How Diana Shipping Inc.’s $1.1 Million Fine Exposes a Major Problem

For those unfamiliar with the fine recently levied against Diana Shipping (NYSE: DSX  ) , it was for $1.1 million, and came with 3.5 years of probation for illegally discharging waste oil and oil-contaminated waste water from one of its ships.This fine was actually levied against Diana Shipping Services, a wholly owned subsidiary of Diana Shipping, which manages the day-to-day operations of its fleet. The fine presents a good opportunity to bring up another troubling issue facing Diana Shipping investors today -- related party transactions.

The details behind the transactions
These transactions revolve around Diana, and two other companies controlled by the CEO, called Diana Enterprises, and Altair Travel Services.The monies paid to these two companies totaled $5.8 million dollars in 2012, and are up 68% since 2010. 

Diana Enterprises has an agreement with the company for the provision of brokerage services for a fixed monthly fee of $0.2 million, or $2.4 million per year, until March 31, 2014. Brokerage fees can range from the obtaining of contracts for shipping voyages to selling or buying ships. Altair Travel Services received $3.0 million in 2012 for travel-related services. 

These are just two of the most recent related party transactions, but going back to 2010 thru today, investors can see the company purchased two of the CEO's separately controlled businesses for $21.5 million -- Universal Shipping and Real Estate, and Diana Shipping Agencies S.A.. .

Do these transactions actually matter?
All related party transactions are not created equally, and don't always have negative implications; but in Diana Shipping's case, it's hard to argue that shareholders aren't suffering from these transactions. In the video below, I go over Diana's new fine, what these related party transactions mean, and my personal opinion on how to handle them.

America's $2.89 trillion super weapon revealed
U.S. News & World Report says this "will drive the U.S. economy." And Business Insider calls it, "The growth force of our time." In a special report entitled, "America's $2.89 Trillion Super Weapon Revealed," you'll learn specific steps you can take to capitalize on this massive growth opportunity. But act now, because this is your shot to cash in before the fat cats on Wall Street beat you to the potentially life-changing profits. Click here now for instant access to this free report.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2758251, ~/Articles/ArticleHandler.aspx, 12/18/2014 4:10:35 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement