U.S. says Seattle firm cheated on crab catch
In assessing what is thought to be the largest fine over a violation of fisheries law, the National Marine Fisheries Service charged that the seafood company controlled two tiny Adak, Alaska, fish processors as if they were subsidiaries and unlawfully used them to rake in an extra $13.2 million in shellfish over two years.
While Icicle's annual limit of brown crab from the Aleutians was 221,000 pounds, the government charged that from February 2002 to February 2004, Icicle and the two Alaska companies together processed more than 4.4 million pounds — roughly a quarter to one-third of the annual catch.
Don Giles, president and chief executive officer of Icicle, said he doesn't think his company did anything wrong.
"We've been aware of the investigation, and we have cooperated every step of the way," he said, declining to comment further.
Marine Fisheries spokesman Brian Gorman said the American Fisheries Act "was intended, in part, to foster competition and prevent big companies from muscling their way into the fishery, dominating and, theoretically, controlling prices."
"Therefore, any entity is limited in how much of the crab it can control. What we're accusing Icicle of was setting up, in essence, shell corporations."
Icicle is a 29-year-old wholesale company that processes salmon, pollock and other types of fish for use in products from fish sticks to fake crab. Icicle officials told The Anchorage Daily News in July 2003 that the company had annual revenue of $225 million the previous year.
When companies such as Icicle were granted access to pollock from the Bering Sea and Aleutian Islands — the richest pollock-fishing grounds on the planet — some fishermen feared the companies would use their profits to expand into other types of fishing, driving prices up and other fishermen out.
As a result, Congress put strict quotas on how much of other species, such as crab, big corporations could catch. It also limited how much of a financial interest those companies could have in smaller outfits that catch fish.
In late 2001, Icicle became co-owner, with Kjetil Solberg, of the fledgling fish-processing firm Adak Fisheries. Solberg also was sole owner of Adak Fisheries Development, which was trying to make a go in part by processing brown crab.
Neither company is subject to the same processing limits as Icicle.
But the two Alaska firms "had the same facility, same employees, same management team, and both had virtually all of their support from Icicle Seafoods," said Sheela McLean with the National Marine Fisheries Service in Alaska. "They weren't functioning independently."
In a written statement, Solberg denied the charges.
"I have full confidence that the alleged violations against my companies will be withdrawn upon further investigation and review," the statement says. He said Icicle's quotas don't apply to him, and "to allege that my companies are controlled as Icicle subsidiaries is inaccurate."
Icicle and the Adak companies may try to negotiate the fine or ask for a hearing before an administrative law judge.
Icicle has not said what it plans to do. Solberg said he intends to seek a hearing.
Clem Tillion, a former Alaska legislator who has consulted for Adak Fisheries, said he asked Icicle officials about the arrangement several years ago. He said he was told that Solberg controlled the crab-processing operation, while Icicle controlled an adjacent fish-processing operation.
Icicle would, however, buy crab from Adak, Tillion said.
But Will Blades, president of Icicle competitor Royal Aleutian Seafood in Seattle, said much of the money Icicle and the Adak companies made would have gone his way.
"They took a considerable amount of crab that otherwise would have come to us," Blades said.
Before Icicle got involved, "Adak was a small line, and they couldn't process very much," he said. "A lot of fishermen wouldn't go there because they were afraid they wouldn't get paid."
Under Icicle, "they increased the production, fixed up the line, added the backing of a substantial company, and fishermen started going there," Blades said.
The brown-king-crab harvest ranks as one of the most remote seafood harvests in North America. It takes place far out along the Aleutian Island chain in an area more than 1,300 miles southwest of Anchorage. The harvest last year involved 24 vessels that pulled in $20 million worth of crab.
The Adak operations are by far the closest to shore from where the crab are caught, according to Forrest Bowers, an Alaska Department of Fish and Game biologist. Other processors, such as Royal Aleutian, operate at Dutch Harbor, an Aleutian Island fishing hub at least 200 miles from the brown-crab fishing grounds.
The American Fisheries Act of 1998 was forged in Congress in an attempt to end years of fierce industry infighting over shares of the North Pacific pollock, North America's biggest-volume seafood.
The act allocated shares to shore-based seafood plants and at-sea processors that operate large factory ships.
During the congressional battle over the act, Icicle was not a major player in the pollock industry, and company officials were vocal opponents of the bill. But once it passed, Icicle began fishing for pollock and reaped benefits from the act.
Craig Welch: 206-464-2093 or cwelch@seattletimes.com
Hal Bernton: 503-292-1016 or hbernton@seattletimes.com