THE ISRAEL LOBBY ENTERS STATE GOVERNMENT

RISE OF THE VIRGINIA ISRAEL ADVISORY BOARD

By Grant F. Smith

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8

Project Jonah Targets a Socially Conscious Market Leader

All Board members are asked to refer to the project by this code name [Jonah]. Leaked information could jeopardize funding opportunities from the State. VIAB Board Meeting Minutes

Project Jonah has long been one of VIAB’s biggest, most sacred projects. Secrecy has been considered to be paramount to success. One can almost imagine VIAB board members turning to cast furtive glances over their shoulders during a key 2013 meeting to see if any enemies or potential competitors were listening. According to minutes from that meeting, VIAB summed up the reason behind all the secrecy. "All Board members are asked to refer to the project by this code name. [Jonah] Leaked information could jeopardize funding opportunities from the State.”[1]

In the bible, Jonah was running away from a God-given task in Nineveh by boat. God raised a mighty storm as a sign of his anger at Jonah. The vessel’s sailors correctly surmised that Jonah was to blame for their peril, and tossed him overboard. Jonah was then swallowed by a “great fish,” sent by God. Jonah began to pray to god for help and repent. After three days, God had the great fish vomit Jonah onto the shores of Nineveh to get back to the task at hand.

If VIAB were to rewrite Jonah as a three-act play, it would go a little something like this. A giant Israeli tilapia sees small tilapia fry eking out an existence in Virginia. Local aquatic creatures encourage him to cross the Atlantic to live with them. The Israeli tilapia obliges, arriving to swallow the local small fry and take over their pond.

The actual story of Project Jonah, while not a biblical tale, is deeply, morbidly fascinating. Local news media, if they had ever troubled themselves to ask questions and dig into the story a bit, could have discovered a great number of disturbing facts about “Project Jonah” and probably saved the state millions in unrecoverable losses in the bargain. The details are all readily available in regulatory filings, site permits, tax records and VIAB meeting minutes. Most important are the files of key funders such as the Tobacco Commission  and Virginia Economic Development Partnership. But as the project soldiered on through the years, VIAB’s leadership needed to have no fear, for no reporter from any major Virginia news media ever bothered looking deeply into Project Jonah. It may be a case of never looking a gift tilapia in the mouth.

Project Jonah is a fish farming project. VIAB, after identifying a proposed Israeli partner, began putting together the massive project. In a venture capital deal, an offtake agreement is a signed contract in which a purchaser agrees to buy quantities of a seller’s product. It is negotiated in most instances even before the seller breaks ground on his production facility. The producer then uses the signed agreement to secure financing for construction, new equipment and startup costs. It is the present day proof of existing demand for future goods that gives venture capital investors the confidence to finance a project. But Project Jonah financiers so far appear to lack such confidence in VIAB.

VIAB works on AquaMaof’s “Offtake Agreement” and Venture Capital

On October 22, 2013 VIAB organized meetings between its Israeli fish farm partners and the Food City supermarket chain headquartered in Abingdon, just fifty miles to the south of the proposed fish farm plant site surrounding the Richlands wastewater treatment plant. The name of the Israeli partner, never mentioned in Virginia or mainstream U.S. press, is AquaMaof. “Aqua” is of course Latin for “water” and “Maof” is a Hebrew word meaning “flight” or “vision.”

Food City was a logical partner for an offtake agreement with a major fish farm. Founded in 1955, the chain grew to 123 stores in Virginia, Kentucky, Tennessee and Georgia. Food City’s holding company, K-VA-T Food Stores was privately owned, meaning any offtake deal inked with AquaMaof would probably not leak to the public. K-VA-T owned its own distribution center, meaning there would be no intermediaries between the Israeli company’s loading dock at Richlands and a distribution network serving 123 outlets.

   

Food City supermarket and headquarters in Abingdon

VIAB also introduced Israeli executives to Tazewell County Council members who quickly pledged $1 million in tax abatements to the project. VIAB assisted in the submission of an application for a loan from the Virginia Coalfield Economic Development Authority  to help finance the project. At the time VIAB estimated it would take $150 million “in public and private equity both from Israel and the U.S., as well as from private/public partnerships in the State and on Federal level.”[2] VIAB also brought in Virginia Tech experts to produce assessments of the project.

No VIAB board member was more excited about Project Jonah than Chuck Lessin,  the entrepreneurial lawyer involved in a portfolio of investments, ranging from bingo,  to sports bars to fantasy sports gambling and even his own VIAB project. (See the chapter on Dominion Biofuels, LLC). In a December 5, 2013 VIAB board meeting he referred to Jonah urging VIAB to “think seriously about building a major project in Virginia,” since according to Lessin  Project Jonah could “create 426 jobs.”

