Winston Ross

12/16/2007
BIG FISH IN A BIG POND
By Winston Ross The Register-Guard

CLACKAMAS – Warren Nobusada ignored a stern warning when he decided to buy a fish processing plant in soggy Astoria in 1994. Oregon belonged to Frank Dulcich, the fishmonger’s operatives told Nobusada. Cross the California border, and Nobusada could expect war.

The West Coast groundfish industry was collapsing, and opportunities to buy companies were everywhere. Nobusada, a fish buyer from Monterey, Calif., had learned that the owner of Astoria Seafood Co. was deep in debt. He figured he could get a good deal on the business. Dulcich knew it, too. For 10 years, the Clackamas-based fish buyer had been building a seafood network that spanned an area from Alaska to Mexico. Dulcich was one of the few businessmen who was investing in the industry even as it shrank. He had made it clear he had no intention of ceding territory to an outsider from California, Nobusada’s attorneys argued in court.

Three days after Nobusada agreed to buy an option on the Astoria company’s stock for $215,000, Dulcich made his own play, without inspecting the plant or reviewing the processor’s books, according to court records. He struck a deal with the plant’s then-owner, Brenda Tarabochia, that would create a new contract with Dulcich’s name in place of Nobusada’s. Dulcich would pay $75,000 to Tarabochia’s creditors. Based on this investment, Dulcich declared Astoria Seafood Co. the property of Dulcich Inc.

On a damp, cloudy day that April, Dulcich and a group of associates marched into the seafood plant’s packing room and announced that they owned it. Dulcich declared that all the employees were terminated, ordered the power and water supply to be cut off immediately and told everyone on site to go home. Only a police officer and a temporary restraining order obtained by Nobusada persuaded Dulcich to retreat to the courts, with a lawsuit.
But to “even the score,” Nobusada’s attorneys said, Dulcich had two of his subsidiary companies buy $100,000 worth of fish from the company and not pay the bill.

Then Dulcich sued Nobusada for the $75,000 Dulcich had paid to lenders and got his money back. Nobusada kept the company.

Dulcich’s Portland attorney, Craig Urness, scoffs at the idea that Nobusada was warned away from Dulcich’s home grounds, saying Nobusada wasn’t told “Do not come to Oregon.” And he faults the California processor for failing to return Dulcich’s investment.

Either way, Dulcich prevailed. Nobusada no longer does business here.

After two decades of buying plants and equipment and expanding his role in the fishing industry, Dulcich’s Pacific Seafood Group is now the largest and most powerful seafood buyer in the country.

Seafood Business Magazine this year crowned Pacific Seafood the No. 1 U.S. fish processor, with estimated annual sales of $874 million and 1,600 employees. It is the first time that Dulcich has topped the list, and the achievement caps two decades of unparalleled growth. The ascent left Pacific’s dwindling competitors stunned. As the company’s clout grew, so did a list of bitter critics.

Wal-Mart of the seas

Twenty-five years ago, the West Coast was home to 50 seafood processors, the middlemen between hundreds of fishermen in fragmented fleets and the retailers that sell their catch to consumers. Today, there are only four major processors left. Pacific Seafood is the undisputed king.

Dulcich’s fishdom buys well more than 60 percent of one of the state’s most valuable sea products, groundfish, and 30 percent to 40 percent of another, Dungeness crab, according to economist Hans Radtke, in reports commissioned by various agencies and nonprofit organizations. (Urness disputes those figures but declined to offer his own.)

The company’s stake gives Dulcich tremendous purchasing power, a tool he wields with ruthless effectiveness, say fishermen who refer to the company as the “Evil Empire.” Dulcich influences how much fishermen earn for their catch and even whether they fish at all, because he determines how much they can sell. He decides how much consumers pay for both fresh and farmed seafood and what they find on supermarket shelves. Urness downplays Pacific’s might, and flatly denies most of the fishermen’s charges.

Pacific’s unprecedented power in the fishing industry has earned Dulcich’s company a coastwide reputation as the Wal-Mart of the seas, according to Pete Leipzig, executive director of the Fishermen’s Marketing Association. But Pacific’s influence over parts of the seafood business is far greater than the late Sam Walton’s company is in retail.

Wal-Mart’s market share of U.S. groceries and consumables is estimated at 20 percent. A monopoly exists when a single company controls 70 percent to 80 percent, or more, of a given market, said Jim Wilen, an economist at the University of California at Davis. In at least the groundfish and Dungeness crab business, Dulcich is approaching those numbers, according to Radtke.
Urness disputed these figures, calling them “overbroad, overstated and inaccurate.” He declined to be specific about the company’s market share, other than saying it’s “far less than a majority percentage of West Coast landings of both groundfish and whiting.”

Dulcich’s critics want him investigated for what they claim are monopolistic practices. But Pacific has never faced scrutiny from federal regulators during his two-decade rise to power.

At the state level, Dulcich paid one of the largest fines Oregon has levied in a criminal case – $800,000. A Dulcich subsidiary named Pacific Surimi LLC pleaded guilty in a Clatsop County court in 2002 to felony theft to settle charges that the company used its clout to encourage trawlers to haul as much illegally caught rockfish as they could and then paid the state and the boats a quarter of what the fish were worth.

Dulcich’s answer to his detractors is simple: He’s doing what he must to keep himself in business and, by extension, keeping alive the fishing industry in Oregon and elsewhere. If he can’t fill supermarket shelves with readily available and affordable fish, the markets will stock farmed fish from Canada or Chile, he said, and everyone loses.

“It’s a world market,” Dulcich said. “Nothing precludes our competitors from coming to the ports we’re in. But the economics aren’t there any more. The market is not there. The whole world has changed. We compete with every part of it.”

What makes Frank Dulcich’s dominion over the fishing industry even more remarkable is this: He once wanted nothing to do with the business.

