US and Chinese Governments Investigate Parent Companies of Marine Life Parks

The DOJ logo is pictured on a wall after a news conference in New York

On Friday June 23, SeaWorld Entertainment released a short statement. The company has expressed that this is the only comment it currently has on the matter:

In June 2017, the Company received a subpoena in connection with an investigation by the U.S. Department of Justice concerning disclosures and public statements made by the Company and certain executives and/or individuals on or before August 2014, including those regarding the impact of the “Blackfish” documentary, and trading in the Company’s securities.  The Company also has received subpoenas from the staff of the U.S. Securities and Exchange Commission in connection with these matters.  On June 16, 2017, the Company’s Board of Directors formed a Special Committee comprised of independent directors with respect to these inquiries.  The Special Committee has engaged counsel to advise and assist the Committee.  The Company has cooperated with these government inquiries and intends to continue to cooperate with any government requests or inquiries.

The Security and Exchange Commission (SEC) and the Department of Justice did not provide comment on Friday when approached, but one thing is clear: in the United States, the government entity that investigates potential infringements of securities law is the SEC.  Investigations can originate within the agency, through whistle-blowing, or through a public complaint. How this particular investigation began has not been publicly disclosed.

If the SEC determines that laws or rules have been violated, its enforcement arm can take one of three actions.  It can rule on an administrative proceeding, basically a “cease and desist” order; it can file a civil enforcement action in a Federal Court, which could result in civil penalties; or if the SEC determines that criminal law has been broken, the case will be handed over to the Department of Justice as a criminal investigation.  In such cases, it is not uncommon for a simultaneous civil action to be pursued by the SEC.

Although it appears per SeaWorld’s statement that the Department of Justice is investigating potential criminal violations of securities law, a search through Federal Court filings does not show that any charges have yet been filed, meaning that at this time, the Department is still investigating the facts and that a determination of action has yet to be made.  Current SeaWorld CEO Joel Manby would likely not be a person of interest in this investigation, unless evidence shows that he was aware of the claims and their alleged invalidity after his hire in April 2015 and failed to take action to rectify the situation.

The August 2013 date corresponds to August 13, 2013, when SeaWorld’s second quarter revenue was announced at US$40 million less than anticipated, resulting in a stock selloff and subsequent drop in price of 33% over the course of the day. Two days later, the company announced its largest investment to date, the since abandoned Blue World Project killer whale exhibits.

In the same announcement on June 23, 2017, SeaWorld confirmed that Board Chair David D’Alessandro had been voted off the Board of Directors by shareholders and had tenured his resignation.  The Board has since requested and D’Alessandro has agreed to stay on as Chair another six months, through December 31 of this year.  According to the company:

. . . the Board took into account the potential impact of Mr. D’Alessandro’s immediate departure on the Board’s and the Company’s ability to successfully address certain challenges that the Company now faces . .

Although the company specifically mentioned the Department of Justice subpoena as one specific reason, others come to mind, from refinancing deals to potential acquisitions and international expansion.

One unknown in the equation is private investment firm Hill Path Capital, which raised US$303 million for its debut fund in January of this year. The firm has been purchasing SeaWorld stock, increasing its ownership substantially. In May, filings with the SEC showed that the company had acquired a 7.7% stake in SeaWorld. According to the most recent filing, on June 6, Hill Path’s ownership stake has now increased to 14.2%. Hill Path was founded by former Apollo Global Management manager Scott Ross, who was instrumental in Apollo’s acquisitions of Chuck E Cheese and waterpark resort chain Great Wolf Lodge. Ross also spearheaded the failed attempt to acquire theme park chain Cedar Fair (owner of Cedar Point and Knott’s Berry Farm, among others). Whatever the long term intentions, Ross and his management have met with the SeaWorld board and executives to address short term issues, such as governance, cost cutting, and immediate revenue streams.

Then there’s Zhonghong, the Chinese real estate and tourism company that now owns 21% of the company and has two of its executives seated on the Board of Directors.  As the final member of the Board with deep ties to Blackstone (he was appointed as Board Chair in 2010 when the company was a private Blackstone holding), D’Alessandro undoubtly had a role in negotiating the sale of Blackstone’s stock to Zhonghong and the deals with Zhonghong for design and development of Asian parks attraction, a number of which are expected to be animal-based in nature.

D’Alessandro has quite a bit of work ahead during the next six months with regards to Zhonghong’s intentions – Whether that be a vast increase in Zhonghong ownership of SeaWorld, as the Chinese company recently did with its stake in luxury tour company Abercrombie and Kent, outright acquisition, or the complexities of negotiating for new animal parks overseas, such as he did with Dubai, Abu Dhabi, and Village Roadshow (and consider these all speculative reasons for him to stay on).

