EXAMINER                                                Issue # 61 January 14, 2000

Monitoring Corporate Agribusiness From a Public Interest Perspective

A.V. Krebs


Cargill, the nation’s largest private corporation and one of the world's two largest grain traders along with Craig D. Hungerford a Madison, Wisconsin land appraiser and his appraisal firm, Real Estate Dynamics Inc., is being charged in a federal court lawsuit  with defrauding California state and federal governments by inflating the value of 10,000 acres of abandoned salt ponds on the northern edge of the state's San Pablo Bay "by establishing an artificial and inflated price of $10 million by making a series of false claims."

In a complaint unsealed on December 17 by U.S. District Judge Charles R. Breyer in San Francisco, Cargill through its wholly owned subsidiary, Leslie Salt Co., was able to inflate the price of its property by relying on an allegedly unlawful appraisal method known as a "public-interest value." Officials at Cargill's Wayzata, Minnesota headquarters have vehemently denied the suits general allegations.

The "public-interest value" technique, as explained by Marc Lifsher in his report of the suit which recently appeared in the Wall Street Journal, purports to set a value for land that may not have much economic value in the open market. "Instead," Lifsher notes, "the technique allows the land's value to be set at a higher price by concluding that its `highest and best use' is to be purchased by the government or some other entity for conservation in its `natural" state'."

Critics of the method contend that it is arbitrary -- and results in inflated values, which is the position that the lawsuit has taken, contending  that the only legal method for appraising such a parcel should be based on its "fair market value," or what it might sell for in an open, public sale.

In reality, the San Pablo tract had a ""negative fair market value" because of the need for the new owners to mitigate environmental damage caused by years of salt-manufacturing operations, the complaint, lodged by John Dale Hansen, executive director of Integrity in Natural Resources, a Santa Rosa-based group that scrutinizes such environmental purchases, charges.

The complaint also specifically alleges that Cargill, Hungerford and his appraisal firm defrauded the state and federal governments by inflating the value of the Napa County marsh property by making a series of false claims, including:

* That new regulations known as the Uniform Appraisal Standards for Federal Land Acquisitions did not apply at the time that Hungerford, working for the Cargill Salt Division in the East Bay California city of Newark, submitted an appraisal to the state Wildlife Conservation Board. The appraisal concluded that the value of the property was $34.8 million. (New regulations issued in 1992 -- do not permit "public-interest value" as an acceptable appraisal method. Prior to those regulations, the rules made no mention of public-interest appraising.)

* That those new standards permitted the consideration of public-interest values in determining market value.

* That Cargill held clear title to all the Napa Marsh, when in fact ownership of at least one-third of the acreage had been claimed and contested by the State Lands Commission since 1973.

* That the land was primarily salt-marsh wetlands, when actually it consisted of man-made industrial salt evaporation ponds.

* That cleanup of super-saline brine deposits, left over from salt-making operations, would cost only $1 million. (Current estimates by several governmental agencies, according to Lifsher, range from $3 million to $20 million.)

Using money from a variety of state and federal environmental funds, the State of California paid Cargill $10 million for the Napa Marsh salt ponds in May 1994, with the aim of eventually restoring them to biologically rich tidal wetlands. According to Cargill, the entire acquisition process was closely scrutinized by numerous government environmental agencies as well as real-estate specialists at the state Department of General Services. According to Lifsher's report the purchase has been widely praised as a good deal by dozens of state and federal elected and appointed officials, according to public records and interviews.

"This is one of the smartest purchases that the state has ever made," Georgia Lipphardt, assistant director for development at the state Wildlife Conservation Board, noted. Lipphardt  served as senior land agent at the time of the Napa Marsh purchase.

In addition to the land fraud charges, the Integrity in Natural Resources complaint also
alleges that Cargill has or may have sought tax benefits by claiming as much as $26 million in charitable contributions --- its claimed value of the property over and above the state's $10 million purchase price. Internal Revenue Service agents in Minnesota, according to Hansen,  have been investigating possible Cargill tax-deduction claims arising from the $26 million. While the IRS agent reportedly in charge of the case, Steve Smith, has declined to comment, Cargill spokesperson Lori Johnson says the company told the Journal that giant grain commodity company had "no indication at all that there is any kind of (IRS) investigation going on."

