June 4, 2001
USDA SEEKS TO DEFEND ACTIONS
IN ADM PRICE FIXING PLEA AGREEMENT
Two separate responses from the U.S. Department of Agriculture have taken issue with the contention that by failing to debar Archer Daniels Midland (ADM) it in effect forced the American taxpayers to fork up over $80 million of the $100 million fine imposed on ADM for price fixing.
In letters to Secretary of Agriculture Ann Veneman, Attorney General John Ashcroft and President-Select George W. Bush, the issue of a compliance agreement in lieu of debarment was raised by a Redondo, California concerned citizen Oscar B. Pichardo.
"I have just finished reading Rats in the Grain by James B. Lieber," Pichardo wrote in his letters, "detailing the criminal activities of ADM over the last four decades; particularly over the past ten years. The author points out a very disturbing fact: although convicted of criminal behavior, the USDA has not debarred Archer Daniels Midland."
In a response to Pichardo, a USDA Acting Deputy Administrator for Commodity Operations Alex King noted:
"On October 15, 1996, ADM entered into a plea agreement with the United States represented by the DOJ whereby ADM agreed to plead guilty to two counts of violating the Sherman Antitrust Act. ADM paid a fine totaling $100 million based on the Plea Agreement. In the Plea Agreement, DOJ acknowledged that ADM provided substantial assistance in the investigation conducted by the United States.
"Additionally, a Compliance Agreement in Lieu of Debarment was made between ADM and USDA as part of our efforts to ensure that future business dealings would be conducted with the high degree of integrity that the Government expects of all its business partners. Based on USDA's reviews and verification of ADM's adherence to the compliance agreement, it was decided at that time that further action was not necessary to protect the Government’s interests."
In a May 21 letter to Pichardo, another Acting Deputy Administrator of USDA's Commodity Operations Steve Gill added, "Your letter implies that suspension and debarment are appropriate forms of penalities. This is not correct. As stated in the regulations governing suspension and debarment of government contractors `[t]he serious nature of debarment and suspension requires that these sanctions be imposed only in the public interest and not for purposes of punishment.' (48 C.F.R. *9.402(b). The Deprtment of Agriculture views the Compliance Agreement as adequately protecting the United States and in our overall best interests."
In replying to King's letter Pichardo expressed his dissatisfaction with the USDA explanation.
"It is a matter of public record ADM did not provide `substantial assistance'
in the price fixing investigation," Pichardo responded to King. "Nowhere in the Plea Agreement is this `substantial assistance' mentioned. Neither is the Compliance Agreement in Lieu of Debarment a part of the Plea Agreement nor was this agreement disclosed in open court as required by law.
"On October 15, 1996, when Judge Ruben Castillo asked if any other agreements or promises have been made to the company, the ADM representative responded none have been made. This represents a serious misrepresentation in obtaining the Plea Agreement, as defendants are required by law to disclose all agreements in open court before a settlement can be finalized.
"Furthermore, your statement USDA's `reviews and verification of ADM's
adherence to the compliance agreement' is flawed. The Plea Agreement between DOJ and ADM covered the period ending June 1995. Since then, ADM has been named in various anti-trust suits in Illinois, California, Massachusetts, Alabama and Georgia. It has also settled law suits against it for irregularities in the marketing of HFCS and sodium gluconate not covered in the Plea Agreement.
"Additionally," he adds, "the Commission of European Communities and the Mexican government commenced investigating ADM activities in September 1997, November 1998 and February 1999. These investigations are not consistent with future business dealings conducted `with the high degree of integrity that the Government expects of all its business partners.'
"Likewise the statement `on December 3, 1996 the Department of Justice indicted three top level ADM executives, subsequently suspended from Government contracting, in accordance with the rules and regulations stipulated in the Federal Acquisition Regulations' is misleading. One of the indicted was the whistle blower who alerted and cooperated with the FBI regarding ADM's illegal activities. He was subsequently dismissed by ADM in August of 1995.
