Seafood: A Strategic National Resource

A public watchdog and advocate for fishermen and their coastal communities. Taufen is an "insider" who blew the whistle on the international profit laundering between global affiliates of North Pacific seafood companies, who use illicit accounting to deny the USA the proper taxes on seafood trade. The same practices are used to lower ex-vessel prices to the fleets, and to bleed monies from our regional economy.

Part 2

Especially instructive was the ending quote from Ed Furia, "It is a simple matter of developing a natural resource much the same as OPEC nations have with their oil. We've got the fish, and we ought to capitalize on that fact."

NEFCO's cover letter:

President Jimmy Carter
The White House
Washington, D.C. 20500

June 27, 1977

Dear Mr. President:

On March 1, 1977, the Fishery Conservation and Management Act of 1976 went into effect, creating what has now become known as the 200-mile fishery zone. Implementation caused immediate conflict with a number of foreign nations, principally Japan and Korea; and the magnitude of the strategic national opportunity involved has created a public and Congressional controversy as to the meaning of the law and whether it will be implemented by your Administration.

The economic, social and political implications to the people of the United States are enormous and there is a growing public constituency for action. This matter is receiving significant, growing media coverage and widespread support among labor and fishermen's groups (see Exhibit 1). The country needs from you a national policy statement and the leadership that this opportunity deserves.

Briefly, the national opportunity includes:

1. The ability to increase the U.S. catch from 4 to 5 billion pounds to over 27 billion pounds annually (Exhibit 2).

2. The ability to take long-term control of a strategic food resource which has political, economic and social characteristics as formidable as the U.S. wheat supply (Exhibit 2).

3. The opportunity to increase U.S. sales of seafood at the processor level from $3 billion to $7 billion annually.

4. The opportunity to create an increase in the U.S. fishery related jobs from 450,000 today to a minimum of 628,000 jobs (Exhibit 3).

5. An opportunity to reverse a $1.5 billion annual balance of payments deficit accrued by the current net U.S. importing of seafood to perhaps as much as $2 billion inflow (Exhibit 4).

6. The ability, with the seafood processing industry fully developed, to provide the local and federal revenue to build the schools, hospitals, roads and other community infrastructure for coastal communities, thereby establishing a solid financial foundation for the full and permanent development of the U.S. fishing industry and the survival of coastal communities where fishing has been the heritage of the people.

7. An opportunity to manage our fish protein resources in a manner which will insure their conservation and their long-term survival; in other words, an opportunity to sustain our fish protein resources for future generations.

The problem of the moment is twofold within government. There is insufficient recognition of the magnitude of this issue, its importance to the people of the United States, and the criticality of each decision that is made. Implementing rules and regulations are in the process of being formulated and these rules will dictate whether or not a fully integrated national fishing industry will develop. It is of the utmost importance that shortsighted precedent be absolutely avoided. Secondly, and more specifically, a NOAA ruling announced in the June 17, 1977 Federal Register effectively derailed the growth program in direct contradiction of its own stated intentions and in direct contradiction to rules declared by regional councils that were created under the Congressional Act to provide directed management and to its announced intentions to hold public hearings on the issue before it was resolved. This specific issue, and other related legal issues are described more fully in Exhibit 5.

Mr. President, I urge you to make a strong policy statement in favor of the development of an integrated United States fishing and processing industry and marshal the forces of the Executive branch behind it. I will be more than happy to help you create a national agenda on this issue up to and including the organization and execution of a Presidential Commission similar to the White House Commission on Food, Nutrition and Health in which I participated in 1969.

I would be happy to meet with you or whatever member of your staff or cabinet you direct to clarify or pursue this matter.

With kind personal regards,

C.R. Rogers, Chairman and President

- - - -

In the report's Politics section, it notes that the chairman of the NPFMC, Elmer Rasmuson - the father of current council member Ed Rasmuson - said for the council, "any short-term benefits to American fishermen to market groundfish by selling directly to floating processors could have a long-term inhibiting effect on the development of U.S. processing capability. The adverse impact on plans of domestic processors was testified before the Council."

It was Oral Burch who was approached by the Korea Marine Industry Development Corp. "to sign up 30 shrimp boats for catching pollock and delivering the raw fish to a Korean 'factory ship' in the 200-mile conservation zone." He was the older brother of Al Burch of Kodiak, a longtime former member of the industry Advisory Panel, who by quirk of fate now helps lead the march to Gulf of Alaska privatization that favors foreign processors. In that Wall Street Journal article on April 20, 1977, Jerry Landauer also reported that "The State Department doesn't find any legal fault with these arrangements" and that "the fish caught by Americans" would be "counted against the priority American quota."

