From Portside Culture <[email protected]>
Subject How Foreign Private Equity Hooked New England’s Fishing Industry
Date August 23, 2022 12:05 AM
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[In recent years, the port of New Bedford has thrived, generating
$11.1 billion in business revenue, jobs, taxes and personal income in
2018, according to one study. But a quiet shift is remaking the city
and the industry that sustains it, realizing local fishermen’s
deepest fears of losing control over their livelihood. ]
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PORTSIDE CULTURE

HOW FOREIGN PRIVATE EQUITY HOOKED NEW ENGLAND’S FISHING INDUSTRY  
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Will Sennott

Propublica
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_ In recent years, the port of New Bedford has thrived, generating
$11.1 billion in business revenue, jobs, taxes and personal income in
2018, according to one study. But a quiet shift is remaking the city
and the industry that sustains it, realizing local fishermen’s
deepest fears of losing control over their livelihood. _

New Bedford fishermen object to allowing scallop permits to be
leased. They say the proposal would accelerate consolidation in their
industry. , Tony Luong, special to ProPublica

 

Before dawn, Jerry Leeman churned through inky black waters, clutching
the wheel of the fishing vessel Harmony.

  

The 85-foot trawler, deep green and speckled with rust, was returning
from a grueling fishing trip deep into the Atlantic swells. Leeman and
his crew of four had worked 10 consecutive days, 20 hours a day, to
haul in more than 50,000 pounds of fish: pollock, haddock and ocean
perch, a trio known as groundfish in the industry and as whitefish in
the freezer aisle.

As sunrise broke over New Bedford harbor, the fish were offloaded in
plastic crates onto the asphalt dock of Blue Harvest Fisheries, one of
the largest fishing companies on the East Coast. About 390 million
pounds of seafood move each year through New Bedford’s waterfront,
the top- earning commercial fishing port in the nation.

Leeman and his crew are barely sharing in the bounty. On deck, Leeman
held a one-page “settlement sheet,” the fishing industry’s
version of a pay stub. Blue Harvest charges Leeman and his crew for
fuel, gear, leasing of fishing rights, and maintenance on the
company-owned vessel. Across six trips in the past 14 months, Leeman
netted about 14 cents a pound, and the crew, about 7 cents each — a
small fraction of the $2.28 per pound that a species like haddock
typically fetches at auction.

“It’s a nickel-and-dime game,” said the 40-year-old Leeman, who
wore a flannel shirt beneath foul weather gear and a necklace strung
with a compass, a cross, and three pieces of jade — one piece for
each of his three children. “Tell me how I can catch 50,000 pounds
of fish yet I don’t know what my kids are going to have for
dinner.”

Leeman’s lament is a familiar one in New Bedford, an industrial city
tucked below Cape Cod on the south coast of Massachusetts. In recent
years, the port of New Bedford has thrived, generating $11.1 billion
in business revenue, jobs, taxes and personal income in 2018,
according to one study. But a quiet shift is remaking the city and the
industry that sustains it, realizing local fishermen’s deepest fears
of losing control over their livelihood.

 Blue Harvest and other companies linked to private equity firms and
foreign investors have taken over much of New England’s fishing
industry. As already harsh working conditions have deteriorated, the
new group of owners has depressed income by pushing expenses onto
fishermen, an investigation by ProPublica and The New Bedford Light
has found. Blue Harvest has also benefited from lax antitrust rules
governing how much fish it can catch.

Since it was founded in 2015, Blue Harvest has been acquiring vessels,
fishing permits and processing facilities up and down the East Coast.
It started with the self-proclaimed goal of “dominance” over the
scallop industry. It has expanded into groundfish, tuna and swordfish,
as well as becoming a government contractor, winning a $16.6 million
contract from the U.S. Department of Agriculture this past February to
supply food assistance programs.

The acquisitions are backed by $600 million in capital from Bregal
Partners, a Manhattan-based private equity firm. Bregal is an arm of a
firm owned by a Dutch billionaire family, who are best known for their
multinational clothing company, which maintains a steady track record
of environmental philanthropy and low-wage labor around the globe.

Bregal, its parent company and Blue Harvest President Chip Wilson did
not respond to questions. Wilson said in an email that he has been
“fighting a handful of fires” and that “speaking with the press
has been low on my priority list of late.” He is more concerned
“about moving our strategy forward so that the 200+ folks who work
for Blue Harvest can be confident about their future,” he said.

