Fish farmers sink in perilous waters of Md. aquaculture; After heavy losses, some blame leader of state advisory panel

THE BALTIMORE SUN

Scott and Donna McCardell saw a chance to get in on an industry of the future.

In rural Cecil County, where farming often means cattle or corn, the husband-and-wife team set out to raise fish. And when they joined forces with a longtime leader in the business -- the chairman of the state's advisory panel on aquaculture, no less -- they confidently bet virtually everything they owned on the venture.

"It wasn't going to make us rich," said Donna McCardell, "but it was going to be a nice, comfortable living."

Now -- barely a year after stocking an innovative network of tanks with fish, only to see them die by the tens of thousands -- the McCardells' WilDell Farms has gone, well, belly up.

The demise of their business, which in some ways was a model for the future of Maryland aquaculture, underscores the seductive, yet risky, nature of the fledgling industry.

But the McCardells -- and two other farmers in similar straits -- also question state officials' actions in promoting aquaculture.

Those officials, the McCardells say, steered them toward an unproven "recirculating" water system developed by Douglas C. Burdette Jr., an Aberdeen fish farmer who was chairman of the state's Aquaculture Advisory Committee, and then helped them secure a low-interest loan to buy Burdette's system.

Recently, the McCardells filed notice of their intent to sue the state, alleging fraud and breach of contract.

"The problem we have was that people in the state were backing this guy from Aberdeen and saying this was the wave of the future," said Scott McCardell. "That's all well and good, but the system was unproven."

The owners of two other troubled businesses that used Burdette's system also said state officials endorsed Burdette's technology.

"Basically, they told me it was the best system in the world," said Anhsiang "Scott" Lee, an Anne Arundel County man.

State officials, however, denied endorsing Burdette's system, saying they merely referred the McCardells and others to it.

"I did not tell them that it works," said Bradley H. Powers, an assistant secretary of the Maryland Department of Agriculture. "We tell everybody this is the riskiest business in agriculture today."

Burdette, meanwhile, says the McCardells failed to operate the system properly and didn't have the money to withstand start-up difficulties.

Powers, who characterized the McCardells' failure as a "severe blow" to the state's $17 million-a-year aquaculture industry, clearly had high hopes for the venture.

"We honestly felt this could be the system we could hold up to the world as photogenic and successful," he said. "We never dreamed that it would not be."

Some businesses have flourished in the industry, growing aquatic animals or plants for a variety of uses -- from restaurants and markets to ornamental ponds and bait.

In Maryland and across the nation, the industry has developed some well-established companies, such as Burdette's, while continuing to attract entrepreneurs.

Still, after more than a decade of state efforts to promote aquaculture, the industry is not as far along as many had hoped.

"It's a tough industry to break into," says Sen. J. Lowell Stoltzfus, a member of the state's Aquaculture Advisory Committee and an Eastern Shore Republican. "I'm glad for the optimists who jump in with stars in their eyes.

"But the reality is the technology hasn't developed to the point where there's a guaranteed result."

'Something neat to get into'

Starry-eyed might be one way to describe the McCardells. The idea of raising fish first hit them about seven years ago, while they were on a camping trip to southern Pennsylvania. They drove past some fish farms, and the notion took root.

"You read about it, and you actually come upon [fish farms] and it's like, 'Wow, that would be something neat to get into,' " said Donna McCardell, 37, who worked as a cook and waitress at her sister's restaurant.

A few years later, when her father, Edward Wilson, bought 40 acres from his in-laws' estate, the McCardells began to seriously consider a future in aquaculture.

In 1996, they called the state's aquaculture office and talked to Powers. He recommended they use an indoor, self-contained system of tanks.

He said that recirculating systems, unlike ponds, made a year-round growing season possible. They also eliminated the need to discharge large amounts of water.

The McCardells said Powers referred them to Burdette, who until June was chairman of Maryland's Aquaculture Advisory Committee. Burdette, 56, was described in a 1993 article in The Sun as a pioneer whose computerized tank system had captured the attention of federal officials, researchers and fish mongers nationwide.

In connection with the deal to buy the system, the McCardells were provided by Burdette with a plan for his company, Aquatic Technologies Inc., to build his recirculating system on Donna's father's land near Port Deposit.

The system of 32 rectangular, interconnected tanks uses pumps and filters to circulate and clean the water, with computers monitoring conditions.