NEFCO claimed "the Korean plan would 'circumvent' the 200-mile law, invite the very overfishing that the conservation zone is supposed to prevent, stunt the development of the U.S. industry on shore and imperil the company's long-standing plan to expand its processing plant on Kodiak Island."

As you will learn in later Groundswell writings, the State Department - similar to NOAA Fisheries - has often had its own opinions and perspective on our resources, often not of any value to our coastal communities, and contrary to real American business interests.

Foreign-investment sprint:

It might interest you that the WSJ article also said that "Naoki Yoshino, president of Nichiro Pacific Ltd.," was in Bayou la Batre, Alabama at the shipyard - already speaking "about the possibility of letting contracts to build as many as 50 fishing vessels." (I worked for Yoshino and his financial vice president at Peter Pan starting in 1979.) And "Japanese businessmen, already holding investments ranging from $100,000 to $12 million in 20 or so American concerns, including majority ownership in Whitney-Fidalgo Seafoods Co. in Seattle, are scouting intensively for fresh investment opportunities from Alaska to Alabama. Koreans, having lost nearly all their fishing grounds off Soviet coasts, are busily putting out new feelers" as well. Japan had renegotiated rights for more Soviet-zone fishing.

Readers generally know that a period of foreign- to more-domestic processing and joint ventures at sea, delivering to foreign vessels, followed for several years off Alaska. (It was in June of 1975 that Pan-Alaska had become part of Castle & Cook's Bumble Bee Seafoods.) And NEFCO filed for bankruptcy around 1979 - in spite of its prominent position in the U.S. seafood industry, and despite the promises of the 'spirit and intent' of the FCMA. The Japanese went on a continued buying spree in the late-1970's.

For example, the solely American firm Peter Pan Seafoods, bought by the Bristol Bay Native Corporation in December of 1975, was sold merely four years later to Nichiro Pacific USA and its parent Nichiro Gyogyo Kabushiki Kaisha of Japan. Many of the NEFCO staff, including myself, had joined PPSF in late 1977, and as an earlier article outlined, Nichiro acquired our premier salmon fleets (many formerly with NEFCO) and obtained our financial cost models.

It was only in September of 1975 that the Council of State Governments published the 88-page book, "To Stem the Tide" for the NMFS national Task Force on Effective State Marine Fisheries Management Programs which was formed for the purpose of developing model legislation for a "Marine Fisheries Management Act." But even after the FCMA, the tide would soon be headed back out.

It is an important historical note that the principal sponsor of the FCMA was Washington State's U.S. Senator Warren G. Magnuson (S.961 was the Senate vehicle), and his leading co-sponsor was U.S. House Representative Senator Gerry E. Studds (D-MA, sponsor of H.R. 200 in 1975, the chosen bill to advance a FCMA). The bills eventually passed the House and Senate on March 29 and 30 of 1976, with an effective date of March 1, 1977. So Rogers' letter comes only a few months into enactment. It is true that the efforts noted included Senator Ted Stevens, Representatives Leonor K. Sullivan, Robert L. Leggett, and Edwin B. Forsythe, "the other cosponsors and members of the committees involved."

R.A. Davenny and Associates pushed the Korean proposal, to use 600 tons of groundfish per day, before the NPFMC on Monday, March 21, 1977 according to the AP. On March 23, 1977, The Kodiak Daily Mirror ran an AP story on the issue titled, "Kodiak bottom fish project 'derailed' by U.S.-Korean plan." At the meetings in the Holiday Inn at Anchorage, Ed Furia had told the "Council on Monday that it had planned to build a new bottom fish processing plant in Kodiak. but that American processors faced with high taxes, high wages and tough health and environmental standards, could not compete with a foreign factory vessel operation." Furia called the plans "absolutely derailed" by the Korean's offshore plan. And, "Davenny defended the proposal [by saying] 'Half a loaf is better than none'." Surely, Bob was not referring to the contrast with the value of wheat, was he?!

That same week in a Mirror article titled "Fishy meeting held here" word leaked that the Coast Guard and Department of State were also in Kodiak with "a Soviet government official and a representative of a major Japanese fishing interest." An Anchorage Times article on March 22, 1977 noted that Davenny said, "Recognizing that heavy foreign fishing has already depleted the supply of pollock in the Bering Sea, the Korean fish would largely be caught in the Gulf of Alaska."

