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Rural Alaska

Kotzebue fishermen's group sues to recover money, equipment

  • Author: Jillian Rogers
  • Updated: May 31, 2016
  • Published December 27, 2013

Just in time for Christmas, after two years without, Kotzebue Sound commercial fishermen got their annual bonuses.

The 65 permit holders that fished Kotzebue Sound this summer and sold chum salmon to Washington-based Great Pacific Seafoods were left in the dark for two years after members of former Kotzebue Sound Fisheries Association jumped ship in 2011 and formed Chum, LLC.

The new Kotzebue Sound Fisheries Association, Inc., re-formed in the spring of 2013, filed a civil suit last month against Chum, LLC after the latter allegedly took possession of money -- upwards of $350,000 -- and equipment that belonged to the association.

The association is a nonprofit entity that exists to support its members -- Kotzebue Sound commercial fishermen -- by negotiating fish prices with the buyer and providing access and equipment.

"The Kotzebue Sound Fishermen's Association board of directors, which consists of seven members elected by the fishermen and women in our region, unanimously voted to file this civil suit," said Bish Gallahorn, president of the new KSFA, last week. "We hope to recover substantial assets and equipment that have always belonged to our fishermen and fisherwomen."

Great Pacific buys chum from the permit holders and then pays around 6 cents per pound of fish harvested to the association (they paid Chum, LLC in 2011 and 2012) for things like beach access, equipment usage and storage space. Of that money, fishermen are allotted about 2 cents per pound as a bonus and/or to purchase equipment they might need, such as life jackets.

Fishermen didn't see their annual bonuses in the two years that Chum, LLC was dealing with Great Pacific Seafoods.

In 2011, Great Pacific received a letter from Chum, LLC -- made up of former KSFA board members -- stating that the Kotzebue Sound Fisheries Association had dissolved and Chum was to take over the contract, thus receiving money, which had previously gone to KSFA.

The association did in fact involuntarily dissolve in 2011, but little was known -- by the buyer or the fishermen -- about the for-profit Chum and its intentions. Chum, LLC was officially formed in February, 2011, according to the State of Alaska's Department of Commerce, Community and Economic Development.

"As a permit holder, I wasn't aware of what was happening," said Kotzebue Sound fishermen Cyrus Harris of the two years that Chum took over. "We didn't hear or see anything, but I didn't really think much of it."

Harris said permit holders were left in the dark until an election last winter when KSFA filed for professional licensing in March 2013 and a new board was chosen.

"The new association is more open (about) what we own in regards to fishing business," Harris said.

Meetings are publicized and members of the public are encouraged to attend, he added.

"There are no hard feelings, but I feel more secure as a permit holder with this new association."

According to the complaint filed last month in Kotzebue district court, William Reich, Roger Mauer, Louis Edenshaw, James McClellan and Chum, LLC times two (the company is named twice because it was formed in 2011, then it dissolved briefly in 2013, then formed again) are named as defendants in the case.

The complaint states that Reich was president of KSFA and failed to file the necessary paperwork that would have prevented the association from dissolving. Meanwhile, the year before, Reich had begun preparing articles of organization for Chum while he was president of KSFA. During 2011 and 2012 Reich et al allegedly transferred money, contract rights, fishing equipment and other assets of the KSFA to Chum, LLC.

Also, according to the complaint, the KSFA bank account was emptied of nearly $140,000 while Chum's account acquired about the same amount on or about the same day. Payments to Chum from Great Pacific Seafoods were made in the fall of 2011 and 2012 totaling approximately $200,000, money that should have gone to KSFA, read the complaint.

"What happened according to our folks, these guys just formed a new organization on their own," said Myron Angstman, the attorney for the association. And money and assets were transferred.

"That's the allegation," he said, adding the money and assets were moved "without the knowledge or approval" of the KSFA.

"The association is not a big, wealthy group," Angstman said. "And you take that kind of money and those assets out of the group and they're not left with much to work with."

Angstman, who was contacted officially in the summer to represent the association, said it's not uncommon for a nonprofit like KSFA to keep less-than-perfect day-to-day records of money and assets.

"People weren't paying as good attention as they should have," he said. "They weren't sure what the problem was when they realized there was a problem. Our group had money and now we don't have money. This is not something where you can walk up to someone and say, 'I want my money back.'"

Great Pacific Seafoods fronted the KSFA some cash last spring for equipment and provisions to get restarted, said Great Pacific's general manager Roger Stiles. The company also began paying KSFA the portion of fish sales again.

Great Pacific received a letter from Chum in August of 2011 announcing that they, the buyer, would be in contact with Chum instead of KSFA.

"We did not understand that Chum, LLC was a for-profit," Stiles said. "We were just given a letter by Chum saying that KSFA was no longer an entity and that Chum was taking over. And that the contracts would be with Chum."

In the time that Chum had taken over, Great Pacific continued to pay them the usual portion of fish sales. A small portion of that usually goes back to the fishermen as a bonus, but permit holders didn't see any bonuses while Chum was in charge. Last month, however, fishermen did get their bonuses under the KSFA.

The new board of the KSFA has restored a trusting relationship with Great Pacific, said Stiles, who said the company is now comfortable staying in Kotzebue. It's an unfortunate situation, Stiles said, but one that did not necessarily affect business on their end.

"Chum, LLC wasn't transparent in their dealings with us," Stiles said. "We were led to believe it was just a transition (and) was supposed to be the same … but obviously that's not the case. KSFA notified us in the spring (of 2013) that Chum was no longer a viable entity."

According to Angstman, an effort was made to contact Chum and ask questions but there was "certainly no resolution." And so the lawsuit was filed in November.

Meanwhile, Great Pacific will continue to do business with the KSFA.

"This doesn't affect our relationship," said Stiles.

As of last week, Reich et al did not have representation.

Attempts were made to contact Chum, LLC, though calls were not returned by press time.

This story first appeared in The Arctic Sounder and is republished here with permission.

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