The NCBA Beef Checkoff Contract: A Blatant, Fundamental and Egregious Conflict of Interest

cattlemendemise

cattlemendemiseTo my bitter disappointment, the many efforts at reform of the cattle markets over the past 16 years have been frustrated by meatpackers and their minions. Chief minion has been the National Cattlemen’s Beef Association (NCBA). This organization is believed by many to be on the side of beef cattle producers. However, it has opposed every major market reform initiative; most notably the ban on packer ownership of cattle, Country of Origin Labeling (COOL) and putting the teeth back in the Packers and Stockyards Act of 1921 through the proposed GIPSA Rule.

To add insult to injury, this opposition to cattle producer interests has in effect, been underwritten by funds extracted from producers through the Beef Checkoff. The $50 million or so that NCBA has received each of the past eighteen years has transformed them into a powerful political force and is in effect their very life blood. It has enabled them to effectively oppose reforms that would work to the interest of Checkoff-paying producers. Through the Beef Checkoff, cattlemen have been funding their own demise!

In July of 2010, it was widely reported that a performance review of the Checkoff Program by the Clifton Gunderson Accounting Firm revealed a disturbing level of mishandled funds by NCBA, the program’s prime (essentially exclusive) contractor. It is my understanding that the examination of only one percent of the transactions of a twenty-nine month period disclosed these blatant improprieties. This shallow examination resulted in a settlement between the Cattlemen’s Beef Promotion and Research Board (CBB), the U.S. Department of Agriculture (USDA) Agricultural Marketing Service (AMS), and NCBA that required NCBA to return more than $216,000 in misappropriated funds. Put another way, the $216,000 in misused funds occurred in the equivalent of nine days of activity. This would suggest that these NCBA abuses were but the tip of the proverbial iceberg. No penalties were imposed, nor was there the suspension of NCBA’s contract that would normally be expected in such circumstances. This was most disturbing!

Based on NCBA’s reporting of membership numbers, they represent only one cattleman in thirty-three, yet they claim to be the voice of the cattle industry and are the prime contractor for a program supported by 100% of cattle producers. NCBA reportedly pays over seventy percent of its operating expenses from the Checkoff Program. There can be no doubt that these Checkoff funds have enabled NCBA in its advancement of meat packer interests over cattle producer interests.

In 2010, the U.S. Secretary of Agriculture expressed his concerns regarding the potential conflict of interest when apolicy advocate, such as NCBA, becomes a Checkoff Program contractor. It was proposed that there be a “firewall” between the NCBA and state beef councils. The CBB Executive Committee, by unanimous vote, also expressed its preference for a structure in which no policy organization had influence on programming, budget or governance decisions. NCBA and its state affiliates successfully resisted this proposed separation.There is an inherent conflict of interest when a policy organization becomes a contractor for the Checkoff Program. Inevitably, contract funds will be used to advance the policy agenda of the organization.

Secretary Vilsack has not been successful in his effort to bring about the separation of the NCBA and its affiliate State Beef Councils and this fundamental and illegal conflict continues. While his authority to compel separation is not clear, he unquestionably has the authority (and good reason) to terminate the NCBA Beef Checkoff contract. It is a classic example of conflict of interest and a glaring violation of the Program Act and Order, as well as AMS guidelines.

On June 10, a delegation which included OCM and others met with Secretary Vilsack and shared our concerns regarding the Beef Checkoff. We specifically asked that he take action to deal with the NCBA conflict of interest matter. A follow-up meeting was held with AMS Administrator Anne Alfonso and her key staff on July 21st. Again, the NCBA conflict of interest problem was the main point emphasized. On August 14th, 20 representatives from a number of like-minded organizations met via conference call. This long-delayed coming together was a breakthrough.

The group has now come to understand that folks with differing opinions (even differing interests) can rally around an issue they agree on and advance that issue.

The call was a huge success. During this call, there were two highly significant agreements:

  1. The outright rejection of the recent proposal for doubling of Beef Checkoff assessments and various other (suspect) changes in the program.
  2. Agreement to sign on to a joint recommendation to Secretary Vilsack that he take decisive action to end the conflict of interest in Beef Checkoff contracting.

This is the first step of an ad hoc alliance which I believe will grow and drive reform of the Beef Checkoff through administrative, legislative and litigation actions.

I am heartened; stay tuned!


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