The Water Rat of Wanchai (4 page)

Ava reached for a black Moleskine notebook resting on the corner of the table, opened it to the first page, and wrote
Andrew Tam
across the top of the lined page. Every job she had ever done had its own notebook, a meticulous day-by-day record of everything she deemed relevant. The completed notebooks sat in a safety deposit box at the Toronto-Dominion Bank two blocks from her condo.

The manila envelope was stuffed with paper, and she quietly groaned at the prospect of wading through it all. However, a quick scan soon brought a smile to her face. The paperwork was beautifully organized, a complete chronological record of Andrew Tam’s dealings with a company called Seafood Partners, starting with a letter from him summarizing the events from start to finish. The letter even referred to appendices that were attached and neatly numbered. Ava admired his thoroughness. Then she wondered what moment of madness had caused him to go into business with a seafood company.

Of all the characters she had dealt with in the past, the seafood guys were the worst. It was as if they were programmed to steal, and once they had your money, getting it back was harder than pulling teeth with your fingers. One of her clients in Vancouver had bought two forty-foot containers of Chinese scallops; when the product arrived in Canada, he found that the boxes — clearly marked scallops — were filled with freezer-burned mackerel. It had taken her close to two weeks’ trekking around seafood plants in dusty, dirty Dalian in northeast China, on the Yellow Sea near the Korean border, before she caught up with the packer. It took another week before she got the money back. Even then the job wouldn’t have wrapped up so quickly if Uncle hadn’t put her in touch with a high-ranking general. They had to split their recovery fee with him (and probably the rest of his unit), but without his influence she might have been there for several weeks more.

Tam’s company was called Dynamic Financial Services. It was on Des Voeux Road, almost next door to the headquarters of the Hong Kong Shanghai Bank, on Queen’s Road in Central, the very heart of Hong Kong’s financial district. About a year before, Seafood Partners had come to Dynamic Financial Services with a master purchase order from Major Supermarkets for six million pounds of Thai shrimp, cooked, peeled, and deveined, with the tail on.

Ava made her first note:
Who introduced Dynamic to Seafood Partners?

The purchase order was of twelve months’ duration, and the selling price was locked in for the entire period.

Note 2:
Isn’t shrimp a commodity? Don’t prices fluctuate? How could Seafood Partners commit to Major Supermarkets for a year?

The product was to be packed under Major Supermarkets’ own label, and Tam had affixed a copy of their specifications. They didn’t seem particularly onerous. There had to be an average of thirty-seven to thirty-nine shrimp in every bag. Each bag had to have a true net weight of one pound, true net weight being the weight after the shrimp had thawed. The tails were to be a uniform red colour, with no black tails allowed. Tripolyphosphates and/or salt were permitted up to a residual level of two percent. The shrimp had to be processed from fresh and frozen only once. On the specification sheet Tam had highlighted in yellow the net weight requirement and the tripolyphosphates level.

It was anticipated that Major Supermarkets would need about 500,000 pounds of shrimp a month. In order to manage that level of business, Seafood Partners would need to have 1.5 million pounds of shrimp in their system at any one time — an on-hand inventory of 500,000 pounds, another 500,000 pounds in transit to the U.S. from Thailand, and another 500,000 pounds being processed. Seafood Partners was buying the shrimp at $4.10 a pound and selling to Major Supermarkets at $4.80 a pound.

Note 3:
Given what was essentially 90 days’ financing at 2 to 3 percent a month, and given customs, storage, trucking, and distribution charges, how the hell did Seafood Partners expect to make money?

The master purchase order was from Major Supermarkets to Seafood Partners. Seafood Partners assigned the purchase order to Dynamic Financial Services, and Dynamic issued letters of credit to the Thai packer and imported the product into the U.S. Major Supermarkets had six distributors that drew up weekly purchase orders for shrimp; Seafood Partners and Dynamic Financial Services were copied on those purchase orders. Seafood Partners released the product from inventory and Dynamic Financial Services sent an invoice for the product directly to Major Supermarkets. The cheques went to Dynamic, which took its money and interest off the top and then sent the balance of the funds to Seafood Partners.