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Zimbabwe’s Minister of the Environment, Oppah Muchinguri, shares her support for Chimelong at its Qingyuan elephant holding facility, December 2015

To date, Zhonghong competitor Chimelong has been developing strong tourism partnerships tied in with animal acquisitions. Its Australian exhibit at Chimelong Safari Park endorses tourism to Australia’s Northern Territory. It’s acquisition of elephants, lions and other animals from National Parks in Zimbabwe for a new conservation-themed park in the mountains of Qingyuan was done in full cooperation with the African nation.  Final Days has learned that Zhonghong’s acquisition of Abercrombie and Kent included the purchase of four leading safari lodges in Botswana and expect that a Chinese park similar to Busch Gardens Tampa Bay may tie in with Abercrombie’s luxury African tour products.

Meanwhile in China, five major companies that have been investing heavily overseas are under investigation by the China’s banking regulators. Their holdings include either full or majority ownership of football team AC Milan, the AMC and Carmike theater chains in the United States, Club Med, Cirque du Soleil, and Hilton Hotels.

One of the companies, Dalian-Wanda Group has been building aquariums and dolphinariums throughout China, located within or adjacent to its mega-malls.

When news broke on June 22 of the investigation, stock value in Wanda’s only publicly traded stock, Wanda Film Group, which includes the company’s film studio and production group, US blockbuster film producer Legendary Entertainment, and the world’s largest collection of movie theater screens – in Australia, North America, China, and Europe – dropped by 10% by end of day. Wanda immediately responded by blaming the drop on lies spread on the internet.

This new scrutiny on uncontrolled debt in the purchase of overseas assets is part of a new initiative by the Chinese government to crack down on the practice.  As a result, the first quarter of this year saw an 80% drop in foreign acquisitions by Chinese companies.

At the same time, the Chinese government is becoming more welcoming to foreign investment, especially in the theme park sector. In eighteen free trade zones, seven of them newly designated in March, foreign developers will be able to build and operate theme parks for the first time without partnering with a local company. For example Shanghai Disney Resort is 57% owned by a Chinese consortium with close ties to the government. Under the new rules, Disney would be able to retain 100% ownership in the free trade zones of future parks and resorts. The new regulations are especially appealing to regional park chains such as Parques Reunidos, owner of Marineland Antibes and the Miami Seaquarium, who to date have had to partner with a Chinese company to enter the market.

Overall in China, there is a long standing joke about looking left (as in reforms), but turning right (as in staying with the party line). As Castor Pang, head of research at Core-Pacific Yamaichi HK, told Bloomberg:  “The most important factor of doing business in China is the company’s political stance. It is important for the company to ‘stand at the right side.’”

There’s a small company fully owned by Zhonghong that’s housed in the London offices of Abercrombie and Kent. It was through this company that Zhonghong purchased its majority stake in SeaWorld Entertainment. The little company is called Sun Wise. There’s a reason for that. Sun Wise in Mandarin is 向右转地, which also translates as “Turn Right.”

A Selection of Comments on the Proposed AWA Rule on Marine Mammals

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SeaWorld, presented by the company’s Chief Zoological Officer, Chris Dold:

SeaWorld APHIS Rule

Dolphin Research Center Vice President of Animal Care and Training, Linda Erb: 

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SeaWorld’s new partner, HSUS, presented by Senior Staff Veterinarian Barbara Kohn:

HSUS APHIS Rule

A joint letter representing Animal Welfare Institute (AWI), Animal Defenders International, Born Free Foundation, Born Free USA, Center for Whale Research, Cetacean Society International, In Defense of Animals, the International Marine Mammal Project, Kimmela Center for Animal Advocacy, Marine Connection, Orca Research Trust, People for the Ethical Treatment of Animals, Whale and Dolphin Conservation, and Zoocheck, presented by Naomi Rose, AWI Marine Mammal Scientist:

AWI APHIS Rule

Finally, and I find this most fascinating as it mentions the specific needs of medical enclosures, a letter from Traci Kendall, Director of Research Training at the University of California, Santa Cruz Long Marine Laboratory:

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Revised Coastal Commission Findings on Blue World Project

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The California Coastal Commission’s staff prepared a revised finding on SeaWorld’s application for Blue World Project, which was to be presented at the March 9 Commission meeting in Santa Monica. A finding is a public hearing and vote to approve findings for a previous Commission action. The only issue is whether the findings adequately support the previous Commission action. The hearing is not to reargue the merits of the prior action. Although the presentation of and confirmation of the revised findings was postponed and SeaWorld, by all accounts, has canceled the project, you can read the full document here.