“New Bedford is an interesting community, particularly in this
‘colorful’ sector, and the rumor mill is particularly vicious,”
he added. “I cannot tell you how many times I have listened to
employees scared to the core for themselves and their families due to
unsubstantiated rumors about our company.”

In the first half of 2021, private equity firms, which often invest in
privately held companies with the goal of ultimately selling them for
a profit, accounted for 34% of mergers and acquisitions in the fishing
industry, nearly double the 2017 percentage, according to trade
publication Undercurrent News. Last fall, one such firm, ACON
Investments, purchased three seafood processing companies, including
one with a 38,000-square-foot plant in New Bedford. Another private
equity company — Solamere Capital, which boasts as partners former
Speaker of the House Paul Ryan and Taggart Romney, son of former
Massachusetts Gov. and current Utah Sen. Mitt Romney — also acquired
processing plants.

“What we’re seeing is a fundamental transformation of the fishing
industry,” said Seth Macinko, a former fisherman who’s now an
associate professor of marine affairs at the University of Rhode
Island. “Labor is getting squeezed and coastal communities are
paying the price.”

To be sure, private equity can inject capital to buy new equipment or
renovate a processing facility. Boosters say that consolidation can
improve efficiency and make U.S. seafood more competitive against
cheaper fish imported from foreign countries that subsidize their
fleets.

Still, private equity’s gain has largely been small fishermen’s
loss. Known for seeking profits by slashing costs in retail sectors
such as toys and shoes, private equity investors have taken a similar
approach to the fishing industry, which offered an opportunity to make
a significant return on investment through economies of scale.

The number of employers in New Bedford’s fishing industry has
dropped by more than 30% in the past decade, according to Bureau of
Labor Statistics data. Fishermen are working much longer hours — 45%
of fishermen reported working 18 hours or more per day in a federal
survey published last year, up from 32% in 2012.

Almost all fishermen in New Bedford are paid a share of the earnings
from their catch. It’s an arrangement with origins in the 19th
century, when whale oil made New Bedford the Dubai of its day. Whaling
captains built the city’s historic mansions; the whale ships’
investors built churches and hospitals.

But today, companies like Blue Harvest take advantage of this pay
structure to shift costs onto fishermen, reducing their income. Under
the private equity takeover, regional economies like New Bedford’s
are keeping less of the industry’s profits while a cut of the
owners’ share is shuttled to skyscrapers in Manhattan and, in some
cases, overseas. Despite rising consumer prices for New Bedford’s
fish, the poverty rate in the city has been double the state average
for the past decade.

“Without question, there is an increase in costs that are being
passed down to crew,” said Matthew Cutler, who studies socioeconomic
trends among fishermen for the regional arm of the National Oceanic
and Atmospheric Administration. NOAA, which is part of the Department
of Commerce, governs the fishing industry.

So far, private equity mainly dominates New England’s groundfish,
which constitutes roughly 11% of all seafood caught off the region’s
coast by weight. But a proposal being considered by federal regulators
could expand private equity’s control over scallops — the most
lucrative seafood for New Bedford fishermen. The proposal has roiled
New Bedford, where more than 100 fishermen signed a petition against
it. It also worries New Bedford Mayor Jon Mitchell.

“Private equity owns a piece of the waterfront now,” he said.
“Remote ownership is always going to be driven by dollars and cents.
Without any loyalty to the place, business decisions can become cold
and harsh.”

 

Owning his own vessel was Jerry Leeman’s goal when he first started
fishing with his grandfather at the age of 12. He climbed the ranks
from deckhand to mate and finally to captain. He hoped to go into
business for himself.

But an overhaul of federal rules adopted in 2010 halted Leeman’s
ascent and that of thousands of other fishermen in the northeast.
Promoted by an alliance of conservation groups and some of the largest
seafood distributors, the new framework sought to end decades of
overfishing that had devastated species like the Atlantic cod while
also helping American businesses compete with cheaper, imported fish
by making the domestic supply more predictable.

Under “catch shares,” as the system is called, regulators cap how
much of each species can be fished and require permits to catch them.
Federal scientists set a “total allowable catch,” determining the
amount of each kind of fish that can be sustainably hauled from
regional waters each year. Based on a decade of their catch history,
individual fishermen and companies were granted rights to a percentage
of the annual total allowable catch — in perpetuity — free to fish
it, sell it or lease it to others.

