Company fishing license
Dongwon Industries is being accused of fraudulently getting around US vessel licensing laws using a scheme involving the nieces of Jae-chul Kim, chairman of the South Korean fishing group.
The company, parent of US tuna brand Starkist, allegedly set up sham ownership of tuna fishing vessels using Delaware-registered companies so it could obtain fishing licenses to fish in the exclusive economic zone (EEZ) of the Pacific Island Nations.
This is an area where US licenses are reserved for US-owned and managed vessels, according to Moore & Company, a law firm that filed the amended claim in the district court of Delaware on Jan. 10. The first claim was filed in November 2012.
The fraud continues through today with yearly misrepresentations to the US government and yearly renewals of the vessels’ documentation and fishing licenses, alleges the document.
The document alleges that one of the two vessels, Majestic Blue, maintained its US registration and FFA fishing licenses until it sank in June of 2010.
Pacific Breeze, the other vessel, continues to fly the US flag and “take advantage of the SPTT [South Pacific Tuna Treaty] fishing licenses to this day”, according to the claim.
These allegations are surfacing at a time when .
Dongwon refutes the allegations it used the Delaware-based LLCs, Pacific Breeze Fisheries and Majestic Blue Fisheries, to gain access to the licenses.
Dongwon “is a separate and independent corporation from the Pacific Breeze LLC and Majestic Blue LLC. Pacific Breeze LLC and Majestic Blue LLC purchased one purse seiner each for fair market value from Dongwon Industries in 2008”, the company stated, in a statement sent to Undercurrent News.
Dongwon “believes the allegations made by the Moore law firm are meritless, and intends to vigorously defend itself in this matter, including seeking a full dismissal of the action”, the company said.
Moore submitted an amended complaint Jan. 10 on the case, which it originally filed under seal in November 2012.
The crux of this most recent case is the Korean company’s alleged creation of puppet companies in order to illegally snag a license to fish in the Pacific island nations' EEZ. It allegedly replicated this scheme every year since 2008 in order to continue its operations there.
Pacific Breeze and Majestic Blue, were registered in South Korea prior to 2008 and named Eastern Kim and Costa de Marfil, respectively, which would have excluded them from licensing eligibility, the claim document states.
Dongwon allegedly got around this by offering “investment opportunity” to the daughters of Dongwon chairman’s brother, Jaewoong Kim, who were US citizens.
The daughters, Jayne Songmi Kim and Joyce Jungmi Kim, formed Pacific Breeze Fisheries LLC and Majestic Blue Fisheries LLC in Delaware in 2008, court documents state.
This goes against the South Pacific Tuna Treaty (SPTT), which the US pays $18m a year in assistance to the Forum Fisheries Agency (FFA) to participate in, the claim alleges.
Under the treaty, the US can grant 40 FAA tuna fishing licenses to US-owned purse seiners and five additional licenses reserved for joint venture arrangements.
Possessing a proper U.S.C.G. Certificate of Documentation is a prerequisite to get an FAA license, and that comes with several strings attached that Dongwon could not have met, including that the owner be a citizen and have certified compliance with the Vessel Documentation Act, which does not allow non-citizens to exercise control over the owning entity.
The Dongwon chairman’s nieces – although US citizens – were clearly not the actual owners or managers of the vessels, alleges the document.
In court documents, the attorneys state the only capital investment the nieces ever put down on the companies was $50 each.
On April 4, 2008, Jayne Kim, as representative of Majestic Blue, and Jong Koo Lee, as representative of Dongwon, signed a purchase and sale agreement whereby Majestic Blue agreed to pay $4.4m to buy Costa de Marfil via instalments over ten years, the claim states.
“Despite Majestic Blue’s negligible capital funds, the agreement does not hold either Joyce or Jayne Kim personally responsible for paying or otherwise securing the multi-million dollar debt, and no mortgage was taken on the vessel as would be usual and appropriate, ” it alleges. “This is because Dongwon always retained true ownership and control over the vessels.”
No purchase funds were ever paid by the LLCs or the Kim sisters to Dongwon and possession of the vessels was never really transferred from Dongwon to the Kim sisters, the document alleges.
A similar purchase and sale agreement was entered into by Pacific Breeze to “purchase” the Eastern Kim, then renamed the Pacific Breeze, from Dongwon, the document then states.
Dongwon then “executed bills of sale ‘selling’ for Majestic Blue and Pacific Breeze, each to their eponymous LLC for $10, ” state court documents, adding later, “Joyce Kim testified at her deposition that she never received any return from either LLC despite the fact that the vessels owned by the LLCs should have been providing hundreds of thousands of dollars in revenue per year through their tuna fishing operations.”
Joyce Kim also testified that she and her sister rely entirely on their father, a former Dongwon executive and Korean citizen, to handle the LLCs.
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