What’s fair in breaking up the empire of ‘the Codfather’?
Randy Cushman, a fourth generation fisherman in Maine, knows what the crimes of Carlos Rafael cost him.
Cushman fishes out of the bucolic village of Port Clyde, population 307, the sort of place many New Englanders might still associate with the region’s storied, struggling fishing industry. Last season, he had to pay $49,000 for fishing quota, most of it for American plaice, a species of groundfish commonly known as dabs. Cushman’s own allowance on the fish ran out after only four days on the water, forcing him to bargain with other fishermen for more.
Up the coast, Rafael had been catching dabs in the Gulf of Maine too. But in an elaborate criminal scheme, the New Bedford fishing tycoon, owner of about 40 vessels, was directing his captains to report dabs as other kinds of fish, often haddock, which is subject to much higher limits. Breaking the rules let Rafael evade the kind of payments that Cushman made. It also depressed prices by flooding the market with black-market fish. Worst of all, the scheme also meant fishing regulators were getting inaccurate information about how many fish Rafael’s empire was scooping out of the Atlantic, bad data that fishermen suspect distorted how scientists analyzed ocean trends, and Cushman believes skewed the way regulators set the amount each fishermen can catch before having to start paying.
“He definitely hurt my business,” Cushman said. Bottom line: “I should have ended up with more allocation on dabs,” he said.
Rafael, whose downfall came after he boasted of his scheme to undercover IRS agents posing as Russian mobsters, is now serving a 46-month sentence in federal prison. The made-for-TV story, complete with an illicit cash buyer in New York, bank accounts in Portugal, allegations of corrupt sheriff deputies, and broad hints that other players on the waterfront must have been in the know, has transfixed New England’s close-knit fishery. Rafael’s arrest has thrust arcane fisheries policies into the spotlight, touched off a political battle between Massachusetts and Maine about the future of his businesses, and raised questions about how fishing regulators can provide justice for his victims and prevent a scheme like his from infecting the fishery again. The feds have already seized some of his permits and four of his boats, but more punishments are widely expected. A spokeswoman for the National Oceanic and Atmospheric Administration, Jennifer Goebel, said the regulatory agency was considering further sanctions against Rafael but that “it’s longstanding NOAA policy not to discuss pending enforcement matters.”
Cushman, for his part, doesn’t think the agency’s path forward needs to be too complicated.
With the criminal case wrapping up, fishing regulators should now use their authority to break up the operation Rafael valued at $175 million — an empire that he built in part by buying out other fishermen in the region who couldn’t compete with a crook. The man who enjoyed his notorious nickname, the Codfather, should “get his ass kicked out of the fishery,” Cushman said. As for the fishing permits, he says, they “should be spread out through the whole fleet, not just the single area he fished from. He impacted everybody in New England.”
As federal regulators mull sanctions, banishing Rafael seems to be one area of broad agreement among elected officials, environmental groups, and other fishermen. Although rarely used, NOAA has the authority to slap lifetime bans on fishermen and seize their permits. If anyone deserves a ban it’s Rafael, a self-described “pirate” who has been fined repeatedly for fishing violations, served prison time in the 1980s for failing to pay taxes on his fishing business, and was convicted again in 2000 for falsifying fishing records. There’s also consensus that any fines collected from Rafael should be used to outfit fishing boats with electronic monitoring equipment that would make it easier to detect misclassification schemes.
But it’s the other part of Cushman’s recommendation that has stirred controversy. Fishing quota is transferable but limited, as part of a regional cap-and-trade system to prevent overfishing, so redistributing Rafael’s permits throughout New England would inevitably mean taking many of them away from New Bedford, the capital city of New England’s fishing industry. The marine businesses that sold nets and fuel don’t see why the federal government should cripple their businesses just because a customer broke the law.
“They’re creating a collapse that’s not necessary,” Tor Bendiksen, whose family-run business sold nets to Rafael, told the Globe earlier this year. The Codfather bought 30 percent of the gear they manufactured. One fuel business in New Bedford relied on Rafael for about 70 percent of its business.
Although groundfish now account for a small slice of the city’s fishing industry — only $21 million in 2014, compared to $251 million from scalloping — losing them would still deal the city a real economic blow. In addition to the related businesses, Rafael himself employed 285 fishermen, “many of whom would lose their jobs if his groundfish permits were revoked or auctioned off to others outside New Bedford,” said the city’s mayor, Jonathan F. Mitchell.
Mitchell, himself a former prosecutor, draws an analogy to the way the feds handle white collar-crime cases. When a CEO breaks the law, prosecutors generally seek punishments that don’t take down innocent employees or other third parties.
“You don’t hit it with a fine that will croak the company,” he said. So why should the feds upend New Bedford’s waterfront economy?
The federal regulations governing seized or cancelled permits, adopted in a public process in 2011, call for redistributing permits throughout the fleet, but Massachusetts lawmakers are flexing raw political muscle in an effort to have those rules set aside. Senator Elizabeth Warren fired off a letter in August warning of “needless, immense damage” if permits leave New Bedford. Governor Charlie Baker asked that the permits at least stay in Massachusetts.