The catch shares system has proven to be an effective tool to reduce
overfishing. Overall, New England waters have “shown slow recovery
since the major declines,” a 2021 study noted. But the change hurt
small fishermen. Their shares were based on their historical
percentages of the catch for a given species. As the total allowable
catch for some species was reduced to avoid overfishing, the same
percentages translated into fewer pounds of those fish. Many fishermen
sold their permits to bigger companies that had been granted larger
shares and rushed to expand. New England’s fleet of vessels actively
catching groundfish was reduced from 596 in 2007 to 269 in 2015,
according to a NOAA study.

 

“This is the door closing on an entire generation of fishermen,”
said Brett Tolley, who comes from a family of Cape Cod fishermen.
After a series of reductions, he said the catch allocated to his
family — about one-third of 1% of pollock and haddock — was too
small to make a living. They sold their permit a year ago to a midsize
local company.

While consolidation started before catch shares, the new system
accelerated the process. It “turned the privilege to catch a pound
of fish into a commodity that could be bought or sold without owning a
boat,” Macinko said. “It opened the door to private equity.”

Recognizing the potential for consolidation, the Pacific Coast branch
of NOAA built in controls prohibiting any individual from owning more
than 2.7% of groundfish permits, limiting the inroads that private
equity could make. Accommodating business interests, the New England
office initially set a much higher cap of 20% before reducing it to
15.5% in 2017.

“You have to limit entry in order to have a profitable fishery,”
said Chad Demarest, an economist with the Northeast Fisheries Science
Center under NOAA. “The goal is to create some profit in the
industry that is shared by the owners.”

Because Leeman was a hired hand when catch shares were adopted, he
wasn’t allocated any permits. And as the price of a single permit
climbed to as much as $500,000 for groundfish, he couldn’t afford to
buy in. His dream of captaining a fishing boat that he owned was
dashed.

Rights to fish “were free 30 years ago,” he said. “But then came
the conservation groups. Then there was consolidation. Then there was
big money.”

In the early years of catch shares, many smaller fishermen sold out to
the same New Bedford fishing magnate: Carlos Rafael, often referred to
as “the Codfather.” A first-generation immigrant from the Azores,
a chain of Portuguese islands, Rafael arrived in New Bedford as a
teenager. He started as a fish cutter, and over four decades he built
one of the largest groundfish operations in the country, running more
than 40 vessels.

A charismatic rogue who liked to describe himself as a modern-day
pirate, Rafael was openly opposed to the catch shares system at first,
believing it would eventually mean only one company would be left
fishing on the East Coast. Yet as New England transitioned to the
system, he was granted about 9% of the region’s total groundfish
permits, one of the largest initial allocations. He decided that if
only one company would be left standing, it would be his.

“So he [a smaller fisherman] doesn’t have the money to buy a
fucking quota,” he said. “So he’s fucked either way. He’s
hanging by his shoestrings. So this is a matter of fucking time for me
to pick the rest of these fuckers and just get them all out of the
picture....I always had the ambition to get fucking control of the
whole fucking thing.”

According to court documents, Rafael made that statement to undercover
IRS agents posing as Russian mobsters. He also divulged to them an
illegal scheme he called “the dance.” On a February morning in
2016, the green- and-white panels of the Carlos Seafood building were
reflecting red and blue as a team of federal agents raided the
waterfront facility. He pleaded guilty in 2017 to 27 counts of fraud
and tax evasion related to mislabeling almost 800,000 pounds of fish;
he was sentenced to 46 months in prison.

At the time of Rafael’s downfall, Bregal Partners was rapidly
tightening its grip on the fishing industry. It took its first plunges
in 2015. It invested in Seattle-based American Seafoods, which Bregal
has described as “the largest harvester of fish for human
consumption in the US.” It also founded Blue Harvest, which quickly
acquired four fishing operations on the East Coast.

 It first bought a large scallop fleet in Virginia, then a midsize
company in New Bedford. In 2018, it added Maine-based Atlantic
Trawlers. (Leeman, who had been working for Atlantic Trawlers, stayed
on the same boat, now owned by Blue Harvest.) It capped off its buying
spree with its biggest prize.

As part of a settlement with NOAA, Rafael had agreed to sell his
empire, estimated to encompass a quarter of New England’s groundfish
industry, to the highest bidder. Rafael had tried to sell his company
to the undercover agents for $175 million. In 2020, Blue Harvest
acquired a portion of Rafael’s holdings — 12 groundfishing vessels
and 27 permits — for $25 million.

