IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE UNITED STATES OF AMERICA Ex rel. MOORE & COMPANY, P.A. Plaintiff, vs. C.A. No. 1:12-cv-01562-SLR MAJESTIC BLUE FISHERIES, LLC, PACIFIC BREEZE FISHERIES, LLC, DONGWON INDUSTRIES COMPANY, LTD, JAYNE SONGMI KIM, JOYCE JUNGMI KIM, and JAEWOONG KIM, Defendants. PLAINTIFF’S FIRST AMENDED COMPLAINT PURSUANT TO 31 U.S.C. §§ 3729-3732, FEDERAL FALSE CLAIMS ACT The United States of America (“United States”), by and through qui tamRelator Moore & Company, P.A., brings this action under 31 U.S.C. §§ 3729-3732 (the “False Claims Act”) to recover all damages, penalties and other remedies established by the False Claims Act on behalf of the United States and itself and, in support thereof, states as follows: INTRODUCTION 1.This action arises from false and fraudulent statements made by Defendants to the United States Government for the purpose of obtaining United States vessel documentation and tuna fishing licenses for two Korean owned and operated purse seiner tuna fishing vessels (the “Vessels ”). Defendants set up sham ownership s tructures using U.S. citizen strawpeople, and fraudulently certified the Vessels would be controlled by U.S. citizens. This fraudulent certification allowed Defendants toobtain United States Certificates of Documentation, which allowed Defendants to obtain fishing licenses under the South {GFM-00547851.DOC-} 1 Case 1:12-cv-01562-SLR Document 23 Filed 01/10/14 Page 1 of 50 PageID #: 1064
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Pacific Tuna Treaty (SPTT), which were available to U.S. registered vessels, but not
vessels registered in the Republic of Korea.
2. The SPTT establishes procedures to request licenses and establishes a system to allocate
a limited number of licenses to the United States and other treaty nations to fish the
waters of certain Pacific Island Nations (the “Island Nations”). 1 The SPTT was first
entered into force in 1988. After an initial 5-year agreement, the SPTT was extended in
1993 and again in March 2002, when the Parties agreed to amend and extend the treaty
and to extend the related Economic Assistance Agreement between the United States and
the Island Nations as represented by an international body designated as their
“Administrator”, the Forum Fisheries Agency (FFA).
3. Under the SPTT and the related Economic Assistance Agreement, the United States pays
approximately 18 Million dollars yearly in economic assistance to the FAA, which then
distributes the assistance funds to the individual Island Nations. In return, the United
States receives fishing licenses for exclusive use of U.S. registered and owned vessels.
This structure promotes the Government’s dual goals of promoting the U.S. fisheries
industry and providing economic assistance to the struggling economies of the Island
Nations.
4. The Treaty provides for licenses for up to 40 U.S. purse seiners, with an option for 5
additional licenses reserved for joint venture arrangements, to fish for tuna in the
exclusive economic zones (EEZs) of the Island Nations. The Treaty establishes a vessel
monitoring system (VMS); and a system establishing fishing capacity, revenue sharing,
1 See International Agreements Concerning Living Marine Resources of Interest to NOAA Fisheries, Office ofInternational Affairs, pp. 69-70 http://www.nmfs.noaa.gov/ia/intlagree/docs/2012/international_agreements.pdf
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52. On each of the LLCs’ Application for Documentation, Jayne and Joyce categorized the
Majestic Blue and Pacific Breeze as a “limited liability company not managed by
members and not similar to general partnership.” In particular, Jayne and Joyce both
averred on the applications they each submitted:
I (we) certify that any person elected to manage the LLC or who isauthorized to bind the LLC, and any person who holds a positionequivalent to the chief executive officer, by whatever title, and thechairman of the board of directors in a corporation, and any personsauthorized to act in their absence are citizens of the United States; and non-citizens do not have authority within a management group, whether
through veto power, combined voting, or otherwise, to exercise control
over the LLC.
[Composite Exhibit 8 - 5/15/2008 Signed Application for Majestic Blue Fisheries;
5/15/2008 Signed Application for Pacific Breeze Fisheries].
