Editor’s Log: Figurehead Fraud - The Fisherman

Editor’s Log: Figurehead Fraud

A lawsuit filed in the Southern District of New York alleges that Cooke Seafood of Canada – the company that purchased Omega Protein in 2017 and allows the Virginia-based menhaden operation to harvest bunker for reduction purposes as Ocean Harvesters – is in violation of the federal American Fisheries Act.  Filed by Benson Chiles and Chris Manthey, the lawsuit charges Cooke and Omega with perpetrating “figurehead fraud” under the False Claims Act.

“This case concerns the control of a large fleet of fishing vessels by a foreign seafood conglomerate called Cooke Inc. and its subsidiaries, affiliates, officers and employees,” the suit claims, arguing that the American Fisheries Act of 1998 prohibits foreign citizens like Cooke from having “de facto control” over vessels engaging in commercial fishing in U.S. waters.

“Defendants have been violating that ‘control’ prohibition since 2017,” the lawsuit states, adding “defendants created a supposedly domestic shell company to nominally own the vessels, but they installed a long-time Cooke employee – who also happens to be the nephew of the Cooke CEO – as a figurehead to ‘own’ the entity on the understand that actual control would be exercised by Cooke.”

The Chiles/Manthey lawsuit charges Cooke/Omega with falsely certifying to the Marine Administration under the U.S. Department of Transportation, as well as the U.S. Coast Guard, that the vessels’ owner had complied with American Fisheries Act citizen requirements.  “As a results of their fraudulent scheme, defendants have illegally harvested from United States waters with many millions of dollars’ worth of fish to which they are not entitled.”

According to WAVY TV out of Norfolk, VA (Lawsuit Claims Omega Violates Federal Law By Sending Bay Profits To Canada) the lawsuit charges Cooke with establishing a Delaware firm to “create a complex corporate structure designed to circumvent longstanding regulations mandating that fishing vessels operating in U.S. waters must be owned and controlled by American citizens or entities.”

“What we should have is an independent U.S. company controlling these fishing operations, with the profits staying in the United States,” lead plaintiffs’ attorney Brandon Demay of Holwell, Shuster and Goldberg told WAVY TV.  The Virginia-based news station also contacted Ocean Harvesters for a response, the company claiming that the lawsuit is “is without merit.”  Demay told WAVY TV that lawsuit probably won’t be heard for at least a year, and said he expects Cooke to file a response soon.  According to the lawsuit, if Cooke is found in violation of the American Fisheries Act the statutory penalty could reach $154,000 per vessel, per day, which could exceed $2 billion.

There’s been a noticeable lack of bunker in New Jersey waters this spring, which often leads to finger pointing towards the Omega Protein fleet.  Honestly, I think the amount of rain we had this spring threw off the salt balance in local waters, keeping bunker from really getting thick inside the Raritan.  But if the Chiles/Manthey lawsuit does prove to have merit in federal court, the Canadian-owned Virginia reduction fleet may have some additional explaining to do!

I would remind folks that it is a violation New Jersey state law (Section 7:25-22.1) to harvest Atlantic menhaden in state waters out to 3 miles by any means for the purpose of “fish meal reduction” which is what Ocean Harvesters does.  According to the state’s menhaden law, this prohibition does not apply to the taking of bunker for bait, hence the bait boats you see from a about a half-mile to 3 miles off the beach.

For more on menhaden and its importance in American history and the environment pick up the book by Dr. H. Bruce Franklin called The Most Important Fish in the Sea. It’s a critical analysis of this oily baitfish written by a former professor at Rutgers University.  Dr. Franklin passed away on May 19th at the age of 90.

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