 Along the way, Blue Harvest bought and expanded processing
facilities off Herman Melville Boulevard, named after the
“Moby-Dick” author, who sailed out of New Bedford on a whaling
voyage in 1841. The goal, the then- chief executive said in 2020, was
to establish the “first vertically integrated groundfish company on
the East Coast” — folding a large slice of the waterfront into one
streamlined operation: vessels, permits, processing and distribution.

Controlling the supply chain enables Blue Harvest to reduce costs and
compete with imports shipped frozen into the U.S. from Icelandic or
Norwegian companies fishing in the North Atlantic. It also means that
the company doesn’t have to pay its fishermen the market price for
their catch.

Independent fishermen sell their catch at public auctions or to
whichever wholesaler offers the best price. But Blue Harvest fishermen
generally don’t have that opportunity. They must sell their fish to
the company — sometimes at prices lower than they could get
otherwise. Blue Harvest did not respond to questions about its
payments to fishermen.

As it cast an ever-larger shadow over the port, Blue Harvest set a
lofty goal: “transforming commercial fishing into an industry that
is defined by sustainability, governed by transparency, and bound to
the promise of delivering excellence to every plate.”

Leeman has never heard of the billionaire Brenninkmeijer family, but
he’s working for them. Blue Harvest’s trail of global ownership
winds from New Bedford’s industrial waterfront to Bregal Partners’
office in a sleek, 50- story skyscraper on Manhattan’s Park Avenue
and then on to a Swiss company, Cofra Holding AG. Cofra, in turn, is
wholly owned by the Brenninkmeijers, a Dutch family described by a
former retail analyst at Morgan Stanley as both “highly secretive”
and a “global powerhouse” in the retail industry. One member
married into the Dutch royal family. Several have lived in a moated,
five-story medieval castle on the River Rhine.

The family’s holding company has a wide-ranging portfolio. It has
focused on renewable energies like solar and offshore wind, as well as
on fossil fuel projects such as natural gas drilling and exploration
in Appalachia’s Marcellus Shale. Its investments include shopping
plazas in Spain, Belgium and the U.K. and commodities such as dairy,
coffee, timber and, now, fish. Its sprawling supply chains encompass
more than one million workers, from New Bedford to Bangladesh.

The family’s vast wealth originated in clothing. In 1841, brothers
Clemens and August Brenninkmeijer began peddling textiles in a small
region that now spans Germany and the Netherlands. In an era when most
European clothing manufacturers catered mainly to affluent families,
the brothers’ company, now called C&A, specialized in ready-to-wear
clothing for the middle and working classes.

Under the Nazi regime, the company took advantage of opportunities
afforded by “Aryanization” to take over stores owned by Jews
fleeing persecution, according to a 2016 book by Mark Spoerer, an
economic historian at the University of Regensburg, who was
commissioned by the family to examine the company’s past. The German
branch of C&A used forced labor in the Lodz Ghetto to manufacture
clothing, Spoerer found. Soon after the war, C&A retail locations
expanded around the world.

“It was opportunism,” acknowledged Maurice Brenninkmeijer, then
chairman of Cofra Holding, in a 2016 interview with German newspaper
Die Zeit. “I suspect that my relatives were solely focused on
business, and in doing so they lost sight of our values.” He added,
“I wish it had been different.”

In rare interviews, family members portray themselves as major donors
to environmental initiatives. Their philanthropic arm, the Laudes
Foundation, promotes sustainable usage of raw materials used in C&A
clothing to address what it calls “the dual crisis of inequality and
climate change.”

Yet C&A has come under fire for contracting with companies that have
allegedly exploited workers. While it produces its own line of
clothes, it also acts as an intermediary between Western companies and
hundreds of garment factories in East Asia and South America. It’s
most active in Bangladesh, where labor costs are among the lowest in
the world.

In 2012, a fire swept through a Bangladesh factory producing clothes
for C&A, killing at least 112 workers. The company agreed to pay
compensation to victims and to assess safety conditions. Last year, a
German human-rights organization filed a criminal complaint against
C&A, among others, for sourcing cotton made with the forced labor of
Uyghur Muslims in China. Cofra and C&A did not respond to requests for
comment.