"On the other hand, the other two executives were provided well connected law firms [Williams & Connolly] for their defense, and their legal expenses were assumed by ADM. Their supposed suspension from government contracting per the FAR would not take place until September of 1998 when convicted. Since one retired and the other took a leave of absence from ADM in October of 1996, the suspensions amount to window dressing - making for great publicity with no de facto penalty. In the meantime ADM has continued conducting business with the USDA, and American taxpayers have been subsidizing both fines and legal expenses incurred by ADM as a by-product of their illegal activities.
"Frankly," Pichardo concludes, "Mr. King I fail to comprehend how this construes `protecting the Government's interests' or demonstrates `the interests and concerns of the American taxpayer take first priority in USDA's programs.' I find it unconscionable ADM continues to conduct business with the USDA, raking profits from the American taxpayer it has defrauded.
"I am not sure the amount of effort expended in composing your reply, but it fails to adequately address the issues raised in my original letter. It also raises another issue demanding investigation," he adds.
"Why was the Compliance Agreement in Lieu of Debarment not disclosed to Judge
Ruben Castillo as required by law? The failure to comply with this legal
requirement casts a serious shadow on the legality of the Plea Agreement between
ADM, DOJ, and USDA granted by Judge Castillo on October 15 1996."
SEC INVESTIGATING CONAGRA PHONY SALES,
MANIPULATION OF EARNINGS, MISLEADING INVESTORS
ConAgra Corp., the nation's second largest food manufacturer, has joined IBP, Rite Aid and Xerox among corporations targeted by the Securities and Exchange Commission (SEC) investigators on charges that they manipulated earnings to mislead investors. ConAgra's phony sales and irregular accounting of its farm-products unit also has led to a overstatement of profits for the past three fiscal years.
Since last November ConAgra's United Agri Products (UAP) revealed that the unit improperly booked revenue on sales for delivery that were to take place at a later date, and that some contracts were fictitious or not binding.
In March ConAgra said that profit at UAP was hurt by concerns among growers over biotechnology, changes in farm policy, and high natural gas prices. UAP, which distributes seed, fertilizer and agricultural chemicals to agricultural growers, is one of three businesses in ConAgra's agricultural-products segment and represented about nine percent of ConAgra's operating profit for the fiscal years 1998, 1999 and 2000.
According to company spokeswoman Karen Lynn the fictitious sales were "relatively small."
Rebates that ConAgra received from its suppliers, which were connected to the deferred sales of seeds, fertilizers and pesticides, also were improperly recorded, the company has concluded from their own in-house investigation.
Analyst William Leach of Banc of America Securities pointed out to Bloomberg News' Robert Finkelstein that the report of accounting irregularities at United Agri Products comes on top of the poor earnings news, and might indicate other problems.
"In a company as diverse as ConAgra, you wonder if this is just the tip of the iceberg," Leach said. "ConAgra's profit fell in the third quarter ended February 25, partly because of a loss at United Agri Products. Losses at the division, which analysts say has 40% of the U.S. market for seed, fertilizer and pesticides, more than offset gains in other agricultural businesses.
With sales of about $27 billion a year, ConAgra is the nation's largest food-service manufacturer and second-largest retail-food supplier. It owns companies across the food chain from the "field to the table," and its major brand names include Healthy Choice, Hunt's tomato products, Banquet meals and Armour meats.
While ConAgra Chairman and Chief Executive Bruce Rohde notes that the
company's "preliminary findings indicate that certain conduct at UAP
circumvented generally accepted accounting practices and violated ConAgra Foods'
corporate policy," the Omaha World-Herald's Victor Epstein reports that
"heads may roll" at ConAgra in the wake of the discovery that their employees
reported false sales to boost their
commissions in its troubled agricultural products division.
Lynn said she could not discuss the number of employees involved in the fake sales because the company's internal investigation is ongoing, but she said the matter is being viewed very seriously by Rohde.
