Delivering the week’s top organic food news
2.26.2020
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Will the USDA Finally Address the Growing Organic Fraud Problem Within our Border?


Despite the fact that The Cornucopia Institute and OFARM had been warning us about fraudulent imported organic grains and other commodities for many years, it wasn’t until the explosive Washington Post investigation in 2017 that the USDA was forced to take meaningful action.

The question now is how long will it take the USDA to also address the serious domestic fraud problem.

A few recent cases illustrate just how grave the situation has become:

* Missouri farmer Randi Constant sold $140M worth of fraudulent organic grains between 2010 and 2017.

He spent hundreds of thousands of dollars in illegal profits on 20 gambling trips to Las Vegas, sex with prostitutes and providing financial support to three women with whom he had extramarital affairs.

* A South Dakota man, Kent Duane Anderson, was just indicted in a $71M case for selling fake organic grain and seeds.

According to court documents, Anderson made a profit of about $25 million from fake organic sales from October 2012 to December 2017. He used this money to fuel his extravagant lifestyle including a yacht, a multimillion-dollar home and luxury cars.

* Three Nebraska farmers — Tom Brennan, his son James Brennan and family friend Michael Potter — pleaded guilty to a multimillion-dollar fraud scheme for knowingly marketing non-organic corn and soybeans as certified organic.

* In Idaho, Bernard Saul was sentenced to three years in prison and ordered to forfeit millions in profits for falsely labeling conventional alfalfa seed as organic.

Between 2010 and fall 2015, he sold 7 million pounds of alfalfa seed labeled as organic. Yet, according to organic certification records that Bernard Saul submitted to state agricultural officials, his farm was only capable of growing 35,000 to 50,000 pounds of organic seed annually.

***

And these are only some of the cases that we know about. One could easily speculate that there are many other fraudulent operators in the U.S., but they have just not been caught yet.

While every industry has fraud, the reality is that cheating in organic is just not that difficult.

Independent analysis of the USDA’s oversight of the system confirms this.

In 2017, the USDA’s Office of Inspector General’s report said that the USDA “was unable to provide reasonable assurance that … required documents were reviewed at U.S. ports of entry to verify that imported agricultural products labeled as organic were from certified organic foreign farms. The lack of controls at U.S. ports of entry increases the risk that nonorganic products may be imported as organic into the United States and could create an unfair economic environment for U.S. organic producers.”

In a 2018 Peer Review Executive Summary by the American National Standards Institute, it was found that the USDA’s National Organic Program (NOP) does not have a sufficient number of auditors, satellite offices of certifiers are not audited on a frequent enough basis to reduce risk and prevent potential fraud, and procedures for residue sampling are not clearly understood or followed.

“The track record of the USDA is abysmal,” said Mark Kastel, founder of OrganicEye, an industry watchdog and investigative organization. “Most certifiers employ independent contractors and bid out the work, often giving it to some recent college graduate who does multiple inspections per day and has no applicable experience in production agriculture.”

Kastel continued, “Even worse is that there are farmers who tell us ‘We have drive-by inspections. Every year, I do all the paperwork but they don’t even look at it or inspect all the fields.’ I’ve even received sporadic reports (backed up by USDA documents received through FOIA requests) of operators stating they hadn’t received an annual inspection, as required of certifiers by law.”

“The reality is that the incredible expense, in aggregate, for the system of certification is amounting to very little. Most of the fraud is discovered because of informants, disgruntled employees or competitors ratting out the evil-doers. It is not because of the auditing that is taking place,” he added.

This veteran industry watchdog suggested that a new overall approach to certification, focusing resources, based on risk, might be warranted. By doing more comprehensive audits — with highly-experienced inspectors — and allocating more funding to unannounced inspections might result in capturing more perpetrators and effectively acting as a powerful deterrent.

In the USDA’s defense, the current system contains an inherent conflict of interest. Certifiers are paid by the companies that they certify. So, there is a financial disincentive for them to crack down on the people paying their bills, particularly the very large clients.

Furthermore, the certifiers decide which operations get spot tested and targeted for unannounced inspections. Annual inspections, representing the vast preponderance of work and expense in the certification field, are always announced and arranged in advance. The USDA needs to be the one who decides which operations get spot tested, and unannounced visits must become the norm — with very severe penalties to both violators and certifiers not doing their job.

At last fall’s National Organic Standards Board Meeting in Pittsburgh, Jennifer Tucker, Deputy Administrator of the NOP, outlined the agency’s plan to crack down on fraud and strengthen enforcement. Additionally, the 2018 Farm Bill appropriated much more funding to fight against fraud over the next few years.

All that being said, the current system is absolutely not working, and domestic organic fraud has now become a real issue.

The question is whether the USDA truly has the will and ability to fix the situation.

—–

For those attending Natural Products Expo West next week in Anaheim, CA, please come say hello.  I will be moderating three panels:

(1) the CEO Keynote Panel during Climate Day — 4:45pm on Tuesday, March 3rd at the Marriott, Marquis Ballroom Central (Here is the live stream link for Climate Day to watch remotely.)

(2) How to Support Farmers Transitioning to Organic — 11:15am on Wednesday, March 4th at the Marriott, Grand Ballroom F

(3) Ensuring Soil Health & Organic Practices: Real Organic Project & Regenerative Organic Certification — 2:15pm on Friday, March 6th at the Marriott, Orange County Ballroom 1.

Also, I will be at the RE Botanicals booth (#3610) on Thursday, March 5th from 3:30pm to 5pm.

With gratitude,

Max Goldberg, Founder

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* In Slovakia, the Agriculture and Rural Development Minister is hoping to ban the cultivation of GMOs.


* There is no Organic Insider next Wednesday, but it will return on March 11th with my full recap and analysis of Expo West. If you will not be at the show, please be sure to follow my Instagram Stories.


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