A pool filled with water hyacinths also filters the water. Fish waste is separated and used to fertilize tomatoes and other plants in a greenhouse.

The McCardells' operation would become one of about 15 self-contained tank systems used to raise fish for food in Maryland. One such system on the Eastern Shore had raised as much as 350,000 pounds of fish in one year.

The McCardells planned to produce tilapia, a hardy food species that has been hailed as a potential cornerstone of aquaculture.

In an arrangement similar to the "vertically integrated" system used in the poultry industry, the deal called for Burdette to supply small "stocker" fish, along with feed and oxygen, and then pay the McCardells by the pound for fish grown to an average market size of a pound and a quarter.

It would be among the first tries at vertical integration in Maryland aquaculture -- an important juncture in the evolution of the industry.

The state began promoting Maryland aquaculture in 1988, hoping to emulate the success of catfish farming in Mississippi and other southern states.

Today, there are about 250 aquaculture businesses in Maryland, raising everything from oysters to plants and fish for ornamental ponds. Many, like the McCardells, are small start-up businesses.

To launch their business, the McCardells secured financing from a private bank, but they also needed money from the state's aquaculture loan program.

State loan officers were reluc- tant to invest in aquaculture ventures, which typically involved people, like the McCardells, with little or no experience in an infant industry.

"We just didn't think, from a credit standpoint, it was something we should be doing," said A. P. Ramsey Crosby, who was then director of the Maryland Industrial Development Financing Authority (MIDFA). "The authority really had to be pushed to do these [aquaculture loans]."

Only nine loans have been approved since the program was established in 1990. A third of them, representing more than $500,000, have been written off as potentially uncollectible, officials said.

MIDFA loan officers questioned whether the McCardells had enough working capital and collateral.

According to state records, they also questioned whether Burdette's company, which had previously received a state loan but had been slow to pay it back, had the financial means to hold up his end of the deal with the McCardells.

In December 1996, MIDFA turned down the McCardells' loan application.

Burdette wrote to James D. Fielder, then deputy state secretary for economic development, criticizing the decision and asking, "Is not the whole purpose of this loan fund to help the individual get started in aquaculture?"

Robert C. Brennan, an assistant secretary for the Department of Business and Economic Development, said, "He looked at us as stumbling blocks to getting his deal done."

But committee members, Brennan said, weren't swayed by Burdette's position as head of the aquaculture advisory committee. "I don't think we looked at it as any undue pressure."

Agriculture officials also weighed in, reminding economic development officials that the fund was established to make loans that private banks ordinarily would not.

"That is the very reason the aquaculture loan program was established as a 'stopgap' measure to fill this void and to provide a degree of comfort to private lenders," wrote then-Agriculture Secretary Lewis R. Riley.

Meanwhile, Brennan said, economic development officials repeatedly counseled the McCardells about the tremendous gamble they would be taking as they pledged their house and Donna McCardell's parents' home and property as collateral.

But, he said, "They were rabid about getting their fish farm in."

In March 1997, the $250,000, low-interest state loan was approved.

The McCardells also invested their own money. In addition to the property pledged against the loans, Donna McCardell said, she and her husband put in $20,000 in cash and her father put in $118,000.

Shortly after the first fish arrived in May 1998, they began to develop lesions. By last fall, hundreds were dying each day. In all, the McCardells said, about 35,000 fish died.

In late June, just days before closing their business, Scott McCardell held a dead tilapia with a nickel-sized hole in its side. "That's how most fish have left the facility," he said.

After learning of problems at the McCardells' farm, Powers arranged for extensive testing. He said scientists determined the fish died from "opportunistic diseases" -- ailments that manifest themselves only in "stressed" fish.

"We all felt that if anyone could be successful in this industry, it was Donna McCardell," Powers wrote in a letter to a state delegate that outlined the family's financial plight.

In an interview, Powers added: "She was an extremely hard worker, very attentive to looking at details."

The McCardells complained that Burdette's company did not complete work on the system, failing to include all of the promised computers.

They expected to raise 200,000 pounds of tilapia a year and collect $17,000 a month in revenues, but fell far short.

But Burdette insists that his own system at Maryland Pride Farms in Aberdeen produces a comparable number of fish, made up of a mixture of stocker fish and larger fish.

And he said the vertical integration arrangement is further evidence of the confidence he has in his system.

"I owned the fish, I owned the feed. If those were at risk because of the equipment, I wouldn't have allowed it," Burdette said, adding that the McCardells' failure cost his business thousands of dollars.