53. Based on these misrepresentations made in each of the Vessel’s Application for
Documentation, the NVDC granted the F/V Majestic Blue and F/V Pacific Breeze
temporary Certificates of Documentation and Official Numbers on May 20, 2008.
[Composite Exhibit 8 - 5/15/2008 Signed Application for Majestic Blue Fisheries;
5/15/2008 Signed Application for Pacific Breeze Fisheries].
54.
The very next day, on May 21, 2008, less than one week after Joyce and Jayne Kim
certified that non-citizens do not have authority to exercise control over Majestic Blue or
Pacific Breeze, both LLCs signed Crew Manning Agreements, Ship’s Maintenance,
Supply, and Insurance Service Agreements, and Tuna Supply Agreements with Dongwon
(together, the “Agreements”), which collectively authorize Dongwon, a Korean-owned,
controlled and based corporation, to exert total control over the LLCs and the Vessels.
we need to get our money from the fish buyers from there!” [ Exhibit 22 - 4/13/2010
Email from Capt. Unterberg to Capt. Hill].
82. Following Captain Ridenour’s observation of the F/V Majestic Blue’s Spring 2010 dry
docking, Captain Unterberg conveyed to him, “Mr. Hwang [(of Dongwon)] arrived and
the company agreed to pay you a nice bonus type of money for which I had asked them!
He has that with him too.” [Exhibit 28 5/10/2010 (emphasis added)]. Again, the U.S.
captains were purportedly employed by the LLCs not by Dongwon.
83. In June of 2010, Captain David Hill died when the F/V Majestic Blue sank in the South
Pacific in broad daylight and clear weather.
84. Following Captain Hill’s death onboard the F/V Majestic Blue, Captain Unterberg again
demonstrated that Majestic Blue relied on Dongwon to pay its captains’ salaries even
though they were employed by the LLC’s not Dongwon. Captain Unterberg wrote to
K.Y. Hwang of Dongwon:
I do not understand why Capt. Dave’s wife after losing her husband at seanow has to worry about getting paid. This borders on mental cruelty inmy mind. … You informed me a few days ago that the money meanwhile
had been send , but also it should have been on his account, it was not! So
please make sure that it was send as you told me. It should be on hisaccount.
[ Exhibit 29 - 6/23/2010 Email from Capt. Unterberg to Hwang (emphasis added)]
c. The Vessels’ Captains understood Dongwon was in Control and American
Ownership was sham:
85. Furthermore, the American captains on board the Vessels understood that Dongwon
officials actually controlled the LLCs and the Vessels. In December 2008, Captain
Jeskevicius described a meeting between Captain Unterberg and Dongwon officials as a
to Capt. Unterberg; 12/25/2008 Email from Capt. Jeskevicius to The Neal Family;
12/26/2008 Email from Capt. Jeskevicius to Capt. Lup].
86. In a December 29, 2008 email to Captain Jill Friedman, Captain Jeskevicius propounded:
“There are some serious questions about this operation that need to be asked – like what
is the advantage of this vessel sailing under US flag instead of Korean flag where it was?
From what I can see, the US flag operation is now just a ‘flag of convenience’
situation.” The captains also theorized, as it turns out correctly, that the Vessels had
been reflagged in order to take advantage of United States regulations and fish in United
States waters. [Composite Exhibit 31 - 12/29/2008 Email from Capt. Jeskevicius to Capt.
Friedman (emphasis added); 12/30/2008 Email from Capt. Jeskevicius to Capt.
Friedman].
87.
Similarly, in his October 2009 handover notes for the F/V Majestic Blue, Captain Doug
Pine wrote to Captain David Hill:
This is an American ship, not a Korean ship. No one on board but youwill seem to care, and they don’t.
***
[The Fishing Master] has been the Master of this ship for eight years, andthen they re-flagged it US…. I don’t believe he respects me personally;and sadly I know he doesn’t respect my authority. If this was truly an
American ship the first thing I would have done would have been to runhim off.
***
After having had some miscommunication with the Head Office, I have
decided that it is best for me to do everything through Jurgen [Unterberg].Bringing the Head Office in on things only serves to confuse the issue.Let Jurgen deal with those guys. You will hear from time to time fromMr. Hwang and Mr. Shin [of Dongwon].
