Police uncover 'serious and organised' criminality in ?63m scam to breach European fishing quotas
An inquiry into the UK's largest fishing scandal has uncovered "serious and organised" criminality by Scottish trawlermen and fish processors in an elaborate scam to illegally sell nearly ?63m of undeclared fish.
Three large fish factories and 27 skippers have pleaded guilty to sophisticated and lucrative schemes to breach EU fishing quotas, in what one senior police officer described as "industrial level" deception.
They went to extraordinary lengths to conceal their illegally caught fish, installing underground pipelines, secret weighing machines and extra conveyor belts and computers to allow them to land 170,000 tonnes above their EU quota of mackerel and herring between 2002 and 2005.
The extent of the "black landings" scandal emerged as 17 skippers and one of the three factories were given fines totalling nearly ?1m at the high court in Glasgow on Friday, after admitting repeated breaches of the Sea Fishing (Enforcement of Community Control Measures (Scotland Order 2000. Another six skippers pleaded guilty at the same hearing to landing undeclared fish worth nearly ?7m at Lerwick, in the Shetlands, and Peterhead, Aberdeenshire.
Four skippers pleaded guilty in January and a further four in the ring, who can't be named for legal reasons, are still to be prosecuted.
Judge Lord Turnbull, told the 17 skippers sentenced on Friday they were guilty of a "cynical and sophisticated" operation, which brought embarrassment and shameon them and their families. "The motivation was purely financial," he said. "Those who were already making a good living saw this as a way more income could be generated and were prepared to participate in deliberate lies and falsehoods."
Once the illegally caught fish had been sneaked past Government inspectors, it was put on sale in the Lerwick and Peterhead markets, where it was sold to wholesalers and fishmongers as if it had been legally landed, in defiance of strict EU regulations designed to protect Europe's fish stocks from over-fishing.
The Guardian can reveal that the illegally landed fish was sold with the knowledge of the government-funded industry marketing authority Seafish, which took a ?2.58 levy for every tonne of over-quota mackerel and herring. That earned it ?434,000 in fees before the Scottish Fisheries Protection Agency, now part of Marine Scotland,
raided two factories in September 2005.
The headquarters of Seafish in Edinburgh were
raided by police and documents seized in 2008, but five months later prosecutors decided not to take any further action. It is thought the Crown Office, the Scottish prosecution body, believed there was no evidence that could lead to the agency being accused of involvement in the scam.
With a series of court cases stretching back to 2010, the scandal has implicated more than half the Scottish mackerel and herring fleet active at that time. It is understood that the true value of the illegal landings linked to the factories involved is closer to ?100m, but prosecutors decided to pursue just ?63m of landings.
Prosecutors have also confiscated ?3.1m from 17 skippers who landed catches in Lerwick, and against two of the three firms so far convicted, under proceedings of crime legislation introduced to tackle serious criminal gangs and drugs lords. The largest confiscation order, ?425,9000, was against Hamish Slater, the skipper of the trawler Enterprise from Fraserburgh, Aberdeenshire, who admitted landing ?3,980,000 worth of undeclared fish. A number of skippers landed fish worth more than ?2m.
At Shetland Catch in Lerwick, one of Europe's largest fish processors, the company installed a duplicate conveyor belt when its new factory was built, fitting a secret weight-reading device in the loft and a computer in an engineer's workshop "a considerable distance" from the factory floor.
In its processing plant at Peterhead, north of Aberdeen, Fresh Catch installed an underground pipe to divert fish to secret weighing devices, which used remotely operated pneumatic valves. It built a secret storage room, and operated the clandestine machinery from a hut known to workers as the Wendy House, disguised with fake "Danger: high voltage" signs on its door.
A second factory in the town, Alexander Buchan, which has since closed, fitted a secret scale and conveyor belt, which allowed up to 70% of a boat's catch to go undeclared. It printed a guidance manual showing its staff how to handle undeclared landings, and its staff misled trading standards officers about its purpose.
Detective Superintendent Gordon Gibson, of Grampian police, the senior investigating officer in Operation Trawler, said: "Make no bones about it: it was serious, it was organised and it was criminal. The element of preparation involved was significant, given the methods and means that all these individuals went to.
"Was I surprised? Absolutely. I was surprised at the levels they had gone to disguise their criminal conduct."
An industry source admitted: "This wasn't casual or by accident. It was organised, it was systematic, it was deception. No one disagrees with that."
In a further penalty, which is thought to have cost the convicted skippers millions, the European commission cut the quotas soon after the scandal was reported to Brussels by the UK government in 2005, calling it a "quota payback".
Although none of the trawlermen have been banned from fishing, their quotas were cut by more than 116,000 tonnes of mackerel and nearly 47,000 tonnes of herring over a seven-year period. That payback will end next year.
One source with detailed knowledge of the case said this had damaging consequences for skippers and crews involved, as the market value of mackerel and herring since 2005 had been as much as double the price 10 years ago.