“Given the scale at which C&A operates, they could literally lift
millions of garment workers out of abject poverty,” said Ben
Vanpeperstraete, senior legal adviser with the European Center for
Constitutional and Human Rights, who helped negotiate compensation for
victims of the 2012 Bangladesh factory fire.

“In the end, they put profits first.”

 One July day in 2017, Joseph Drago woke up in a loud, dark cabin
below deck of a scallop vessel owned by Blue Harvest. He had a
splitting headache and couldn’t catch his breath. He stumbled onto
the deck and asked the crew what was happening.

It was fumes, one replied in Spanish. An exhaust leak from the engine
had been pouring into the sleeping quarters. Soon after, the engine
blew out, leaving the vessel bobbing in swells 80 miles off the coast.
It had to be towed into port.

 

Blue Harvest boats have had a number of mishaps. Last year, one Blue
Harvest vessel burned at sea; another ran aground, which can be
attributable to human error or weather conditions. Leeman had to cut a
fishing trip short in January when the boat’s engine malfunctioned.

Current and former workers said that several vessels that Blue Harvest
regularly operates were already past their prime when the company
bought them. “Their next stop should have been the scrapyard,”
said the former Blue Harvest mechanic, who requested anonymity out of
concern for his career. “The boats had been worked like dogs.”
Blue Harvest did not respond to questions about the condition of its
fleet.

Captains and crew on Blue Harvest boats pay for maintenance, according
to settlement sheets and fishermen. The company has also imposed other
charges that fishermen say they haven’t encountered elsewhere in the
industry, including a 3% “electronics fee” and a $400 “wharfage
fee” for pulling up at the company dock to unload fish.

“The price stays the same but all our expenses just keep going
up,” said Drago. “Every trip they’re taking more and more out of
the crew’s share.”

Drago, like Leeman, aspired to buy his own boat. But with nerve damage
in his hand from years working at sea, the 35-year-old plans to leave
the industry as soon as he can find another job.

“You can no longer work your way up from the deck, become a captain
and buy your own boat and permit. That was always the arrangement,”
he said. “You’ll never make enough. They made it unattainable to
do anything but work for them.”

As Blue Harvest snapped up fleets, it also acquired their permits.
Today, it is approaching the antitrust limit of 15.5% ownership of
permits for groundfish caught off New England.

 

 Blue Harvest owns 12% of the permitted catch overall, including 21%
of haddock, 19% of winter flounder, 16% of ocean perch and 15% of cod.
It stays below the aggregate cap by owning smaller shares of other
species, like 2% of a certain northern flounder. The company’s
groundfish permit holdings total about 46 million pounds.

But those figures underestimate Blue Harvest’s market share. In
addition to owning permits, it also leases fishing rights from other
permit owners. At the beginning of the year, the company will lease a
“bucket of fish,” one Blue Harvest manager said. “If we’re
short on something, we’ll buy it” for the year. The manager said
that this practice addresses a weakness in the catch shares system,
which allows individuals and organizations to hold permits and
passively earn a profit through leasing rather than fishing
themselves. About 40% of all groundfish permits are not used by their
owners and are available only on the leasing market, records show.

Leasing provides a small but steady revenue stream for those owners,
and it helps to ensure that enough seafood reaches the market to
satisfy demand. The practice also enables the expansion of larger
companies. That’s because NOAA’s antitrust rules apply only to
ownership. “There is no restriction on leasing,” said NOAA’s
Demarest. “It would be a very illiberal idea to try to cap the
amount that each corporation can land.” Theoretically, Blue Harvest
or any other major player can legally circumvent the 15.5% cap by
leasing the rights to catch more fish. Because of leasing, the cap
“does not really prevent consolidation at all,” said Mary Hudson,
a manager at a Maine cooperative that makes permits available to
independent fishermen at discount prices. “Private equity backing
can come in, set [leasing] prices and still buy it all.” Instead of
fishing, some small fishermen have taken to leasing out their rights,
she added: “They just don’t have the capital to compete.”

The news organizations’ analysis could not determine how much quota
— the industry term for the number of pounds of fish someone is
allowed to catch — Blue Harvest is leasing, or from whom. That’s
because groundfish permits belonging to individual fishermen,
organizations and large corporations are generally pooled and managed
in groups known as sectors. The sectors act as a black box — fish
quotas can be seen flowing in and out, but who exactly is leasing them
is hidden. NOAA tracks and publishes the weight of fish leased between
sectors, but those transactions do not identify the specific lessor or
lessee. Even the U.S. government doesn’t track that information.