A fight to survive

The company that would become Pacific Seafoods was founded as a small fish market in 1941 by Frank Dulcich’s Croatian grandfather, Frank Dominic, and his father, Dominic, who dropped out of the ninth grade to work in the family business.

In 1957, Dominic bought out his dad’s stake and continued to operate the market at 34th and Powell streets in southeast Portland. By the 1970s, the company was selling $15 million worth of seafood annually.

Frank Dulcich worked for his father as a teenager but left home on his 18th birthday, eager to make his own mark on the world.

He had earned a black belt in karate, and Dulcich decided to skip college to enter the competitive fighting circuit. He won at least one international title by the time he was 19, and started a karate studio in San Diego. But Dulcich figured his career as a competitor couldn’t last long. He decided to go to college, choosing clinical psychology as a major at the University of Portland.

While in school, Dulcich interned at the Oregon State Hospital, the decrepit institution that houses the state’s criminally insane patients and the setting for Ken Kesey’s novel “One Flew Over the Cuckoo’s Nest.” The experience taught Dulcich he wanted no part of life as a psychologist, he said.

“I didn’t want to warehouse people,” he said. “I didn’t want to put labels on people that were subjective.”

After he graduated, Dulcich reluctantly went back to work for his father. It “sucked,” he said. But he fought hard to rise above the nondescript fish shack at 34th and Powell. Dulcich worked for his dad during the week but spent the weekends developing his own company, which he founded in 1977 and called American International Trading, a fish importing business.

It was a challenging time to be in the seafood business. An El Niño weather system had pushed food and fish off the continental shelf, reducing supply. Dominic Dulcich’s right-hand man, Jim Watts, left the company to work for Ocean Beauty, then the whale in the marketplace, and immediately decided to force the Dulcich company into the ground, Frank Dulcich said. Watts could not be located for comment through online searches and telephone directories; people who previously knew him said they do not know where he is today.

“He said `Either sell to Ocean Beauty or we’re going to put you out of business,’?” Dulcich said. “It was the first time I’d ever seen my dad cry.”

The younger Dulcich refused to buckle. Ocean Beauty controlled a big chunk of the processing business, packing fish it bought directly from boats, while Dulcich was only a distributor and retailer, buying fish from processors, not individual fishermen. The larger company cut off the smaller firm’s supply, Dulcich said.

“In one year, 72 percent of our fresh seafood supply was gone,” he told Seafood Leader magazine. “We realized we had to get into production.”

Frank Dulcich decided that his only chance to survive was to expand his company’s reach. In 1983, the company bought its first seafood processing plant, in Warrenton, where skippers brought in regular and reliable shipments of Dungeness crab, cold-water shrimp, groundfish and salmon. This move gave Dulcich the opportunity to deal directly with boats. Shortly thereafter, in 1985, Dulcich merged his company into his father’s, creating Dulcich Inc.

The plan to expand the company’s reach worked, and the merged companies grew steadily. According to records obtained by The Register-Guard, gross profits for Dulcich Inc. grew 19 percent in 1987 and 1988, and 21 percent in 1989, rising from $10 million to nearly $14 million in two years.

But Dulcich’s battles with competitors had just begun. And his next big fights came from an unexpected place for a company that prides itself on family ownership: with his siblings and his mother.

Fight goes to the family

In September 1993, Frank’s brother Jeff and his sister, Anne Dulcich Bisio, sued him in Multnomah Circuit Court for $3 million, charging common law fraud, securities fraud, breach of contract and civil racketeering. They demanded his removal from the board of directors of Dulcich Inc. and all its subsidiaries.

Jeff and Anne’s lawsuit alleged that Frank had illegally diverted company funds to his own bank account and that he’d unfairly wrestled a majority of Dulcich Inc.’s 200 shares of stock from his aging father by inflating the value of the two companies he’d founded that merged into Dulcich Inc. Dominic later referred to this merger as a “dirty deal,” according to court documents, because of the pressure he said Frank had put on his father to make it happen.

The complaint also charged that Frank had withheld financial information from his siblings so they wouldn’t know how much the company was worth, alleging that he intended to buy out their shares in the business.

Frank Dulcich’s attorney Kenneth Stephens said in court documents that his client’s brother and sister were increasingly jealous of Frank’s success turning the company around.

In 1994, the siblings settled their dispute, signing a 21-page agreement that required Frank to pay his brother $585,000 as compensation for his work in the company, in exchange for Jeff’s agreement to sell his shares to Frank for nearly $1.2 million and his agreement to drop the lawsuit. Frank also settled with Anne. His sister agreed to repay the company $123,000 in loans she’d taken out, and Dulcich agreed to pay Anne $948,000 for her shares of company stock.

The agreements threatened to bankrupt the company, and Chris Maletis, a member of Dulcich Inc.’s board of directors, quit in protest.

“The settlement effectively wiped out the growth that Frank had achieved for the company,” Dulcich’s attorneys said in court.

But the deal also left Frank Dulcich in full control of Dulcich Inc., which was exactly where he wanted to be.

If he could clear the debt to his siblings, the business’ future was promising. But the family struggles still weren’t finished.

Frank had agreed to pay his parents $150,000 a year as consultants and provide medical benefits for the remainder of their lives. Not much time passed before Melba Dulcich, Frank’s mother, started complaining that she wasn’t getting paid.

The conflict stretched on for years, even though Dominic Dulcich testified in court that the company had been paying him and his wife, as promised. It took another court battle to resolve the issue. In September 2004, Melba and Frank settled their dispute, with Frank agreeing to pay an undisclosed lump sum to his parents and continue annual payments in the future.

While these court battles were going on, Frank Dulcich worked feverishly to see that the company’s profits continued to skyrocket – taking out competitors in the marketplace and in court.

