Codfather Case Studied by Law Enforcement

Continued from January 2020 Homepage

one of the nation’s largest commercial fishing businesses.

In March 2017, he pleaded guilty to one count of conspiring to commit offenses against the United States, 23 counts of false labeling and fish identification, two counts of falsifying federal records, one count of bulk cash smuggling, and one count of tax evasion. He was sentenced to 46 months in federal prison, followed by three years of probation.

“I look at this case as an opportunity to learn,” NOAA Special Agent Troy Audyatis told the New England Fishery Management Council (NEFMC) at its December meeting. “How can we do things better? How can we make sure something like this never happens again?”

One fisherman said the agencies should have stopped Rafael sooner.

“I can’t tell you how angry my fishing community is over this,” he said. “We came before the council and said this is happening….So somewhere along the line, I’m sure enforcement knew it was happening. I think all the tools were there to stop this much sooner than it did. So my question is, if the council knew and the administration knew and fishermen knew and enforcement pretty much knew, where was the ball dropped?”

Rafael owned at least 40 commercial fishing vessels with approximately 60 federal permits, a large percentage of the Northeast groundfish permits. He was responsible for hundreds of fishing-related jobs in New Bedford, Mass.

But he was no stranger to the penal system, said Audyatis. His prior history included conviction for tax evasion in 1987, for which he served six months; price fixing in 1994, on which he was acquitted; false statements on federal forms in 1999, for which he served two years on probation; and multiple NOAA civil fisheries violations.

The case kicked off in January 2015, when Rafael expressed his intention to sell his fleet to an out-of-state buyer, said Audyatis.

“We took this as an opportunity to reach out to Rafael as interested buyers to purchase his business,” he said.

The investigative team included NOAA’s Office of Law Enforcement, Internal Revenue Service Criminal Investigation Division, Federal Bureau of Investigation, Department of Homeland Security, and Coast Guard Investigative Service.

According to a 2017 press release from the Department of Justice’s U.S. Attorney’s Office for the District of Massachusetts, federal agents posed as organized crime figures interested in buying Carlos Seafood.

“From 2012 to January 2016, Rafael lied to the National Oceanic and Atmospheric Administration routinely about the quantity and species of fish his boats caught in order to evade federal quotas designed to guarantee the sustainability of certain fish species,” the release said. “During that period, Rafael misreported to NOAA approximately 782,812 pounds of fish, telling NOAA that the fish was haddock, or some other abundant species subject to high quotas, when in fact the fish was cod, sole, or other species subject to strict quotas. After submitting false records to federal regulators, Rafael sold much of the fish to a wholesale business in New York City in exchange for duffle bags of cash. During meetings with the undercover agents, Rafael said that in his most recent dealings with the New York buyer he received $668,000 in cash. Rafael smuggled at least some of that cash out of the United States to his native Portugal, hiding it there to evade federal taxation on that revenue.”

The agencies conducted five joint undercover operations from June 2015 through February 2016 with Rafael and his business associates.

Results of the undercover investigation revealed egregious fisheries violations to include false reporting over a several-year period; federal tax evasion; and bulk cash smuggling and structuring, Audyatis said.

“We had hours of audio and video of Rafael telling us what he did and how he did it,” he said.

Audyatis explained that discovery of the violations was a matter of simple math. Investigators recorded weight of the product that was actually sold and subtracted the weight of landings that were reported to NOAA and the weight of product that was purchased from third parties. The result was the amount of unreported and illegal landings.

For example, on a given day, he might have sold 10,000 pounds of grey sole, reported 3,000 pounds of that to NOAA and purchased 500 pounds from a third party. That left 6,500 pounds of unreported and illegal landings.

Rafael had a couple of ways of cheating, Audyatis said. One was to misrepresent the type of fish he was selling. For example, if he didn’t have enough quota to cover the amount of cod that was caught, he reported it to NOAA as another species for which he had an overabundance of quota, such as haddock or pollock.

And if there was no observer on a boat and no dockside monitor or other type of law enforcement to oversee landings, “Thousands upon thousands of fish would simply disappear” from the records, he said.

In all, he said, Rafael falsified records for 782,812 pounds of fish, worth $1,684,565 and sold to 22 secondary dealers. By the time the product reached the consumer, the mark-up on value was estimated to be between $3.7 million to $7.1 million, for a mean value of $5.2 million, he said.