“It’s not legally traceable,” Demarest said. “The government
can’t get involved in what happens within sectors.”

In Blue Harvest’s case, most of the company’s permits are held in
two sectors that have leased the rights to catch more than 14 million
pounds of groundfish since 2018. But there are other permit owners in
those sectors as well. “This sector acquires quota from just about
every sector out there,” said Hank Soule, who manages both sectors
where Blue Harvest operates. He declined to say which owners within
the sector were leasing the most quota.

Blue Harvest boats “are the ones that are fishing, day and night,”
said John Pappalardo, a member of NOAA’s regional council. “Nobody
else is fishing at the level they are. Obviously, they are going to be
the ones setting the price and moving the market.” The Cape Cod
Commercial Fishermen’s Alliance, a cooperative headed by Pappalardo,
originally opposed catch shares, fearing the system would gut the
local industry. But when he realized that the new system was
inevitable, he voted to adopt it. Today, he’s stoic about the entry
of private equity into the fishing industry. “If not them, then
who?” he said. “I don’t think you’re going to see a lot of
independent vessels or communities get into the fishery again.”

Since Leeman doesn’t own permits, he isn’t eligible to lease them
himself — that’s a perk afforded only to permit holders. But he
ends up paying for it anyway. Blue Harvest passes the cost of leasing
permits on to its fishermen, the same way it does for fuel, fishing
gear or vessel maintenance, the manager and workers said. In November
2021, a settlement sheet shows, Blue Harvest deducted a $3,329.90
leasing charge from the pay for Leeman and his crew.

 

There’s a long history of foreign fishing in U.S. waters. In the
1970s, trawlers from Russia and elsewhere depleted East Coast fish
populations, spurring a 1976 federal law pushing foreign fleets at
least 200 miles offshore. In 1998, a cap was added, limiting a foreign
entity to owning 25% of a U.S. fishing vessel.

In recent years, foreign companies have reentered U.S. fishing grounds
through a different route: investing in local operations. They include
Canada-based Cooke Seafood, which recently acquired a one-fourth
interest in scallop fleets in New Bedford and North Carolina, and
Profand, a Spanish company that did the same with Seafreeze Ltd., the
largest squid and mackerel operation on the East Coast. According to
Undercurrent News, Profand’s majority shareholder is Enrique García
Chillón, who is known in his home country as “el emperador del
pulpo,” or the emperor of octopus.

Federal enforcement of the 25% cap largely relies on companies’ own
assurances that they are in compliance. The Coast Guard lacks the
resources to vet businesses’ paperwork, a former official said, and
is required by law to “minimize the administrative burden” on
owners and operators of vessels.

“There should be more transparency in ownership. But there isn’t.
It’s basically an honor system,” said Charlie Papavizas, a
Washington, D.C., attorney specializing in maritime law. “As a
result, there is a big gray area in what is permissible.”

In a 2015 press release, Bregal Partners acknowledged that, “as an
arm of German-Dutch Brenninkmeijer Group,” it was limited by law to
“a 25 percent ownership in any quota-holding fishing company.”
Ownership forms for four of Blue Harvest’s vessels from 2018 and
2019 — submitted to NOAA and obtained through a public records
request — listed four owners for each of the boats. One was Jeff
Davis, who served as Blue Harvest’s CEO before retiring from the
company in 2018. Another was Chris Lischewski, who was then chief
executive of Bumble Bee Seafoods, known for its canned tuna. The
others were Mark Thierfelder, a lawyer who has represented Bregal
Partners, and Michael Arougheti, chief executive of a finance company
that has advised Bregal on acquisitions in the fishing industry.

Davis and Thierfelder could not be reached for comment. A spokesperson
for Arougheti declined to comment. Lischewski stepped down as CEO of
Bumble Bee after he was indicted for conspiring to fix canned tuna
prices. He was found guilty in 2019 and sentenced to 40 months in
prison. NOAA lacks the regulatory authority to require investors to
disclose the percentage of their stake in a vessel or permit, said Ted
Hawes, chief of NOAA’s regional permitting office.

Blue Harvest said in a statement that the Coast Guard had approved its
“capital and ownership structure” in advance and that the company
has “continued to submit all required notices and reporting
materials” to regulatory authorities. “At no time has Blue Harvest
been owned 100% by Bregal,” it added.