Frank Fredricks, owner of Salem-based Fitts Fish Co., ran into financial trouble in the 1990s. Fredricks decided to turn to three local accountants for help, and the parties signed a lease agreement under which Fredricks would continue to operate his business but pay rent to the accountants. The accountants took out a $450,000 loan from Key Bank of Oregon in July 1991. But the business was soon struggling. The trio turned to Dulcich for help.

Dulcich agreed to buy Fitts in 1992, but shortly after “discovered that the owners … had grossly misrepresented the value of the company,” according to minutes from a meeting of Dulcich Inc.’s board of directors.

Dulcich decided instead to buy the company’s debt from Key Bank, then seize its assets. This way, Dulcich would get a plant and equipment that the investors said was worth $533,000 for about $460,000, according to court documents.

Dulcich bought out the loan from Key Bank in January 1993, took over the company’s assets and then sued the accountants for failing to pay rent on time. In the end, Dulcich got the business and its property for far less than it was worth, Fredricks said in an interview with The Register-Guard.

“I lost my shirt,” Fredricks said. Urness’ only comment about the Fitts lawsuit was to acknowledge that Dulcich bought out the company’s debt.

Other acquisitions that Dulcich made as he built his empire were less acrimonious.

Earlier, Dulcich had bought the New England Fish Co. for $500,000 after it went bankrupt in 1980, with banks that were grateful to get out of their obligation allowing Dulcich to repay the loan at $5,000 per month. He bought a processing plant in Eureka, Calif., when it was losing $1 million per year.

He started a distribution company in Sacramento in 1989 with a leased plant and four employees – and sold $1.5 million worth of seafood the first year. Seven years later, sales topped $40 million. He bought the license for seafood distributor Jake’s Crawfish from Portland restaurateur Bill McCormick and cut a deal to supply fish to McCormick’s restaurants, the fastest-growing chain on the West Coast.

He paid $275,000 for an idled processing plant in Charleston once owned by Charter Oil Co., then negotiated low-interest loans with banks in return for creating new jobs.

Dulcich bought out the struggling owners of Washington Crab Producers for
$3.5 million, outbidding Pacific Fish Co., the largest distributor in Seattle, and Tyson Seafoods.

These purchases helped Dulcich’s company catapult into the No. 1 spot on Seafood Business magazine’s list. Dulcich says he doesn’t want the title, because being the biggest is a distraction from being the best.

03/09/2009
WASHED UP FIN WHALE FORCES BEACH CLOSURE

State parks officials are considering how to remove the 40-foot animal, but blowing it up is not seen as an option

By Winston Ross The Register-Guard

FLORENCE – For all you history buffs out there, the Oregon Parks and Recreation Department is not – repeat, not – planning to dynamite the dead whale that washed up at Heceta Head on Sunday, mindful of the last harebrained scheme to blow up a beached leviathan in Florence in 1970 that resulted in huge chunks of blubber raining down upon dozens of onlookers.

But unless the tide comes in something fierce and drags this 40-foot carcass from its current resting place at a popular wayside of the Oregon Coast, something will have to be done with the cetacean.

“We normally bury animals like this on the coast,” said Chris Havel, a state parks spokesman. “But the sand there is so shallow that burying just isn’t an option. There are also archaeological sites we have to be sensitive to.”

Before that problem is solved, biologists must perform a necropsy to determine why the fin whale showed up so close to shore in the first place.
In Havel’s 15 years with the state, no fin whales have beached here, he said.

That species of whale, second only to the blue whale in size and weight and among the fastest of the great whales, typically travels far off the continental shelf. It’s capable of bursts of speed of up to 23 mph, which is why it’s known as the “greyhound of the sea.”

When this particular whale showed up in Oregon’s waters on Friday, it could barely swim at all, an indication that it was chronically sick, said Jim Rice, coordinator of the Oregon Marine Mammal Stranding Network.

U.S. Coast Guard officials noticed the bleeding mammal thrashing in the surf about two miles north of the North Jetty in Florence, and called Rice.
Rice got to Florence by mid-afternoon and spotted the creature rolling from side to side, pounded by waves and struggling to breathe. He guessed that blood emanating from the creature was from abrasions against the sand, because once it finally freed itself and swam northward, no more blood could be seen.

Rice then went up in a Coast Guard helicopter to view the whale from above.
“I could see it was underweight and having difficulty swimming. Whatever illness it may have had could have caused it to become disoriented,” Rice said. “It could not get out of the surf zone and was swimming parallel to the beach.”

Rice watched until dusk, waiting for the whale to show up again somewhere else. On Saturday, someone called in a dead whale on the beach south of Heceta Head, in a spot that’s barely accessible by a narrow “goat trail.” He went to check it out, but by then the tide had moved the carcass out to sea. Within a few minutes, another call came in that the whale was at Heceta, at Devil’s Elbow State Park.

Before long, so were hundreds of curious onlookers, Havel said.

“There were problems with people getting in and out of the parking lot and problems down on the beach with the sheer number of people,” he said.

On Sunday afternoon, parks officials closed the state park while they puzzle over how to get rid of the animal.

“One of the options is to tow it offshore, but that will take some coordination and logistics,” Havel said.

Asked if dynamite was one of the possibilities being considered, Havel burst out laughing, then answered, “No.”

Winston Ross can be reached at (541) 902-9030 or at winston.ross@registerguard.com.