"Bruce Rohde has seized this moment to clearly and unequivocally communicate that this behavior is inappropriate," Lynn said. "(It's) his belief that ConAgra Foods shall be a respected and trusted company, and he will take the necessary steps to regain that trust and respect."
Food industry analyst Christine McCracken of Chicago-based Midwest Research has said the prospect of a sale of the Greeley, Colorado.-based agriculture division, which has been a money loser since energy prices began to soar last year, is more important than the financial adjustments and accounting changes recently reported by ConAgra.
"What happened is that there were accounting procedures set up at ConAgra that weren't closely monitored, and some salespeople took advantage of them, and they're probably going to be gone," McCracken said. "The bigger issue is whether this incident will prompt some strategic action to reduce the company's exposure to this kind of activity."
"That's Wall Street lingo," Epstein notes, "for selling off the agriculture
division, which has long been part of ConAgra, which was founded in 1919 under
the Nebraska Consolidated Mills banner."
USDA PROJECTIONS CONSISTENTLY OVERESTIMATE
ACTUAL U.S. AGRICULTURAL EXPORTS
Grain export projections used by the U.S. Army Corps of Engineers and agriculture policy-makers have consistently over-estimated actual exports, according to a new study by Dr. C. Phillip Baumel, a professor of economics at Iowa State University.
The study, "How US Grain Export Projections from Large Scale Agricultural Sector Models Compare With Reality," was commissioned by the Minneapolis-based Institute for Agriculture and Trade Policy (IATP). It analyzed the two major sources of export projections: the USDA Agricultural Baseline and the Food and Agriculture Policy Research Institute (FAPRI) Agricultural Baseline.
The USDA and FAPRI state that their models are not intended to be forecasts, but rather baseline projections to be used for policy analysis. Yet the practical reality is that they have been used as forecasts in the proposed Upper Mississippi River Navigation Project and by other analysts in the formulation of US farm policy.
Dr. Baumel states that, "The Corps of Engineers, agribusiness, and farm organizations use these projections to make business and infrastructure decisions. It turns out that they are relying on models that have a tendency to project increasing exports, even in the face of a 20-year downward trend in actual exports."
Key findings of the report include:
* The models used by USDA and FAPRI have a tendency to project increasing exports even in the face of declining exports;
* USDA's annual projections of Brazil soybean exports show minimal growth, while the actual trend since 1992 has shown sharp increases. FAPRI projections also show minimal growth, and have underestimated Brazil's soybean exports almost every year since 1990.
* While China imports of corn have declined sharply since 1995, USDA projections in 1997, 1998, 1999 and 2000 all showed China importing large quantities of corn.
* In 1997 and 1998, USDA projected South Korea and Taiwan corn consumption to increase considerably more than what has actually occurred.
* USDA's 1997 export projections to Europe called for continued corn exports at 90 million bushels for the next ten years. By 99-00 EU imports of US corn dropped to just over one million bushels and remain at that level due to concerns related to genetically engineered crops not considered by the USDA.
Government agencies, trade associations, and agribusiness increasingly use baseline projections from USDA and FAPRI as forecasts. A federal grant finances FAPR's annual crop and livestock price projections to Congress.
FAPRI is a joint venture of Iowa State University and the University of Missouri. The overly optimistic USDA projections are a particular concern because the U.S. Army Corps of Engineers is using the projections as the basis for its 50-year Mississippi River corn and soybean traffic forecasts.
"The Corps is considering spending over a billion dollars on Mississippi River navigation based on these projections," said Mark Muller, Senior Associate at the Institute for Agriculture and Trade Policy. "In light of this report, the validity of using these projections as forecasts needs to be re-evaluated."
"This report also has important implications for our domestic farm policy which continues to place unrealistic hopes for export expansion as a way to help farmers," said Muller. "We need start implementing policies that are based in reality, and address more fundamental issues of price."
