04 QUOTA ALLOCATION SYSTEM ANALYSIS

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NZ QUOTA MANAGEMENT SYSTEM - ALLOCATION ANALYSIS

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Date: 29 December 2025

Source: FAO Case Study by R. Connor, Australian National University

CRITICAL FINDINGS FOR JENSSEN INVESTIGATION:

• THE 1986 QMS INTRODUCTION

The Quota Management System was introduced on 1 October 1986, creating Individual Transferable Quotas (ITQ) as perpetual property rights to catch fish. Orange roughy was one of the original 26 species included. The system was born from dual motivations: concern about inshore stock depletion and the desire to allow domestic industry to capture value from deepwater fisheries previously dominated by foreign fleets.

• HOW QUOTA WAS ALLOCATED

Initial allocation was based on "catch history" over the three years 1982-1984. Fishers were assessed on their landings records and asked to choose their best two of three years. This became their Provisional Maximum ITQ (PMITQ). The system specifically favored those with established catch history and the capital to continue fishing.

• DEEPWATER QUOTA ALLOCATION (INCLUDING ORANGE ROUGHY)

For deepwater species like orange roughy, quota was initially allocated in 1983 under an "enterprise allocation" scheme to nine commercial entities (seven large companies and two consortia). The allocation criteria combined catch levels with investment in onshore processing, employment, and fishing capital. Vessels less than 30m were excluded from deepwater species assessment as they cannot fish at required depths.

• THE VALUE EXPLOSION

The FAO document confirms that orange roughy quota became extraordinarily valuable. By the late 1980s, the total market value of orange roughy and oreo quota had grown to $350 MILLION. This represented a massive windfall for those who received initial allocations.

• THE CRITICAL TIMING - 1986-1987

The QMS was implemented October 1986. The Deep Sea II was lost November 1987 - just 13 months later. This timing is significant because:

• Quota had just been allocated based on catch history
• The vessel loss would have eliminated the ability to fish the quota
• Without a vessel, quota must be sold, leased, or transferred
• The quota value was rapidly appreciating

• QUOTA AS PROPERTY RIGHT

The FAO document explicitly states: "These characteristics establish the character of the ITQ as private property in the right to harvest fish from a given stock." Quota could be bought, sold, leased, and used as security for loans. It was perpetual and transferable.

• THE 1990 ORANGE ROUGHY CRISIS

A critical change occurred in 1990: "When faced with potential for stock collapse in orange roughy and the need to reduce this valuable quota by large percentages, the system was changed so that ITQ were denominated as a percentage of the TAC, rather than as a specific tonnage." This means anyone holding orange roughy quota in 1990 had their tonnage converted to percentage shares - a permanent property right.

• WHO BENEFITED FROM THE SYSTEM

The document notes: "The relatively small number of companies involved in the deep-water sector means that both the focus of policy and the influence of the industry has shifted toward the larger companies." Small operators were systematically disadvantaged. The system transformed fishing "from a small-time and unprofitable business to a major and highly professional export industry."

• THE JENSSEN HYPOTHESIS

If the Jenssen family held orange roughy quota allocation from 1986:

• The quota would have been worth potentially millions of dollars
• Loss of the vessel Deep Sea II in 1987 would have forced a decision: sell quota or lose it
• Any trust accounts holding quota proceeds would have been managed by McKay Hill
• The $5 million allegedly missing aligns with potential quota value
• The timing of Anne McAllister joining McKay Hill (1986) coincides exactly with QMS introduction

• QUESTIONS REQUIRING FURTHER INVESTIGATION

The FAO document does not name individual quota holders, but confirms that detailed records exist. Key questions:

• Did Deep Sea Fisheries Ltd receive orange roughy quota allocation in 1986?
• What was the tonnage allocated?
• What happened to that quota after November 1987?
• Who acquired it and at what price?
• Were the proceeds deposited in McKay Hill trust accounts?
• Is there a connection between quota transfer and the McKay Hill trust fund deficit?

• THE "FRAME-UP" THEORY CONTEXT

If both Jenssen brothers were fighting over the business while the quota was being stripped, they would have been distracted from noticing the actual theft. The FAO document notes that many fishers "had little real idea of the value of perpetual rights to fish for particular stocks." This information asymmetry could have been exploited.

NEXT STEPS:

• Search Companies Office for Deep Sea Fisheries Ltd records
• Find Fisheries NZ quota transfer records from 1987-1990
• Search for any court cases involving Jenssen quota disputes
• Investigate who currently holds the quota that may have originated with Jenssen