Metro

Fish mogul is alleged to have cheated quotas

A fish buyer examines a Haddock before the start of the daily auction at the fish market in Grimsby, Britain November 17, 2015. The market handles about 15,000 tonnes of fish per year, but since the decline of the local fishing fleet most supplies come from Iceland and Norway. The European Union is not an abstract concept in Grimsby, an English port where many blame EU fishing quotas for destroying livelihoods, but views on whether Britain should quit the club are more nuanced than the decaying fish docks suggest. Photograph taken November 17, 2015. REUTERS/Phil Noble

Phil Noble/REUTERS

Haddock on sale at a fish market.

He called all the fish haddock, even if they weren’t. The dab fish. The gray sole.

If the fish inspectors weren’t watching when his boats came into the docks in New Bedford, according to authorities, fish mogul Carlos Rafael labeled every species of fish he caught as the cheaper, more common haddock — while secretly trading hundreds of pounds of more coveted species for bags of cash.

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The goal: evade the federal quota on the more lucrative fish.

“When the [inspector] disappears, that’s when we got a chance to make the fish disappear,” Rafael allegedly told an undercover federal agent, posing as a Russian gangster who wanted to buy his business.

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Rafael, 64, the owner of Carlos Seafood Inc. in New Bedford and one of the Northeast’s biggest commercial fishing entrepreneurs, was arrested by federal agents Friday, charged with falsifying federal documents.

Authorities said that Rafael, who owns more than 40 fishing vessels ported in New Bedford and Gloucester, developed a lucrative scheme to cheat the federal fishing quotas that were enacted — to the dismay of fishermen from New Bedford to Maine — to protect the sustainability of certain fish species.

Rafael allegedly told his boat captains to label fish they hauled in as a common species such as haddock that they were allowed to fish without violating the quota. In reality, his fishermen would be bringing in fish that would have been restricted by a quota, such as pollock. His company would then buy the fish at the lower price of haddock, but sell it at its higher market price to a New York buyer.

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According to authorities, Rafael capitalized on his standing as the owner of the fishing boats and as the owner of the company that served as a broker for the fish haul — and on lax monitoring regulations that let fishermen report on their own what kind of fish they catch and buy, and the quantity.

“The vessel operator and the dealer must collude. This is easier when the vessel and the dealer are owned by the same person, here Carlos Rafael,” Ronald Mullett, a special agent with the Internal Revenue Service, said in an affidavit filed in federal court on Friday.

Rafael appeared in court briefly on Friday and was ordered held without bail pending a detention hearing Wednesday.

The alleged scheme began to unravel in June 2015 when Rafael met with two undercover agents posing as Russian gangsters interested in buying his business after he had advertised it for sale earlier that year.

Rafael showed his potential buyers tax statements showing that in 2013 and 2014 his business had reported between $3 million and $4 million in adjusted gross income, according to the affidavit. Also, according to the tax statements, he reported that his business had combined assets of about $21 million. But he allegedly told the potential buyers that he earned much more. He offered to sell his business to the gangsters for $175 million, the affidavit said.

When asked how he could justify valuing his business at $175 million, Rafael allegedly responded, “We are profitable. You will not see it on paper for Carlos Seafood,” court records say.

According to Friday’s court filing, Rafael is accused of hiding much of his business off-the-books. At one point at a meeting in January 2016, Rafael and his bookkeeper, Debra Messier, 60, allegedly explained what they called “the dance,” the process by which Rafael and others coordinated with his boat captains to falsify federal forms meant to track the quantity and species of fish that was caught. Records for Carlos Seafood were adjusted to match the records of the fishing boats, the court records allege.

In one case in January, one of Rafael’s boats recorded that it had hauled in 8,200 pounds of haddock, well within the quota for that species. Records for Carlos Seafood show that the company bought 4,595 pounds of haddock from the vessel, at $2.75 a pound.

According to court documents, Rafael explained to the undercover agents that the boat had hauled in dabs, which he fraudulently labeled as haddock, and that he in turn sold the dabs to his New York City buyer, for $3.15 a pound.

Rafael said his boat captains were involved in the scheme, though he did not pay them the higher rate.

“I pay them as haddock, but it’s not haddock,” he allegedly said.

Rafael told the agents that his trucks made daily deliveries to New York City, and that he had someone retrieve bags of cash at designated spots in Connecticut. Rafael allegedly told agents he had earned $668,000 in less than six months, and that he smuggled some of the cash through Logan International Airport to Portugal.

He used the money to fix his parents’ house, as well as his own, and he spent $100,000 on a pleasure boat, according to authorities.

In one of the meetings with the agents, Rafael described his arrangement with his New York buyer, and how the buyer wanted another million dollars’ worth of fish. He then expressed caution.

He could regret talking to them, he said, “because I don’t know you. You could be the IRS in here. This could be a [expletive]. So I’m trusting you. The only thing is, I open myself because both of you is Russians and I don’t think they would have two Russians,” he said. “That would be some bad luck!”

Rafael, of Dartmouth, is scheduled to return to court Wednesday.

Messier, 60, was charged as an accomplice. She was released on $10,000 unsecured bond. Her lawyer would not comment on the allegations Friday.

Rafael has a history of crime related to his business. He served a six-month prison term for tax evasion in the 1980s and was charged with price-fixing in 1994, though he was acquitted in that case, according to court records. He was also convicted of making false statements on landing slips for commercial fishing vessels in 2000 and was sentenced to probation, according to court records.

Milton J. Valencia can be reached at milton.valencia@globe.com.
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