Hansen also notes that in 1992, California state officials rejected an appraisal  by Hungerford that he performed for Cargill on the 30-acre New Chicago Marsh near San Jose. The rejection had noted that the state must rely on fair market value and not other "subjective" values. In the Napa Marsh purchase, however, the state declined to perform an independent appraisal and instead relied on its own experts' determination that the 10,000 acres was worth at least $10 million.

The current suit is asking that triple damages be assessed against the defendants, as spelled out in the federal False Claims Act, a Civil War-era statute created to protect the U.S. government from war profiteers selling shoddy, overpriced goods to Union armies. The law, which was last overhauled in 1986, now allows private citizens to file civil suits in the name of the government in an effort to recover allegedly fraudulent payments.

NOTE: For some two years this editor has been aware of the facts of this story, however, in deference to those formulating the aforementioned law suit he has abided by their desire for confidentiality. From a mass media perspective it is understandable why the Wall Street Journal as opposed to THE AGRIBUSINESS EXAMINER was alerted to this story by the Integrity in Natural Resources for actual publication.


The enormous wealth of grain trading firms and the fact that most are private corporations unaccountable to the public or stockholders, has give the U.S. grain trade untold and often unseen power to influence federal, state, county and local trade and tax policies while at the same time gaining lucrative federal, state and local financial assistance in hidden subsidies.

Cargill, for example, has leased or built a number of giant grain terminals from Seattle (See Issue #44) to Buffalo, financed primarily by industrial revenue bonds and special state and federal funds. At the same time it has shown little regard for the communities' best economic interests when these interests conflict with its own corporate goals.

One illustration: In February, 1978 in Buffalo, Cargill simply abandoned three grain elevators after refusing to pay property taxes on them for five years, leaving the city with an uncollected bill of $860,000. The city, subsequently acquired the property at its own tax sale, but was unable to realize as much money from the selling of the property as the amount Cargill owed in taxes.

Buffalo sought to collect the delinquent tax money from Cargill by taking the case to the New York State Supreme Court. The Court, however, ruled that state law compelled the city to bid on the property at the tax sale and that the same law deemed the deliquient taxes to have been paid when Buffalo picked up the property at the tax sale.

Later that same year, Cargill announced the purchase of Leslie Salt Company in California, which included over 44,000 acres of salt evaporation ponds in six of the nine counties that surround San Francisco Bay.

In light of the furor over property taxes in California and that passage of the state's Proposition 13, this editor wrote to each of the six county tax assessors questioning them as to how much land in their county Cargill would be paying taxes on, what the rate would be and whether the county had any administrative or statutory procedure to prevent Cargill from doing to that county what it did in Buffalo.

The replies all pretty much followed the same pattern as to the county's recourse in such circumstances. One assessor, however, concluded his letter candidly: "After this long explanation, what I am really telling you is that we could possibly find ourselves in a similar situation as Buffalo, New York."

Thus, in a state where property taxs had become the number one political issue, local governments remained uncertain as to how they might go about collecting delinquent taxes in their own county form the nation's largest private corporation.


American Farm Bureau Federation (AFBF) officials in a a desperate attempt to discredit their own family farm members recently found themselves enmeshed in a thicket of denials, semantic flim flam and bureaucratic buck passing as they sought to extricate themselves from an embarrassing anti-bureau policy resolution passed by one of their own state organizations.

On December December 6, 1999, Fred Stokes, a member of the Mississippi Farm Bureau Federation (MFBF) and president of the fledgling Organization for Competitive Marketing presented a resolution (See below) which was unanimously accepted by the members of the MFBF which strongly rebuked the AFBF for opposing Minnesota U.S.Senator Paul Wellstone's Agricultural Merger Moratorium Act.

"The national Farm Bureau policy book is full of statements expressing concern about concentration of market power and monopoly in agribusiness," Stokes reminded the state delegates. "Yet AFBF President Dean Kleckner and the national staff consistently sell out their members and jump in bed with agribusiness."

Condemning the national office as acting in "clear and blatant conflict" with policy characterizing it as "a gross breach of faith and detrimental to the interests of  producer members" the unanimously accepted statement further stated that the "Mississippi Farm Bureau Federation strongly condemns this and other actions by AFBF leadership which violate the implicit contract with it's grassroots membership to effectively advocate their interests and refrain from breaching established policy."