03/10/2009
End to sad tale of whale
Scientists search for clues to why the 55-foot fin whale died
By Winston Ross The Register-Guard
HECETA HEAD – Old whale removal technique: Stuff full of dynamite, blow to smithereens.
New whale removal technique: Dig whale-sized hole. Roll whale down beach. Push whale into hole.
The modern-day approach to cetacean disposal proved far less messy than the former on Monday afternoon, as state parks officials and a crew from Florence-based Leisure Excavating bulldozed a 55-foot fin whale into a crater at Devil’s Elbow State Park.
The leviathan’s odd arrival here Sunday prompted some questions about how best to get the marine mammal off the beach and why it showed up there in the first place.
Answering those queries proved a bit problematic Monday at Heceta Head, as dozens of curious onlookers fended off a bitter wind to see how the saga would play out.
Oregon Parks and Recreation Department officials wanted the 30-ton whale in the ground pronto. Its stench blew clear onto Highway 101, and its presence already had tempted at least one person to sneak onto the beach Sunday night and make off with pilfered pieces of baleen, the filtering plates in the upper jaw, which lay agape on the sand Monday in a shallow pool of blood. Removing pieces of whale carcass or altering it in other ways is prohibited by federal law, parks officials said.
“He’s pretty beaten up,” said Craig Hayslip, research assistant at Oregon State University’s Marine Mammal Institute, noting the scars on the whale’s skin from “cookie cutter” shark attacks and parasites. “It is an abnormally skinny animal.”
Scientists wanted to do a necropsy, cutting into the whale’s blubber, stomach and intestines to examine the contents for clues about why the juvenile male might have ventured so far away from its normal migration route, miles off the continental shelf.
Specifically, they planned to look for the presence of biotoxins that could indicate algal blooms, which have been known to cause whale deaths in other parts of the world, said Jim Rice, coordinator of the Marine Mammal Stranding Network.
It’s also possible the whale was struck by a ship, although that can’t be determined without a closer check for bruising beneath the blubber or broken bones.
Researchers from the East Coast already have put in a request for the whale’s ears to study whether sonar testing did any damage to the tissue, but that would require decapitating the carcass, which was ruled out.
“There seems to be a lot of concern about grossing people out,” Rice said.
In the end, science and the state agreed on a compromise. First, a bulldozer and excavator would roll the whale up the beach closer to the hole. They’d then allow Hayslip and Rice to carve up the animal’s stomach with giant scalpel-looking tools called Flensing knives. Once those two had collected all the samples they needed, the whale would be buried.
The plan hinged on being able to move the animal, however. The early afternoon’s high tide had failed to carry the whale back out to sea, and U.S. Coast Guard officials deemed the rough surf at Heceta Head too treacherous to try towing it out via some kind of boat.
So they decided to roll it.
With a bulldozer at one end and an excavator on the other, they nudged the animal up the beach. End over end, the whale flopped toward its 11-foot-deep grave.
By late afternoon, the machines had moved the mammal to the edge of the hole, close enough for Rice and Hayslip to slice into it.
After an hour or so, the science was finished, and the funeral could proceed.
Parks workers dumped lime on the carcass as the dozers carved out a little extra space for its tail, then filled in the hole. As they worked, Kelly Lucas, whose husband, Dennis, is the manager of Heceta Head Scenic Viewpoint, fashioned a handmade cross from two sticks bound by yellow caution tape. She then stuffed the stems of a bouquet of daffodils she picked from her garden into the cross and laid it against some driftwood.
“We named him Jonah,” she said.