Dr. Baumel stresses that a large part of the problem is that these models are misused as forecasting tools when they were designed only to measure the incremental impacts of changes in agricultural policy.
"Probably the greatest barrier to correcting these problems is the limited resources currently available for developing true forecasting models," says Baumel. "If the Corps of Engineers and agribusiness intend to use these as forecasting models, then they need to provide substantially more funding."
Dr. Baumel is a Charles F. Curtiss Distinguished Professor in Agriculture at the Iowa State University. Dr. Baumel served on the National Research Council Committee to Review the Upper Mississippi River - Illinois Water Navigation System Feasibility Study which issued its report in January 2001.
The Institute for Agriculture and Trade Policy promotes resilient family farms, rural communities and ecosystems around the world through research and education, science and technology, and advocacy.
The full report can be read at:
IOWA'S TOM HARKIN:
WILL ASSUME SENATE AG COMMITTEE CHAIRMANSHIP,
PROMISES BIG CHANGE IN U.S. FARM POLICY
Family farm agriculture benefitted handsomely when Sen. James Jeffords of Vermont recently announced that he would quit the Republican Party and affiliate himself as an Independent for in giving the Democrats control of the U.S. Senate, Iowa's Tom Harkin will become the new chairman of the Senate Agriculture Committee.
Harkin will take the place of Sen. Richard Lugar, Rep.-Indiana, who will then be the ranking Republican member.
In a written statement, Harkin praised Jeffords for his decision.
"I have known Senator Jeffords for a long time and have always known him to be a man of courage, conviction and common sense," he said. "His decision will bring the legislative agenda back to the center."
Harkin also will take on chairmanship of the Appropriations subcommittee on labor, health and human services and education.
Harkin told the Des Moines Register's George Anthan and Jane Norman that he will push for big changes in U.S. farm policy as chairman of the Senate Agriculture Committee, including a safety net for farmers when commodity prices drop and a greater emphasis on conservation.
"There will be significant changes to Freedom to Farm," said Harkin, referring to the 1996 GOP farm policy intended to move the United States toward a more market-oriented approach. "There will definitely be a safety net."
Harkin who has long considered himself belonging to those Midwestern senators who call themselves "Prairie Populists" have consistently sought programs to boost farm prices, increase conservation and improve government scrutiny of agribusiness mergers and consolidations.
Harkin has frequently referred to the GOP's Freedom to Farm Act as the "Freedom to Fail Act." He strongly opposes its guaranteed annual payments, which are not tied to farm prices. He also says the money often goes to people who are not actually producing crops.
"I think this will change the face of the upcoming farm bill," John Whitaker of Hillsboro, Iowa., president of the Iowa Farmers Union, told the Register.
Harkin said he would not support attempts by House Republican leaders to split the next farm bill into sections, passing the segment related to commodities this year and then moving on to nutrition, conservation and food- safety programs next year. Harkin said the Senate will take up a traditional unified farm bill.
Harkin, along with Sen. Gordon Smith (Rep-Oregon). recently re-introduced legislation to establish a universal and voluntary incentive payment program to support and encourage conservation practices by farmers and ranchers. Representatives John Thune (Rep.-South Dakota) and Marcy Kaptur (Dem.-Ohio) introduced identical legislation in the House of Representatives with a bipartisan group of cosponsors.
Dubbed the "Conservation Security Act," Harkin said the bill would provide
farmers the following:
* Receive an annual payment of up to $20,000, with the ability to access a one-time advance payment of the greater of $1,000 or 20% of the annual payment for implementing a basic set of practices. This basic category, Tier I, would include such practices as nutrient management, soil conservation, and wildlife habitat management.
* Receive up to $35,000 and access to a one-time advance payment of the greater of $2,000 or 20% of the annual payment, farmers would add to their Class I practices by choosing a minimum number of Class II practices --- including such practices as controlled, rotational grazing, partial field practices like buffers strips and windbreaks, wetland restoration and wildlife habitat enhancement.
