GloucesterTimes.com, Gloucester, MA

September 8, 2011

Auction faced fishermen's suit

By Richard Gaines
Staff Writer

Two Cape Cod fishermen have filed a federal lawsuit alleging the Gloucester Seafood Display Auction, founded by the Ciulla family 14 years ago and sold last week, had been "skimming" from the actual sale price of their fish.

Seeking $1 million for "breach of maritime contract," the suit by Eric Hesse and Greg Walinski — both members of the board of the controversial Cape Cod Commercial Hook Fishermen's Association — was filed in U.S. District Court on Aug. 10 by Gloucester attorney David S. Smith.

Smith is the law partner of Stephen Ouellette in the firm of Ouellette & Smith, and Ouellette was listed in the Secretary of State's Corporate Records Division as of May 26 as the agent for Kristian Kristensen, who has acquired the auction from the Ciulla family.

On June 14, Ouellette also filed the incorporating papers as agent for the Zeus Fish Export Co. Inc., also owned wholly by Kristensen.

Neither Smith nor Ouellette would comment Thursday on whether the suit and the auction's sale were connected in any way.

At 6 p.m. Thursday, Smith — on behalf of Hesse and Walinski, and Paul Muniz — speaking for the Ciullas, told the Times that they had reached a settlement agreement that would end the federal lawsuit.

Smith said a document to execute the agreement would be drafted and filed in federal court in the coming days.

The attorneys, however, refused to reveal the terms of the settlement; Muniz, asked if "anybody paid money to anybody," said, "we're not going to go into that."

"My clients have filed a lawsuit in a dispute over fees," said Smith, "but after a meeting with the Ciullas, they concluded there was a misunderstanding and the case has been resolved."

Kristensen acquired the keystone business of the Gloucester waterfront last Friday, according to Larry Ciulla, president and CEO of the auction, whose new corporate name is the Cape Ann Seafood Exchange.

The Ciulla family sold only the auction business while keeping the 1.03 acres of real estate — landing wharves and moorings, Capt. Carlo's Restaurant, offices, the auction chamber and cold storage as well as fish processing space leased to Zeus Packing — at the tip of Harbor Loop. The overall property is assessed at $2,182,000, city officials confirmed Thursday.

Ciulla told the Times the sale had been in the works "for some time."

The lawsuit, meanwhile, alleges that the auction was discovered last November to have been paying Hesse, chairman of the board of the Cape Cod Commercial Hook Fishermen's Association, less than the understood terms would have indicated.

The bad news was received "after settlement sheets and checks were sent via U.S. Mail, approximately one month after the auction date," the suit alleges.

According to the suit, the auction took 10 cents per pound for brokering, according to the arrangement under which the auction operated.

After obtaining and reviewing records for 2009 and 2010, the suit alleges "the plaintiffs found that the sales price reported on their settlement sheets had been reduced by an additional (6 to 36 cents) for fish on every trip throughout the period, in addition to stated fees for vessel off loading and auction sales."

The rough outline of the suit echoes some suspicions of NOAA law enforcement, which undertook a relentless 10-year campaign to prove the Ciulla family was running a black market alongside the $15 million to $20 million auction business. The Gloucester Seafood Display Auction has been the No. 1 platform for the sale of seafood harvested from along New England's East Coast, including the Gulf of Maine, Stellwagen Bank and Georges Bank.

However, the federal enforcement investigations attempted and failed to prove that the auction was cheating the government, whereas the lawsuit alleges that the auction was cheating the two fishermen.

After three lawsuits, an illegal entry by federal agents, and a botched smear campaign executed by the agent in charge of the Gloucester-based Northeast regional office of NOAA's National Marine Fisheries Service, a special judicial master concluded this spring the Herculean government efforts had uncovered no evidence of illegal activities.

In May, after the report of the master, the auction and eight other fishing businesses were given a public, Cabinet-level apology and reparations for the penalties paid into an Asset Forfeiture Fund.

In forcefully defending itself, the Ciullas became the vanguard of a resistance to heavy-handed NOAA enforcement tactics that have led to the transfer of the entire leadership at NOAA's Office of Law Enforcement and Office of General Counsel for Enforcement and Litigation. No one within NOAA enforcement, however, has been fired of otherwise punished for his or her actions.

Larry Ciulla, the soft-spoken head of the family business, testified last June at a Senate subcommittee hearing in Boston on the abuses of the Asset Forfeiture Fund, that he felt stigmatized by the repeated allegations of federal agents and was ashamed to say he had avoided taking calls from Larry Yacubian, a former New Bedford scalloper, who had been driven out of the industry and Massachusetts by false allegations.

Despite the NOAA apology, Cuilla was told on the day of the hearing that NOAA had decided to enforce a 15-day closure on the business, the residue of a March 2010 settlement of three cases brought against the auction by NOAA.

"What did I do wrong? Nothing," Ciulla said, speaking emotionally that day. "I stuck up for my rights. We were abused. A branch of the U.S government raided our place of business with guns. They're doing this to justify what they did."

Ouellette, meanwhile, represented the auction in the first of the cases brought against it by the National Oceanic and Atmospheric Administration early in the previous decade.

Ouellette declined to say Thursday why he allowed his name to be associated with a suit against the auction by fishermen representing the hook association.

"We represent fishermen of all types," Ouellette said of his law firm. "Fishermen are fishermen."

The Cape Cod fishing group was implicated itself in a lawsuit filed by the cities of Gloucester and New Bedford and dozens of fishing industry interests. That suit alleged bias in the creation of Amendment 16, the federal regulatory framework that includes the catch share management system being targeted for steering more quota into the hands of big businesses and driving small, independent boats out of the industry.

Ouellette argued the case before U.S. District Rya Zobel, who dismissed the claims, which are now under appeal.

The catch share approach had been experimentally introduced by the Cape Cod group, which stood together with environmental nonprofit groups and have reeled in a number of related foundation grants. Hesse and Walinski proselytized the new system, and their supportive comments were featured together in a March 25 story in the Cape Cod Times.

They argued that catch shares gave them a chance to get a guaranteed price for their catch from the Whole Foods Market chain — the supermarket buyer that advertises adherence to Monterrey Bay Aquarium's color-coded good fish, bad fish buying guide.

While selling to Whole Foods Markets, whose fish dock and processing plant is at Gloucester's Jodrey State Fish Pier, Hesse and Walinski have long also sold at the auction. Whole Foods also buys from the Gloucester auction.

Richard Gaines can be reached at 978-283-7000, c3464, or at rgaines@gloucestertimes.com.