Note 4:
Why didn’t Dynamic retain complete control of the inventory? Why did they allow Seafood Partners to release product?

After five months, relations between Major Supermarkets and Seafood Partners began to go sour. Shrimp sales were not meeting expectations, and the buyer at Major Supermarkets was having second thoughts about the length and volume of his commitment. The documentation included copies of emails that had gone back and forth, and in many of them the buyer was looking for price relief. He claimed that the market had tanked and that he could buy the same shrimp more cheaply almost anywhere. He needed help to remain competitive.

At first Seafood Partners refused. A deal was a deal, they repeated. The buyer kept at them to reduce their prices, making (not very subtle) threats to go elsewhere to average down the cost of Seafood Partners’ product. Finally Seafood Partners relented and dropped their selling price to $4.40.

Note 5:
Didn’t Dynamic Financial Services ask if dropping the selling price of the shrimp was even remotely possible?

As Ava read on, she could see the train wreck coming. She didn’t know what form it was going to take, but Tam’s yellow highlighting of the net weights and chemical levels offered a clue.

There are several ways to make more money on a basic food commodity than the market warrants. Cheating on weights is perhaps the simplest. Put a label weight of one pound on a bag and then put 15 ounces of product in it, and you can increase your profit by seven percent. If someone actually weighs the bag, the packer has a problem. But the weight of shrimp is easier to manipulate than most other seafood products, since you have to add an ice glaze to protect the flesh. Under normal circumstances a five percent glaze is added, meaning that a one-pound bag’s gross weight becomes 16.8 ounces. If Seafood Partners put a twelve percent glaze on the shrimp, the bag would still have a gross weight of 16.8 ounces, but 1.8 ounces would be ice, leaving only 15 ounces of shrimp. The product would pass any rudimentary inspection.

Another common trick is to “pump” the product, to add moisture to it. Ava didn’t know who had discovered this technique, but she knew that just about every protein sector — including beef and chicken producers — does it. With shrimp it’s very simple: all you have to do is soak them in a chemical solution, typically a tripolyphosphate. The longer you soak the shrimp and the more potent the solution, the more moisture the shrimp absorbs. The moisture adds weight — artificial weight.

The economic impact of adding weight goes beyond the extra weight itself. Shrimp are sold by size: the larger the size, the higher the price. Shrimp that come to between 31 and 40 pieces per pound sell for more than smaller shrimp that count between 41 and 50 pieces per pound. So if Seafood Partners added enough weight chemically to change a 41–50 count into a 31–40 count, they would make more on a per pound basis.

How many stunts had Seafood Partners tried? As it turned out, all of them. Ava could hardly believe it. Cheating using one method was risky enough. Trying two was begging for trouble. Doing all three? Craziness — or complete desperation.

And Major Supermarkets had caught them out. Actually, the U.S. Food and Drug Administration caught them first, in a random inspection, which was when the weight discrepancy was identified. The FDA turned the problem over to Major Supermarkets’ in-house quality-control team, which bored in and exposed the whole mess. It was the excuse the buyer needed to get out of the twelve-month contract. The day after the internal inspection results, Seafood Partners were informed that they had been delisted. The product already in stores was to be picked up, the master purchase order was cancelled, inventory in the U.S. and on the water was now their problem, and none of the outstanding invoices would be paid.

Seafood Partners did not tell Dynamic Financial Services about the fiasco. It was not until Dynamic called Major Supermarkets about the outstanding invoices that they were told what was up. In the meantime, Seafood Partners had moved the inventory and Dynamic had no idea where it was. More than a million pounds of shrimp had gone missing. Add close to a million dollars in unpaid invoices, and Dynamic was out of pocket at least five million dollars.

Andrew Tam had done a good job of piecing it all together. There were copies of the financing agreement, the master purchase order, the letters of credit Dynamic had issued, and examples of Major Supermarkets’ purchase orders. He had also attached the FDA inspection report and Major Supermarkets’ quality-control team reports, and he had somehow accessed a series of emails from Seafood Partners to the packer that outlined, in bold terms, what they wanted him to do.