In a Seattle Times article of April 21, 1977, Senator Magnuson was joined by Ted Stevens in complaining that "the State Department tries to prevent the Coast Guard from seizing foreign fishing vessels that violate the new 200-mile offshore-fishing limit."

They spoke at a Senate Commerce Committee hearing - but readers might find it interesting that "Magnuson and Stevens spoke out after Senator Edward M. Kennedy, Massachusetts Democrat, accompanied by a group of New England fishing representatives" had complained weeks earlier about Russian ships the State Department had overruled the Coast Guard about, because of 100 boarded and 90 cited, only two Russian boats were intercepted. President Carter said [that] action was necessary to impress on foreign fleets United States intentions to strictly enforce the law."

'Outhustled' coalition fights 'economic war':

On April 22, 1977, The Kodiak Daily Mirror ran "Casey and company sign: NEFCO joins coalition," where "Tom Casey, manager of the United Fishermen's Marketing Association (UFMA), said Friday morning his group had joined with NEFCO in sending a letter to state and federal representatives Thursday announcing their effort" in an alliance "dubbed the North Pacific Ocean Protein Coalition." Casey warned, "NOAA and the Department of Commerce 'seem ready to allow a catch in excess of the quota' and that the group is calling for safeguards to be placed within the 200-mile limit law to protect Americans both onshore and offshore from 'the onslaught' of foreign investment." In protecting the communities, Casey also "emphasized the strategic importance of fish" and noted, "Let's protect the American people who pay the bills for the American government to function."

Foreign direct investment (FDI) was episodic and rising. Also on April 22, Oregon Journal writer James Long quoted one American official who said, "It doesn't sound illegal. There's nothing to prevent Americans from selling fish to foreigners. There is nothing to prevent foreigners from investing in American companies. Let's face it - we're being outhustled. In fact we're being imperialized, and it's pretty incredible for the United States to be imperialized by Korea," because of "a loophole, as wide as the Minnesota Freeway."

Opposition occurred by Representative Les AuCoin (Astoria) on NEFCO's behalf, but Japan and Korean FDI (ownership, loans, and purchase guarantees) already compromised other companies. But an Oregon fishery expert also pointed out that there was "underdevelopment because of a lack of domestic capital and that the foreign money is simply flowing into an American-created vacuum." (Readers can contrast that with the upcoming Heggelund and Sullivan article's 1979 predictions regarding excessive foreign ownership.)

An Anchorage Daily News article on April 29, 1977, said that American fisherman had gotten only 1,000 MT as "most of the 150,000 MT TAC for the GOA pollock was awarded to Japan on the basis of historical fishing rights." Also, Lokken pointed out "it was doubtful Alaska boats could harvest" that much, "necessitating 'bringing in Outside boats'." Coast Guard Rear Admiral John Hayes "said he feared the arrangement and possible future projects of its kind could lead to the 'development of economic warfare'."

A Kodiak Daily Mirror article that same day said "The R.A. Davenny proposal, detailed in Kodiak at last week's Fisheries Institute, was rejected" although Davenny had "signed a contract with KMDC earlier this month for the delivery of 135,000 MT of pollock by American fishermen" which was "to be delivered to a factory ship called "the largest in the world." On May 16, 1977, (Seattle Times, May 17) NEFCO announced it was expanding its cannery facilities, starting in Kodiak, to harvest, process and export bottom fish."

At the time, it was quite exciting to be working at NEFCO. But in the Seattle Times article, Furia had already outlined the three strategies foreign interests could use to avoid impacts of the FMCA. Tom Casey of UFMA "in Kodiak, said present ships should be able to handle the new and large bottom-fish trade this year, but that bigger ships will be needed in the future."

Crab cooperatives crashing, 2006:

At the crab cooperatives meeting in Seattle last week (Wednesday, April 26, 2006) I found it odd when our friend Casey complimented this column then added, "Just tell us what to do next." In all due respect to an old and capable warrior, Tom's like most of the folks today, economically choking under the processors' greedy 'race to privatize' - stunned at how the United States still allows this to continue. And is likely hampered as much by his current clients' own conflicted goals than by anything else.

The meeting deserves its own post, but I'll answer Tom with two temporary comments. First, that Groundswell has long been committed to finding the part of the U.S. government that is still willing to do the job of protecting the Nation. And second, that the crab cooperative meeting was a real flounder. (In addition, we encourage Tom to share any thoughts and facts he'd add about the 1970's.)

