Robert F. Bukaty/AP Photo
An Atlantic salmon leaps out of the water at a Cooke Aquaculture farm pen near Eastport, Maine, October 11, 2008.
Commercial fishers are one of the professions that’s been nickeled-and-dimed in recent decades, right up there with long-haul truckers and chicken farmers. A once stable livelihood has been devastated by the dominant middlemen who’ve accrued vast power over the market, depressing the earnings of fishers while raising costs on the retail side for consumers.
In New Bedford, Massachusetts, the most lucrative port for seafood catches in the country, a fisherman profiled by ProPublica in 2022 was forced to contract with one of the world’s seafood powerhouses, Blue Harvest, because it had become the only buyer in the local market. Per the contract, fishers have to lease fishing permits from the company; the costs for vessel maintenance, fuel, gear, and repairs on company-owned boats are taken out from fishers’ own paychecks, called settlement sheets.
After fishing around the clock for ten days to meet quotas, Jerry Leeman only made 14 cents on the pound and his crew 7 cents, even as their haddock catch sold for $2.28 per pound at market. Blue Harvest took the lion’s share of earnings, while placing all the risks of the trade onto fishers. “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 told ProPublica in its investigation.
Blue Harvest went bankrupt in 2023 because of pillaging from its foreign private equity owner. But these practices are now commonplace beyond New Bedford, because of the rapid consolidation of the seafood business since the 1990s. One company, Pacific Seafood, now controls the market for salmon and shrimp across the Northwest coastline; in Alaska, four companies hold the share rights to over 77 percent of catches for several crab species; and Seattle-based American Seafoods has been described as “the largest harvester of fish for human consumption in the U.S.”
But at the top of the corporate pyramid, seafood executives do not appear to be as scrupulous about their own legal obligations as they are about enforcing the domineering contracts choking fishers down at the bottom. A degree of corporate piracy has run rampant in recent years.
Before Blue Harvest’s rise, New Bedford was run by the notorious Carlos Rafael, known as the “Codfather,” who was indicted on a variety of charges from tax fraud to price-fixing to attempting to work with fake Russian mobsters, landing him in prison in 2016. The Dutch-owned private equity firm Bregal Partners that owned Blue Harvest was likely engaged in clever accounting to skirt a 25 percent foreign ownership restriction on fishing licenses in the U.S., while looting the company into bankruptcy. Pacific Seafood continues to face plaintiff antitrust lawsuits for anti-competitive conduct, though one court dismissed a recent price-fixing case. Concentration in seafood across the board has only taken place because of lax merger enforcement by regulators.
A 1920s law, known as the Jones Act, requires that all vessels carrying goods between U.S. ports must be built by the U.S. shipping industry and owned primarily by U.S. citizens.
Most recently, the seafood industry has been rocked by a multibillion-dollar lawsuit accusing the world’s largest private seafood company, Canada-based Cooke, Inc., of operating illegally in U.S. waters through a fraudulent figurehead ownership scheme.
The plaintiff lawsuit alleges that in order to get its 2017 mega-merger with U.S.-based Omega Protein approved by regulators, Cooke created a Delaware shell company run by the CEO’s nephew to bypass restrictions on foreign ownership of vessels in U.S. waterways. Cooke, Inc., was not fully transparent about the parent company’s degree of involvement with the shell company in its legal filings to approve the merger, according to the lawsuit, though it more fully briefed the Wall Street lenders financing the deal to sell its upside. There may be tax issues involved with the merger as well, sources have told the Prospect, though that is outside the scope of the lawsuit.
“We see a pattern here of a company that thinks it can do whatever it wants and won’t get caught,” said Brendon DeMay, a trial attorney for Holwell Shuster & Goldberg, the New York law firm bringing the case.
The lawsuit targets two of the major players in global seafood, but the response from industry insiders indicates that this arrangement may be much more widespread than previously known. Sources speaking to local press have not disputed the lawsuit’s charges, instead shrugging it off as nothing unusual. “That’s very typical,” one said. It speaks to a certain level of lawlessness that’s apparently taken for granted in fishing.
THE STORY OF THE CASE DATES BACK to before the merger.
Cooke is like the Cargill or Koch Industries of seafood in terms of its scale and family-run structure. It has built up a global empire with a dominant position in particular for salmon catches that spans from the coast of Maine to Chile and Australia. During a brief stint as a public company, Cooke’s top clients were revealed to be major retail chains and agribusiness giants such as Costco, Land O’Lakes, and Cargill. One of its key suppliers was actually Omega Protein, which provided fish feed for its aquaculture facilities, which are like factory farms for the seafood business.
In recent years, Cooke set about expanding into U.S. markets through a series of acquisitions, buying up smaller operations Wanchese in 2015, then Icicle Seafoods in 2016, and later All Seas Wholesale in 2019.
But the 2017 deal to purchase Omega Protein was Cooke’s biggest and most enticing merger yet. Omega operates largely along the Chesapeake Bay and is one of the biggest companies in the growing business in menhaden, a small forage fish that is a key component for all sorts of protein products, from feed to pet food and even bait for recreational fishing. Omega owns over 100 vessels, and several processing plants. By acquiring Omega, Cooke could swallow one of its suppliers and get feed on the cheap for its entire global operations.