07/16/2006
Gaming and gaining
Oregon’s Indian tribes are expanding their ventures and their influence
By Winston Ross The Register-Guard
EMERGING PLAYERS
First of a four part series on Indian casinos in Oregon
THE SERIES
Today: Tribes use casino revenue to pull members out of poverty
Monday: Cow Creek Band of Umpqua Indians grows bingo hall into diverse portfolio with side story, Cow Creek, county at odds over land intended for trust
Tuesday: Tribes’ political influence keeps pace with revenues with side story, Casinos deal clout, controversy to lobbyists
Wednesday: Off-reservation casinos threaten to shake stability among Oregon’s tribes with side story, Critics say Kulongoski’s pact sets precedent
$79 million Revenue of Oregon’s six Indian casinos in 1995
$419 million Revenue of Oregon’s nine Indian casinos in 2004
36.1 Percentage of Indians in Oregon living in poverty in 1990; state total: 14.2 percent
28.6 Percentage of Indians in Oregon living in poverty in 2000; state total: 13.1 percent
GRAND RONDE – She survived a U.S. Army raid on her Rogue River Indian village by hiding in a beaver dam. She marched barefoot, at federal troops’ gunpoint, for 33 days and 250 miles to this strange place in the fog-soaked foothills of the Coast Range mountains.
Now, Martha Jane Sands is immortalized in bronze in the foyer of the fine-dining restaurant at the Grand Ronde tribe’s Spirit Mountain, Oregon’s richest casino. In her hands is a basket full of slot machine vouchers and cash, good luck donations from passing gamblers. A placid, Mona Lisa smile is spread across her weathered face.
Sands has much to smile about.
Before the federal government restored this 5,000-member tribe in 1983 with 10,000 acres of its original reservation, tribal leaders were reduced to meeting in a tool shed on their only, tiny piece of property: a cemetery. Now, the Grand Ronde owns a 90,000-square-foot casino, pulling in an estimated $76 million in revenue per year.
Once subjugated, vanquished and scattered, Oregon’s Indian tribes are now the state’s fastest-rising class of citizens. Flush with cash from a decade of casino profits, they are expanding their gaming ventures into full-scale resorts, complete with golf courses and high-end hotels.
They are buying up local land and businesses. They are pumping money into Wall Street investments, building projects and funding endowments to preserve revitalized health clinics, scholarship funds, government programs and subsidized housing for generations to come. They’re funneling millions into campaign contributions in Salem and Washington, D.C.
Most important: Oregon’s nine federally recognized tribes are pulling their sovereign nations out of the abject poverty that has had them in a chokehold for decades. They remain the state’s poorest minority group, but poverty and unemployment rates among tribes here are plummeting.
If tribal leaders can continue to diversify their booming portfolios, their impact on surrounding communities, politics and the statewide economy can only get bigger, experts say.
Oregon Indian tribes owe this success, in part, to federal law that gives them unique competitive advantages against other businesses. Tribes don’t pay property taxes on land taken into trust. They don’t pay state or federal income taxes on casino profits. And they’re exempt from state and local land use laws, leaving tribes free to develop properties as they see fit and heightening the potential for conflict with resentful neighbors.
Without sweeping changes to federal law, however, those special rights are interminable – and the tribes’ futures are bright.
“Indian casinos have put tribes on the map,” said economist Bob Whelan, who has studied the issue for his firm, ECONorthwest, since the first casinos opened. “They were long-ignored politically, socially and economically. This has given them a chair at the table.”
Consider the statistics:
In 1995, the six Indian casinos then in business pulled in an estimated $79 million in revenue, according to Whelan’s research. Two years and one more casino later, the number jumped to $224 million. In 2004, after Three Rivers Casino opened in Florence, Oregon’s nine casinos had $419 million in revenue, a figure close to the annual budget of the city of Eugene. This growth surmounted an actual decline in the percentage of adults who told ECONorthwest that they’d gambled at an Oregon casino – from 25 percent to 18 percent from 1998 to 2005 – and explains why Spirit Mountain marketers now shun their reputation as the state’s biggest tourist attraction.
For one, they say, it is no longer true (the Woodburn outlet mall holds that title). More important, casino operators don’t want to be seen so much as a tourist haven but a local destination, which is
why profits can continue to rise even with fewer visitors. Repeat customers spending more at their favorite establishment account for 69 percent to 94 percent of casino profits today.
With more than 1,600 workers and a $32 million annual payroll, Spirit Mountain is now the largest employer in timber-depressed Polk County. The Coquille, Siletz and Umatilla are the second-largest employers in their respective counties, and the Cow Creek Band of Umpqua Indians is the third-largest in Douglas County.
In 2003, nearly 11,000 jobs in the state could be traced to tribal gaming, paying $348 million in wages and benefits and resulting in a billion dollars in indirect economic output for the state, according to ECONorthwest.
By the 2000 census, only a few years after most casinos opened, social statistics among Oregon’s 22,000 Indians already had improved dramatically over the prior 10 years. Indian households earning less than $25,000 per year fell from 56 percent to 40 percent from 1990 to 2000, while those earning more than $75,000 per year jumped from 3 percent to 11 percent. The unemployment rate for Oregon Indians dropped from 15 percent to 12 percent. The poverty rate fell 7 percent. The number of Indians enrolled in college grew 22 percent.
Profits ease debt burden
To non-Indians, all of this money might conjure up images of Indians cruising reservations in Audis and Beamers, tribal leaders acknowledge. But that’s a fallacy in Indian Country. This minority group’s overall poverty and unemployment rates remain double that of other Oregonians.
Despite the common perceptions of fast, easy money, casinos are business endeavors like any other. It takes time to recoup startup investments. For the first several years after most of Oregon’s casinos opened, they were either saddled with debt or locked into a contract with an outside manager who took anywhere from 20 percent to 30 percent of gaming profits. If tribes borrowed money to build their casinos instead of relying on a manager to secure financing, they paid interest rates as high as 15 percent to nervous lenders.
Even at the Three Rivers Casino – where Tim and Mike Rose of ROI Gaming work as employees rather than under a management contract – the Coos, Lower Umpqua and Siuslaw Indians spent much of the casino’s profit from its first 18 months repaying 20 years of debt, economic development director Bob Garcia said. When the casino opened in July 2004, the tribe still owed money on the 100-acre parcel on which Three Rivers was built.
“We’re still at the point where the spigot has just been turned on,” Garcia said.
Members get their cut
With debt payments largely under control now, tribes have had to face one of the most controversial decisions in Indian Country today: whether to hand out a portion of their profits as cash payments to individual members.
Both the Siletz and Grand Ronde tribes pay out a third of their profits in per capita payments. For the Grand Ronde, that means $5,000 per year for its 5,000 members, plus another $1,000 a month for elders. Asked why they pay out such a large chunk of profits in per capita, 30-year-old tribal council member Chris Mercier’s response is, “because we can afford to.”
But there’s more to it. Federal law requires tribes to provide services such as health benefits and scholarships to those who live in the closest counties to their headquarters or ancestral homeland. Ninety percent of the Grand Ronde tribe’s members live outside that service area, and there’s constant pressure to beef up per capita payments.
Other tribes eschew the per capita system, afraid it’s at best a poor way to benefit the tribe as a whole and at worst a welfare check that actually makes it harder for Indians to succeed. Cow Creek’s per capita percentage is 5 percent of its profits. Umatilla’s is 15 percent. Both the Coquille and Coos tribes don’t do per capita payments at all. For Cow Creek Chairwoman Sue Shaffer, there’s a clear reason to invest profits rather than hand them out: It hasn’t worked in the past. Shaffer shudders when she remembers the impact cash payments for a government-forced land sale had on the Klamath tribe in the 1950s. Her brother’s Klamath wife spent the money on a big, black Buick, a red convertible and a pink Cadillac after her husband died, Shaffer said.