It’s a measure of the outsized political clout of the Massachusetts fishing industry that such demands are even taken seriously.
“If this was someone involved with any other kind of illegal activity, we wouldn’t be talking about how we can keep their illegal gains in a place,” said Ben Martens, executive director of the Maine Coast Fisherman’s Association. “It’s still illegally gotten money that was used to buy stuff that’s now being seen as part of a community’s heritage.”
The potential disasters that worry New Bedford have already hammered other coastal areas — in part because of the stacked deck that fishermen like Cushman faced in the years they were competing out in the Gulf of Maine against a serial cheater. Across the region, the number of active groundfish vessels fell from 293 to 206 between 2010 and 2015, just as Rafael’s fraudulent business was booming.
And even if regulators do set aside their written rules and decide there’s a value in keeping Rafael’s permits in their “home,” the government would then also have to consider the places he squeezed his permits out of in the first place. “How many of those were bought from Maine businesses, or Gloucester businesses?” Martens said. Which port do they belong to, really? To allow the permits to stay in New Bedford would, in effect, bless the crooked process by which Rafael accumulated them there.
Even if regulators were able to repatriate quota to the ports Rafael took it from, there’s another twist: Rafael’s starting share may itself have been illegitimate. When the government implemented the current quota system, it doled out allocations of different species to fishermen in the region based on hauls they had reported in previous years. But by Rafael’s own admission, he’s been fudging his reports for decades. “We call them something else. It’s simple. We’ve been doing it for over 30 years,” he said to the undercover agents.
Keeping the permits in the Whaling City would also probably mean passing up the best chance NOAA is likely to get to stem consolidation in New England’s fishing industry, which community advocates have identified as one of the biggest threats to the viability of a traditional New England way of life. Rafael had a vertically integrated business, controlling both the boats and the dealers, an arrangement that helped him evade the checks and balances that are supposed to keep everyone honest. Just allowing another big player to take over — Richard and Ray Canastra have reportedly offered $93 million for the bulk of Rafael’s businesses — would leave that empire intact.
“The issue of consolidation won’t be addressed with one big player being replaced with another,” said Niaz Dorry, coordinating director of the Northwest Atlantic Marine Alliance. The organization is pushing NOAA to redistribute Rafael’s quota, but cap the amount any one fishermen can receive at 2 percent.
Finally, regulators shouldn’t ignore the elephant in the room: what appears to have been some degree of complicity within the same New Bedford fishing community that’s now seeking special consideration.
All across New England, fishermen have chafed at federal regulations that limit how much they can take from the ocean. But opposition in New Bedford has been especially virulent, abetted by local politicians who always seem ready to tell fishermen they’re the victims of government overreach. In that toxic atmosphere of contempt for federal authorities, Rafael flourished.
The Codfather had no trouble finding accomplices.
In his recorded conversations, Rafael described how he directed his captains to falsify catch reports based on requests from his under-the-table buyer, later identified as New York fish dealer Michael Perretti (who had previously pleaded guilty to selling fish from a polluted stretch of the Hudson River). “The captain reports to me. The captain says I’ll be in, and I ask him what do you got? . . . He says I got dabs, I got pollock, I got this and I got that, and then I call Michael and I say what are you looking for tomorrow[?]”
Captains sign those reports under penalty of perjury, but none have been charged. The feds dropped charges against Rafael’s bookkeeper. Many of his boats were even still on the water until regulators grounded them in November.
Reflexively taking the side of home-state fishermen might be sensible politics, but Warren, Baker, and the rest of the state’s leaders aren’t doing the industry any long-term favors. Just the opposite: If they get their way, they risk destroying confidence in rules that are the best way to ensure the long-term future of the Gulf of Maine fishery.
For decades fishermen, environmental groups, and regulators have been fighting with each other — and among themselves — to plot a viable future as harvests of cod and other fish have dwindled. New England’s fishery is a textbook example of the tragedy of the commons — a public resource threatened by overuse.
Winning acceptance of the limits remains difficult, because it’s never in any individual fisherman’s interests to obey them.
“Fishermen only reluctantly live with regulations because they believe it’s good for the whole fishery,” said Representative Chellie Pingree, who represents coastal Maine and has been urging regulators to redistribute Rafael’s permits back to the whole region.
Enforcement needs to be impartial. If any fisherman — or any fishing port — is seen as profiting from rule-breaking, or that it has the clout to have rules set aside for its advantage, confidence in the whole system will be put at risk.
“Now is the time to show the fishing industry that there is a reason to follow the rules. Fishermen must believe that there will be swift, sure punishment for cheating,” said Lawrence P. Kavanagh Jr., a New Bedford ship owner, in a victim impact statement in Rafael’s criminal case. “Rafael’s business is deeply tainted by years and years of flouting regulations, keeping this business intact is deeply unfair to every fisherman who tried to follow the rules through the very difficult previous decades.”
Just locking up Rafael, without exiling him from the fishery and redistributing his permits, isn’t enough to send that message. The feds have the tools to make a powerful statement against a culture of defiance that has undermined the future of New England’s most iconic industry. They need to use them.