 

The Russian Dolphinarium Part I – Wait 20 to 30 Years and You’ll Be Ready for an Orca

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For over thirty years, I thought one thing to be true: that it all started with Shamu.  To place it another way, the global dolphinarium industry spread so rapidly during the 70’s and 80’s because of the success of Shamu and Sea World’s killer whales, that because they saw the huge attendance and profit these animals could bring, every dolphinarium owner wanted to place one in their dolphin tank – often a tank far too small.

While studying the industry that operates in Russia and China, I came to a much different conclusion.  In the Communist East, it was not Shamu that led to the rise of the dolphinarium and the Russian orca market.  It was rather societal progress.  When a society reaches a certain level of sustainability in zoological exhibits or shows, it begins to look for the next big challenge – something bigger, something more exciting, something more exotic, something more profitable.  In the Communist East, there were no captive orcas on display prior to this Century*.

The modern Western dolphinarium can trace its roots back to 1938 (Marine Studios, later Marineland of Florida).  The Soviet Union would not have its first dolphinarium until 1975, when one opened in Batumi,  a Black Sea resort town in modern day Georgia.  23 years after the opening of Marine Studios, Wanda would become the first orca to be held alive in modern captivity – at Marineland of the Pacific.  She lasted two full days.   Three years later, it was Moby Doll.  The year after that, Namu, then Shamu.

Russia’s orca revolution began at the place in the photo above – at Utrish, also on the Black Sea.   In 2003, 28 years after the first Soviet dolphinarium, a female orca was captured and placed in a sea pen at the Ultrish Dolphinarium.  Here is the account of what transpired, from the official report of the Marine Mammal Council, dated December 9, 2003:

 LM Mukhametov, Ph.D. (IEE RAS, Utrish Dolphinarium) reported the circumstances of the capture and death of a killer whale in the Utrish Dolphinarium.

Attempts to capture orcas with seine nets were few, and most were unfortunate. Animals left over the top, or by diving under the lower net. This managed to happen even with calves.

Not even Rapporteur has placed a successful capture.  It is roughly 45-50 miles (his words “four o’clock fly”) from Avacha Bay. (In fact, according to our data, the capture was actually in the Bay of Sabotage, which is located about 15 kilometers from the entrance of Avacha Bay).  They encountered a group of 9 – 10 animals (which is a violation of the rules of capture, according to which based on the number of cetaceans, cast nets shall not exceed 5 layers). Most of them had gone over the upper part of the net, just jumping and floating. In the end, inside the net remained five animals.

Two swimmers were released from inside the net. One whale died because it did not see, did not even know that it was in the net, jerking was heard. Another orca was still captivated.

The age of the animals was determined by the ratio tables for ages and sizes of animals.

Unfortunately, I could not ask for some populations from composed tables (Pacific killer whales are much larger than the Atlantic, such as a newborn in the Atlantic has dimensions of 220-230 cm and 250-270 cm in the Pacific).

The dimensions of killer whale: 435 cm in length and weigh ~ 1100 kg. For several days, the orca was kept in a fenced off area in the Gulf of Kamchatka, but muddy water did not allow us to establish precisely whether or not feeding occurred. The fish was thrown into a pond, it was observed that the whale took it into its mouth. However, if it was ingested, it is unknown.  Therefore, the killer whale was transported to Utrish in a complete water bath. During transportation, it emitted so much feces that comrades thought it was a sign of a successful feeding.

There is something I do not understand here, to be frank. Bottlenose eat with difficulty, against the backdrop of the relevant drugs. I personally saw how powerful eaters belugas are. What I recounted to [Leo] Mukhametov, saying that there was a likelihood that the wild orca just threw the fish, and it is the very beginning of it there?

We used Antistress drugs: When asked, Rapporteur mentioned only one – relanium or Valium (another name). A blood test showed the presence of inflammation in the body.
The killer whale had died after 13 days.

The autopsy revealed a large number of worms. Also was found morbillivirus. The blame lay for the death of the animal on the morbillivirus, because it can cause the lung lesion that was detected. On the basis of what Rapporteur has repeatedly claimed, the entire population is infected, and is on the verge of epizootic diseases.

The findings of the scientific meeting:

Krokhin: let’s say thanks to Mukhametov that this moves forward Russian science, not only to catch up with the Americans. By the way, I’ve developed a patent for catching whales, let me in, and’s let’s go.

Goskomrybolovstvo: estimate of the number of killer whales in the Sea of Okhotsk – 2500.

K.b.n YD Starodubtsev (Moscow State University): think how many thousands of people will be brought joy by one single killer whale.