***
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95. Captain Jeskevicius reiterated his concerns about the F/V Majestic Blue’s crew’s
violations of MARPOL to Captain Unterberg on December 8, 2008, stating in relevant
part:
When I did my turnover, I did look to see that the Garbage Record Bookwas being kept up, and on the surface it was. Closer inspection of thegarbage records revealed that no entries were being made at sea. Whatfurther roused by suspicions was that there were no indications of trashhaving been sent to a facility in Noro. Lo and behold, I discovered thatthey were dumping everything over in plastic bags, completely ignoringMARPOL ANNEX V.
************
The bottom line is that [the senior South Korean officers on the vessel]
knew exactly what they were doing.
[Composite Exhibit 35 - 12/8/2008 Email from Capt. Jeskevicius to Capt. Unterberg].
Captain Jeskevicius sent an email containing the same information, virtually verbatim, to
Dongwon Representative Sam Lee that same day. [Composite Exhibit 35 - 12/8/2008
Email from Capt. Jeskevicius to Sam Lee].
96. On December 10, 2008, Captain Jeskevicius reported to Captain Unterberg that he
noticed an oily sheen coming from under the F/V Majestic Blue and observed that the
vessel’s bilge pumps were being operated with a non-functioning oily water separator.
[Composite Exhibit 36 - 12/10/2008 Email from Capt. Jeskevicius to Captain Unterberg].
97. In a December 20, 2008 entry in the Captain’s Log, Captain Jeskevicius elaborated on the
rampant MARPOL violations he witnessed occurring on the F/V Majestic Blue and his
fruitless efforts stopping them, stating:
It has become quite apparent that the senior personnel on this vessel haveabsolutely no regard for the regulations imposed by MARPOL Annex V.I have communicated this to Majestic Blue Fisheries, LLC and incollaboration with the F/V PACIFIC BREEZE have revised andimplemented a new WASTE MANAGEMENT PLAN. Feeble attemptshave been made to show that the PLAN is in force; but the amount of
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waste contained nowhere comes near to that of waste having beengenerated. In addition, I have personally witnessed some senior personnelthrowing plastic over the side…. [T]rash that has been collected and storedon deck has been disappearing. The types of trash waste have included but not been limited to plastics. Neither has any of this waste been
reported or recorded as I have all the GARBAGE RECORD BOOKS inmy possession. This continues to be a problem.
[Composite Exhibit 37 - Captain’s Log Entry for 12/21/2008].
98. On December 22, 2008, Captain Jeskevicius again notified Captain Unterberg of the F/V
Majestic Blue’s crew refusal to abide by his waste management plan or MARPOL V. He
wrote to Captain Unterberg, “Trash is still going over the side and NOT BEING
REPORTED. For the amount of waste generated these past six weeks there is a paltry
minimal amount being held on board.” [Composite Exhibit 38 - 12/22/2008 Email from
Capt. Jeskevicius to Capt. Unterberg].
99. Captain Jeskevicius attempted to resign as captain of the F/V Majestic Blue on December
27, 2008 “based on [his] observations of illegal trash dumping.” [Composite Exhibit 37 -
Captain’s Log entry 12/27/2008].
100.
Captain Jeskevicius again reported illegal dumping occurring on board the F/V
Majestic Blue to Captain Unterberg on December 28, 2008, stating:
In six weeks of fishing it has become painfully obvious that the seniorcrew members cannot be trusted to do the right thing with regards to USand international regulations governing waste disposal. We did a resupplytoday… I was out there for most of the deliveries and a considerableamount of packaging went over the side when I was not on deck and, infact, has been going over since I first came aboard.
[Composite Exhibit 39 - 12/28/2008 Email from Capt. Jeskevicius to Capt. Unterberg].
101. The MARPOL violations continued while Captain Doug Pine was in command of
the F/V Majestic Blue in Fall 2009.
102. On August 30, 2009, Captain Pine recorded in the Captain’s Log:
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I observed an oily sheen and what appeared to be soap suds off thestarboard side of this vessel. I called the C/E to the site. He begansquirting Joy soap on the water after speaking to one of his crew in thehold. I directed him to stop applying the soap as it is illegal to do so. Iasked him what the source of the oil was and if it was from the bilge. He
said no, the source was the brine from the fish wells. I took photos for thearea. Will call Jurgen.