Note 6:
Has Tam spoken to the packer? Does the packer have any liability?

Ava checked her watch; it was 4 a.m. in Hong Kong. She dialled Tam’s cellphone number. To her surprise he answered. “I was hoping you’d call,” he said.

“I’ve just finished going through your paperwork. What a mess.”

There was silence from the other end, and Ava wondered if she had insulted him. Then he said, “Tell me about it.”

She looked at her notes. “I see two signatures on the financing agreement on behalf of Seafood Partners. How many partners are there?”

“Those are them: George Antonelli and Jackson Seto. Antonelli lives in Bangkok. He handles production and the technical side of things.”

“Like short weights?”

“I guess. Seto kind of floats between Seattle and Hong Kong. He seems to have residences in both places. He is the marketer and the money guy.”

“I take it you’ve spoken to them about this problem?”

“I’ve tried to.”

“And?”

“They initially tried to pin it on the buyer for Major Supermarkets, saying that he was just looking for a way to get rid of them and buy some cheaper product. But after I got hold of the FDA's and Major’s inspection reports, they switched gears and told me I should be going after the packer, that he had screwed up the specifications and was liable for any loss. The packer was the one who supplied me with the emails from Antonelli instructing him to change the specs. The emails were very specific.”

“And then what?”

He paused. “And then they stopped answering my emails and taking my phone calls,” he said.

“Where is the company registered?”

“Hong Kong.”

“Bank account?”

“Also in Hong Kong, and it has nothing in it.”

“Is that the account you sent money to?”

“Yes.”

“Always to Hong Kong?”

“Yes.”

“They could have an offshore account.”

“I wouldn’t know.”

She chewed on a sour candy. “Tell me, Andrew, who made the introduction? Who brought you together?”

“An old schoolmate of mine. He met Seto in Hong Kong through another friend of his. Seto mentioned that he was looking for purchase-order financing and the schoolmate put him on to me. I don’t think he knew Seto very well.”

“I’ve looked at the numbers, and the profit margins look thin. That didn’t concern you?”

“Seto told me they’re standard for the industry, and then he implied — actually, more than implied — that they were getting back-ended by the packer.”

“How about when the selling price to Major Supermarkets was reduced — still no concern?”

“Quite a bit, really. But I still had all my costs and interest covered, and Seto told me they would get what they needed from the packer.”

“You did the invoicing?”

“Yes, it wasn’t onerous. Usually about six invoices a week, and with net thirty-day payment terms, we had only twenty-four to thirty invoices outstanding at any time.”

“Why didn’t you retain ownership of the inventory?”

“We did.”

“Then how come your inventory disappeared on you?”

“Seafood Partners was authorized to do releases. We aren’t equipped to deal with warehouses and truckers and the like. I mean, there’s a twelve-hour time difference between here and most of Major Supermarkets’ distribution centres, and sometimes they wanted product on very short notice. I don’t have the staff to handle logistics.”

Ava walked over to her window. It was late afternoon and winter’s darkness was settling in. Below her the traffic crawled bumper to bumper up Avenue Road. It would be that way till past six o’clock. “Do you have any idea where the inventory is?”

“No. I talked to the warehouse and they gave me the name of the trucking firm that did most of the pickups. They wouldn’t give me any information. They said their customer was Seafood Partners, and unless Partners authorized it they weren’t in a position to release any information to me.”

“Are their names in the file Alice gave me?”

“Not all of them.”

“Can you email them to me?” she said.

“I’ll do it when I get to the office.”

“What else have you done to recover your money and your shrimp?”

“I hired collection agencies.”

“Agencies?”

“One in Bangkok, one in Seattle, and one in Hong Kong.”

“Regular firms?”

“What do you mean?”

“I mean they don’t use machetes.”

“Ms. Lee, we are a reputable financing firm.”

“That doesn’t answer my question.”

“I used collection agencies that were recommended to me by various friends. They are — were — very professional. They just weren’t effective.”

“So you went to your uncle.”

“I had to talk to someone, and he has been through a hell of a lot.”