Subsequently, David Kruse, President, CommStock Investments in a syndicated column, " Farm Bureau - Getting Its Head on Straight," in a report on the Mississippi resolution noted that  "the Farm Bureau claims to be a grass roots farm organization with policy being derived from members. As with membership, there is ambiguity here. There are State Farm Bureau affiliates to the American Farm Bureau Federation. State policy directives can be ignored in Washington. Farm Bureau leadership will take positions on their own initiative.

"AFBF opposition to the recent ag merger moratorium and proposed legislation to require packers to divest ownership of hogs and cattle are cases in point. These errant AFBF positions were what the leadership wanted them to be. This kind of leadership flexibility can be both good and bad. You don't want to tie their hands so they can't respond to issues of the day but it's painful to see AFBF leadership act in direct conflict with its grass roots policy directives," he added.

The Kruse column, which appeared among other places, in Iowa's Spencer Daily Reporter  was immediately challenged by Iowa Farm Bureau spokesperson Aaron Putze who, in a memo to the state's county Farm Bureau leaders, claimed “upon reviewing the [Kruse] article, the AFBF has said Kruse is wrong in his report of what took place at the Mississippi Farm Bureau annual meeting; that the organization did not pass the resolution as eluded to by Kruse. In reality, Kruse used a fabricated news release written by an anti-Farm Bureau organization as the "fact" behind his column.

When questioned by this editor regarding his claim Putze said that while the memo was for "internal use" (although it was not so indicated on the memo itself), he "took the word of the AFBF"  in making his denunciation of the Kruse article, the "word" being from Joe Fields, the AFBF director of communications.

Contacted by phone in Houston, Texas where he was attending the AFBF's annual convention Fields first told this editor that the resolution had to first be studied by the MFBF's board before it could be reported to the state's membership for an official vote then later in the conversation he stated that the resolution was not valid because it had not been approved by the national Federation's resolution committee at their meeting in Rosemont, Illinois on December 14-15. Stokes, meanwhile planned on reintroducing the resolution from the floor of the convention.

But, on Thursday the delegates to the convention passed a resolution simply urging the federal government to make sure antitrust laws were not being trampled by agribusiness mergers dropping by a 242-115 vote, language supporting a moratorium on mergers if Congress did not act this year. In their endorsing language urging a review, and strengthening, "if necessary," of antitrust laws they deleted support for a moratorium out of reportedly concern it would block "useful consolidations."

In Kruse's article he observes that "if there is anything coming through loud and clear as grass roots Farm Bureau members greatest concern, it's the corporate subjugation of agriculture and the integration of livestock industries."

Relating that the Iowa Farm Bureau had "a constructive convention, adopting as policy: `We support federal legislation that prohibits packer ownership or control of livestock unless the packer is farmer-owned,'" Kruse noted that "there was nothing ambiguous about that.

"The Illinois Farm Bureau convention went even better than did Iowa's. The Illinois Farm Bureau adopted policy resolutions: Opposing packer ownership of sows, saying if co-ops compete against their members, they can demand pay out of deferred dividends and retained earnings taking a strong stand against anti-competitive markets.

"An Illinois Farm Bureau member called to tell me that it took a protracted effort to get their resolutions past the state leadership. As with many farm organizations or cooperatives, a resolutions committee rides herd over the process. He says the Illinois resolutions were thrown out twice by such committees but were reintroduced from the floor and passed. Serious electoral  challenges of current state officers were made in Iowa and Illinois that had more than the usual degree of support in an organization so conservative that an incumbent would need to be convicted of multiple felonies to be beaten," Kruse added.


Adopted unanimously by the membership on December 6, 1999:

Whereas; American Farm Bureau Federation is a grassroots farm organization that is known as the voice of agricultural producers.

Whereas; American Farm Bureau Federation, speaking on behalf of it's five million members, is very influential in national agricultural policy issues.

Whereas; policy and positions taken on issues are properly a reflection of the consensus of the membership as reflected by policy established through the resolution process.

Whereas; the policy book for 1990 is replete with statements of concern over monopoly and the growing concentration of market power, acquired by agribusiness through merger.

Whereas; American Farm Bureau acted in clear and blatant conflict with such statements of policy in opposing legislation that would have caused an eighteen-month moratorium in larger agribusiness mergers.