VIAB needed skilled support, so it hired consultant Lala Korall, and paid her company I-Deals LLC $11,788.82 from its 2014 budget in “management fees.” Korall could spin out the right business speak and enticing numbers. The Harvard graduate majored in Economics and History, and later did an MBA at the Robert H. Smith School of Business at the University of Maryland. Korall assured the VIAB board that “for every job the aquaculture project will bring to the state, seven more are created through ancillary services like trucking, etc.—It is a vertical operation.”[3]

On December 19, 2013 the Virginia Coalfield Economic Development Authority announced a loan of $10 million had been earmarked to Project Jonah, conditioned on their raising $137 million in matching funds.

The Virginia Coalfield Economic Development Authority was created by the state assembly in 1988 to diversify and grow the economy of southwest Virginia and bring jobs to a seven-county, one-city area. VCEDA is funded by local taxes paid by coal and natural gas companies. Its cornerstone program is a revolving low interest loan fund for land purchases, building acquisition, construction and equipment. VCEDA targets projects that can create at least 15 new full-time jobs within three years. Its website claims that between 1988 and 2016 it approved more than $188 million in funding for 289 projects across the coalfield region.

VCEDA set December 13, 2014 as the expiration date for the loan offer, so AquaMaof and VIAB had to move fast. Korall wasn’t the only one on VIAB’s “Project Jonah” payroll rushing to assemble the financing that would allow the project to take off. VIAB not only brought Virginia Tech, but in 2014 VIAB paid it $7,500 for “management services” from its then $176,000 budget.[4] Despite the effort, Project Jonah missed its 2014 deadline to meet the VCEDA performance agreement.

In January of 2015 VIAB dispatched a group of Tazewell County officials to visit AquaMaof’s tilapia plant in Poland as part of “due diligence” activities. VIAB reported that it:

… took the group for visits including an on-site waste treatment plant that will work well in the Tazewell area as well as greenhouse companies and an aquaculture facility that is similar to the facility that we hope will be built in Virginia. Virginia’s facility will be from 8 to 10 times larger. We also met with prospective venture capitalists.[5]

By September 17, 2015 the Tobacco Region Revitalization Commission,  County of Tazewell and Dominion Aquaculture LLC signed a separate performance agreement for a $1.5 million grant. David Hazut, CEO AquaMaof International LTD. signed an unconditional guarantee for “any and all obligations of every nature owing by Dominion Aquaculture, LLC.” Lala Korall had moved up in the world, and was now listed in the documents as the contact to receive the $1.5 million at AquaMaof’s U.S. subsidiary Dominion Aquaculture, LLC, housed in a dingy storefront building in Cedar Bluff, Virginia. But Project Jonah again missed 2014, 2015, then 2016 deadlines for the $10 million Virginia Coalfield Economic Development Authority loan.

   

Project Jonah site surrounding the Richlands wastewater treatment plant.[6]

A pattern of pleading for deadline changes from Project Jonah to Virginia Coalfield Economic Development Authority then commenced. All were quickly and perfunctorily granted. Then Project Jonah started hammering VCEDA to sweeten the terms of the loan. The Chief Operations Officer of Dominion Aquaculture, John H. Schiering, along with Lala Korall, who by August of 2017 was vice president of the venture, demanded and won a reduction of the required private matching funds to $110 million. The pair also demanded that VCEDA agree to convert portions of the loan to outright grants and reduce the interest rate to 0 percent until year three and 2.125 percent thereafter if certain performance benchmarks were met. VCEDA also quickly agreed to this, perhaps not realizing that they would not only forfeit $4.78 million of loan interest and principal repayments, but also only be repaid $6.46 million of their $10 million investment.[7]

Target: Blue Ridge Aquaculture

One core question raised by Project Jonah is why VIAB ever came to think of Richlands as a good location for a $100 million fish farm. A 360 degree geographic sweep of the region reveals that as in the case of Energix and Alony Hetz, Oran Safety Glass and Sabra, a proven market had already been established and was being served by savvy home grown American, and in this case, Virginia companies.

In Virginia it is no secret that Blue Ridge Aquaculture,  located at almost the same latitude just 166 miles to the east of Project Jonah in Ridgeway, Virginia already revealed “proof of concept.”

Blue Ridge Aquaculture (BRA)  is the largest producer of Tilapia using recirculating aquaculture systems, producing four million pounds of tilapia and shipping 10-20 thousand pounds of live tilapia every day. BRA ships to Asian and Hispanic consumers in New York, Boston, Toronto and Washington D.C. who prefer live seafood over the packaged refrigerated or frozen kind. Blue Ridge Aquaculture’s management believes they have won 20 percent of the market for live tilapia. BRA emerged in 1993 from a former catfish producer called Blue Ridge Fisheries that operated from 1988 through 1991. In 1993 BRA began producing tilapia, overcoming severe threats of disease with in-house technology, as well as pressing financial challenges.

As an employee owned company, BRA is socially conscious and believes “recirculating aquaculture systems are the most environmentally friendly, beneficial source of protein because of its relatively small ecological footprint.”

AquaMaof’s core technology is also recirculating aquaculture. In 2010 AquaMaof applied for a U.S. patent on a “modular aquaculture system” but its patent expired due to “Non Payment of Maintenance Fees.” In 2014 AquaMaof again applied with partner Dakota Fisheries Inc. on behalf of the inventor Gary Myers of Sartell, Minnesota. On November 22, 2016, the trio was issued a patent number 9497941.

