US senators call for federal scrutiny of private equity intrusion into fisheries – ProPublica

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This article was prepared for ProPublica’s Local Reporting Network in partnership with The New Bedford Light. Sign up for Dispatches to receive stories like these as soon as they are published.

Three US senators, including two members of a Senate subcommittee that oversees the fishing industry, are calling for greater federal scrutiny of private equity intrusion into East Coast commercial fisheries.

Connecticut Senator Richard Blumenthal and Democrats Elizabeth Warren and Ed Markey all condemned the government’s lax antitrust policies and weak enforcement of foreign ownership restrictions in the fishing industry. They were responding to an investigation published July 6 by ProPublica and The New Bedford Light, which reported that companies associated with private equity firms and foreign investors now have an outsized share of the market for demersal fish such as pollock, haddock and Redfish control and push to expand into other parts of the industry. Under this new regime, the research found, working conditions for local fishermen have deteriorated as they work longer hours and bear a larger share of costs such as vessel maintenance.

“This alarming investigation raises serious concerns about possible violations of federal law,” Blumenthal said in a statement. “A powerful foreign private equity giant has acquired tremendous power over a vital American industry. This apparent dominance raises antitrust issues that should be examined by the US Department of Justice.” Both Blumenthal and Markey sit on a Senate subcommittee overseeing the National Oceanic and Atmospheric Administration and the Coast Guard.

Warren said she is dismayed that federal enforcement of a cap on foreign ownership of fishing vessels in US waters depends largely on companies’ own assurances that they are complying with the rules. “Predatory private equity billionaires have bought into almost every sector of the economy, generating huge profits for insiders while leaving workers out in the cold,” Warren said. “I am deeply concerned by this report about the lack of government oversight of foreign property borders and that some hard-working fishermen in New Bedford are not being treated fairly.” She added, “I intend to work with federal authorities to address these issues.” and protect fishing families in Massachusetts.”

The ProPublica/New Bedford Light investigation found that a federal regulatory regime known as “catch-shares,” introduced in 2010 to reduce overfishing, has encouraged industry consolidation through private equity at the expense of independent fishermen. The largest single permit holder in the New England demersal industry is Blue Harvest Fisheries, which has the right to catch 12% of the demersal, approaching the 15.5% antitrust limit.

Blue Harvest, founded in 2015 by Manhattan private equity firm Bregal Partners and based in New Bedford, Mass. owns more than 15.5% of the allowable catch for certain fish species, but by owning smaller shares stays below the total cap of other species. It increases its market share by leasing fishing rights from other license holders. There are no antitrust restrictions on leasing. Blue Harvest has billed the captains and crew on its vessels for maintenance, electronics and wharfage fees, among other things. The investigation traced ownership of Blue Harvest to a Dutch billionaire family.

Blue Harvest said in a statement that it recognized the “historically significant role that the area’s fishermen and women play in our bottom fish business” by investing more than $10 million to improve the health and well-being of encourage employees and crew members. Total crew payments have increased by 36% over the past three years, the company says. Blue Harvest plans to launch several state-of-the-art vessels by 2024, reflecting its commitment to “set higher standards and benchmarks for the fishing industry,” it said.

Blue Harvest added that the Coast Guard has approved its “ownership and capital structure.” The company said it “remains committed to acting as a responsible steward of the vital domestic US fishing industry and actively supports regulation for the benefit of the industry at large and the communities in which we operate.” Bregal Partners did not respond to a request for comment .

Like Warren, Markey condemned foreign ownership and its impact on independent fishermen. “Our working waterfronts should work for local communities, and our local ownership laws should be implemented and upheld, not undermined or circumvented,” Markey said. He vowed to “ensure we have a robust federal oversight system” and that “the private equity industry cannot take advantage of companies or their workers.”

A spokesman for NOAA’s chief of fisheries said it will “work directly with our partners in Congress to respond to any inquiries.” Michael Pentony, the regional manager for the division’s Northeast, said NOAA’s goal is to “ensure a sustainable future for our fishery and the communities that depend on it.” He did not want to address specific questions.

The current antitrust ceiling “does not prevent excessive consolidation in the fishery,” said Geoff Smith, one of 18 members of the New England Fishery Management Council that advises NOAA. “We certainly do not believe that Blue Harvest or any other company should be able to own excessive interests in the fishery to the detriment of fishing communities.” Other council members declined to comment or did not respond to messages, and the executive director declined to comment away.

The council is considering whether to back a controversial, industry-backed proposal that would authorize the leasing of scallop fishing rights. Current scallop regulations allow one permit per boat for up to 17 vessels and leasing is prohibited. Many local fishermen fear that implementation of the proposal would accelerate consolidation and allow private equity to enter the lucrative scallop market as well as demersal.

“I hope the New England Fishery Management Council will recognize that the South Shore was built on the backs of hard-working fishing families and that upcoming decisions reflect the respect they deserve,” said US Rep. Bill Keating, a Democrat whose district is New Bedford.

Fishermen, former regulators and community activists recommended various reforms. They called for a reduction in the 15.5% permit cap on demersal fishing, more transparency on permit ownership and leasing, and enforcement by NOAA and the Coast Guard of the US Fisheries Act, which limits foreign ownership to 25% of a US fishing vessel. The Coast Guard’s National Vessel Documentation Center, which is responsible for overseeing compliance with foreign ownership restrictions, did not respond to written inquiries.

The way the regulations currently stand, “a handful of companies can come in” and “buy up the entire fishery,” said Ben Martens, chair of the Maine Coast Fishermen’s Association. A lack of transparency in ownership and leasing “creates a murky market,” he added.

Blue Harvest bought part of its fleet and permits from New Bedford fishing magnate Carlos Rafael, known as “Codfather”, after he pleaded guilty to 27 counts of fraud in 2017 and agreed to the sale of his empire.

“Rafael’s fishing days are over, but fishing industry manipulation is alive and well, only with fancier suits and offices and less interesting but better groomed employees,” wrote Joshua Amaral, who runs a community service program in New Bedford, to the light.

Brett Tolley, who runs the Northwest Atlantic Marine Alliance, which campaigns for independent fishermen, said the influx of private equity firms is the “inevitable result” of the catch-share system. “The warning signs were always there,” Tolley said. “They have become so dominant, with such influence and leverage on our local economy, that they have essentially become too big to fail.”

David Goethel, a New Hampshire fisherman who served on the New England Fishery Management Council from 2004 to 2013, said the industry’s problems run deep.

“NOAA is scared of what they might find if they really start shaking the whole rotten tree,” he said.

As a council member, Goethel cast the only dissenting vote against the catch shares. “We knew then that someone was going to buy the entire fishery,” he said. “Well, that’s what happened now.”

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