NEW BEDFORD — Federal authorities are cracking down on New England fishermen evading income taxes, charging eight in the last three months in a set of investigations that have sent tremors through the New Bedford waterfront.
The Internal Revenue Service described tax evasion in the commercial fishing industry as a “pervasive” issue. During four tax years between 2018 and 2021, about 35% of commercial fishermen failed to report fishing income on their federal tax returns, according to the IRS — representing about $255 million in untaxed earnings.
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Investigators described the string of indictments as a message to the commercial fishing industry aimed at bringing others into compliance with the tax obligations. At least one fisherman was arrested on the waterfront, according to investigators.
“One in three fishermen are not reporting any of their income,” said Ronald Mullett, a supervisory special agent with the IRS. “That’s a substantial tax loss. Or, as we call it, an area of substantial non-compliance.”
In a press release, the IRS shared information on its “voluntary disclosure practice,” which allows those who have failed to properly file their taxes the opportunity to resolve the issue and limit exposure to criminal prosecution.
Taxes in the fishing industry are complex. Fishermen are considered independent contractors, meaning they are technically self-employed and responsible for their own tax withholdings. That’s because fishermen can work on multiple vessels or across multiple fisheries and most are paid a share of the vessel’s catch each trip.
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It’s an arrangement with origins in the whaling days. But the current tax system for the fishing industry was codified in the mid-1990s in a bill introduced by Rep. Barney Frank that tightened the wording allowing fishermen to be paid as independent contractors. It also allows boat owners to avoid paying some payroll taxes like matching Social Security.
That bill came on the heels of an IRS dragnet audit of the fishing industry in the late 1980s that called into question the practice of paying fishermen as independent contractors. The investigation then turned up about $17 million in back taxes and penalties owed by vessel owners, later eliminated by the bill.
Since then, the IRS has sporadically dug into the fishing industry, usually going after businesses instead of individual fishermen. But those in the industry say the eight fishermen charged this year represent the largest IRS sweep of the waterfront in recent memory.
Some say it seems like the IRS would have bigger fish to fry.
“They’re going after the low-hanging fruit,” said attorney John Markey, who represents many in the commercial fishing industry, though not any of those charged in the recent string of tax-related indictments. “If they [the IRS] really wanted to reclaim tax money, they’d be taking a harder look at Wall Street … Instead, they’re going after hard-working fishermen.”
The investigations were spurred by a 2020 congressional mandate for the IRS to investigate what it describes as “high income, non-filers,” or individuals who earn over $100,000 per year and fail to file tax returns. “The New England commercial fishing industry lands squarely within this directive,” said Special Agent in Charge Joleen Simpson with the IRS Criminal Investigations, Boston Field Office, in a written statement.
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Seven of the commercial fishermen allegedly evaded taxes on earnings between $900,000 and $1.9 million over multiple years, according to the Justice Department’s Tax Division. Court filings describe how the defendants lived primarily cash-based lifestyles, cashing paychecks or incrementally depositing cash to conceal income.
They all fished out of New Bedford or ports in Rhode Island. The cases are being prosecuted in both states. According to a release by the DOJ, the seven fishermen charged are Jorge Cazarin of New Bedford, Christopher Garraty of Newport and East Greenwich, R.I., Wojciech Kaminski of West Warwick, Brian Kobus of Durham, Conn., Rodolfo Membreno of Fall River, John Doe of New Bedford, and Miguel Cruz Rubio of New Bedford.
The indictments have put the New Bedford waterfront on edge.
“They think we’re all pirates,” said one fisherman. He added that, with federal observers required on some fishing trips, and strict federal regulations across most fisheries, “the reality is the federal government is always breathing down our necks.” He asked not to be named for fear of falling into the crosshairs of the IRS.
“It’s sad to see how some guys have to live and move when they’re behind,” said another fisherman, who described how easy it is to fall behind on taxes when spending most of the year at sea. “It feels impossible to dig yourself out.”
Special Agent Mullett, who said he had an advisory role in the investigations, said that the IRS is not specifically targeting the fishing industry.
“We know [fishermen] are a hard-working lot. We certainly aren’t looking for ways to make it harder,” he said. “But for everyone else that goes to work wearing a hard hat, or an apron, or a stethoscope, and pays their taxes, it’s about being fair.”
Mullett is no stranger to the New Bedford waterfront. He was involved in the 2016 IRS sting on fishing mogul Carlos Rafael, which led to a 46-month sentence for fraud and tax evasion related to mislabeling almost 800,000 pounds of fish.
Since the Rafael investigation, he said the IRS has become more savvy about longstanding and opaque practices in the fishing industry. “Some things that were a bit of mystery aren’t a mystery anymore,” he said.
Mullett and the IRS are urging fishermen who have fallen behind on their taxes to take up the voluntary disclosure program.
“We’re here. We’re not going anywhere,” he said. “But we’re asking: let’s settle this voluntarily.”
Email Will Sennott at wsennott@newbedfordlight.org.
Editor’s note: This story was amended on May 10, 2023, to include the names of the fishermen charged.
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