In early 2017, the two companies engaged in negotiations and came to an official agreement on a $500 million deal.
But along the way, they identified a legal problem.
A 1920s law, known as the Jones Act, requires that all vessels carrying goods between U.S. ports must be built by the U.S. shipping industry and owned primarily by U.S. citizens. It’s one of the longest-standing Made in America laws, though one protecting an industry that even Adam Smith, a critic of mercantilism, deemed necessary for national security.
Steve Helber/AP Photo
A crew member of the fishing boat Windmill Point heads to shore after the boat docked at Omega Protein’s menhaden processing plant on Cockrell’s Creek in Reedville, Virginia, November 26, 2019.
Controlling waterways and maintaining an adequate supply of ships is important for defense as well as supply chain crises such as during the pandemic. China’s dominance in global shipbuilding is one reason why the law has garnered renewed attention as one tool for regaining U.S. prowess in shipping. Labor groups like the United Steelworkers have been vocal supporters of the Jones Act for keeping jobs in the U.S.
In his 2021 Made in America executive order, President Biden singled out the Jones Act and reasserted the country’s commitment to enforcing it.
There are broader economic arguments for the law as well. Government bodies invest substantial resources in maintaining and protecting national waterways. If there’s an accident, the government has to clean it up. Thus it has an interest in prioritizing U.S. companies to operate there, so the profits stay in the U.S. and also benefit shipbuilding workers.
The law is not without its detractors, in particular libertarians and free-marketeers who deride any form of protectionism as heresy. Puerto Rico’s struggles to find U.S. ships to supply the island is one case often cited as evidence of the law’s ills, though as a U.S. territory it really should be exempt and frequently receives waivers.
Primarily though, the Jones Act is a thorn in the side of multinational conglomerates like Cooke trying to do business in U.S. markets. A provision passed in the 1990s extended restrictions to fishing, stipulating that a company can’t hold licenses to fishing vessels in U.S. waters with more than 25 percent foreign ownership.
According to the lawsuit, Cooke realized that the planned merger with Omega would run afoul of this provision, and it wouldn’t be able to directly operate Omega’s vessels.
Technically, Cooke and Omega still could have gone through with the deal, but they would have had to sell the vessels to another company and then purchase the fish catches from them. But that ruined Cooke’s entire plan to control a vertically integrated supply line.
Instead, according to internal communications and a timeline that the lawsuit lays out, the two companies preemptively entered an agreement to dodge regulators at the U.S. Maritime Administration (MARAD), which directly oversees these transactions.
Cooke faces over $2 billion in potential penalties for knowingly violating the American Fisheries Act.
In June of 2017, Cooke sent Omega a revised proposal to transfer ownership of its vessels to an outside newly formed holding company so they could maintain their U.S. fishing certificates. As a sweetener, the two agreed to a hefty termination fee of $20 million that Cooke would pay to Omega in case regulators caught on to them and the deal went south.
The plan entailed setting up a series of interlinked shell companies incorporated in Delaware registered as Alpha Vessels, with the newly formed business Ocean Harvesters operating Omega’s ships.
The transfer of vessels and other licensing rights was structured to give “the illusion of independent ownership, while ensuring that Cooke and Omega would retain total control,” according to the lawsuit.
On paper, it looked to MARAD regulators like they’d divested. But Cooke was more candid about the situation to the Wall Street investors whom it courted to finance the purchase.
The new owners of this supposedly independent third-party company are all still current employees of both Cooke and Omega. The lead controlling officer, Seth Dunlop, is the nephew of Cooke’s CEO Glenn Cooke, and happens to be a U.S. citizen, so he could check the box for the citizenship requirement.
In a slide presentation to investors, the familial relationship and employment status of these new owners was made explicitly clear to investors to assure them of the shell company’s subservience to Cooke.
The lawsuit claims that since the purchase, Cooke and Omega dictate the fishing routes, quotas, and all operations of Ocean Harvesters. They are a subsidiary in every way. On one occasion, Cooke even instructed Ocean Harvesters to overfish their allotted quotas, despite a new regulatory cap constraining their catch share. When the Atlantic States Marine Fisheries Commission found out they were not complying with the new cap, they referred a complaint to then-Commerce Secretary Wilbur Ross to impose a moratorium on their operations. In order to fight this complaint, Omega Protein officials reached out to object—not Ocean Harvesters, which was ostensibly the actual company at fault.
In various other instances, Omega and Cooke have handled the lobbying on ordinances and rules relating to Ocean Harvesters.
The lawsuit was referred to the Department of Justice, which could have launched its own investigation, dismissed the case, or allowed it to proceed. It opted for the latter. Cooke faces over $2 billion in potential penalties for knowingly violating the American Fisheries Act.
Similar arrangements to circumvent maritime laws are likely not uncommon across the industry, but it may be far harder to prove in court that the third-party shells are not independent. The difference in this case is that the legal team found a very specific instance where family members and current employees of the parent company had been installed. If successful, the lawsuit could strike down one facet of the tightly woven set of fishing monopolies that dominate workers and consumers alike.