On the first point, Groundswell started at the Internal Revenue Service and had some success - and they are now primed for future action within a joint task force, if we can get it formed. Currently, readers know that we're asking the Department of Justice in Washington DC to try (once again) to look at this from a new point of view, and to fully consider the necessary divestitures and other Deconcentration measures that the situation requires. Especially in light of three decades of Abusive Transfer Pricing - cross-border product laundering by the transnationals who've bled us dry with Commerce Department permission - and Ted's pseudo-Congressional irrational machinations and other "half loaf" solutions.

On the second point, I'll never understand why some fishermen act like a farm team without pads who invites the opposing pro football team's coaches into our locker room at halftime to show them our playbook - like at the crab coop meeting. Some of the pro team's quarterbacks attended too, because that's the infiltration system that Crab Ratz created. How do you expect to win that way? If you want government "for the People" it has to start "by and of the People" with crab fishermen turning into government witnesses and spilling the beans about the racketeering activity that was Crab Ratz. And stop listening to bush league coaches who work for all sides. What's up with paying them again just so processors can steal more from you?

For those who cared to notice, on the wall of that Sons of Norway room where the crab meeting took place was a mural titled "Hard Times We Bore That Tried Us," words from Bjornstjerne Bjornson's national hymn, regarding the epoch at the start of the 19th Century. It was a time when the Freedom of Norway was in jeopardy and Fire in the Mountains was a means of Calling to Arms. If you take a careful look, Groundswell has done more on a poverty budget to awaken Congressmen and the public, and to find the still-functional part of OUR government who wants to take a bite out of our industry's problems as if they are a juicy steak - and a path to promotion: for those who want an Elliott Spitzer-like reputation.

It's not wise to compromise a federal investigation, but there is a lot going on behind the scenes: always. And a lot more could be done - largely at government expense. But we have to first raise the banners (e.g. this site, and other writings), blow the war trumpets (e.g. Council activism and emails), and as Leon Panetta advised (as a Fish Expo keynote speaker) Groundswell must "bang the drum louder." So maybe Groundswell is a far better place for slave ship owners to start putting some of their remaining crab dollars, instead of investing in the same 'conflicted' folks who helped flood their bilges in the first place. I hope that's part of the answers you were looking for, Tom.

Russia fishes hake, 1970's:

Again, it's incredibly ironic that the Japanese now have a commanding ownership in Alaska's seafood resources "in perpetuity" through the privatization schemes of pollock and crab rationalization. So many other foreigners who fished before 1976 and in the JV fisheries have comparatively little to none today. That is, Japan has today what it could not have before the MFCMA, due to the very reasons that Rogers forewarned. (More later on how Korea and Japan used treaties to undercut sideboard protections under the later American Fisheries Act.)

In June of 1977 the Anchorage Daily News also said, in a "Our views" piece titled "No to NOAA," that the decision to allow deliveries to foreign vessels in the EEZ "can only lead to disastrous consequences for American fishing interests and serve as a potential roadblock for building a stronger U.S. coastal fisheries community."

In a Seattle Times "Maritime" UPI article of May 3, 1977, editor Glen Carter wrote about "A proposal for a Soviet-owned factory ship (the Sulac) to process hake off the coasts of Oregon and Washington by U.S. fishermen was to be reviewed again today by the Pacific Fishery Management Council. The hake proposal was made by the Marine Resources Co." where Wally Pereyra was vice president - during the 1990's Wally became a member of the NPFMC. It was part of a pattern that had decimated rockfish stocks in the Gulf of Alaska already.

"Russian and, to a lesser extent, Japanese trawl vessels heavily exploited Pacific ocean perch (POP is a slope rockfish species) in the early 1960's and 1970's, with a peak catch of 350,000 MT in 1965. This heavy exploitation occurred during a period when Steller sea lion populations were considered healthy and POP rarely appeared in the sea lion diet. After a period of pulse fishing, POP were overfished in the GOA, and Russian fleets moved south to exploit rockfish stocks off Oregon and Washington." (Decline of the Steller Sea Lion in Alaskan Waters, NRC 2003)

On June 13, 1977, the PFMC considered arguments by Pereyra and economist James Crutchfield of the University of Washington that the fishery would pay American fleets high prices and spur development. But "Council members said the venture might slow American entry into the hake market," (Los Angeles, UPI, June 15). Alaskan interests wanted to process the fish and joined with Ed Furia, who said, "permitting the Sulac to process American caught fish would be accepting 'Strategies by foreign interests who do not want the full impact of the (200-mile) law visited upon them'."

