The right of first refusal in the business plans of all 12 sectors organized by the Gloucester-based Northeast Seafood Coalition — representing more than half the active boats in the catch share groundfishery — has been used to wrongly restrain trade in catch shares and fishing permits, a New Bedford fisherman has alleged.
Outlined in a letter last month to Patricia Kurkul, then the regional administrator based at the National Oceanic and Atmospheric Administration's Northeast regional headquarters in Blackburn Industrial Park, the fisherman, Pat Kavanagh, identified Vito Giacalone, policy director for the coalition, and two other industry leaders as linked in a cartel-like relationship to control fishing quota.
The others in league with Giacalone, according to the letter, are New Bedforders Carlos Rafael, who owns the region's largest fleet of groundfish and scalloping boats, and Richie Canastra, who, with his brother Ray owns and operates the region's dominant auction business, with an outlet in Gloucester operated by Giacalone's sons on Fisherman's Wharf.
Giacalone, Canastra and Raphael are all Northeast Seafood Coalition board members. Giacalone is also president of the Gloucester Fishing Community Preservation Fund, which acts as a permit bank for local boats.
"Busting the Rafael/Canastra/Vito cartel would be a wonderful legacy for you ..." Kavanagh wrote to Kurkul, who retired from her administrator's job at the end of December.
In a letter to the chairman of the New England Fishery Management Council soon after receiving Kavanagh's complaints, Kurkul said she saw the potential in the mutual extension of first refusal across the 12 Northeast sectors to "affect the liquidity" of catch share trading within what operates as a virtual commodities market.
The system, launched in New England in 2010, is consolidating the fleet rapidly, driving out some 25 of Gloucester's 95 boats during the 2010-2011 fishing year alone, according to NOAA figures. It is also creating fissures between haves and have-nots within the industry, and pressure for the government to consider whether and how it might institute trade controls and accumulation limits, with more and more fishermen's quota being landed by fewer but larger businesses.
A member of the Sustainable Harvest Sector, which is not associated with the coalition's sectors, Kavanagh declined making any comment when reached Friday by the Times.
But in his Dec. 2 letter to Kurkul, he described having the Preservation Fund, which is Northeast Seafood Coalition Sector 4, exercise what he believes was an unfair "right of first refusal" to acquire a "multi-species permit" that Kavanagh had arranged to buy from a member of Northeast Sector 8.
Northeast Sector 4 "bought the permit out from under me," he wrote.
"The Northeast Sector 8 members declined to act on (their) right of first refusal, and subsequently Northeast Sector 8 voted to accept my membership in that sector via the sale of the permit," he wrote.
Giacalone denied that he acquired the permit — actually two permits and boats — on behalf of the permit bank, which was funded with $12 million from the state as part of a mitigation settlement with operators of two liquefied natural gas terminals off Gloucester's coast.
But Giacalone acknowledged Friday that, as a working fisherman and member himself of Northeast Sector 2, "I exercised my right of first refusal" and stepped in to acquire the permits and boats that Kavanagh sought and expected to be able to land once Sector 8's members had passed on the deal.
According to legal papers, on April 21, 2011, Giacalone acquired two permitted boats — Destiny and Sea Escape — from a New Bedford businessman, then sold them to Rafael on May 3.
"I needed the permits," Giacalone said in a telephone interview, adding that he couldn't afford the liability costs of insuring the boats. So he said he sold them to Rafael, who owns more boats by far than he uses, concentrated in Northest Sector 9.
Rafael, who recently said he has stacked 60 permits on 15 working vessels, told the Times in a telephone interview that he sold Sea Escape to an African buyer, while Destiny is active in his working fleet.
"I bought the two boats because the price was right," said Rafael. He said a previous owner recently invested $700,000 in Destiny, making it "seaworthy."
The New England Regional Management Council holds a scoping hearing in Gloucester on Monday night (6 to 8 p.m. at the state Division of Marine Fisheries station on Emerson Avenue) on whether the industry wants to cap catch share accumulation, or would rather continue to evolve as an unregulated free market.
The Northeast Seafood Coalition opposes efforts to establish limits on accumulation of quota.
Rafael was outspoken in his feelings during the Fairhaven scoping meeting a week ago, insisting he would spend up to $10 million fighting to keep his outsized share of groundfish allocation.
But owners of smaller-scale businesses at a scoping hearing in Hyannis on Thursday said the council needs to act to protect smaller boats and businesses, and many observed that big boats no longer constrained by effort controls — the system prior to catch shares — were making gigantic hauls of cod in Stellwagen Bank.
A surprising new assessment of inshore cod finds it to be badly overharvested.
Jackie Odell, executive director of the Northeast Seafood Coalition, said her organization is not involved with the details of sector activity.
"We do not receive or manage quota. Nor do we get involved in the operations plans," she said in a statement
Giacalone said the right of first refusal helps give Northeast Seafood Coalition sector members resources that allow them to remain active, and further that the range of boat sizes and gear types represented in Northeast sectors helps ensure fleet diversity.
Richard Gaines may be contacted at 978-283-7000 x3464 or email@example.com.