On May 11, more than 160 scallop fishermen, business owners, marine
scientists, attorneys and vessel owners crowded into the New Bedford
Whaling Museum for a rowdy meeting. Attendance was especially high
because the seas were stormy and many fishermen stayed in port. To
loud applause, more than a dozen people denounced a proposal, backed
by Blue Harvest and other large companies, that independent local
fishermen fear would enable private equity to storm their last
stronghold — scallops.

Leasing scallop permits is currently prohibited, but the proposal
would allow it. The biggest companies in the market, which are running
up against a cap on permit ownership, are advocating for the change.

Current scallop regulations allow one permit per boat, up to a total
of 17 vessels. One local company, Eastern Fisheries, has reached the
limit, according to a letter it sent to NOAA in 2021. In its own
letter, Blue Harvest listed 15 scallop vessels.

“This is going to hurt the fishermen and the local economy,” said
Tyler Miranda, a third-generation fisherman from New Bedford and
captain of two scallop vessels who is leading the opposition. “The
only people to benefit are the owners of the largest companies. How
much do the biggest owners need to take out of our wages and bring
into theirs? How much is enough?”

One of the few speakers in favor of the proposal was George LaPointe,
a policy consultant to Blue Harvest and a former commissioner of
Maine’s Department of Marine Resources. “We believe that we can
improve flexibility,” said LaPointe, who was there to represent
large scallopers, including Blue Harvest. As he returned to his seat,
many fishermen booed.

New Bedford fishermen had a strong union until the mid-1980s, when the
union was broken in the heat of a strike. Now, with private equity
setting its sights on scallops as well as groundfish, talk of a union
is beginning to stir again.

Leeman said he would welcome a union to fight for fair pay. On his
own, he spends his days on land making calls to check how the rate
that Blue Harvest paid compares to the market price.

Last year, after a 10-day fishing trip, he took a look at his
settlement sheet and burst into the management office, demanding fair
pay for him and his crew. “I said, ‘Until we get this straight,
I’m not leaving the dock,’” he recalled.

And with the weight of a multibillion-dollar industry resting on the
labor of a few hundred New Bedford fishermen, the company relented and
paid him what he said was the market rate. “If I didn’t say
anything, they’d still be paying us half of what that fish was
worth.”

About the Data: How We Tracked Blue Harvest’s Fishing Permits

After hearing from local fishermen that Blue Harvest Fisheries is
dominating New Bedford’s fishing industry, we set out to document
how much of the total allowable catch the company is pulling in.

A first step was to find out how many permits the company owns. The
National Oceanic and Atmospheric Administration provided a database
breaking down the permit holdings in the groundfish industry for the
2022 fishing year. Each permit has a unique identification number and
represents a certain percentage of the total allowable catch of a
species of groundfish. Blue Harvest holds permits in the names of
limited liability companies. Most of these companies have “BHF” as
part of their corporate name, and we confirmed that they were linked
to Blue Harvest through their corporate filings, which list Blue
Harvest’s executives. Our analysis was limited to permits that could
be clearly linked to Blue Harvest through these records. It is
possible that Blue Harvest holds additional permits.

We measured Blue Harvest’s share of permits as a percentage of the
total quota by weight. When aggregating across different kinds of
groundfish, these percentages were averaged, consistent with how NOAA
calculates its 15.5% cap. We found that Blue Harvest owns permits for
12% of groundfish quota — the industry’s term for the total pounds
a permit-holder is allowed to catch — in the current fishing year.

In addition to owning permits outright, companies can also lease
permits. However, company-level lease agreements are not made public.
Instead, NOAA posts leasing transactions at a more summary level.

Permits are managed in groups of permit holders known as
“sectors.” If one permit holder leases to another in its own
sector, NOAA does not publish the transaction. If a holder leases to a
party in another sector, that transaction is recorded publicly, but
only the sectors are identified, not the specific lessor or lessee.

Most of Blue Harvest’s permits are kept in two of the 18 sectors.
NOAA’s leasing records through May of this year show that more than
14 million pounds’ worth of fishing quota have flowed from other
sectors into those two sectors since 2018.Interviews with individual
fishermen and others in the industry indicate that Blue Harvest has a
significant leasing operation; however, lack of precise data from NOAA
makes it impossible to determine the exact extent of the company’s
leasing.

Alex Mierjeski contributed reporting, and Joel Jacobs contributed data
reporting.

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