* Adopt comprehensive Tier III conservation practices on their whole farm ---- under a plan that addresses all aspects of air, land, water and wildlife --- would receive up to $50,000 and have access to a one-time advance payment of the greater of $3,000 or 20% of the annual payment.
Commenting on President Bush's energy package, Harkin said it was "a
throwback" to the 19th century, saying he favors increased use and production of
NEBRASKA FARMERS UNION PRESIDENT
"UNFAIR FARM AND TRADE POLICIES"
TAKING A TRAGIC TOLL ON "SOUL OF AMERICA"
John Hansen, president of the Nebraska Farmers Union, one of the most consistent and outspoken defenders of family farm agriculture and critic of the role of corporate agribusiness in American agriculture, has called for "fundamental economic fairness" for the nation’s farmers.
Hansen is a 5th generation family farmer, and former purebred Charolais
breeder, from Madison County, Nebraska. Besides being the leader of NeFU he is also chairman of the Nebraska Citizens Trade Campaign, chairman of the Nebraska Farm Crisis Council and served seven years on President Clinton's Agricultural Policy Advisory Committee for Trade.
In a recent statement Hansen has made a plea to those who have an interest in the food they eat, care about our soil and water resources, appreciate our farmer's contribution to our national culture and political society, or care about families that farm to lend family farmers a hand.
"The American families who produce our food and fiber are hemorrhaging. The pressure from one sided and unfair farm and trade policies is taking a tragic toll on farm families, farm businesses, rural communities, and the soul of America. Yet, where is the outrage? Where is the public debate over the horrific and massive failure of the 1996 Farm Bill?
"While spring is the seasonal time of hope, many of our nation's farm and ranch families did not get their operating loans from the bank renewed this spring. Some quit because of credit failure, some quit because they want to get out while they still have some assets left, some quit because their families have disintegrated from the prolonged stress, and some quit because they are worn out from work and worry, and see no glimmer of hope from either the Bush Administration or Congress for a better future.
"The calls to the Farm Crisis Hotline in Nebraska remind us that there are very real human consequences to non-competitive agricultural markets, one sided trade and farm policies, and public elections and public policy dominated by big money.
"Last year, for the fourth year in a row, the number of families asking for help increased, and the severity of the situations that people found themselves in, also worsened. Our farmers are proud, independent, and self-reliant. How much pain must they be in to set aside their pride and call a hotline to ask for emergency food assistance, legal help, financial counseling, and personal counseling?
"The 1996 Farm Bill was strong-armed through Congress by a Republican leadership that continues to claim they are pro-family. Yet, their big business sponsored Farm Bill is destroying both our nation's traditional food production system of family owned and operated farms and ranches, and the families in our nation that farm and ranch. Make no mistake about it, the 1996 Farm Bill, and the politicians that support it, all self serving claims to the contrary, are anti-family.
"Our American farm and trade policy no longer represents the hopes, dreams, values, or interests of America. Our farm and trade policy has been hijacked by a group of American-based transnational big business extremists with an appetite for world wide control.
"The simple facts tell the story. The average national price comparison for the major crops from 1996 to 2000 quickly shows who won the battle between the food producers and the food processors. Not counting the loss of value from inflation, the average national price of corn has collapsed 32%, soybeans 35%, wheat 38%, cotton 25%, and rice 37%.
"What most taxpayers fail to appreciate, is that the loss of earned income from the sale of our crops, and the increased cost of production from inflation, energy, and competitive ag suppliers, when added together outweigh the increase we received from federal income transfers.
"Our farmers do not ask for more subsidies, we ask for fundamental economic fairness. We want to be paid a fair price for the products we grow in a competitive marketplace. But thanks to the political power the agricultural sectors conglomerates can buy, farmers have neither competitive markets, or fair prices. As a result, most of us who represent family farmers and ranchers, spend most of our time doing short term bail out, hand on, damage control.