Whereas; such action is deemed by this body to be a gross breach of faith and detrimental to the interests of producer members.

Therefore be it resolved; that Mississippi Farm Bureau Federation strongly condemns this and other actions by AFBF leadership which violate the implicit contract with its grassroots membership to effectively advocate their interests and refrain from breaching established policy.


Prior to the convening of the American Farm Bureau Federation's annual convention in Houston, Texas this past week a number of family farm representatives including disaffected AFBF members Fred Stokes, a cattle producer and a 28-year member from Mississippi  and Karen Hudson, the wife of an Illinois grain farmer, held a press workshop to voice their disapproval of the organization that touts itself as "the voice of American agriculture."

Also on the panel was John Hansen, president of the Nebraska Farmers Union; Sue Jarrett, a member of the U.S. Department of Agriculture's Commission on Small Farms; Bill Christison, president of the National Family Farm Coalition; and economist Bill Weida.

In interviews with South Bend, Indiana Tribune farm writer Wayne Falda the panelists voiced their unhappiness with the farm organization, the nation's largest.which boasts of 4.9 million members while there are only 1.9 million farmers in the U.S.

Hudson, who leads Families Against Rural Messes, an organization that opposes mega-mergers in agriculture and large corporate livestock farms cited the AFBF's opposition to Minnesota Sen. Paul Wellstone's request for an 18-month moratorium on agribusiness mergers as proof that the organization is out of touch with everyday farmers who are shocked at the speed at which agriculture is being monopolized by a few giant agribusinesses.

A resident of rural Peoria County, she opposed the arrival of a Murphy Farms enterprise near her farm, but felt that Farm Bureau was working behind the scenes in the Illinois statehouse to subvert people, including other farmers, who want tighter controls on large, vertically integrated hog farms. "We are trying to get some strong regulation passed to at least regulate these facilities as they come into the counties in Illinois," she told Falda.

"The Farm Bureau supports local control over nonagricultural pollution such as low-level nuclear waste or garbage incinerators that come down here from Chicago," she said. "But when it comes to ag waste, they say the county government does not have the expertise to make decisions on matters such as that. We in a sense feel that the Farm Bureau is speaking out of both sides of (its) mouth," said Hudson.

Stokes pointed to the decline of small farms and the rising dominance of sprawling agribusinesses as having forced him to join ranks with people whom he has traditionally opposed, namely environmentalist and labor union activists. "What I am going to do from here on out  --- much to the chagrin of a lot of people, including my wife --- is to dog this thing," he said. "I am going to associate with some people who I have been conditioned not to like over the years --- the tree-huggers and the labor union people. But we share some things in common, and these are important things. So we are not going to quibble on other matters."

Hansen said he will join the panel to press the National Farmers Union to call for a reopening of the 1996 Farm Bill, a move that has been opposed by Farm Bureau president Dean Kleckner.

"Do I think there is a gap between grassroots Farm Bureau membership and the Farm
Bureau leadership? Yes, there is," Hansen stressed to Falda

"Dean Kleckner is knocking down $300,000 a year talking about how he is a corn and hog farmer from Iowa," he said. "So let's take that money away from Dean and see how Dean does on his 300-acre farm with corn prices back to 1951 levels."

Soon following Hansen's remarks the AFBF voted their 16-year President Kleckner of Iowa out of office in favor of Texas Farm Bureau President Bob Stallman at its national convention in Houston. Reuters reported that numerical results of the voting, which took place by state blocs depending on the size of membership, were not released. Stallman had criticized Kleckner for being too closely tied to the Republican Party, for spending too much time on international travel rather than lobbying in Washington and for supporting trade agreements without closely monitoring them.

Corn prices being at $1.70 a bushel --- or approximately the same as they were 49 years ago NeFU's Hansen is convinced that the farm bill has failed. "The depression in farm country can be alleviated by higher loan rates and a return to farm policies that include elements of controlled commodity production," he emphasizes.

"Farm Bureau continues to stick with its original position on the 1996 farm bill despite the fact that the value of ag exports has dropped since the farm bill was passed by $10.8 billion and ag imports has gone up $4.9 billion," he said. "Meanwhile corn (prices are) down 33%, wheat are down 42%and soybeans are down 34%."

