January 29, 2013 — Former Massachusetts Attorney General Scott Harshbarger, Senior Counsel at Proskauer Rose LLP, conducted an independent four-month review of allegations made against the Gloucester Fishing Community Preservation Fund. The report found no credible basis to support the allegations, and deemed them to be without merit. The fund hired Proskauer to conduct an independent assessment of its governance, policies and operations after receiving a letter from state Senator Bruce Tarr and state Representative Ann Margaret Ferrante concerning alleged complaints, including conflicts of interest, nepotism, insider trading and improper kickbacks.
The following was released by Proskauer Rose LLP:
January 29, 2013 (Boston) – An independent review of serious allegations made against a Gloucester nonprofit fund that has been serving the region’s fishing community for five years found no credible proof of accusations of misconduct made against the fund or its leadership.
The 45-page report is the result of an exhaustive, four-month investigation by Proskauer Senior Counsel Scott Harshbarger. The inquiry found no convincing evidence in support of allegations that board members of the Gloucester Fishing Community Preservation Fund violated their fiduciary duty to the fishermen of Gloucester, failed to adhere to charitable governance rules or engaged in alleged unfair, deceptive and untoward business practices.
“Our investigation found that there is simply no credible basis to support the allegations. To the contrary, they are without merit,” said Mr. Harshbarger, who is a former Massachusetts Attorney General.
Since its founding in 2007, the mission of this nonprofit fund has been to safeguard and enhance the economic engine of Gloucester and Cape Ann. In August 2012, the organization hired Proskauer to conduct an independent assessment of its governance, policies and operations after the fund received a letter from state Senator Bruce Tarr and state Representative Ann Margaret Ferrante concerning alleged complaints, including conflicts of interest, nepotism, insider trading and improper kickbacks.
Based on the investigation of the facts, the report found:
– No violations of the fiduciary duties of care, loyalty and independence by any board member
– No failure on the part of the board to adhere to accepted charitable governance and operational policies and procedures
– No reasonable or credible factual basis on which to conclude that any members of the board obtained an unfair business advantage, took kickbacks, engaged in collusion or in any way engaged in conduct constituting a conflict of interest.
Despite the findings, the report recommended a package of governance improvements to help it avoid similar future allegations. Among the improvements are expanding the fund’s board members, publishing details of how fishing permits are allocated and reviewing its process for qualifying fishermen.
“These changes, which follow best practices for nonprofits of the fund’s size, scope and history, will help it continue to serve the Gloucester fishing industry,” Mr. Harshbarger said.
Mr. Harshbarger has briefed Massachusetts Attorney General Martha Coakley’s office, community leaders and many in the fishing industry on the investigation and the report’s finding.
EXECUTIVE SUMMARY
The Gloucester Fishing Community Preservation Fund (the “Fund”) was established as a non-profit organization in 2007 to distribute fishing rights to individuals who participate in the Gloucester fishing industry. The Fund’s board of directors (the “Board”) consists of prominent members of the Gloucester community, most of whom have longstanding involvement in the Gloucester fishing industry. The Board and Fund have been targets for regular criticism from the outset, including publicly in articles and blogs published in The Gloucester Daily Times. The Board decided in August 2012 to retain Proskauer Rose LLP (“Proskauer,” “we,” or “us”) to conduct an independent investigation of all of these allegations in light of the governance and operational conduct of the Fund.
In particular, the Board asked Proskauer to investigate allegations of wrongdoing including conflicts of interest, nepotism, “insider trading,” improper kickbacks and other monetary improprieties and unfair business advantages. After an extensive review, including legal and factual research, board member interviews and interviews of members of the Gloucester fishing industry and general community, we have completed our investigation and have prepared this report for such action as the Board deems appropriate.
As detailed in our report, we have made three key findings in connection with our investigation:
First, we found that the Fund has played a vital role in the Gloucester fishing community. Its mission and leadership are industry lifelines and its existence is a critical force in preserving the local business community. It is this very success, as well as the prominent roles in Gloucester of members of the Board, that seems to have triggered the allegations directed at the Fund and its alleged governance flaws, or the appearance thereof.
Second, we quickly found that all allegations emanate from a handful of individuals in the community who asserted allegations and engaged in an unfounded negative media blitz against the Fund and its members, particularly Executive Director Vito Giacalone.
Third, we found that the regulatory structure overseeing the fishing industry is complex to the point that many people in Gloucester, in addition to individuals in the fishing community, do not understand how it works. Similarly, many of the individuals with whom we spoke do not understand how the Fund was created, how it operates, how the Board makes decisions, how it ensures that the proper checks and balances are in place and that its transactions are transparent and fair. Lacking a real understanding of both the regulatory structure and the Fund, some are willing to accept allegations of conflict and collusion among the Fund, the Board and others as fact, innocently or otherwise.
Based on our investigation, we conclude that there is no credible basis to support the allegations of wrongdoing. To the contrary, they are without merit. Accordingly, we found:
a) No violations of the fiduciary duties of care, loyalty, and independence by any board member;
b) No failure on the part of the Board to adhere to accepted charitable governance and operational policies and procedures; and
c) No reasonable or credible factual basis on which to conclude that any members of the Board obtained an unfair business advantage, took kickbacks, engaged in collusion, or in any other way engaged in conduct constituting a conflict of interest.
Nevertheless, we propose a handful of simple and common sense governance improvements to serve as a road map for the Board so that it may avoid similar baseless allegations or misperceptions in the future. These changes, following best practices for non-profits of the Fund’s size, scope and history, will help it continue to serve the Gloucester fishing industry.