The Department of Health and Human Services has launched a special welfare fraud investigation that targets Maine’s approximately 500 licensed elver fishermen, some of whom have earned up to $100,000 a year for their catch over the past few seasons.

The agency, in cooperation with the Department of Marine Resources and Maine Revenue Services, is reviewing catch records and tax filings from 2010 to 2013 to determine whether any elver fishermen who received welfare benefits have failed to report income. It’s unclear what motivated the special investigation or how much money the state is devoting to the initiative, which is described in official records obtained by the Maine Sunday Telegram.

The records disclose that the three agencies prepared a memorandum of understanding formalizing an agreement to share information. The Telegram has requested a copy of the agreement under the Freedom of Access Act, together with other records related to the project, from all three agencies. But state officials have so far refused to release any additional information. They assert that some of what the newspaper is seeking should be kept secret because it is “intelligence and investigative record” information, “confidential tax records” or “confidential fishery reports.”

DHHS asked the newspaper to destroy the documents that refer to the investigation, saying the material was mistakenly disclosed and should have been redacted because it is confidential. DHHS also asked the Telegram not to publish a story about the initiative, which the agency has dubbed the “Elver Project.”

Several lawmakers involved in DHHS oversight, as well as members of the elver fishing industry – which includes many members of the Passamaquoddy Tribe – told the Telegram they were unaware of the project until contacted by the newspaper.

The project was described briefly in a two-page memo that appears to have been drafted by Scott Fitts, head of the DHHS Fraud, Investigation and Recovery Unit. The undated memo outlines several anti-fraud efforts that the unit has undertaken since the hiring of eight additional investigators.

The memo, forwarded to top DHHS officials, is apparently intended to demonstrate how the fraud unit plans to deploy its additional resources and investigators. The LePage administration has made welfare fraud a priority and hired additional investigators at a cost of $700,000 a year, raising the fraud unit’s annual budget to $1.5 million.

The agency records do not specify why elver fishermen are being singled out for investigation; however, popular anecdotes implying welfare fraud often include individuals working in seasonal industries. Many of those stories involve clam diggers or lobstermen allegedly underreporting their income to qualify for publicly funded health insurance or other benefits. But fisheries other then elvers are apparently not included in the fraud initiative.

Officials involved in the initiative declined to comment last week. Kevin Wells, the legal counsel for DHHS, said the Office of the Attorney General has advised state officials not to discuss the matter.

A POST-TSUNAMI GOLD RUSH

The project was launched amid ongoing efforts by agencies and lawmakers to regulate a booming industry that is primarily a cash business. Additionally, the number of licensed fishermen – many of whom migrated from other, less lucrative pursuits, such as clam digging and harvesting periwinkle snails or seaweed – has soared amid strong demand for the baby eels in Asia. Elver prices skyrocketed after a 2011 tsunami in Japan wiped out eel farms. In the past, elver prices were as low as $25 a pound, but they climbed above $2,000 a pound last year. Last year’s haul of roughly 19,000 pounds was worth nearly $40 million, earning some fishermen in excess of $100,000 over the course of a 76-day season.

Landings declined slightly this year, to a total of 18,253 pounds with a value of nearly $33 million.

The big dollars, along with the LePage administration’s high-profile quest to uncover fraud, may be the impetus for targeting the elver fishery.

Patricia Bryant, an elver dealer and licensed harvester in Nobleboro, said she did not know about the initiative until contacted by the Telegram. Bryant said she suspects a number of fishermen could be ensnared, noting that some have complained to her about a new card system designed to accurately capture catch data.

The new system, which goes into effect next year, would require all licensed elver fishermen to use a card that would be swiped to record catch data at dealers.

“They’re really pissed,” Bryant said. “That’s why they’re saying things like, ‘I don’t like this mandatory reporting because they’ll know how much money I’m making.’ I say, ‘What’s your issue with that?’ They say, ‘Well, if they know how much I’m making I’m going to lose my benefits.’ I say, ‘Well, for chrissakes, if you’re making $30,000 or $40,000 in 10 weeks, you don’t deserve benefits!’”

Jeffrey Pierce, executive director of the 197-member Maine Elver Fishermen Association, had a different perspective. He described his members as “straightforward people” who previously scratched out a living and never anticipated the elver gold rush.

“These people are proud to get off welfare and they’re proud that they no longer need the government for help,” Pierce said. “It’s a big shock for them to see how much they pay in taxes, sure, but many of them are proud that they have to.”

Federal regulators are considering cutting the harvest between 25 percent and 40 percent for 2014 to address scientific concerns about the health of the eel population on the Atlantic coast. Pierce said his members are terrified that the fishery will disappear, sending them back to the government for assistance.

“I had a 54-year-old woman who does this come to me in tears,” he said. “ ‘If we lose this fishery,’ she said. ‘I’m going to have to get back on welfare.’ She used to pick periwinkles, dig worms and seaweed. She’s never earned this kind of money.”

Pierce, a former Republican candidate for the state Senate, said he believes there is widespread welfare fraud in a system that, in his view, fosters dependence. He said it’s possible there are elver fishermen who “exploit the system,” but he’s uneasy about his industry being in the crosshairs.

“I think it’s going to turn them off to the government even more,” he said of the fishermen.