"The Jury is in," National Family Farm Coalition president Christison declared, "`Freedom to Farm,' genetically manipulated organisms, and bad trade policy have brought devastation to family farm agriculture. If any of us are to survive, we must have a new direction in agriculture policy. We urge the American Farm Bureau and the commodity organizations to start supporting agriculture policy that will return profit to grassroots family farmers."


Already being sued for price fixing (See Issue #32) and for covering up job-related injuries in its plants (See Issue #60), IBP Inc., the U.S.'s leading beef packer and appropriately named the nation's "corporate outlaw," is now being charged in a 48-page lawsuit by the U.S. Department of Justice with violating five federal environmental laws with numerous incidents of air and water pollution and with improper handling of hazardous waste.

The suit was filed by the Justice Department on behalf of the Environmental Protection Agency (EPA).

"This is a substantial case which could result in a substantial penalty," said U.S. Attorney Tom Monaghan in Omaha. "And we're asserting some serious violations and a wide array of violations." In total, the Justice Department cites 15 different violations and seeks fines of up to $25,000 for each violation per day from August 1994 to Jan. 30, 1997, and up to $27,500 per day per violation since then.

In filing the suit, the Justice Department  alleges that IBP, which processes more than 5,000 head of cattle daily at its Dakota City plant, repeatedly has avoided complying with federal environmental requirements and procedures for handling and disposing of hazardous waste. It has also been in violation of the Nebraska state law regarding permits controlling pollution discharges, according to the suit.

Further,  the Justice Department contends that since August 1994, the meat-packing company in northeast Nebraska has illegally discharged excessive amounts of ammonia, nitrogen, fecal contaminants, chlorine and other solids into the Missouri River thus harming aquatic life in the river, which has shown a continuing toxicity problem, the Justice Department said.

IBP's wastewater also emitted noxious odors in violation of a state permit and the Clean Water Act.

In addition, IBP has discharged illegal amounts of sulfur dioxide and hydrogen sulfide into the air in violation of the Clean Air Act. Dating from 1989, the suit contends, IBP's meat-packing plant released hydrogen sulfide, a hazardous substance, into the environment without reporting as required under the Community Right to Know Act of 1986. The releases of hydrogen sulfide also were supposed to be reported, but were not, to the National Response Center, a federal violation, the Justice Department complaint states.

Rod Krogh, a South Sioux City, Nebraska businessman and member of a citizens group, told the Omaha World Herald's Jake Thompson that he was pleased by the government's action. "This company treads on our health and quality of life every day," Krogh said. "The bill has now come due. These are legitimate health concerns the community has raised for close to ten years, or longer in some cases," Krogh added. "We welcome their action, and it validates our concerns."

By law such facilities as IBP's are required to report discharges of hydrogen sulfide into the air that exceed 100 pounds a day. The government's complaint estimates that the Dakota City plant discharges, which smell like rotten eggs, and can cause headaches, nausea and eye irritation, are as high as 1,800 pounds each day.

The Department of Justice suit alleges that when IBP built its hide tannery in 1989, it increased its amount of wastewater, but did not obtain a required permit. The company also was cited for failure to obtain permits in 1994 and 1995.

IBP also is charged with skirting  the federal Resource Conservation and Recovery Act
by failing to analyze its solid waste discharges. The beef processor improperly threw hundreds of pounds of spent stun gun cartridges, which are used in its cattle killing operations, air filters and stun gun cushions, with their toxic chemicals barium and lead, into its general trash.

Federal law requires that such hazardous materials be disposed of at a dump specifically licensed to handle the material, according to the Justice Department.

In addition to all the above charges the DofJ suit states, on numerous occasions since 1994, IBP failed to keep required accurate information and report it to the government about its discharges into the Missouri River in violation of the Clean Water Act. And it declined to, as required, try to minimize its adverse impact to the environment, according to the government's case.

In a three-page response to the lawsuit, IBP said it was disappointed that the government filed suit. "The lawsuit will benefit no one," said Gary Mickelson, IBP's spokesman. "It only further delays environmental improvements we have been trying to make in Dakota City since 1997. We also strongly refute the allegations stated in the government complaint."


It is perfectly understandable if U.S. Secretary of Agriculture Dan Glickman tries to hide his annual report card from his superiors for surely if he showed it to them he would make himself liable for several months grounding.