K. Alexander Zharikov (VNIRO): catching ten whales will not affect the population.

DSc, acad. AV Yablokov: a proposal to reduce the TAC include, development of methods of catching, feeding and content specifically for killer whales.

LM Mukhametov, Ph.D.: We should prohibit the fishing network, because it leads to an increased likelihood of mortality and loss of corpses, which are also valuable. By the way, the bodies are also a great value for science. Now they are exploring killer whale brains and viscera and blood sent for analysis to Novosibirsk.

He argues that the preservation of killer whales as a species is only possible in the aquarium, referring to his own experience reintroducing bottlenose dolphins in the Black Sea.

Prof. VA Zemsky previously concluded: Mukhametova congratulates this beginning, and offers to develop special techniques for catching whales.

A decade later, the killer whale capture industry in Russia would be well under way.  And Ultrish would be threatened by new players out of Moscow and the Ukraine moving in on its turf.  It would bring forth allegations in its attempt to survive of criminal activity by the newcomers, organized crime connections, and government corruption.

Next time: Ultrish, NEMO, White Whale, Moskvarium, TINRO Center, FEBRAS and the web connecting them all.

*Ocean Park in Hong Kong was a British Crown Colony at the time it held orcas

The Russian Dolphinarium – Introduction

ArcticIce01“I have a very positive attitude to anyone who is protecting the environment, but it’s inadmissible when people are using it as a means of promoting themselves, using it as a source of self-enrichment. I don’t want to name any specific examples… but often, environmentalism is used to blackmail companies.”

Vladimir Putin

In late December 2013, Putin released 30 activists associated with Greenpeace who had been detained for protesting a Russian oil rig.  The 30 had faced up to fifteen years each in a Russian prison.

The release solidified Greenpeace as a pawn of Russian government publicity and was carefully orchestrated to provide a distraction from three controversial government decisions.

First was the arrest of the Greenpeace protesters themselves, who had not been arrested on the oil rig, but rather on the seized Greenpeace vessel Arctic Sunrise. Following a reduction of charges and the issuance of bail, amnesty was awarded by the Putin government as part of a wider initiative that included the granting of amnesty to numerous other political detainees, including members of the anti-Putin rock band Pussy Riot, in a move the Guardian called “a Putin masterstroke ahead of Olympics.”

Then there’s the matter of the Russian economy, which is reliant almost entirely on gas and petroleum sales and exports.  Any development outside of Russia that results in competition in the market could have a devastating effect upon Russia’s economic stability. Therefore, it’s necessary that Russia be gracious in some respects to Greenpeace, especially since, as NATO Secretary-General Anders Fogh Rasmussen announced in a speech in London in 2014, “I have met allies who can report that Russia, as part of their sophisticated information and disinformation operations, engaged actively with so-called non-governmental organisations – environmental organisations working against shale gas – to maintain European dependence on imported Russian gas.”  Among the NGO’s Russia is believed to have financed through donations from government shell corporations is Greenpeace Germany.

The third reason for the release of the Greenpeace detainees goes back to 1773.

ORIGINS

The modern circus began in 1768 in England when Phillip Astley, a former military man turned trick rider, laid out a ring on a surface and discovered by having the horse follow the ring, he could maintain his balance standing on the horse.  He eventually added clowns, musicians, and other entertainers to round out the show.

In 1773, a former Astley performer, Charles Hughes, brought a two ring circus to the court of Catherine the Great in St. Petersburg.  Some consider this the birth of the Russian circus, though because it only offered horse tricks, others date it to the 1820’s and the arrival in Russia of Frenchman Jacques Tourniaire and his circus.

Circus spread throughout Russia and with it, as in most other parts of the world, animal acts.  After the consolidation of Communist control, all of Russia’s circuses were unified into a single state-run company.

The Russian dolphinarium industry had a much different origin than its Western counterpart.  It is with the establishment in 1966 of a Soviet Navy dolphin program in Sebastopol on the Crimean Peninsula that all dolphinariums in the Ukraine and Russia have their roots.

By the mid-1970’s “public demonstration” dolphinariums had opened in a number of locations within the Soviet Union, all attached to scientific research institutions.  The trainers at these dolphinariums either came from or had been mentored by trainers involved with the Navy program and took their expertise, combined with the showmanship of the Russian circus, to create something uniquely Russian, particularly with traveling shows.

Although a few belugas began popping up over the years in Russian shows, it was not until the 2000 moratorium on commercial beluga hunting that beluga capture for aquariums and theme parks in Europe, North America, and Asia came into fashion. The industry of capturing orcas for these types of facilities was a direct result of the success of the beluga trade.

