Magic pipe costs Diana $1.1 million

DECEMBER 5, 2013 — Diana Shipping Inc. (NYSE:DS) today announced that its subsidiary, Diana Shipping Services S.A.  was sentenced by the United States District Court in Norfolk, Virginia to a fine of $1,100,000 and a period of probation of three years and six months as a result of its conviction earlier this in the Thetis "magic pipe" case.

Diana Shipping Services had faced a maximum fine of $5.5 million and five years of probation.

Diana Shipping Services S.A., a Panamanian corporation headquartered in Greece, Ioannis Prokakis and Antonios Boumpoutelos, both citizens of Greece, were convicted August 8 after an 12-day bench trial on charges related to the illegal discharge of waste oil and oil-contaminated waste water from the M/V Thetis, a cargo vessel operated by Diana Shipping Services,

All the defendants were convicted of conspiracy, knowing failure to fully maintain an oil record book, falsification of records and concealing tangible objects in a federal investigation. In addition, Prokakis was also convicted of obstruction of justice for ordering crew members to lie to U.S. Coast Guard inspectors on board the ship.

According to the U.S. Department of Justice, in September 2012, Diana crew members reported that the vessel was discharging its bilge waste and sludge illegally by various means, including a "magic pipe" that bypassed the oily water separator. Coast Guard inspectors boarded the vessel when it entered port in Norfolk and discovered the "magic pipe" and that the oily water separator was non-functioning. The inspectors were also presented with an oil record book that contained false entries made by the ship's Chief Engineer, Ioannis Prokakis and the Second Engineer Antonios Boumpoutelos. During the inspection, Prokakis lied to inspectors about the "magic pipe" and told other members of the engineering crew to not disclose its existence to the Coast Guard inspectors.

According to Diana Shipping, in the sentencing proceedings the Director and Treasurer of DSS, Mr. Ioannis Zafirakis, stated to the court that DSS has previously undertaken a comprehensive review of its existing management system and operations, and implemented an enhanced environmental management system, or EEMS, to ensure that all of the vessels managed by DSS are operated in accordance with applicable maritime environmental laws and regulations. Mr. Zafirakis also noted that the EEMS has been independently audited and certified as being ISO 14001 compliant and that environmental compliance will continue to be given utmost priority by Diana Shipping Services S.A. He added that DSS intends to continue to transform its corporate culture and operations to make certain that it is a model in the maritime industry for environmental compliance.