The report card, drawn up by 22 of the 29  members who served on the USDA National Commission on Small Farms, a commission appointed in 1997 by Glickman to recommend actions for USDA to create a future for family farming and ranching, failed to meet even a "C" average even as some family farm critics felt a "C" being too generous.

The grades in ten categories are part of the second annual Time to Act Campaign report card (see Issue #20) which measures the progress made by USDA over the past year in implementing the recommendations of the Commission.

Time to Act Campaign members were particularly disappointed in USDA's failure to issue rules to define discriminatory pricing that is prohibited under the existing authority of the Packers and Stockyards Act. Without these rules, family farmers will continue to receive less money for the same quality livestock than large corporate producers.

"Despite the crisis faced by family farmers and livestock producers, Secretary Glickman is failing to use the powers at his disposal under the Packers & Stockyards act to provide a fair marketplace," Chuck Hassebrook, Program Director for the Center for Rural Affairs and who served on the Commission pointed out. "That is why for the second straight year USDA receives a `D' on the issue of market access."

USDA received grades higher than a "C+" in only two areas out of ten. "While there has been some progress, the bias towards large-scale enterprise continues at USDA," said Hassebrook . "There can still be a bright future for family farmers and rural communities but only if we begin to get the strong leadership we need --- leadership that has so far been lacking."

The report card contains the following grades:

     Market Access D
     Market Development B+
     Research and Extension C-
     Conservation C
     Credit C
     Beginning Farmers B-
     Farm Workers D-
     Civil Rights D
     Risk Management C+
     Outreach and Organization C

The National Commission on Small Farms major finding was that the erosion of family farm agriculture was not a result of inevitable market forces, but of a bias towards large-scale enterprises at USDA. Its report, A Time to Act, provides a blueprint for returning USDA to its historic mission of helping family farmers. It points the way to a more competitive, environmentally sound agriculture that strengthens rural communities.

Copies of the report can be seen by visiting the Center For Rural Affairs website at:


The Corporate Agribusiness Research Project (CARP) web site is now posted on the World Wide Web featuring: THE AGBIZ TILLER, THE AGRIBUSINESS EXAMINER and "Between the Furrows."

THE AGBIZ TILLER, the progeny of the one-time printed newsletter, now becomes an on-line news feature of the Project. Its initial essay concerns one Hillary Rodham Clinton, the almost declared candidate for a U.S. Senate seat in New York State.

In "HILLARY RODHAM CLINTON'S $99,537 MIRACLE: IT'S THE PITS!!!" now available through THE AGBIZ TILLER you'll learn some of the messy details behind her cattle futures "miracle." You will also find in this section the archives for past editions of the THE AGBIZ TILLER.

By popular reader demand THE AGRIBUSINESS EXAMINER section includes not only an issue-by-issue and verbose index of this weekly e-mail newsletter, but an archive of all the past issues.

In "Between the Furrows" there is a wide range of pages designed to inform and educate readers on the inner workings of corporate agribusiness. In addition to CARP's "Mission Statement," "Overview" and the Project director's "Publication Background," the viewer will find a helpful "Fact Sheet" on agriculture and corporate agribusiness; a "Fact Miners" page which is an effort to assist the reader in the necessary art of researching corporations; a "Links" page which allow the
reader to survey various useful public interest, government and corporate web sites; a "Feedback" page for reader input, and a page where readers can order directly the editor's The Corporate Reapers: The Book of Agribusiness.

The CARP web site was designed and produced by ElectricArrow of Seattle, Washington.

Simply by clicking on either of the addresses below all the aforementioned features and information are yours to enjoy, study, absorb and sow.

Although there is no subscription fee for THE AGRIBUSINESS EXAMINER, donations will, as always, be gladly accepted.Checks made out to A.V. Krebs, P.O. Box 2201, Everett, Washington 98203-0201 [NOT to "Agribusiness Examiner"] will continue to be received with much gratitude. A reminder also to those who might wish to receive a weekly e-mail edition of THE AGRIBUSINESS EXAMINER, please provide your NAME and E-MAIL ADDRESS. At this time THE AGRIBUSINESS EXAMINER is not available in printed form. --------------BCA1EFCBE99E075338F532D6--