But it’s not clear to industry observers that AquaMaof’s technology is any better or substantially different than what is generally in use across the industry. On background they cite how the limited experience of workers at AquaMaof’s showcase Poland facility caused it “not to work” properly and other problems at facilities in Russia. Fish farms are not gold mines, and others looking into AquaMaof’s numbers feel they simply “don’t add up.”

Late into Project Jonah, AquaMaof began claiming its Poland facility and proposed Virginia production site were not going to produce tilapia after all, but rather ship higher margin farm raised salmon. Although Virginia Coalfield Economic Development Authority reset the Project Jonah deadline once again for year-end 2019 in November of 2018, the state lender appeared to be starting to wriggle out of AquaMaof’s net. The Virginia Coalfield Economic Development Authority demanded a copy of a signed MOU between Project Jonah and a local community college said to be poised to provide job training (to be lavishly funded by state Tobacco Commission  grants not yet secured by AquaMaof, of course). VCEDA also demanded additional details on collateral, written evidence that the $110 million in private funds had been raised and a letter from the Virginia Economic Development Partnership that it fully supported the project.

Tazewell officials who already had put at least $1.5 million into Project Jonah soldiered on. In April of 2019 County Administrator Eric Young told the Bluefield Daily Telegraph that the facility was still, “very much in play…they are very close to having their money in place.” Tazewell County Supervisor Mike Hymes claimed that although the initial plan was to raise tilapia, it may be changed to salmon. In any case, it would be different in that the idea now included “flash freezing” and taking the fish “directly to supermarkets.”[8] This announcement calls into question whether an offtake agreement with Food City has either collapsed, since that proposed “offtake” partner is capable of shipping to its network of supermarkets. Or perhaps it was never signed in the first place.

While there are no signs that Project Jonah’s investment bank 8F has secured funding for Project Jonah, surface ripples indicate something is moving. In 2019, Lala Korall reinvented herself once more, this time as the company’s “Public Fundraising Director.” Dominion Aquaculture Chief Operating Officer John H. Schiering forwarded to potential lenders a copy of a letter from the Tazewell County Tax Commissioner affirming the group had, in fact, acquired 123.09 acres “on the waters of the Clinch River in the Town of Richlands.”

Once the massive operation is up and running, there is little doubt it will have to maximize profits to its Israeli and offshore investors. That means shipping flash frozen salmon direct to Food City and other supermarkets. AquaMaof will also need to take over all of Blue Ridge Aquaculture’s live seafood markets on the East Coast. If it ever acquires private equity, Virginia’s state-funding powered AquaMaof, like Sabra taking on Cedars (as profiled in the next chapter), will be well-positioned to undercut, underprice, out market and seize market share from one of Virginia’s proudest, most innovative employee owned aquaculture operations.

   

Southwest Virginia Community College in Richlands.

But Project Jonah may also now be a “zombie” like Charles Lessin’s Appalachian Biofuels LLC after the crash in transportation fuel prices. Food City is stuffed to the gills with low-priced frozen tilapia sourced from Indonesia, a country that grows the fish with low price labor in conditions resembling flooded pits. There is also no shortage of frozen salmon at Food City, some ready for cooking on cedar planks, sourced from Florida.

Nevertheless, AquaMaof purchased an option to buy land adjacent to Southwest Virginia Community College. At the time of writing Project Jonah in partnership with the Virginia Economic Development Partnership was pressing the college to sign a memorandum of understanding to train aquaculture technicians for its future fish farming operations. Like Oran Safety Glass training, it is to be paid for by even more state-funded grants. SW has so far balked at signing the MOU, which will become “null and void” if the fish farm does not begin operations by year-end December 2020.

Is Project Jonah ready to swallow Blue Ridge Aquaculture?  Will it use its new U.S. patents to pressure existing American fish farms for royalties? Or is it, like Charles Lessin,  simply stalling for time and developing tactics to wriggle out of repaying Tobacco Commission grants?


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[1] VIAB Board Meeting Minutes, August 1, 2013.

[2] VIAB Board Meeting Minutes, December 5, 2013.

[3] VIAB Board Meeting Minutes, December 5, 2013

[4] 2014 Audit Records of VIAB over travel reimbursement , as released under the Virginia Freedom of Information Act in MS Excel https://Israellobby.org/viab2/FOIA/VA_Israel_Advisory_Board_2014.xlsx

[5] VIAB Board Meeting Minutes, March 24, 2015

[6] Photograph by author taken in September of 2019.

[7] By the author’s financial analysis.

[8] Boothe, Charles, "Project Jonah moving forward: Tazewell officials still hard at work to make $130M fish farm happen" Bluefield Daily Telegraph, April 22, 2019, https://www.bdtonline.com/news/project-jonah-moving-forward-tazewell-officials-still-hard-at-work/article_cbc6fe16-649a-11e9-8172-176c31825789.html