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UNITED STATES OF AMERICABefore theSECURITIES AND EXCHANGE COMMISSIONSECURITIES ACT OF 1933Release No. 10286 / January 23, 2017SECURITIES EXCHANGE ACT OF 1934Release No. 79857 / January 23, 2017ACCOUNTING AND AUDITING ENFORCEMENTRelease No. 3855 / January 23, 2017ADMINISTRATIVE PROCEEDINGFile No. 3-17807ORDER INSTITUTING CEASE-ANDDESIST PROCEEDINGS PURSUANT TOSECTION 8A OF THE SECURITIES ACTOF 1933 AND SECTION 21C OF THESECURITIES EXCHANGE ACT OF 1934,MAKING FINDINGS, AND IMPOSING ACEASE-AND-DESIST ORDERIn the Matter ofOVERSEAS SHIPHOLDINGGROUP, INC.andMYLES ROBERT ITKIN,Respondents.I.The Securities and Exchange Commission (“Commission”) deems it appropriate thatpublic cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of theSecurities Act of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of1934 (“Exchange Act”) against Overseas Shipholding Group, Inc. (“OSG” or “the Company”)and Myles Robert Itkin (“Itkin”) (collectively “Respondents”).II.In anticipation of the institution of these proceedings, Respondents have submitted Offersof Settlement (the “Offer”) which the Commission has determined to accept. Solely for thepurpose of these proceedings and any other proceedings brought by or on behalf of theCommission, or to which the Commission is a party, and without admitting or denying thefindings herein, except as to the Commission’s jurisdiction over them and the subject matter ofthese proceedings, which are admitted, and except as provided herein in Section V, Respondents

consent to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934,making findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below.III.On the basis of this Order and Respondents’ Offers, the Commission finds1 that:SUMMARY1.This matter concerns the failure of OSG to record material federal income taxliabilities in its financial statements from 2000 through the second quarter of 2012. The taxliabilities, reportable under Internal Revenue Code Section 956, which provides that when a“controlled foreign corporation” guarantees the debt of its U.S. parent company, the amountsborrowed by the parent are, in effect, “deemed dividends” and taxable to the parent. During therelevant period, OSG’s credit agreements contained a provision making its controlled foreignsubsidiary, Overseas International Group, Inc. (“OIN”), and another subsidiary “jointly andseverally” liable for OSG’s debt, thereby triggering Section 956 current tax liability for thoseamounts that OSG borrowed, and deferred tax liabilities for amounts not borrowed but availableunder the credit agreements. From 2000 to the second quarter of 2012, OSG failed to record andreport these federal income tax liabilities in various annual and quarterly reports and earningsreleases filed with the Commission. Certain of these nondisclosures constituted violations ofSection 17(a)(2) and (3) of the Securities Act.2.During the relevant period, OSG failed to recognize its tax liability despitesignificant indicia that the structure of its credit agreements, in effect, made OIN a guarantor andcould trigger tax consequences, including tax memos from outside counsel and communicationswith the banks during the negotiation phase of the credit agreements. Despite these indicators,OSG failed to disclose the issue to its outside auditors and ascertain whether the creditagreements impacted its financial reporting. Moreover, OSG had inadequate internal accountingcontrols over its accounting for income taxes and had deficient controls over the impact of thecredit agreements on its financial reporting process.3.As a result of its misconduct, OSG restated its financial results for all annualreporting periods in fiscal years 2000 through 2011, as well as the results for the quarterlyreporting periods in the first half of 2012. For example in 2000, by failing to record the deferredtax liability related to the prospective drawdowns under the first credit agreement to contain the“jointly and severally” language, OSG understated the deferred federal tax income tax liabilitiesin its financial statements by 122.5 million, or approximately 10% of its total liabilities. Thefailure to record the related income tax expense resulted in OSG recognizing a profit that yearwhen it would have otherwise recognized a loss. By 2011 the cumulative failure to record thecurrent and deferred income tax liabilities arising from the Section 956 issue resulted in anunderstatement of OSG’s income tax liabilities by approximately 512 million, or 17% of itstotal liabilities. Had OSG recorded the related income tax provision in that period, its net lossThe findings herein are made pursuant to Respondents’ Offers of Settlement and are notbinding on any other person or entity in this or any other proceeding.12

