shows we love, and it's got thousands of five-star reviews because it's consistently interesting. So if you want another show that scratches

that I want to understand how people in the world really work, itch, search for something you should know wherever you get your podcasts. Look for the bright yellow light bulb and start listening. You can thank me later.