***
Called Jurgen – Left voicemail on his cell and office telephones.
***
I have sent an email and pictures to Jurgen and Mr. Hwang.
104. Again, on October 2, 2009, Captain Pine recorded in the Captain’s Log, “I
witnessed a deckhand throwing approx. 0.06 m3 Plastic (Cat 1) garbage overboard. I told
him to not do this again.” [Composite Exhibit 37 - 10/2/2009 Captain’s Log Entry].
105.
In his final entry in the Captain’s Log, Captain Pine wrote, in pertinent part:
This is my statement regarding my allegations that the Korean officers onmy ship have been, while under my command, in daily violation ofMARPOL 73/78 Annex V in that they routinely dump Category 1 (plastic)garbage at sea.
***
I know in my heart that the Korean officers on my ship intended to violatethe waste mgt. plan. I know this because on a few occasions they did thisdirectly in my presence without the slightest hesitation.
***
I have personally witnessed, on many occasions, the entire compliment ofofficers and unlicensed seamen of the Majestic Blue violate MARPOL andIOPP and CFRs by dispensing of plastic waste at sea.
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106. Despite the significant attention drawn to F/V Majestic Blue’s environmental
violations by Captain Pine’s incident, Defendants failed to implement meaningful change
to the vessel’s waste management policies. Thus, when Captain David Hill took over as
captain in May 2010, he observed the crewmembers dumping plastics and oil from the
vessel and trying to hide their actions from him.
107. On June 2, 2010, Captain Hill wrote to his wife:
Last nite the crew threw fifty gallons or so of hydrolic oil and oily ragsinto the sea. They have also been throwing plastic in. Next they lied to
me about it. The Chief Engineer just came to me now and admitted aboutthe oil, but blamed it on the bosun. The bosun lied to me about it. Themate lied to me about the plastic, and the FM [Fishing Master] lied about both.
[Composite Exhibit 40 - 6/2/2010 Email from Capt. Hill to Mrs. Hill (emphasis added].
108. Captain Hill further admitted to his wife that he and other crew members knew
about the dumping but intentionally did not report it, stating:
So the observer from Palau has agreed not to report our little pollution
incident if no more happens. I have been busy yelling at everyone I can tomake sure it don’t. I could be in real trouble already if it gets out that wespilled oil, I knew about it and did not report it.
[Composite Exhibit 40 - 6/4/2010 Email from Capt. Hill to Mrs. Hill].
109. Captain Hill informed Captain Unterberg about the crew’s illegal dumping of oil
and garbage, and Captain Unterberg relayed the information to Dongwon officials,
having no authority himself to address the situation personally.
COUNT I: VIOLATION OF THE FALSE CLAIMS ACT
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110. Plaintiff/Relator incorporates herein Paragraphs 1-109 above as relevant.
111.
Defendants knowingly presented or caused to be presented to the United States
Government a false or fraudulent claim to obtain a Government benefit and/or
Government property and/or the property of a “contractor, grantee or other recipient” to
which the United States Government provides all or part of the property or money, by
fraudulently requesting or demanding U.S. Vessel Documentation and using the
fraudulently obtained Certificates of Documentation to request or demand a FAA licenses
from the Government, specifically the National Marine Fisheries Services (NMFS).
112. As part of a Government program to financially benefit U.S. citizens and to
promote the U.S. fisheries industry, the United States pays the FAA approximately $18
million annually and in return receives an allotment of fishing licenses for the exclusive
use by United States documented Vessels.
113. An FAA license is a Government benefit and/or Government property and/or is
the Property of the FAA which is a “contractor, grantee or other recipient” to which the
United States Government provides all or part of the property or money requested or
demanded.
114. Possessing a proper U.S.C.G. Certificate of Documentation is a prerequisite for
legally obtaining an FAA license. 50 C.F.R. § 300.32(h)(7)(v). To obtain a U.S.C.G.
