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Originally published June 1, 2013 at 8:00 PM | Page modified June 2, 2013 at 7:49 AM

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American Seafoods fined over alleged deception

American Seafoods slapped with big fine over claims that crews misreported their catch by many tons; also, Meridian Mortgage’s Darren Berg subjected to prison disciplinary proceeding.

Seattle Times business staff

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It seems apparenty their pattern and practice of altering the scales resulted in... MORE
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Something is fishy when the scales on a factory trawler read from 6 percent to nearly 70 percent less than what the catch really weighs.

For such discrepancies, allegedly extending over many years, the federal government seeks penalties of more than $2.7 million from Seattle-based American Seafoods, which operates factory trawlers that catch and process pollock off Alaska.

The National Oceanic and Atmospheric Administration (NOAA) claims a pattern of crew members tampering with scales that weighed fish aboard three American Seafoods vessels.

By reporting lower weights, crews could process more fish than their federally allowed quota, in what officials say was “essentially stealing fish.”

NOAA’s office of law enforcement lays out the case in three violation notices, one issued in 2012 and two more published last month. The alleged violations date back as far as 2007.

Federal regulations require that scales be no more than 3 percent off in their tallies. But federal agents — using reports gleaned from federal observers aboard the vessels — cite scales that often weighed light from 6 to 17 percent.

In one extreme incident, aboard the company’s American Dynasty in March 2007, a federal fishery observer found that fish weighing 108 kilos (238 pounds) registered only 33 kilos (73 pounds) on the ship’s scale — off by nearly 70 percent.

Acting Special Agent in Charge Matthew Brown of NOAA’s Alaska Division said in a statement that “violations of this magnitude have the potential to severely impact fisheries if left unchecked.”

Federal officials provided no estimates of the total of underweighed fish.

Alan Kingsolving, a NOAA official who works as a scale coordinator, said an average single haul in the catcher-processor pollock fishery is somewhere between 80 and 100 metric tons. So a 10 percent underweighing of a 100-ton bag of fish would amount to 10 tons of unreported fish.

In 2012, American Seafoods had an allocation of more than 185,000 metric tons of pollock, according to a report submitted to federal regulators.

American Seafoods said it “takes seriously its commitment to sustainable fishing practices and has cooperated fully with NOAA in investigating these matters.” It will respond to NOAA’s allegations after completing a review.

A NOAA law-enforcement spokeswoman said that a March 26 hearing before an administrative law judge about the American Dynasty violations was postponed so that the agency and American Seafoods could discuss a “global settlement” covering all three vessels.

American Seafoods, which operates six factory trawlers that work off Alaska and reports revenue of more than $500 million, is one of the major players in North American Seafood industry. Most of the company’s revenue comes from pollock in harvests managed by the federal government.

Under the current harvest system, fleetwide catch limits are set at levels intended to prevent overfishing. Vessels then are assigned quotas, and the scale weights are used to determine and report the amount of fish each ship has caught.

Aboard the American Dynasty, federal fishery observers that monitor the catches documented alleged violations during a two-year period ending in 2008. They repeatedly saw crew members adjusting the scales. Then, when observers checked the scales, they reported that scales weighed light.

Four years later, in January 2012, NOAA law enforcement issued the notice of violation against the company and the operator of the American Dynasty for the 2007 and 2008 incidents.

By then, observers had documented numerous violations aboard two other American Seafood vessels, the Northern Eagle and American Rover.

Even after the January letter of violation was issued about the American Dynasty violations, federal officials allege that violations continued aboard the Northern Eagle through March 29th of that year.

— Hal Bernton: hbernton@seattletimes.com

Prison disciplines Meridian’s Berg

Frederick Darren Berg, convicted last year of running Washington’s biggest Ponzi scheme, has been confined to a more restrictive setting at the low-security federal prison in Lompoc, Calif., where he is serving an 18-year sentence.

Handwritten legal papers filed by Berg in the appeal of his conviction indicate he’s been separated from the general prison population since April 21. No explanation for the move is given.