He says the McCardells failed to run the system correctly, despite his attempts to help them. And they lacked the money, he said, to weather the inevitable setbacks that come with a start-up business.

"You can't just quit and say, 'Let's blame Doug,' " he said.

In July, Burdette removed the last of his fish from the McCardells' tanks.

Meanwhile, the McCardells' farm is up for sale or for lease. The lenders want their money.

"We're now in a process of getting out from under," Scott McCardell said.

They might file for bankruptcy, the McCardells said.

Fish wouldn't grow, or died

Andy Rhodes knows about bankruptcy.

Like the McCardells, he purchased a system from Burdette's company. Like the McCardells, his business went under.

His fish farm -- a virtual carbon copy of the McCardells' -- was built next door to his home in Felton, a small town near York, Pa.

The tanks at Felton Aquaculture have long been drained. Recently, he stored antique automobiles in the hangar-like building.

Rhodes, a one-time plastics factory engineer who previously raised a pond of bait fish, loved the tilapia, especially at feeding time.

"It's like having 80,000 puppy dogs," he said. "Everybody's happy to see you. They watch you with their eyes out of the water."

But like the McCardells, he talks of sick fish and fish that would not grow to market size.

"They got up to a certain stage and they wouldn't grow," he said, adding that he lost as many as 300 fish a day.

He has sued, charging that Burdette's company misrepresented the system's capabilities. That suit, and the breach of contract counter-suit filed by Burdette, is pending in Harford County Circuit Court.

Burdette said Rhodes, like the McCardells, mismanaged the facility and ran short of cash.

To obtain a loan, Rhodes pledged his house, and his parents put up their northern Baltimore County farm. He quit his factory job to undertake his venture.

"I learned one thing," said Rhodes, 43, who's gotten his job back. "I will never put any property up for a business again."

But, like the McCardells, he says state officials share the blame for his predicament. Among his papers is a "to-whom-it-may-concern" letter from Powers that states: "The office supports Mr. Burdette and his prototype of a recirculating system."

Rhodes and his parents said they filed notice last year of their intent to sue the state, but the state denied their claim for damages. No suit has been filed.

"There was a lot of trust involved because it was sold by the state and by Doug Burdette," Rhodes said.

Fish raising by the bay

Aided by a $250,000 state loan, Scott Lee bought Burdette's system and, in 1997, began to raise tilapia in the bay-front community of Deale.

Lee, 29, said Burdette told him the system would produce more than 200,000 pounds of market-size tilapia a year, but he was able to grow only about 70,000 pounds in two years.

Burdette said problems began when Lee brought in diseased fish from out of state.

But Lee said otherwise healthy fish suffered an outbreak of disease when the system was unable to handle the effects of a heat wave last summer.

"Three systems aren't growing fish. It's all the growers' fault? I don't think so," Lee said.

Of the aquaculture industry, he says: "Whoever asks me about getting into the fish industry, I'm not going to promote it.

"I'm going to deter them."

But experts say the business has a way of promoting itself.

"There is some kind of charisma about aquaculture," said Fred Wheaton, a University of Maryland professor and authority on aquaculture.

Kevin Fitzsimmons, a research scientist at the University of Arizona and vice president of the American Tilapia Association, said the prospect of making money lures many people.

But he says growing fish in tanks is like having a green thumb in your garden: Some people have the knack, and no amount of coaching -- or fancy technology -- seems to help those who don't.

"Some people get enamored of the technology, and some people are intimidated by it," he said. "There are not very many of these turnkey systems that are real successful."

None of this deters Joseph Engers, 55, a Bel Air man who is among the latest to be lured to the industry. Engers invested his lump sum retirement in a recirculating system designed and built by Burdette.

Recently, he began stocking some of his tanks with fish -- tilapia recovered from the McCardells' tanks.

Many of the fish have grown to market size, he said, adding, "We shipped our first fish [last week]. We shipped 173 pounds of fish. The next shipping will probably be around a thousand pounds."

Engers, who raises cattle, corn and soybeans on his 40-acre farm near Bel Air, said he has at least one clear advantage over the others: the sixth-sense that farmers have about animals.

He will watch the tilapia, he says, for signals about their health just as he watches his beef cattle.

He said he doesn't expect to make money on the fish for at least a year, but he is willing to ride out any difficulties.

"I know the system will work," he said.

Pub Date: 9/09/99

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