`You always wondered: `Why is there a Mercedes dealership in Klamath Falls?’ ‘ Shaffer said. “They might as well have given that money to a child who wanted to go to the ice cream parlor.”
Other ways to help
Both the Siletz and Grand Ronde tribes have found myriad other ways to provide for their members.
The Siletz gave desktop computers and training to each household of its 3,500 members. Any who want to go to college get a full scholarship. The tribe also supplements declining Indian Health Service funds, helps members with down payments on houses and subsidizes rent, besides establishing a charter school in Siletz that regularly bests the state average in test scores.
With Spirit Mountain’s profits, the Grand Ronde built a gleaming Head Start center, where Indian children learn the Chinook Wa-Wa trade language that bound the tribes herded onto the reservation; an expansive government center; a gymnasium; a health clinic that services the entire community and dozens of low- and middle-income tribal housing units.
To pay for government programs in the future, the tribe also has been investing its money into endowments. In a few years, the interest on those investments will support Grand Ronde programs indefinitely.
“This is going to bring people back,” said Melvin Brisbois, 36, who left the reservation in the 1990s concerned that there wasn’t enough for his children to do. He now works as the tribe’s recreation coordinator.
Nongambling endeavors
What there’s little of in Grand Ronde is much in the way of business endeavors that aren’t tied to gambling. The tribe does some outside investing, including financing an office building in Portland’s revitalized Pearl District, but few other businesses on or near the reservation are owned by the tribe.
In part, that’s because the highways that lead to Grand Ronde are curvy and narrow, and the surrounding communities still suffering from timber declines don’t offer much destination potential, tribal leaders say. Plus, new ventures can’t possibly create the return on investment that the casino has.
“Any venture we get into will not generate the instant revenue the casino has,” council member Buddy West said.
Now that state policy shifts raise the potential for off-reservation casinos to move closer to Portland, Grand Ronde council members are wishing they’d done more to diversify. With 40 percent of the tribe’s members still living below the poverty line, self-sufficiency remains a distant goal.
“We’re kind of going backwards,” tribal elder Earl LaBonte said. “We’ve only gained 1,000 acres in 18 years. There are no jobs here in this area other than the casino.”
To remedy that, the council soon will hire an economic development director. Once the endowments are big enough, there will be more money to shift to other projects.
Tribal council member Angie Blackwell says she knows revenues eventually will drop as the competition closes in. The percentage of growth in casino revenue has declined each year since Spirit Mountain opened. But she considers the endowments the tribe’s most important investment.
“I don’t have to worry about whether my child is sick enough to go to the doctor anymore,” said the self-described high school dropout and teenage mom. She credits tribal programs with getting her toward a college degree and a good job.
As for hindsight, Blackwell said the tribe’s location off of a major interstate but close to Oregon’s big population centers has made the casino the best investment there is.
“None of us picked where our reservation would be,” she said. “But we’ve all done the best we can with what we had.’
Proximity a key factor
The 340-member Burns Paiute tribe knows that story too well. Isolated in the high desert of Eastern Oregon, the two closest towns of Burns and Hines are populated with fewer than 7,000 residents combined.
Proximity to a casino is the single best predictor of whether a person visited one in the past year, according to ECONorthwest.
The Old Camp Casino in Burns has added 100 slot machines to the 75 it had when it opened. But after losing money on table games, the tribe pulled them out. The casino still struggles to break even.
“Location, location, location,” sighed Burns tribal Chairman Dean Adams, who is working on getting a data storage company online that he hopes soon will host state archives. “We’re just trying to survive with what we have.”
Other remotely located tribes have struggled to make their casinos lucrative as well. Though the actual profits are kept confidential, Whelan says the best indicator of a casino’s success is its size. The Klamath tribe’s 300 slot machines make the Kla-Mo-Ya casino one of the smallest in the state. Warm Springs’ Kah-Nee-Tah casino is no bigger than that, and the tribe is desperately lobbying the federal government to allow it to build a new gaming center in the Columbia River Gorge.
Diversification pays off
What makes the difference between a successful tribe and a struggling one? Where casinos are concerned, it’s certainly all about location. But it’s also important to have a stable tribal government, a positive attitude about the outside world, an entity specifically established to deal with business and a written commercial code, says Scott Clements, a financial consultant who has worked with Northwest Indian tribes since 1978 on some of their outside endeavors.
“Some tribes are better prepared to involve themselves in the commercial world than others,” Clements said.
Some tribes say having an established land base is a boon, but for others, the “fresh start” brought about by government termination is equally beneficial, freeing the tribe to develop property where it makes the most sense.
The Umatilla, whose tribal status was never terminated by the federal government like six of the state’s other tribes, oversees a reservation of nearly 210,000 acres in northeastern Oregon.
Its operating budget has ballooned from $7.5 million in 1992 to $108 million in 2004, according to figures from the tribe’s annual report. Only $11.2 million of those funds came from gaming; most of the rest came from other tribal enterprises. Just two years after the Wildhorse casino was built in 1994, the Umatilla broke ground on a golf course, 100-room hotel and 100-unit RV park.
“We were probably the first tribe to think about diversifying our economy,” said Gary George, the 2,500-member tribe’s executive director and chairman of the Oregon Gaming Alliance, a consortium of the state’s nine tribes that advocates for the right to continue gaming.
The Umatilla may have been among the first to venture outside the gaming business, but it certainly wasn’t the last.
The Coquille tribe, with 6,500 acres in trust, is spending $3 million to build a fiber-optic network that will snake from The Mill Casino in North Bend to its offices and housing in nearby Empire, a small city west of Coos Bay. A 10-acre organic cranberry farm, planted a decade ago, recently has begun to turn a profit.
But the 800-member tribe’s biggest new venture is its 60-acre parcel north of the casino, where the Coquille Economic Development Corporation is planning a $100 million retail development that’s hoped to revitalize the North Bend-Coos Bay waterfront.
Learning from others
Meanwhile, the last tribe to build a casino in Oregon has been waiting in the wings. With a meager six-acre parcel also in Empire, the 800-member Coos, Lower Umpqua and Siuslaw Indians once planned to build a casino in Coos County. But when the Coquille tribe was restored in 1989, the federal government allowed it to build The Mill Casino first in North Bend. The Coos tribe sued to block that project and lost, then set its sights on Florence.
After 10 years of legal battles and perhaps the most hotly contested casino project in the state, the Three Rivers Casino’s expansion plans hint at its early success. The tribes are now planning to quadruple the casino’s size, build a 100-room hotel and double the casino’s slot machine offerings to 650, adding craps, roulette and poker to the gaming options.
Economic diversification is a ways off, as the tribe continues to pay down debt and focus on expansion. But in just the past two years, the tribe acquired developable land at Coos Head in Empire and bought the Windward Inn in Florence, where offices are planned.
Assuming Three Rivers continues to prosper, this tribe will have had the benefit of watching eight others go first. Per capita payments are unlikely, Garcia says, in part because they’re taxed, reducing the value of the investment. Investing in the stock market also is something the tribe isn’t interested in.
“I’ve seen tribes that have a Wall Street money manager look after their assets,” Garcia said. “I would question what that does for a local community.”
What they’ll do exactly is too far off to be specific about. “The thing to avoid,” Garcia said, “is spending too much money.”
Winston Ross can be reached at (541) 902-9030 or rgcoast@oregonfast.net.