Earlier, Ed worked with NEFCO's Pier 89 food laboratory - I was a cost analyst for the Ship Ahoy product line that spring - as they tried processing hake fillets, which you could wring the water right out of, making it difficult to 'bread and batter' them, as the moisture would blow large parts of the batter right off the flesh during the oil deep-fry process. Tasty product, but incorrigible. We dropped the idea.

The 1977 NEFCO report called surimi "deflavored fish pulp" but noted it could also be used in the U.S. as a protein base. It also compared most of Alaska's fish to wheat by saying the former was a complete protein, while the latter was incomplete - "deficient in the amino acids lysine and methionine" - and noted other food potentials and new market options, in the USA.

Treasury returns, anyone?

In the Issues section, the report asked a favorite Groundswell concern, "Who, if anyone, has taxing authority over foreign operations in the economic zone? Who should?" And it asked, "Does the federal government prefer the subsidy approach for development of a U.S. industry rather than creating the conditions under which it can compete in the world market? The Canadians have done this." So, here we sit after 20 years of ATP - and an insufficient IRS and Justice Department effort - that acted as a subsidy to Japanese firms to dominate investment in Alaska. It also looms as an obvious violation of the Uruguay Round restrictions of the WTO, because the Council process gave private quotas forever to a few select transnationals, and by doing so, harmed all other nations' firms as well as potential domestic competitors.

Readers generally know that the ensuing Joint Venture fisheries, not halted until the early 1990's, suffered from a lack of 'checks and balances' and law enforcement, devastated certain resources (especially West of Kodiak Island), and was dominated by greed. I worked for one of the Korean JV's just before operations ceased, and the paradigm they had was to leave no money in the United States, too. So much for working on the trade deficit concerns that first led to the MFCMA - or for returning any wealth to the Treasury from OUR nation's resources, too. (More in the next piece.)

In the Senate's 1977 records, it was Edward Kennedy who inserted (the week after publication) a May 13th article from the Boston Globe, where author Richard E. Chaisson said, "a well-planned American fisheries policy incorporated in an over-all American food policy could begin to make progress toward an equitable distribution of food commodities worldwide." Chaisson concluded, "The Carter Administration and Congress must take a hard look at our agricultural and fisheries policies. Fishermen, farmers, environmentalists, politicians and, most important, the American consumer must join together to build a food policy for this nation that maximizes efficient production and responsible distribution of our food resources."

Rogers' report said in the Politics section, "Those who criticize the idea of keeping foreign investment in the American fishing industry to a minority interest claim we are violating the concept of free trade. To that criticism we respond that we are not talking about trade in shoes or cameras or automobiles. We are talking about trade in a strategic national resource."

To that, Groundswell adds another question, "What about the harms done to free trade by the U.S. Treasury, Justice, and Commerce and its NOAA Fisheries allowing decades of a lack of 'accountability, transparency, and full law enforcement' - of subsidies such as price-fixing and Transfer Pricing abuses - that let billions of dollars be bled from the promised Domestic development and our fishing communities?" Without removal of the 'buyers-as-owners cartel' and restoring a 'comparable, uncontrolled price,' in fair trade, 'at arm's length,' how can we ever fulfill the mission of maximizing the net national benefit from our 200-mile limit fisheries?

As I looked at the helmeted Vikings on the Sons of Norway murals, I thought back to my rookie Dungeness crab trip off of Westport years ago in January, at the ripe age of 46. Doing the strings twice, we pulled over 1,600 pots and caught only 4,000 pounds - yet despite crucifying carpals, I loved it; but it was pretty stupid to think we'd make some real money, huh? (Maybe anyone who steps on deck has that in common.) But who's going to step back on deck at these prices?

Another Call to Arms:

I'm of German and Austrian descent; so naturally, I enjoyed the costly muffins and coffee last week. But hey, speaking from one 'enthusiast' to another, for how long and just how many Calls to Arms have you crabbers been waiting for?

Join the Groundswell - it's time to bring a check, and get us off to Washington DC soon: and almost cheaper than your green fees. So, let's see what government "of, by and for the People" can do for one and all; and change the scarlet 'J' back to Magnuson's red-letter 'A'. You know where to reach us.

Stephen Taufen - 2006

April 28th, 2006

April 23rd, 2006

April 18th, 2006

April 14th, 2006

April 4th, 2006

March 28th, 2006

March 24th, 2006

March 16th, 2006

March 7th, 2006

February 27th, 2006

February 16th, 2006

February 16th, 2006

Seafood: A Strategic National Resource