The Wikipedia page[1] has a more detailed analysis of the regulatory situation that HN is probably most interested in:
"But Coast Guard investigations, and independent examinations of the wreck, told a different story: the Marine Electric left port in an un-seaworthy condition, with gaping holes in its deck plating and hatch covers. The hatch covers, in particular, posed a problem, since without them the cargo hold could fill with water in the storm and drag the ship under. And it was there that the investigation took a second, dramatic turn.
Investigators discovered that much of the paperwork supporting MTL's declarations that the Marine Electric was seaworthy was faked. Inspection records showed inspections of the hatch covers during periods where they'd in fact been removed from the ship for maintenance; inspections were recorded during periods of time when the ship wasn't even in port. A representative of the hatch covers' manufacturer warned MTL in 1982 that their condition posed a threat to the ship’s seaworthiness. But inspectors never tested them. And yet, the Marine Electric was repeatedly certified as seaworthy.
Part of the problem was that the Coast Guard delegated some of its inspection authority to the American Bureau of Shipping. The ABS is a private, non-profit agency that developed rules, standards and guidelines for ship's hulls. In the wake of the Marine Electric tragedy, questions were raised about how successfully the ABS was exercising the inspection authority delegated to it, as well as about whether the Coast Guard even had the authority to delegate that role. Also there was a conflict of interest in that the inspection fees paid to the ABS were paid by the ship owners. "
What gets me is how often these conflicts of interest go sideways.
I'll give you another one, in the UK there is a panel of civil servants who get to decide if another civil servant would be entering a conflict of interest by working for an organisation he/she used to oversee.
I.e. a civil servant in the ministry of defense retiring and going to work as a non-executive director for British Aerospace.
Of 450+ decisions they made, 0 where considered a conflict of interest.
If you ask the other wolves if the first wolf did anything wrong by attacking the sheep you can't be surprised by the answer.
In fact, that is what they still do. As someone who deals with ABS regularly, it is as weird of a conflict of interest as one would think. ABS, as far as I've seen, is comprised of honest folks who take their jobs seriously (i.e. they don't take it easy on shipbuilders or owners in hopes of retaining business). However, it's an odd dynamic. It's kind of like being sued and having to pay not only your defense lawyer, but also the prosecution's lawyer.
This story brings to mind the propublica article submitted to HN a week ago on the USS Fitzgerald[0]. At what point does a ship’s captain refuse to put to sea because his vessel is unseaworthy? Does it happen frequently and these are just exceptions, or is it the norm to follow orders and damn the consquences?
A former USN sailor I know says it was the norm (in his experience), but I know of an infantry company commander in the Army who was replaced mid-tour because he stopped taking his company out on pointless “movement to contact” missions. Different jobs, but same principle — safety of one’s team.
"But Coast Guard investigations, and independent examinations of the wreck, told a different story: the Marine Electric left port in an un-seaworthy condition, with gaping holes in its deck plating and hatch covers. The hatch covers, in particular, posed a problem, since without them the cargo hold could fill with water in the storm and drag the ship under. And it was there that the investigation took a second, dramatic turn.
Investigators discovered that much of the paperwork supporting MTL's declarations that the Marine Electric was seaworthy was faked. Inspection records showed inspections of the hatch covers during periods where they'd in fact been removed from the ship for maintenance; inspections were recorded during periods of time when the ship wasn't even in port. A representative of the hatch covers' manufacturer warned MTL in 1982 that their condition posed a threat to the ship’s seaworthiness. But inspectors never tested them. And yet, the Marine Electric was repeatedly certified as seaworthy.
Part of the problem was that the Coast Guard delegated some of its inspection authority to the American Bureau of Shipping. The ABS is a private, non-profit agency that developed rules, standards and guidelines for ship's hulls. In the wake of the Marine Electric tragedy, questions were raised about how successfully the ABS was exercising the inspection authority delegated to it, as well as about whether the Coast Guard even had the authority to delegate that role. Also there was a conflict of interest in that the inspection fees paid to the ABS were paid by the ship owners. "
[1] https://en.wikipedia.org/wiki/SS_Marine_Electric