02/05/2006
A long day’s work
Oregon fishermen face Pacific’s roguish waves to catch pricey crabs
By Winston Ross The Register-Guard
NEWPORT – It is mid-morning on a dreary, drizzling, foggy Thursday at the Oregon Coast. A dozen grizzled, coffee-clutching Dungeness crab fishermen are huddled at Chicken Point, where they’re about to make a life-or-death decision: whether to steer their small boats across the Yaquina Bay bar.
Conditions are marginal at best. A 15-foot swell means a change in the tide could cause waves to break at the river mouth, which could turn and then topple their vessels. The U.S. Coast Guard has closed the bar to recreational boats. But that decision doesn’t apply to the skippers of the state’s most valuable fishery, which raked in a record $50 million last season.
These men are on their own.
“We’re heading to the south, with four people on board,” crackles a captain’s voice over the VHF radio in the truck Florence fisherman Al Pazar rides in to Chicken Point. “We’ll probably be back sometime tomorrow.”
“You’d better be,” Pazar mumbles beneath his breath. The forecast for Friday is for gale-force winds and 37-foot swells, twice the size of the ones that make the skipper of the Delma Ann think long and hard about heading out this morning. If he does go and can’t make it back before the big swell comes, the boat could be trapped at sea in some of the worst conditions possible.
Pazar, dressed in jeans and a grimy sweat shirt bearing his boat’s motto (“where the flogging continues until the morale improves,”) climbs out of the truck and strolls up to his friend and fellow crabber Mark Newell, who’s watching the surf with his wife, Lisa.
“What’s a guy to do here?” Pazar asks Mark Newell.
“I don’t like the looks of it right now,” Newell says.
“The Michele Ann just took a beating,” Lisa says. “And here comes the Challenge. He must really be hungry. This ought to be worth watching.”
“Now I’m getting shamed,” says Pazar. In the past, the president of the Oregon Crab Commission has been one of the first to ply the tricky bar, setting the standard for other boats his size. But the father of two teenagers no longer makes decisions like this with his gut alone.
Back at the Hallmark Fisheries dock, Pazar’s boat is idling . His two-man crew is idle, after loading 1,000 pounds of squid, sardines and razor clams on board.
The “puller,” or “block man,” is Claude Badet, a soft-spoken, college-educated Frenchman who’s been fishing with Pazar for the past five or six years for the money and the adventure. The baiter is 23-year-old Tony Fultz, a shaggy-haired, self-described smart-aleck from Siletz, stabbing the bait box with a paring knife out of boredom. He says he hasn’t drawn a real paycheck since he got out of rehab last summer. He’s grumpy today because two of his friends are headed to jail on felony convictions – and because he’s waiting for Pazar’s decision, instead of earning money.
“It’s a real nice ocean,” yells Dennis Krulich, the skipper of Pazar’s other boat, the Tempest, tied up behind the Delma Ann at Hallmark. “You just have to get there.”
At Chicken Point, so named because it weeds out the chickens from the brave, the skippers learn that a fierce current is yanking down the buoys that mark their underwater crab pots, to the point where they can’t be seen from the surface. The boats could make it across the dangerous bar and not be able to find their pots. The fishermen talk about hunger and greed. They wonder aloud which is the bigger motivator.
“Oh, here it is. Joe’s going,” Pazar groans as he watches a tin can of a boat, the Last Dance, head towards the river mouth. “That’s it. Somebody with a lower bow than me.”
So Pazar will fish, too. But he won’t be happy about it.
“I hate days like this,” Pazar grumbles on the way back to the Delma Ann. “I just hate them.”
Season started six weeks late
Pazar and his crew have been up since well before dawn. He drove from his home in Florence, where he owns the Krab Kettle fish market, to Newport’s Yaquina Bay, where his 50-foot boat is parked at Dock 5, just across from his brand-new and bustling restaurant, Local Ocean Seafoods.
Fishing is still Pazar’s bread and butter. His decision to go out will determine whether his crew makes $0 or $1,500 for a long day’s work, whether he’ll spend more on fuel and bait than he gets back in profits. The season started six weeks late, and without the 64-hour “pre-soak” period that allows small boats like the Delma Ann to keep pace with their bigger counterparts, who can drop 500 crab pots in the water on one trip and pick them all up on the next. The pre-soak, during which boats are only allowed to drop pots and not reel them in, allows skippers like Pazar to catch up, making several trips out to drop all the pots they own and then come back to retrieve them – when the weather permits.
Here’s where Pazar also is at a disadvantage. Conditions such as today’s aren’t even questionable for 80-foot boats. He spotted the lights of eight or nine vessels from shore on the drive up from Florence, boats that left the night before and are already pulling in crab.
After the state delayed the season for a month because the crabs weren’t fat enough, one of the coast’s roughest winters on record kicked in, pushing the fleet’s start date into January. By the time the weather cleared up enough to fish, price negotiations kept boats tied to the docks, effectively on strike, as they bartered with processors for a better deal.
Pazar should have been fishing since early December, selling his product whole for Christmas dinners and New Year’s parties. Instead, it’s already Groundhog’s Day and he’s only been out a half-dozen times, waiting with the rest of a hungry fleet, in a town that relies on crab in the winter to keep the economy afloat during the lag in tourism.
“Believe me, Newport can feel it when we’re not fishing,” Pazar says.
Now he’s racing to make up for lost time.
Crossing the bar is tricky
The tide is ebbing, which is the ideal time for boats to head to sea. Pazar pushes the throttle to 8.1 knots – about 9 miles per hour – and steers toward the river mouth, between the giant jetties that help drive water and silt into the ocean, keeping the channel navigable. As he drives, Pazar is already talking to eager buyers, whose demand for crab is urgent thanks to the late season start.