Sentencing was based on the retail value of the fish, so investigators followed the value through the supply chain, he explained.

Investigators executed search and arrest warrants in February 2016. In May 2016, Rafael and a sheriff’s deputy involved in the scheme were indicted. Rafael was indicted on 25 counts of Lacey Act False Labeling and Identification, filing false reports and bulk cash smuggling. The sheriff’s deputy was indicted for bulk cash smuggling and structuring. In March 2017, superseding information included tax evasion.

In October 2017, the sheriff’s deputy was sentenced to one year and a day in federal prison.

In November 2017, Rafael was sentenced to 46 months in federal prison, followed by three years of probation.

In September 2019, Rafael agreed to pay $3,010,633 in civil penalties and to completely divest from the commercial fishing industry. Seventeen of his captains were penalized with a combined 1,320 days of permit suspension, 382 months of probation and are subject to enhanced reporting requirements.

Audyatis told NEFMC that possible areas for improvement include increased and refocused monitoring efforts, possibly with regard to dockside monitoring, observer coverage rates, and electronic monitoring. Another avenue to explore, he said, are additional restrictions on vertically integrated companies.

“This is not a slam on vertically integrate companies,” he said. “But he was able to do what he did because he owned the boats and he owned the business.”

NEFMC member Michael Sissenwine wanted to know if, at some stage, there’s an intention to take the numbers and create an analysis of the impact they would have on stock assessments and total allowed catches: “That would be an obvious step to take, to further use this information,” he said.

Sissenwine said the discussion regarding vertical integration has merit.

“There are many fisheries that have strong vertical integration,” he said. “So when you suggest that we need to have some way of looking at vertical integration, is there any effort going on to look specifically at fisheries that are vertically integrated, and what provisions are in place to improve the situation or guard against the abuse we saw?”

He also wanted to know if the law enforcement agencies have identified whether portside or at-sea monitoring would be most useful for improving the situation, and to what extent.

“If portside monitoring hasn’t been sufficient, would it be necessary to increase enforcement capability to at-sea monitoring?” he asked. “What’s the most efficient way to tackle the problem? Can it be done purely through portside monitoring or is it necessary to take on the additional challenges of at-sea monitoring?”

Lastly, Sissenwine wanted to know if, as it pertains to law enforcement, it would be valuable to have more fisheries pursue traceability certifications, which also has public health benefits.

Audyatis said the agency’s goal is to identify specific steps that might be taken to improve enforcement.

“One thing I’ll specifically touch on is the suggestion regarding increased at-sea monitoring,” he added. “You’re generally correct that portside monitoring should account for the entire catch. The problem is, when you have single species managed in several stocks, it’s hard to tell where those fish were caught, if you don’t have someone onboard.”

But, said New Hampshire fisherman David Goethel, “You’re not going to catch crooks with dockside monitors or at-sea monitors or any of that stuff. Turning a fishery into a police state is not going to catch crooks. To catch crooks, you’ve got to use the right bait. Rather than make honest fishermen have all this aggravation, we should spend more time developing the right bait.”

In a related report, Capt. Kevin King, First District Enforcement Chief with the U.S. Coast Guard, provided a separate presentation on the agency’s analysis and investigation of misreporting in the groundfish fishery.

The Coast Guard conducted the analysis from late 2014 through 2016.

“The analysis identified over 350 trips from 2011-2015 where there appears to be evidence of misreporting,” according to his report. “Each of these trips has a suspected amount of misreported fish associated with it based on the specific actions of the vessel during that trip coupled with various data sources available.”

Many incidents of misreporting occurred in the seasonal fisheries or choke species, the report says.

“When these seasonal fisheries occur, vessels can catch tens of thousands of pounds of these species in a single trip, quickly exhausting” their quota for that stock area. If the sector has excess quota for the same species in a neighboring area, “they might falsely report that they caught part, or all, of that species in the other stock area,” the report says. “This analysis revealed that this type of misreporting in a seasonal fishery can result in the illegal transfer of several hundred thousand pounds of fish across stock areas in a few months.”

Evidence from the investigation also indicates that some sector members have underreported the amount of choke species caught or misreported their stock area, the report says.

“This analysis revealed several misreporting schemes were utilized from 2011 to 2015 and that potentially up to 2.5 million pounds of regulated species were misreported by vessels from multiple sectors” in the groundfish fishery, the report says.