GloucesterTimes.com, Gloucester, MA

March 21, 2013

Fish fund shows boats' debt up 700%

By Richard Gaines
Staff Writer

---- — Over the first two years of catch share fishing, through 2011, debt to the Gloucester Fishing Community Preservation Fund for the lease of the allocation of fish from the permits acquired by the fund to help keep Gloucester boats active climbed almost 700 percent to nearly $800,000, according to the fund’s 2011 filings with the Internal Revenue Service and the state attorney general.

Gloucester fishermen interviewed for this story said the spike in debt for the lease of quota reflects the increasing desperation of fishermen to remain at work even without the resources to pay or provide collateral for the additional fishing rights that the preservation fund provides.

A number of fishermen said they had leased quota in small amounts — no more than $3,000 — without providing collateral, and were appreciative of the courtesy.

The accounts receivable at the start of 2010 was recorded to be $12,290 on the nonprofit’s 990 in lieu of tax filing. By the end of the year, the form showed accounts receivable of $143,713, according to the earlier form signed by Vito Giacalone, then the president of the preservation fund which is also known as the Gloucester Permit Bank.

That same amount, $143,713, was the sum of the accounts receivable listed at the start of 2011, according to the later filing signed by Jacqueline Odell, treasurer of the permit bank. The end of 2011 accounts receivable had ballooned to $791,695.

The audited financial statement filed with Attorney General Martha Coakley’s office Jan. 28, 2013 contained a note describing “accounts receivable” as “the amount management expects to collect from balances outstanding at year-end on management’s assessment of the credit history and current relationships with each vessel. Management believes that all accounts receivable are fully collectible and therefore no reserve for bad debt is required,” the note concluded.

The preservation fund was incorporated in 2007 as a 501(c)3 charitable corporation, created to receive $12 million from the state in mitigation of the loss of fishing grounds off Gloucester for liquefied natural gas terminals. Giacalone was the president and only full-time salaried employee, paid $72,000 a year.

He was recently replaced as president by Angela Sanfilippo, who is also president of the Gloucester Fishermen’s Wives Association. She said the board — Giacalone, Odell, executive director of the Northeast Seafood Coalition, and Dale Brown, a former community development director in the administration of former Mayor John Bell — decided “it would be better to share responsibilities.”

Recognized as one of Gloucester’s best informed and connected fishing business innovators, Giacalone led a small board in the acquisition of permits which contained forms of fishing rights that were made available to the fishing community.

The permit bank has been credited with back-filling the fishing rights of the Gloucester based boats. There were 82 including 45 trawlers in sector II and 37 gill net boats in sector III eligible to fish commercially in 2011, according to the operations plans for the sectors, the so called fishing cooperatives that were integrated into the catch share commodity trading system.

Although the quota was technically leased to the sectors rather than individual commercial permit-holders, it is they, the boat owners, who elect to lease quota, based on their needs.

“To determine how much quota can be offered each fisherman, the total amount of quota held by the (preservation) fund for each species is divided by the number of qualifying fishermen within NEF (Northeast Fisheries) Sectors II and III so that each qualifying fisherman within (them) is able to elect to lease the same amount of quota,” wrote former Attorney General Scott Harsbarger, in a Jan. 29 report, commissioned by the preservation fund which nonetheless was described by the fund as “independent” and found “without merit” insinuations that either the fund or Giacalone, through his many business connections, had violated his fiduciary duties or in any way had acted improperly in a self serving way.

“After the first round of quota election,” Harshbarger’s report continued, “inevitably some quota will remain, as smaller operators will not be able to utilize all quota made available to them by the (preservation) fund. As such, the sectors conduct additional elections until no sector member opts to purchase additional quota. Should any quota remain, the fund will offer the remaining quota to NEF Sedtors II and III non-qualifying members, followed by other NEF sectors.”

Each sector has more members than are qualified to fish either because they have sold their permits or boats or become inactive otherwise.

“(The preservation fund) is a member of (NEF) Sector IV.,” said Giacalone in an email answering written questions. “Our sector quota is transferred in bulk to Sectors II and III. We are not extending credit to individual fishermen but instead, to the sector entity collectively. The sectors have always paid the full amount owed to (the fund) which is why we can confidently state that the accounts receivable are fully collectable.

“Quota can only be ‘obtained on credit’ from (the fund) by (Sectors II and III). No boats or individual members receive quota on credit from Sector IV (which contains the fund or the fund).”

In addition to his role on the board of the preservation fund, Giacalone is also a member of the board of the Gloucester-based seafood coalition, the region’s largest industry group and the platform for 13 of the fishing sectors including the preservation fund as one. Giacalone is also the owner of Fishermen’s Wharf which serves as an outlet to the BASE system of fish auctions based in New Bedford and owned by Richard and Raymond Canastra, who contract with Giacalone’s three sons to process landings at Fisherman’s Wharf.

Giacalone is also a active groundfisherman and a member of Sector II, the Gloucester trawl sector.

He took issue with fishermen who described the growth accounts receivable as a sign of a tapped out fleet.

“There actually is no correlation between the size of the accounts receivable and Gloucester boats capacity to access capital or collateral,” said Giacalone. “Instead, the fact that our fund tax / accounting year is based on a calendar year and the fishing year is May 1 to April 30 causes our accounts receivables to appear high at our calendar year end because we try to give the sectors ample time to finish their fishing year before we can do a final calculation of the sector level invoice. This means that our accounting has to be calculated at the point in time at our calendar year end which is what is reported for that year.”