JULY 2013 ~ UNITED STATES VS BENGIS / DAMAGES FOR ILLEGAL FISHING


The long awaited conclusion to the Bengis saga finally came on Friday 14 June 2013, with the United States Court of Appeals ordering a restitution award of $ 22,446,720.00 to the South Africa government for compensation for the illegal export of large quantities of West Coast rock lobster from South African waters. Arnold Bengis, his son David Bengis and his business partner Jeffrey Noll had been illegally harvesting rock lobsters in South African waters from 1987 to 2001 for export to the United States (U.S.) in violation of both South African and U.S. law. A container destined for the U.S. was seized and opened by South African authorities in May 2001. Prosecutions in both South Africa and the U.S. followed, the results of which included jail time. The on-going litigation has now culminated in a massive restitution award, the largest known restitution order in the history of the Lacey Act (U.S. legislation).

BACKGROUND

During the U.S. Court procedures, it was found that Arnold Bengis, David Bengis and Jeffrey Noll had engaged, from 1987 to 2001, in an “elaborate scheme” to illegally harvest rock lobster in South African waters for export. Bengis Snr. was the Managing Director and Chairman of Hout Bay Fishing Industries (Pty) Ltd (Hout Bay Fishing), a fishing and processing operation in Cape Town, and Noll and Bengis Jnr. were presidents of two U.S. corporations that imported, processed, packed and distributed the fish within the U.S. on behalf of Hout Bay Fishing. The rock lobster was harvested by Hout Bay Fishing in amounts far exceeding authorised quotas.

 

In May 2001, the South African authorities seized and opened a container of unlawfully harvested fish scheduled for export to the U.S. Following the seizure, the South African authorities obtained arrest warrants for Bengis Snr., Bengis Jnr. and Noll but concluded that because the three defendants were outside of South Africa, as were the bulk of their financial resources, they were beyond the reach of the South African authorities. The South African authorities focused instead on the prosecution of the South African based entities involved in the scheme, including Hout Bay Fishing, its operational manager, Collin van Schalkwyk, seven fisherman with whom Hout Bay Fishing had contracted and fourteen fisheries inspectors who had taken bribes during the course of the scheme. Bengis Snr. returned to South Africa in April 2002 to enter a plea of guilty on behalf of Hout Bay Fishing for the over-fishing of South and West Coast rock lobster. A plea agreement was struck and Hout Bay Fishing paid a fine of R 12 million and forfeited two fishing boats and the contents of the seized container.

 

In the U.S., Bengis Snr. and Noll pleaded guilty to conspiracy to violate the Lacey Act (a federal statute which makes it a crime to import into the U.S. any fish, wildlife, or plants taken in violation of a state or foreign law), and to violations of the Lacey Act. Bengis Jnr. pleaded guilty to the conspiracy charge only. In 2004, the three defendants were sentenced to varying terms of imprisonment (which have now been served) and together forfeited a total of $ 13,300,000.00 to the U.S. Although the concept of restitution to the South African government was acknowledged in these proceedings, the district court deferred the restitution hearing to a later date.

 

RESTITUTION AND THE PROPERTY LAW DEBATE

 

The issue of restitution to the South African government was first heard in the United States District Court for the Southern District of New York, where it was held that South Africa had no right to restitution. In terms of the American statute under which the claim for restitution was brought, restitution could only be paid if the offence constituted an offence against “property”. The district court held that South Africa had no property interest in either the lobsters that the defendants took from South African waters or in any tax or other form of revenue that the State would have been entitled to, but for the defendants’ breach of South Africa’s regulatory laws. The basis for this decision was that it was held that in South African law the State does not “own” the fish in its territorial waters. The court furthermore held that in U.S. law, the definition of “property” is limited to “tangible property” and does not extend to “purely regulatory” interests.

 

On appeal to the U.S. Court of Appeals, it was argued that South Africa has a property interest in rock lobsters unlawfully harvested from its waters, and is a “victim” as defined in the restitution legislation and is accordingly entitled to restitution. On appeal it was held that under South African law rock lobsters may only be harvested subject to the regulatory scheme administered by the then Department of Marine and Coastal Management. Furthermore, under South African law, lobsters caught illegally are not the property of those who caught them, and the South African government is authorised to seize illegally harvested lobsters, sell them and retain the proceeds. Evading seizure of overharvested lobster therefore deprives South Africa of an opportunity to sell those illegally harvested lobster at market price and retain the proceeds, representing an economic loss each time an illegally harvested lobster goes unseized. It was therefore concluded that South Africa’s interest goes beyond a merely regulatory interest in administering fishing activities in its waters. This decision of the U.S Court of Appeals was handed down on 4 January 2011, with an order that the case be remanded to the district court with instructions to calculate restitution and enter an order of restitution in favour of the Republic of South Africa.

 

The extent of the restitution was hotly contested before the district court. Two different methods for calculating restitution were prepared by the Ocean and Land Resource Assessment Consultants (OLRAC). Method I focused on the costs of remediation, i.e. what it would cost South Africa to restore the rock lobster fishery to the level it would have been had the defendants not engaged in overharvesting. Method II focused on the market value of the overharvested fish. The figure reached under Method II was greater than Method I. Method II was then deemed the appropriate method. Under Method II, the losses to South Africa from the overharvesting of both West Coast and South Coast rock lobsters were calculated. However, it was found that there was no evidence that any of the South Coast rock lobsters were imported into or intended for the United States. It was held that the U.S. restitution legislation, which formed the basis for the award to South Africa, only allows for restitution for harm caused through importation to the U.S. There was therefore no basis for awarding restitution to South Africa for lobster taken in violation of South African law that was neither shipped to the U.S. nor taken for the purpose of its shipment to the U.S. Method II’s calculation of the market value of West Coast rock lobster therefore formed the basis of the award. This calculation yielded the amount of $ 29,494,800.00 which was then reduced by the $ 7,049,080.00 which the defendants had already paid to South Africa, resulting in a final award of $ 22,446,720.00. Although this final award is clearly substantial and is the largest restitution award in the history of the Lacey Act, mention must be made of the fact that the award could have been more than double the amount had there been sufficient evidence that South Coast rock lobster had also been imported to the U.S. OLRAC calculated the loss to South Africa from over-harvesting of South Coast rock lobster to have been $ 32,436,000.00. However, as far as the record had disclosed neither witness had spoken about the South Coast rock lobster and there was not sufficient evidence to show that it had been sent to the U.S. These evidentiary problems therefore ironically “cost” the South African government.

 The restitution judgement was handed down on 14 June 2013. According to the Cape Times report of 17 June 2013, Desmond Stevens, the Acting Deputy Director of Fisheries, said that the Department had initially wanted more than R 537 million as restitution, but was “overjoyed” with the sum which the U.S. court had ordered. The higher amount hoped for would have been achieved had there been sufficient evidence with regard to the South Coast rock lobster. After discussion of the details with the National Prosecuting Authority and the U.S. authorities, the money will presumably be paid into the Marine Living Resources Fund. Stevens is quoted in the Cape Times as expressing a desire to utilise the money to help fight poaching. If properly managed, the amount represents a huge opportunity to curb poaching.