The convictions follow a complex, 10-year investigation involving forensic accountants from KPMG, who analysed the paperwork for thousands of landings, a core team of 25 detectives and support staff from Grampian and Northern police, four British sea fishery officers with Marine Scotland, the Home Office Holmes police computer system, money laundering experts with the Scottish Crime and Drug Enforcement Agency, and specialist prosecutors at the Crown Office.
Operation Trawler has brought to an end a practice which was once endemic in the British fishing industry, but has been made extremely difficult by hi-tech monitoring and tracking of every registered trawler at sea, and much tighter controls on landings at processing firms.
The skippers and firms involved have refused to discuss their convictions; Shetland Catch is still facing confiscation proceedings. But sources with detailed knowledge of the scandal have admitted the practice was widespread within the pelagic fishing industry. Lawyers for one of the convicted men, George Anderson, 55, from Whalsay, Shetland, claimed this year that he evaded the controls because he believed that discarding under-sized fish was "repugnant".
"Black landings" are still common practice across the EU, and prosecutions still take place. In Lerwick and Peterhead, some insist that the undeclared landings, which helped many of the skippers and their crews enjoy comparatively luxurious lifestyles, were well-known within the industry and among regulators.
Asked about its knowledge of the illegal landings, Seafish told the Guardian it was legally required to take the levy, and insisted it had tipped off the authorities to the over-quota landings. However, one source said that the issue was discussed in board meetings, "but the Seafish line was that we weren't a fishery protection agency, our job was to take a levy on every tonne landed."
He added: "They were totally aware they were getting a levy on quota and over-quota fish."
The source denied it was serious and organised crime: the skippers involved paid income tax and business taxes alongside the Seafish levy on all their illegal landings, largely because the over-quota fish was sold in the fish markets as if it were legally declared. Fraud charges were dropped by prosecutors at an early stage, he said.
But he added: "There is nobody defending this. It was morally wrong; it was ecologically wrong and sustainably wrong. There is no excuse.
"A lot of the skippers are saying, 'What we did wasn't right; it was wrong. We really want to draw a line under this and move forward.'"
He said the scandal had the effect of transforming Scotland's pelagic fishing industry into one of the most sustainable in the world: after the raids, the mackerel and herring fleet introduced very strict monitoring and quota management. Since 2008, its fisheries have won a prized Marine Stewardship Council eco-label, and are now the largest in Europe with MSC certification.
But the "black landings" scandal is coming back to haunt the industry. It is expected to lose its MSC accreditation later this year after a bitter dispute with the Faroe Islands and Iceland: both countries have claimed much larger mackerel quotas than is sustainable for the north-east Atlantic stocks, in breach of MSC rules. The Faroese in particular believe the over-quota prosecutions puts the Scottish industry's credibility in severe doubt.
"It's not a proud moment for what is a very proud industry," one senior figure conceded.
Richard Lochhead, the Scottish agriculture secretary, said the convicted were guilty of appalling behaviour. "These illegal activities are a stark and shameful reminder of the culture that existed in some sectors of the fishing industry in past years," he said.
"Thankfully, there has been seismic change in the attitude and behaviour of the fishing fleet, which can only be good thing in securing a viable future for the industry."
Dr Mireille Thom, a senior marine policy officer for the conservation group WWF Scotland, said: "Deliberately ignoring quota rules by landing 'black fish' isn't a victimless offence. Such landings not only undermine the conservation of fish stocks and the fortune of the fleets that fish them, they also distort competition by depressing fish prices. In short, they threaten the public good for the benefit of a few."
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"The transition to new management will hopefully help J&J focus on rectifying its manufacturing problems," said George Sillup, professor of pharmaceutical marketing at St. Joseph's University and a former J&J executive. But, Sillup notes, J&J is a huge operation with $65 billion in revenue, and reputations - good or bad - don't change quickly. "The concern with that is, once you start going wrong, you can't turn the battleship. That is very difficult to recoup."
The challenge is not only in the more well-known consumer divisions. J&J has issues in pharmaceuticals and medical devices.
One example is the antipsychotic drug Risperdal, J&J's third-best-selling prescription medication, which had sales of $1.6 billion in fiscal 2011.
J&J's subsidiary Janssen makes Risperdal. Gorsky, who started as a Janssen sales rep, was leading the company in the early 2000s when problems with the drug first came to light.
In January, the company paid $158 million to settle allegations - first made in Pennsylvania by whistle-blower Allen Jones - that the company illegally promoted Risperdal for unapproved use in children and adolescents, in part by paying Texas Medicaid officials to give it preferential treatment.
Such episodes would run counter to J&J's official credo that says the company's "first responsibility is to the doctors, nurses, and patients, to mothers and fathers and all others who use our products and services." After mentioning employees and communities, "our final responsibility" is to shareholders.
"After settlement was announced in the Austin courtroom, I had a brief, congenial conversation with J&J's corporate representative," Jones said last week when asked about the CEO change. "I asked him to please go back to his company and fix things - to try to make the J&J Credo mean something again. I sincerely hope that J&J has the same desire and that this is a step in that direction."