would have increased by approximately 265%, from 193 million to 705 million. In November2012, following the discovery of the issue, OSG filed for bankruptcy protection.4.Myles Robert Itkin (“Itkin”), the chief financial officer (“CFO”) for OSG and itsforeign subsidiary during the relevant period, who participated in the negotiation of and was thesignator to OSG’s credit facilities, oversaw OSG’s financial reporting function, and becameaware of significant red flags indicating tax consequences from the credit agreements, causedOSG’s Securities Act Section 17(a)(2) and (3) violations from 2011 through the second quarterof 2012 and caused the company’s reporting, books and records and internal accounting controlsfailures going back to 2009. Itkin also negligently misled OSG’s auditor by representing thatOSG had not received any written tax advice concerning income tax issues and signed falsecertifications under Sarbanes-Oxley for filings in 2011 and 2012.RESPONDENTS5.Overseas Shipholding Group, Inc. (“OSG” or the “Company”), is a Delawarecorporation incorporated in 1969, and its wholly owned subsidiaries own and operate a fleet ofoceangoing vessels engaged primarily in the transportation of crude oil and petroleum productsin the international and domestic markets. OSG managed its international and domesticoperations through its wholly owned subsidiaries, OIN, a Marshall Islands corporation, and OSGBulk Ships, Inc. (“OBS”), a New York corporation, respectively. OBS’s vessel-owning andvessel-leasing corporations conduct OSG’s US shipping operations, and OIN’s vessel-owningand vessel-leasing corporations conducted OSG’s international shipping operations. OSG, OBS,and OIN were the key corporations of the OSG corporate group. During the relevant time, OSGhad a class of securities registered under Section 12(b) and a reporting obligation under Section13(a) of the Exchange Act. In November of 2012, OSG and 180 subsidiaries filed forbankruptcy protection under Chapter 11 of the US Bankruptcy Code in the US Bankruptcy Courtfor the District of Delaware (all of which proceedings were jointly administered under Case No.12-20000 (MFW)), and its shares were delisted. In July of 2014 the bankruptcy court confirmeda plan of reorganization that provided for a rights offering sponsored by certain of OSG’s equityholders, pursuant to which they purchased shares in the reorganized Company. In October 2014,OSG’s Class B common stock became listed on the NYSE MKT. OSG’s Class A common stockbecame listed on the NYSE MKT in November 2015, and its listing was moved to the New YorkStock Exchange in June 2016. OSG’s Class A common stock is registered with the Commissionpursuant to Exchange Act Section 12(b). There are no outstanding shares of OSG’s Class Bcommon stock.6.Myles R. Itkin (“Itkin”), age 68, was OSG’s Chief Financial Officer from June1995, to April 12, 2013, when he was terminated from the Company. Itkin is not a CPA. Itkinhad primary responsibility overseeing OSG’s taxes, accounting, and financial statementpreparation and reporting and participated in the negotiation of and was the signator to the creditagreements at issue. He was also the senior vice president and CFO of the Company’ssubsidiaries, OIN and OBS, and sat on the board of OIN. As an OIN director and officer, Itkinmade and implemented decisions concerning OIN’s assets, liabilities, transactions, includingdebt incurrence, and transfers, including distributions of assets to OSG or OBS. Since October2006, Itkin has served as a director of Danaos Corporation, a Marshall Islands company, whose3