Certificate of Documentation for a vessel, a vessel owner must certify its compliance
with the citizenship and other requirements of the Vessel Documentation Act including
2 On May 20, 2009, the False Claims Act was amended by the Fraud Enforcement & Recovery Act ("FERA"), Pub.L. No. 111-21, § 4, 123 Stat. 1617, 1621 (2009).
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that non-citizens do not exercise control over the owning entity. 46 U.S.C.S. §§ 12101 et
seq. A United States Certificate of Documentation is Government property and/or is a
Government benefit with actual, real and substantial value.
115. Defendants’ made false and fraudulent claims for U.S. Certificates of
Documentation by falsely certifying to the United States Coast Guard in their Initial
Applications for Certificates of Documentation in 2008, that the LLCs were not
controlled by non-citizens, when in fact the LLCs were controlled by the Korean
company Dongwon.3
116.
Defendants then presented the fraudulently procured Certificates of
Documentation (a false record) to the Government, specifically the National Marine
Fisheries Services (NMFS), for the purpose having the NMFS request the FFA issue FFA
licenses.
117. Defendants have successfully perpetrated this fraud every year since 2008,
renewing their U.S. Documentation by recertifying (falsely) each year that the LLCs were
not controlled by non-U.S. Citizens; and by yearly presenting their fraudulently obtained
Certificates of Documentation to the NMFS to obtain a renewal of the FAA licenses
purchased by the Government.4
3 Despite Defendants’ certifications of compliance, in truth the LLCs were never operated in compliance with theVessel Documentation Act because they were actually controlled by a Korean company and were owned on paper
only by Korean born U.S. naturalized citizen straw men who purchased the Vessels in a less than arm’s lengthtransaction without paying any money for the Vessels. Defendants falsely certified that “non-citizens do not haveauthority within a management group, whether through veto power, combined voting, or otherwise, to exercisecontrol over the LLC,” despite knowing that Dongwon would actually exercise ultimate control over the LLCs.Defendants also falsely “certified” that the Vessels “will at all times remain under the command of a U.S. citizen,”even though the LLCs only ever hired inexperienced “paper” captains from the United States as window dressing, infact leaving the Korean “fishing masters” to exert actual command over the Vessels.
4 On June 14, 2010, the F/V Majestic Blue sank. After this date renewals occurred only for the F/V Pacific Breeze.
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money or property to be spent or used on the Government’s behalf or to advance a
Government program or interest and the Government has provided a portion of the
money or property requested or demanded.
124. Possessing a proper U.S.C.G. Certificate of Documentation is a prerequisite for
legally obtaining an FAA license. 50 C.F.R. § 300.32(h)(7)(v). To obtain a U.S.C.G.
Certificate of Documentation for a vessel, a vessel owner must certify its compliance
with the citizenship and other requirements of the Vessel Documentation Act including
that non-citizens do not exercise control over the owning entity. 46 U.S.C.S. §§ 12101 et
seq. A United States Certificate of Documentation is Government property and/or is a
Government benefit with actual, real and substantial value.
125. Defendants’ made a false and fraudulent claims for a U.S. Certificates of
Documentation by falsely certifying to the United States Coast Guard in their Initial
Applications for Certificates of Documentation in 2008, that the LLCs were not
controlled by non-citizens, when in fact the LLCs were controlled by the Korean
company Dongwon.5
126. Defendants then presented the fraudulently procured Certificates of
Documentation (a false record) to the Government, specifically the National Marine
5 Despite Defendants’ certifications of compliance, in truth the LLCs were never operated in compliance with the
Vessel Documentation Act because they were actually controlled by a Korean company and were owned on paperonly by Korean born U.S. naturalized citizen straw men who purchased the Vessels in a less than arm’s lengthtransaction without paying any money for the Vessels. Defendants falsely certified that “non-citizens do not haveauthority within a management group, whether through veto power, combined voting, or otherwise, to exercisecontrol over the LLC,” despite knowing that Dongwon would actually exercise ultimate control over the LLCs.Defendants also falsely “certified” that the Vessels “will at all times remain under the command of a U.S. citizen,”even though the LLCs only ever hired inexperienced “paper” captains from the United States as window dressing, infact leaving the Korean “fishing masters” to exert actual command over the Vessels.
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