State lawmakers said they were also unaware of the Elver Project until contacted by the Telegram.

Rep. Richard Farnsworth, D-Portland, House chairman of the Legislature’s Health and Human Services Committee, which receives briefings from DHHS and its fraud unit, said there are often anecdotes about under-the-table earnings in a number of industries.

“The concern I have is, are they targeting the Native American population?” Farnsworth said.

CONFLICT OVER LICENSING

A large portion of the state’s elver fishermen are members of the Passamaquoddy Tribe, which last spring engaged in a tense standoff with the LePage administration over management of the fishery. In 2011, there were two licensed elver fishermen from the tribe. The number skyrocketed to 236 in 2012.

The state issued 433 licenses this year, and also certified an additional 272 licenses issued by the tribe.

Licenses issued by the Passamaquoddy Tribe are a source of friction with state officials. Earlier this year the tribe, invoking sovereign nation rights, tried to issue 575 licenses, touching off the standoff with law enforcement and the LePage administration in April. Marine Resources Commissioner Patrick Keliher, along with law enforcement officers and wardens, traveled to Pembroke to inspect licenses. State officials later told tribal leaders that they would invalidate 150 state-issued licenses, saying the Passamaquoddys’ actions threatened the vitality of the fishery and could precipitate a shutdown by federal authorities.

Tensions escalated when Gov. Paul LePage joined in a conference call with tribal leaders. Newell Lewey, a spokesman for the Passamaquoddys, later claimed that the governor threatened reprisals against the tribe during the call.

Representatives of the Passamaquoddys said they had no knowledge of the Elver Project until contacted by the Telegram. Fred Moore III, the fisheries committee coordinator for the tribe, said he supports a fraud crackdown.

“You’re not going to get any opposition from me – in fact, it may not go far enough,” Moore said of the initiative. “If there’s a suspicion that there’s welfare fraud going on, I would not hesitate for a second to see who exactly is being targeted.”

But Moore also voiced skepticism about what motivates the LePage administration.

“The tribal fisheries management people have found that while some ideas coming out of Augusta are good ideas, we have supported them only to have them turned against many of our people,” he said.

Moore said the elver boom has lifted many in his tribe out of welfare. A significant portion of the fishery and the Passamaquoddy Tribe are located in Washington County, which is home to the state’s highest percentage of people living below the poverty level (20 percent) and, as of August, the second-highest unemployment rate (9 percent). In August, the state paid out $3.1 million in welfare cash benefits to Washington County residents. For comparison, that’s nearly five times the amount paid to residents of Lincoln County, which has nearly the same population.

According to U.S. Census data, Maine is one of nine states with 30 percent or more of its American Indian population living below the poverty level. More than 13 percent of tribal members earn between $25,000 and $34,999 annually, according to federal data. The majority, 32 percent, earn less than $10,000 a year.

The statistics provide a backdrop for the fraud crackdown and tensions over the elver fishery. The tension between state regulators and the Passamaquoddys has eased, but it has not dissipated completely. Bryant, the elver dealer in Nobleboro, predicted more friction in 2014, as the state enforces catch reports and license limits under the threat of decreased quotas from the federal government.

“We’re going to have a serious issue with them (the Passamaquoddy) next year,” Bryant said.

INCOME UNDER SCRUTINY

According to the DHHS fraud unit memo and related emails obtained under the Freedom of Access Act, the Elver Project was initiated in August and ends Jan. 31, 2014. It involves comparing elver license holders in 2010, 2011, 2012 and 2013 with welfare benefit eligibility data over the same period.

“Our plan is to obtain harvest information to determine income and compare that income with reported income of recipients involved,” the memo says.

It’s unclear how the agencies are deploying what they often describe as thinly stretched manpower resources for the initiative. Bryant suspects the Department of Marine Resources is merging its fraud effort with a highly publicized crackdown on elver poaching. The illegal taking and selling of eels has resulted in stiffer penalties, and a first offense can now result in jail time.

While Bryant applauds prosecuting welfare cheats, she worried that the Elver Project could be complicated as a result of rampant poaching. Some elver dealers, she said, buy poached eels from unlicensed fishermen and report the catch under the name of a legally licensed fisherman.

She said if the state is comparing catch data with income filings with Maine Revenue Services, some fishermen could be wrongfully accused of committing tax or welfare fraud because part of their reported catch had actually been made by an unlicensed fisherman.

Sen. Chris Johnson, D-Somerville, is co-chairman of the Legislature’s Marine Resources Committee, which oversees fisheries and receives reports from the Department of Marine Resources. Johnson said the Elver Project has never been mentioned.

“I was aware that they are working on some enforcement actions, but I had assumed that had to do with the illegal fishing of elvers,” Johnson said. “He (Commissioner Keliher) said he couldn’t provide any details about it.”

Johnson questioned the need for confidentiality about the elver initiative but said fraud should not be tolerated.

However, he added, many elver fishermen may come from dire economic circumstances. He said that individuals underreporting income to receive benefits should be “put on notice.” However, he didn’t think the state should throw the book at them without warning.

“I think we need to let them know that this is not acceptable and it will be prosecuted before we start ruining people’s lives over it,” he said.

Steve Mistler can be contacted at 620-7016 or at:

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