securities trade on the New York Stock Exchange under the symbol “DAC,” and serves on itsaudit committee. Itkin is not otherwise currently employed.FACTSBackground on Relevant Tax Provisions7.From 1987 to 2004, OSG was required to pay U.S. income taxes on currentoffshore shipping income of its foreign subsidiaries, including OIN, whether it was distributed ornot. However, after the passage of the American Jobs Creation Act of 2004 (the “Jobs CreationAct”), OSG was no longer required to pay taxes on undistributed foreign shipping income earnedby its offshore subsidiaries or controlled foreign corporations (“CFC”) so long as the incomeremained offshore. OSG, thus, could only make tax-free distributions of foreign shippingincome up to the amount previously subject to income taxation that had not been distributed.Over time the amount of deferred taxes for undistributed foreign shipping income became quitesubstantial because OIN was the primary source of income for the Company.8.Under Sections 956(c) and (d) of Subpart F of the Internal Revenue Code(“Section 956”) when a foreign subsidiary guarantees the loans of a U.S. parent company, theuntaxed “accumulated ‘earnings and profits’ of that subsidiary are deemed to have been distributedto the U.S. parent company” in amounts equal to average quarterly loan balances. Specifically,the deemed dividends in this scenario under the Code arise from “investments in United Statesproperty” and includes types of property a CFC could purchase with its untaxed retainedearnings to provide an economic benefit — the functional equivalent of a dividend — to its USparent corporation without having transferred title in such assets to its US parent corporation.Such property can include real assets in the United States, tangible or intangible, or financialassets, such as its US parent corporation’s equity, called “stock,” or debt, called an “obligation.”To capture circuitous attempts of economic benefit from the CFC to its US parent corporation,Section 956(d) expands the meaning of “obligation” to include a CFC’s guarantee of its USparent corporation’s debt obligations to a third-party lender. Accordingly, Subpart F treats suchearnings as if the CFC had distributed them as a distribution or dividend to its US parentcorporation or as “deemed dividends.” The parent company is therefore subject to United Statesfederal income taxation on the amount of the deemed dividend (subject to certain offsets availableto the company).OSG’s Pre-2000 Credit Facilities and Understating of Section 956 Tax Implications9.As early as 1990, OSG, which in some years did not generate significant cashinflows or profits, relied on large credit facilities with lending banks to sustain its operations.The facilities typically had credit limits in the hundreds of millions of dollars and terms of five orseven years. When a credit facility period ended, the balance under the credit facility becamedue as a “balloon” payment. Given the lengthy terms of the facilities and the extendednegotiation period preceding a credit facility, OSG often had more than one revolving creditfacility available at any given time.4

10.By the late 1990s, OSG’s lenders, aware of OSG’s financial results, soughtgreater credit enhancement on the revolving credit facilities. OSG’s downstream guarantees ofloans made to its subsidiaries, OBS and OIN, were not optimal given that OSG’s income waslimited to dividends from its subsidiaries and earnings on its securities investments. Also, OSGwas a significant borrower under the facilities. The banks sought to obtain, as security, directaccess to the significant current and retained earnings of OIN. To obtain this direct access, thebanks sought to make OIN a guarantor of payment on loans made to OSG and OBS under thefacilities, using “joint and several” language that joined the entire facility balance into a singledebt on which OIN would be obligated to pay. With regard to the credit facilities, as early as1997, the income tax implications from OIN guaranteeing OSG’s debt was discussed amongcertain OSG management and resulted in a decision that OSG could not accept the language‘jointly and severally’ in a credit facility because of the possible adverse tax consequences.11.In 1997, OSG negotiated a credit facility specifically to avoid including a “jointand several” provision because it would make OIN, OSG’s foreign subsidiary, a guarantor ofOSG’s loans under these credit facilities and trigger tax consequences under Section 956. OSG’scredit facilities from 1990 through 1997 did not provide for such a guarantee, but only a“downstream guarantee,” meaning that OSG’s subsidiaries would not be required to pay OSG’sdebt in the instance of OSG’s debt default.12.Consistent with this understanding, in connection with negotiating a 600 millioncredit facility in 1997, OSG specifically rejected an attempt by the lending banks to include aprovision that OSG, OBS, and OIN be “jointly and severally liable” for all advances on the creditfacility regardless of which of the corporations received the funds from the drawdowns. OSGalso rejected the lending banks’ request that all three corporations, OSG, OBS, and OIN, co-signall promissory notes for loans made under the 1997 credit facility.13.In response, as reflected in draft credit facilities, OSG crossed out the provisionthat OSG, OIN, and OBS would be “jointly and severally” liable for a

securities and exchange commission securities act of 1933 release no. 10286 / january 23, 2017 securities exchange act of 1934 release no. 79857 / january 23, 2017 accounting and auditing enforcement release no. 3855 / january 23, 2017 administrative proceeding file no. 3-17807 in the matter of overseas shipholding group, inc. and myles robert itkin , respondent s. order instituting cease -and .