The litigation is not over, not by a long shot. J&J said last week in a filing with the Securities and Exchange Commission that the company started 2012 with 10,415 lawsuits pending, including 420 involving Risperdal. Besides other state battles, J&J said in the SEC filing, it is negotiating with the federal government to settle civil and criminal allegations of improper marketing. That bill might run beyond $1 billion. Then there are individual suits, 63 of which are being argued by Philadelphia lawyer Stephen Sheller's firm.
In court filings, Sheller has argued - unsuccessfully so far - that evidence of negative clinical data provided by J&J in discovery should be forwarded to the FDA with the idea that Risperdal would be pulled from the market because of negative side effects.
"I hope they've had an epiphany and will do the right thing," Sheller said of paying the plaintiffs, some of whom rely on taxpayer-funded Medicaid to provide health care, including for diabetes and gynecomastia (enlarged breasts in boys , which are some of the possible side effects of Risperdal.
Gorsky got the job in part because he was in charge of J&J's DePuy medical-device unit and was intimately involved in J&J's pending $21.3 billion acquisition of Synthes Inc., another device-maker, with several facilities in Chester County. Before J&J made the largest purchase in its history, Gorsky met several times with Synthes chairman Hansjorg Wyss in 2010 when Wyss was looking to sell his company. At the same time, Synthes was preparing to settle criminal and civil charges involving illegal human testing of one of its products, a bone cement.
DePuy is facing lawsuits over recalled replacement hips. Now, integrating Synthes with DePuy will not be easy, and the device market has been hurt by the recession in the United States and Europe.
J&J's challenges were the subject of a recent article in the online periodical
Knowledge@Wharton from the Wharton School of the University of Pennsylvania. The article's title: "Patients Versus Profits at Johnson & Johnson: Has the Company Lost Its Way?"
Gorsky holds an M.B.A. from Wharton.
In the article, a Wharton professor of legal studies and business ethics, Thomas Donaldson, gave J&J credit for taking steps to fix manufacturing plants, but said J&J managers were having to juggle a lot of balls.
Ryan Braun stood alone at a microphone at Milwaukee Brewers spring training camp in Arizona and told Major League Baseball — in defiant but polite terms — what it could do with its drug testing program.
Calling the process "fatally flawed" and having characteristics "opposite of the American judicial system," Braun breathed a public sigh of relief, not only because he won't be suspended for 50 games for testing positive for elevated testosterone, but also because his reputation, he believes, has been restored.
[
Jeff Passan: Braun ruling deals blow to MLB testing ]
"We won because the truth is on my side," Braun said as teammates listened from the stands at the Brewers facility in Phoenix.
The truth is, Braun won because he had the very best legal advice possible, and there's nothing wrong with that — if you can afford it. Per
the Associated Press:
Braun detailed how the urine sample he provided on Oct. 1, the day the Brewers opened the playoffs, was not delivered to Federal Express until Oct. 3. Baseball's drug agreement calls for samples to be delivered to FedEx on the same day they are collected.
And so, on Thursday night,
the arbitrator with a Jedi's name — Shyam Das — ruled in Braun's favor. It's the first time an appeal of this nature at the major-league level has been sustained. And it's pretty simple as to why. No mind tricks were necessary. Perhaps Braun's legal team could have fought the suspension in other ways, but they didn't need to. Braun had MLB dead to rights on the rules.
No matter what the sample collector did with Braun's urine — even if he kept it safe in a special urine-only refrigerator with deadbolt locks and a pee guard dog — it doesn't matter. The rules say he had to express the sample to the testing facility on the same day, and he didn't.
[
Y! Sports Radio: Jeff Passan says Ryan Braun still has much to prove]
MLB is said to be furious with the ruling — worrying that it puts its entire drug testing program at risk — and is looking into a lawsuit to get Das' ruling set aside or overturned. But if the 48-hour lag time "doesn't matter," then why is it in the agreement that samples must be rushed to the testers in Montreal? Based on its track record in court when it comes to arbitrators rulings, MLB is bound to lose this fight. They might want to, instead, read this part of Braun's statement:
"We're part of a process where you're 100 percent guilty until proven innocent — it's the opposite of the American judicial system. If we're held to that standard, it's only fair that everybody else is held to that exact same standard.
"With what's at stake — this is my livelihood, this is my integrity, this is my character — this is everything in my life being called into question. We need to make sure that we get it right. If you're going to be in a position where you're 100 percent guilty until proven innocent, you can't mess up. And today is about making sure that this doesn't happen to anybody else who has played this game."
Amen. Two or three mens, in fact. Braun also pointed his finger at news media to whom sources inside MLB leaked information that turned public what was supposed to be confidential and private matter.
"Despite the fact there have been many inaccurate, erroneous and completely fabricated stories regarding this issue, I've maintained the confidentiality of this process," Braun said. "There's never been a 'personal medical issue,' I've never had an STD [and] many of the original stories reported by the original network have continued to live on and it's sad that people continue to leak information that's inaccurate."
This part is not up to ESPN to fix. MLB needs to tighten its security, and its own lips, or else this will happen again.
Braun might or might not be innocent. But being not guilty is all he needs to play, and there's no good reason to not enjoy him do so. Unless you're a Cubs fan. Here's Braun's statement in its entirety:
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