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.