"The 1996 Farm Bill authority expires in 2002. Now is the time to overhaul our nation's fundamentally flawed and unfair national farm and trade policies. Our nation's current farm and trade policy must be overhauled, not fine tuned. It does no good to fine tune the engine on a bus headed over the cliff to economic destruction. We need folks who can put their hand on the steering wheel of public policy.
"As a state leader of a general farm organization that represents the economic interests and well being of family farmers and ranchers, I ask everyone who has an interest in the food they eat, cares about our soil and water resources, appreciates our farmer's contribution to our national culture and political society, or cares about families that farm to lend us a hand. We need it, and appreciate it.
"My organization lives by the motto that we should never ask for anything for
ourselves that we would not also want for our neighbors."
CONGRESSIONAL BLACK CAUCUS
CITES USDA'S "HISTORIC BIAS"
AGAINST MINORITY FARMERS
OPPOSES DORR NOMINATION AS UNDERSECRETARY
"I think you ought to perhaps go out and look at what you perceive the
three most successful rural economic environments in this state. . . . youill
notice when you get to looking at them [the counties] that they're not
particularly diverse, at least not ethnically diverse . . . [the counties are]
very diverse in their economic growth, but they have been very focused, they
have been very non-diverse in their ethnic background and their religious
background . . . There's something there obviously that has enabled them to
succeed and to succeed very well."
---- Thomas Dorr
These remarks, during a December, 1999 Iowa State University video-taped conference, in addition to a number of other controversial views have brought calls from farm, environmental groups and 18 members of the Congressional Black Caucus to Senators Tom Harkin (Dem-Iowa) and Richard Lugar (Rep.-Indiana) of the Senate Agriculture Committee opposing the nomination of Thomas Dorr as USDA Undersecretary for Rural Development.
In their call the Black Caucus cited "USDA's historic bias against minority farmers,” saying they doubted Dorr's "ability to serve all American farmers in a way that is sensitive to their needs and struggles." The Black Farmers Association and the National Association for the Advancement of Colored People also have registered their concerns over Dorr’s nomination.
A former Iowa Board of Regents member, Dorr in the videotaped recording of the conference first made public in May in the Des Moines Register, in addition to attributing the economic success of three rural Iowa counties [Carroll, Lyon and Sioux, predominantly white and Christian] to their being "very non-diverse in their ethnic background and their religious background," also said he thought that the economically ideal Iowa farm would be 225,000 acres in size and lamented that Iowa had not been "more aggressive" in attracting the type of factory hog farming that has taken hold in North Carolina and other Southern states.
Based on the latest US Census of Agriculture data, making Dorr's ideal farm size a reality would cut the number of independent farms in the state from roughly 90,000 currently to 139, driving 99.8% of farms out of business. (There are currently 31,166,699 acres of farmland in Iowa, averaging 343 acres per farm.)
If the Dorr formula was applied to the entire country, the number of independent farms would plummet by 99.7% from 1.9 million to roughly 4,200. The nation's farms currently encompass 931 million acres of farmland, averaging 487 acres per farm.
In addition, the growth of factory hog farms, in which up to 20,000 hogs can be located on plots as small as two acres, has been a source of public outcry in rural areas of North Carolina and other states. Hog waste pits have ruptured, causing massive drinking water contamination; persistent, noxious odors have dropped property values for people living downwind of the farms; and, thousands of small hog farmers have been driven out of business.
Dorr was a former campaign official in the Bush-Cheney presidential campaign. On July 23, 1999 when candidate Bush named him to be the co-chair of his Iowa campaign’s finance committee on July 23, 1999, Bush would give a speech in Iowa in Spanish about the need to reach out to different groups.
Dorr, who was also a contributor to Bush's campaign, and served as a
transition adviser, has drawn praise from the White House. Bush spokesman Scott
Stanzel told reporters that Dorr is a highly qualified nominee, "an innovative
thinker" with "a unique understanding of [agricultural] issues."
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