The typical Russian or Ukranian dolphinarium is comprised of one part government, one part private industry, a dash of corruption, a splash of organized crime, and an operational mentality at least fifty years behind the West.

SOCHI

Over the years, as a journalist covering the attractions and museum sectors, I have profiled venues as varied as a sourdough bakery visitor center in San Francisco and a next generation botanical garden in Singapore. In 2013, I was covering the construction of Sochi Park, a US$371 million theme park being built directly adjacent to the main Olympic venues.

I had my doubts that the park, designed to showcase the best of Russia by the same firm behind Abu Dhabi’s massive Ferrari World, would open in time.  This was primarily driven by a conversation I had with a friend who was in Sochi to cover the lead up to the Olympic games. He told me about how his brand new hotel room had no water hooked up to the toilet, so the management had recommended he come use the restroom in the lobby when he needed. That idea became highly unmanageable when the inside doorknob fell off his room’s door and he was unable to contact anyone due to there neither being a phone in the room nor a reliable cellular signal.

My doubts became reality as construction on the park was halted while construction workers were reallocated to other, more pressing projects, such as hotels and Olympic venues. When the games came in 2014, the only part of the park to open was a kiddie land with off the shelf rides.

So in late 2013, when I heard about two orcas that would be “participating in the Olympics,” I started wondering if they were headed to Sochi Park in a stopgap measure to actually have something there to pull in the crowds.

This is how I learned about the Sochi Dolphinarium and White Sphere, and how I embarked on a three-year long odyssey to understand the Russian/Ukranian dolphinarium scene and its relationship to China and Taiji.

Along the way, I have been grateful to a number of tourism and zoo professionals and government officials in both Russia and China who have shared background information. As neither of these countries provide the same liberties as we experience in the West, I have opted to keep these sources confidential to protect both their livelihoods and freedom.

I am also grateful to animal activist Jim Smith of Oregon for his exceptional research on Vladivostok and Sebastopol, to the posters on the Russian Orcas forum, and to the staff of Ceta-base, who through personal correspondence helped identify a link between Taiji and the Russian Academy of Sciences.

And this brings us back to Putin releasing the Greenpeace activists.

THE SEAWORLD CONNECTION

The third reason that Putin released the 30 Greenpeace detainees was to draw attention away from the two orcas destined for Sochi, which was turning out to be a controversial action, news of which was being played in the mainstream international media.  Only a month prior to the Greenpeace release, the whales had been rerouted, almost in secret, to Moscow, where they would wait for over a year in rusting tanks under an inflatable structure for a new “temporary” home to built at the All Russia Exposition Center.  I use the term “temporary” as Narnia and Nord remain the property of White Sphere, which owns the Sochi Dolphinarium.

In the days following the discovery of White Sphere’s involvement, conspiracy theories began to envelope the internet showing a direct connection between White Sphere and SeaWorld.

The most common conspiracy goes something like this: White Sphere lists IAAPA, the International Association of Amusement Parks and Attractions, as a partner on its website. SeaWorld, in January 2014 hosted IAAPA for a private function.  Therefore, logic dictates that IAAPA must somehow be an intermediary between White Sphere and SeaWorld.  But in this case, logic’s wrong.

Both SeaWorld and White Sphere are members of IAAPA, but IAAPA is a membership organization for the attractions industry, with tens of thousands of members worldwide. Anyone in the industry can be a member.  I’ve been with museums, attractions, design firms, and publications that have all held IAAPA membership.  At one point, I held an individual membership myself.

The January event in question is an annual one.  As part of the IAAPA Institute for Leadership Education, which takes place yearly at San Diego State University’s School of Hospitality and Tourism Management, delegates attend private events and tours of both the San Diego Zoo and SeaWorld.

Why White Sphere management would spend $5000 per person for a six day seminar in attraction management skills just to meet with SeaWorld about how to capture and train orcas is beyond me when all they’d need to do is send an email or make a direct call.

In a November 2014 article in the Russian paper Izvestia, White Sphere’s Yulia Frolova (who had made a number of confusing and contradictory statements during the relocation of the orcas), stated that SeaWorld was assisting with the animals’ training.

As SeaWorld itself has never confirmed working directly with these animals, it should be taken under consideration that she may have been implying current or former SeaWorld trainers working independently of the company, with or without SeaWorld’s knowledge or consent.  It is common for SeaWorld staff to interact with their Russian counterparts through scientific conferences, veterinary associations, and IMATA.

NEXT

In the next part, I’ll look at three dolphinarium companies that are making their mark on the rest of the world – NEMO, Ultrish, and White Sphere.