Twenty-seven palegic trawler skippers – those who fished mackerel and herring, the largest and most lucrative part of the industry – were in on the act, along with factories and agents.
Ingenious ways were found to smuggle tens of thousands of tonnes of fish through secret underground pipes and illegal conveyor belts, away from the prying eyes of inspectors, in what has become known as the “black fish” scandal.
Fortunes were being made in the North Sea, and greed was running riot. It was a tangled web of collusion and lies the industry knew would have to unravel. Yesterday, the full extent of the fraud was finally laid bare.
Between January 2002 and September 2005, 27 Scottish skippers and three fish factories illegally handled £62.8 million – more than 170,000 tonnes – of undeclared fish.
Proceeds of crime confiscation orders of almost £3m have been made against 17 pelagic skippers, while Alexander Buchan Ltd, which had a factory in Peterhead but no longer trades, has been told to pay £165,000. Orders are also expected to be made against the other two factories, Fresh Catch Ltd, in Kirk Square, Peterhead, which pleaded guilty yesterday, and Shetland Catch Ltd. Ten more skippers have pled guilty to the same charge – landing undeclared fish – including six yesterday, and could also now face confiscation orders. Sixteen of the 26 pelagic vessels in operation in Scotland at the time were involved in the scam.
Marine Scotland finally asked KPMG to audit the accounts of all eight palegic factories north of the Border in early 2005. But the industry says the fraud was widely known for years beforehand.
Former skipper Ian Gatt, chief executive of the Scottish Pelagic Fishermen’s Association, said: “It was not a secret. In my office I’ve got detailed minutes of meetings between the industry and Marine Scotland. Our industry was saying this is a widespread thing. Not only in the palegic industry, but across all sectors around the UK, and also in Europe.”
He said some of those meetings dated back to the late 1990s, even though the period covered by the police investigation only starts in 2002. Marine Scotland insists it had suspicions and was investigating, but was unable to find the proof.
Prosecutors admit the £62.8m estimate of fish illegally caught and sold could have been far higher. There have been rumours the true value was more than £100m.
Unchecked, the vessel masters and factory bosses grew more ambitious. The Fresh Catch factory in Peterhead was designed with fraud in mind. Divert pipes were placed underneath the factory, allowing fish to bypass the flow-scales.
The fish were then hidden in an area known as the tank room. When inspectors visited, staff hid the door to the room behind boxes of fish. The pipes were operated by pneumatic levers hidden in a portacabin, known as the Wendy House. A “danger – high voltage sign” was placed on the door, to deter prying eyes.
At Shetland Catch Ltd, the largest pelagic factory of its kind in Europe, the flow-scale was manipulated to provide false figures. Inspectors found an electrical lead running from the flow-scale to the loft, where computers were found that measured the true weight of the fish caught.
Police investigated Shetland Catch and Fresh Catch in September 2005 after the KPMG audit revealed earnings that could not be supported by the declared landings.
The fraud at Alexander Buchan Ltd came to light via a different route. In November 2004, a Marine Scotland official noticed an additional conveyor belt, on top of the official weigh belt where the fish entered the factory. The managing director said the belt was used to move fish into bins to be transported to other factories.
The following April a trading standards officer noticed the additional belt, and also that a further weight belt had been fitted with loading scales.
It was not until July 2005, that the managing director finally confessed.
Shetland Catch Ltd managed to hide 122,800 tonnes of fish, Fresh Catch Ltd concealed 32,402 tonnes, and Alexander Buchan managed 15,300 tonnes.
Meanwhile, fishing agents found ways of hiding the profits in company accounts.
One tactic was sending two invoices, one for the amount declared to Marine Scotland, and another that included the undeclared amount, which was marked to signify it should not be disclosed.
Another method involved inflating the price per tonne, so a smaller amount of fish appeared on the invoice along with the actual amount of money made, and a third, known as the “Japanese bonus”, claimed the extra money was for the high quality of the fish.
No fishing agents have been prosecuted as a result of the investigation.