“I can get you 3,000, maybe 3,500 pounds,” Pazar says into his cell phone to a buyer in Portland. As he nears the first swell, he hangs up: “I’d better watch what I’m doing here.”
The trick to crossing an Oregon river bar is to keep your eyes open, Pazar says. Watch for any sign of a breaking wave and be ready to power directly into it, or the water could crash into the side of the boat and flip it. Guiding the Delma Ann through the channel, Pazar avoids the breakers hitting the north and south jetties, plants his feet firmly in place and rides out the violent bobbing of the boat, lurching up and then plummeting down as it hurtles toward the ocean.
In a few minutes, the Delma Ann is at sea, where the conditions aren’t much better. The boat rocks side to side, up and down.
Pazar heads south, against the current, dodging buoys and logs that could tangle or bend his rudder, his boat barely able to travel 6 knots. On an earlier trip, he had dropped a string of pots a few miles off Waldport, marking the point of the first one on his Global Positioning System plotter. As long as the current hasn’t pulled it under, Pazar and his crew will be able to get to work.
Boat rocks erratically
Sure enough, the first buoy is visible. As Pazar maneuvers the boat close to the buoy, Badet reaches out from the port side with a long, hooked “buoy stick” and snares the line connecting the buoy to the pot. He maneuvers the line into a turning wheel and the power block’s hydraulic motor reels it up, until the pot is close enough for him and Fultz to hoist it on deck. Fultz unties
the pot and the pair starts pulling crab out, tossing females and undersized males back into the water and the keepers down an aluminum drop shoot, into a waiting tank filled with seawater.
The pots can hold 100 pounds of crab, 50 apiece, depending on the size. The first one has only 10 writhing Dungies. But 10 is better than nothing. Pazar has 620 pots out in nine strings. He’s hoping the crew can haul in at least half of them by midnight, when the flood tide will allow the Delma Ann to return to port.
When the pot is empty, Fultz and Badet add bait to it and wait for the boat to pitch so that Fultz can toss the pot back into the water. He’s careful to ensure that there’s no slack line on deck, which could wrap around his feet and yank him overboard. Seagulls hover behind the boat, hoping to snatch a piece of discarded bait from the water before it sinks out of reach.
Over and over, pot after pot, the two-man crew works, their hair drenched in sweat and seawater, their orchestrated movements so smooth and coordinated that the work takes on a poetic rhythm.
Not that it’s easy. In the early afternoon, the wind shifts to the west and waves start hitting the boat broadside. One crashes over the crew, soaking them. Every so often, Badet misses a pot, forcing Pazar to back up or circle around to retrieve it. Changing direction can force wind down the chimney of the diesel stove, blowing choking fumes into the galley and forcing Pazar to leave the wheel to air out the close quarters or turn the stove off.
And throughout this nonstop toil, the boat is rocking erratically, bow to stern and port to starboard. One wrong pitch off balance could send the fishermen overboard.
On this trip, Pazar also has to stop and find his anchor, dropped on his last trip after the alternator nearly burst into flames. He had to drop anchor to try and repair it, then leave the anchor behind as the Coast Guard towed him to the bar to pick up a new alternator. One of his tasks today is to find the anchor, marked by a buoy, and haul it back up on deck.
As nightfall approaches, someone unplugs the generator, cutting power to all of Pazar’s equipment. When he gets it back on, two of the lights on deck don’t work anymore.
Ocean calms at night
As the skies turn dark, the ocean calms, giving the crew a more stable platform. They get short breaks between pot strings as Pazar drives to the next location. The skipper doesn’t take breaks, but he does climb down the ladder into the house for an occasional pot pie. Then it’s back to work again.
Pazar could have headed back to port on the evening’s next flood tide at around dinnertime. But after reports from other skippers who couldn’t make it across the bar, he decides to wait, meaning his next window to return to port won’t come until well after midnight – 14 hours after the crew left port.
The day’s catch is finally halted when Pazar discovers that half of the pots on his last string have been buried underwater by the current. For now, he can’t get to them, and he realizes he dropped them too close to the beach, where the high seas are driving the pots into the sand.
The crew’s last job will be to drop a string of nine test pots in deeper water, in the hope that they’ll be more successful there.
Midnight approaches. Pazar, just south of Yachats, turns the boat around and heads north, his speed picking up now that he’s working with the current. As he nears the river bar, he flips on AM radio, listening to a women who tells the host she’ll never move here from Colorado because she had a dream that she was flying over Oregon and it had all turned to sand.
Pazar looks for two red lights, or range markers, on shore and lines them up vertically to ensure he’s pointed directly at the channel. He chats with Krulich about what they’ll do over the weekend. Badet and Fultz crawl into their bunks for an hour or two of sleep.
The bar’s incoming tide carries the Delma Ann in smoothly. Pazar guides it back to the Hallmark dock, where he and the crew will doze until the processor opens for business. He has an appointment at noon for a magnetic resonance imaging scan on his bad left knee – damaged by decades of holding himself in place on ship – so he wants to be the first boat to unload his cargo.
At an average of 10 crabs per pot, it turns out to be a decent day. Pazar’s crew pulled in more than 300 pots, with 6,000 pounds of crab. At $1.50 a pound, that’s $9,000. Fultz and Badet get 12 percent of that each, or a little more than $1,000 for some 24 hours of work.
Pazar’s decision to cross the bar 17 hours ago was a sound one. But he’s not thinking about that any more.
His mind is on the next one.