Berg wrote May 15 that he “attended a disciplinary hearing with the Bureau of Prisons” that day and “was ordered to be held in the specialized housing unit (the ‘SHU’)” until July 14.

At a low-security prison like Lompoc, the general population is in an open area where prisoners can move around during the day, said Bureau of Prisons spokesman Chris Burke in Washington, D.C.

But prisoners sent to the SHU either for disciplinary reasons or for their own protection would be locked in a two-person cell almost all day.

In two brief filings, Berg said he’d lost access to most of his legal materials and to computer or word-processing equipment. He asked U.S. District Court Judge Richard Jones to stop the clock on upcoming deadlines in his appeal.

“Having spent 25 days in the SHU, and in response to seven separate requests,” Berg wrote, he “has been allowed access to the law library for a total of two hours.”

The 51-year-old Berg pleaded guilty in 2011 to wire fraud, money laundering and bankruptcy fraud that cost investors in his Meridian Mortgage investment funds more than $100 million.

Berg contends he got an inadequate legal defense and was subjected to “outrageous government conduct” in the form of a conspiracy between the Meridian bankruptcy trustee and federal prosecutors.

Jones on April 25 ruled against Berg’s effort to subpoena more information from prosecutors and the trustee. Berg wrote that he plans to ask the judge to reconsider that ruling once his computer access and legal materials are restored.

— Rami Grunbaum: rgrunbaum@seattletimes.com

Inner City 100 honors state firms

Three Washington companies — all of them dependent on the Internet — made this year’s Inner City 100, a list of fast-growing companies in the urban core of U.S. cities.

The companies were selected and ranked by the Initiative for a Competitive Inner City, a Boston area nonprofit founded in 1994 by Michael Porter, a Harvard Business School professor. The think tank supports job creation in inner cities through research, training entrepreneurs and connecting them to investors.

QuoteWizard, an online firm that provides auto- and home-insurance quotes to consumers from a network of thousands of insurers, ranked sixth on the list.

The 58-employee company has its office in Pioneer Square and was founded in 2006 by brothers Scott and Rob Peyree. QuoteWizard’s total revenue in 2011 was $27.7 million, with a five-year compound annual growth rate of 90 percent, according to the Boston area think-tank.

True Fabrications, an online retailer that sells wine accessories, ranked 44th on the list.

CEO Dhruv Agarwal started the company in his garage in 2003. The company, with offices in Seattle’s Georgetown neighborhood, employs more than 50 people. The company’s five-year compound annual growth rate is 30 percent and 2011 total revenue was $11.5 million.

Finally, Tacoma-based SiteCrafting, a Web design and development company, ranked 66th on the list, its fourth consecutive year on the list.

FORTUNE recently published the rankings on its website, in conjunction with an awards reception. The Inner City 100, in its 15th year, is sponsored by Chevron, Goldman Sachs and Staples.

Past winners from Washington state have included Seattle companies Tutta Bella Neapolitan Pizzeria, Adapt Engineering and Lam’s Seafood Market as well as Spokane-based consultancy Kaufman & Associates.

In developing this year’s list, the Boston think tank focused on total revenue growth from 2007 to 2011 and ranked companies based on their growth rates during this period.

To qualify for the Inner City 100 list, companies have to meet several criteria:

• At least 51 percent of their operations must be in an “economically distressed urban area,” defined as having a 50 percent higher unemployment rate, 50 percent higher poverty rate and 50 percent lower median income than the metro area.

(The initiative has been using data from the 2000 Census. A spokeswoman said it plans to rely on more current data from the American Community Survey next year.)

• At least 10 full-time employees.

• A five-year operating sales history, with at least $200,000 in revenue in the first year of consideration, an increase in year-five sales over year-four sales, and fifth-year sales of at least $1 million.

Collectively, the Inner City 100 companies employed a total of nearly 10,400 workers and generated $2.3 billion in aggregate revenue, according to the think tank. Just over one-third of the firms were minority-owned, and 28 percent were owned by women.

— Sanjay Bhatt, sbhatt@seattletimes.com

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