Ms. Alonzo, I am Fred Stokes representing The Organization for Competitive Markets (OCM), a sixteen year old non-profit advocate for a fair marketplace for what farmers and ranchers buy and what they sell.In other words, we want the game to be straight. I thank you for giving us this opportunity to express our concerns regarding the Beef Promotion and Research Program, commonly known as the Beef Checkoff.
OCM has associated itself with other like-minded groups, including the Humane Society of The United States (HSUS) in an effort to reform and restore integrity and the cattle producer’s confidence in the Beef Checkoff, a program that in our view has run awry.
We met with Secretary Vilsack on June 10 and made the following points:
- Although the Beef Checkoff program has collected and spent some 2 billion dollars, it has been an abject failure.
- The essentially exclusive contractor for the program, NCBA, was revealed to have misappropriated funds and is acting as an adversary to checkoff-paying cattlemen.
- AMS has a history of deficient administration of the program.
- We feel that the USDA OIG’s audit was severely lacking and was a whitewash.
- USDA OIG has not properly responded to OCM’s FOIA requests for material that was the basis for the OIG Audit Report.
- David Wright, A CBB member, presented hard facts showing NCBA’s undue influence over the CBB and their many abuses of the Beef Checkoff program.
Since we have a bit more time, I would like to go into a more detail today.
I was personally involved in the effort to bring about the Beef Checkoff. During the seventies and early eighties, chickens were rapidly encroaching on beef’s market share. There were bumper stickers that said, “support the beef industry, run over a chicken.”I believed that cattlemen should fund a program that promoted their product and thereby their interests.
It took three referendums to get the program passed. However, we envisioned a U. S. Beef program, not one that promoted beef from our foreign competitors; who play under a different set of rules.
So after 29 years of operation, how has the program performed?
- The per capita consumption of beef has gone down from 78 pounds in 1985 to 53 pounds today.
- The per capita consumption of chicken has gone up from 53 pounds to 85 pounds.
- More than 40% of our beef cattle producers have gone out of business.
- The beef cattle herd has been significantly reduced in numbers. This year’s calf crop is the smallest since 1941.
- These are the disappointing measures of a failed program.
Cattle prices are currently at record levels (and so are input costs), but the recent prices being experienced by today’s cattlemen are the result of market failure, not a competitive market. The lack of a fair and open marketplace has caused decades of low prices, forcing producers out of business and reduced cattle numbers well below demand. This is largely the result of cattlemen’s beef checkoff dollars being diverted to NCBA, an aggressive policy advocate of meat packers and big retailers rather than the checkoff paying cattle producers.In 1996, NCBA became the prime contractor for the Beef Checkoff Program. It has generally received some $50 million of the $80 million collected by the program each year, for a total of some $900 million. This represents more than 80% of NCBA’s total revenue. These funds have allowed NCBA to become politically powerful and influential in farm policy and farm publication perspectives.
The large media buys NCBA makes biases farm publication editorial points of view and content toward that of the NCBA. In addition, many of the ads are aimed at checkoff payers, promoting the program rather than beef.
Let me just state that in my view, cattlemen are being compelled to fund their own demise.
Your agency is charged with oversight of the Beef Checkoff as well as the several other commodity promotion programs which collectively bring in more than 500 million dollars annually. Under previous leadership, AMS has established a poor history of performance.
At least two USDA OIG audits have found the agency deficient in its oversight of these programs. Recommendation for remedial actions were made and agreed to by AMS but thus far, no significant changes appear to have been made.
Someone from this agency is supposed to sign off on all disbursements of checkoff funds. We are aware of several significant disbursements that have no apparent relevance to beef promotion and tend to support the notion that the Beef Checkoff is a nothing more than an NCBA slush fund.
A USDA OIG audit of the Beef Checkoff was begun in February of 2011, with its investigative work completed in December of that year. For more than fifteen months after the investigative phase, the report writers pondered and deliberated, generating more than 3000 pages of drafts for a seventeen page report.
The report effectively exonerated NCBA of wrongdoing, and was viewed by many as an outright whitewash and cover-up. Amidst a great deal of criticism, it was recalled and released again in January of this year. The most significant change was the removal of the verbiage pertaining to NCBA’s innocence.
USDA OIG has been less than responsive to OCM’s FOIA request for material supporting the findings in the audit report. There has been a great deal of delay. However we are determined to learn why the OIG Audit Report was in stark variance with what we believed to be the evidence.
NCBA has long exercised undue control over the CBB and the contract award process. They have used their veritable lock on the CBB committee that awards Beef Checkoff contracts and used that lock to consistently award the contract to themselves. As an attorney you can understand this blatant conflict of interest.
David Wright, a Beef Board Member who has long decried NCBA’s lock on contract awarding and their running roughshod over the CBB, will share some interesting information on this.
NCBA has been clearly demonstrated to be a mere tool of the meat packers and has consistently opposed actions benefiting producers. NCBA being a plaintiff in the lawsuit aimed at blocking the long-delayed implementation of COOL is but one example of their adversarial relationship with cattlemen.
We see NCBA, with its pro meat packer agenda, its eighteen-years as essentially the exclusive contractor for the Beef Checkoff, its de facto control over the program and its relationship with the CBB as the MOTHER OF ALL CONFLICTS OF INTEREST.
The Beef Checkoff Program is rife with problems and shortcomings. This is especially true since it was made a government tax by the Supreme Court ruling that these mandated collections are not a violation of the First Amendment but rather “government speech”. The problems with the program itself will likely require a legislative remedy that will be contentious and time consuming. But the bleeding needs to be stopped now. There can be an almost immediate administrative fix that could separate NCBA from receiving any checkoff dollars.
The most egregious ill resulting from the program is not that beef cattle producers are compelled to fund a program that doesn’t work; but rather that they are made to provide funds in support of an organization that actively works against their interests.
You are in a position to make a big difference. We ask that under your administration you see that AMS properly administers the Beef Checkoff program and further, we ask that you assist us in persuading Secretary Vilsack to use the powers, that we are convinced he has, to rule that policy organizations acting as contractors constitute a conflict of interest, and are therefore precluded from receiving checkoff funds. We would be most happy to assist in any way possible.
Perhaps the largest conflict of interest is the revolving door of power players who have been running our government agencies. With respect to the AMS, this would be Patrick Boyle, who was administrator of AMS and then became president of the American Meat Institute.
Perhaps the well publicized hit against the former GIPSA Administrator, Dudley Butler, of being a “fox in the henhouse” originated from meat packers and the foxes they put into these agencies.
I will also have to note that in my own poultry case, the powers running our govt. agencies abused that power once again to provide protection for their meat packer cronies. The GAO (Govt. Accountability Office) already criticized GIPSA (and by implication the Sec. of Agriculture) for pulling out economists from GIPSA after they gained experience of what was happening in the industry so that there would be no competent economic analysis coming out of GIPSA in meat packer cases. In my case, this is exactly what happened. The office was totally shaken up by the Johannes Administration and JoAnn Waterfield after the economists at GIPSA were educated on the latest fraud at that time by producers. The main economist at GIPSA was transferred to AMS after his informed analysis hit the meat packer cronies hard and exposed them to legal liability.
Washington is full of politicians hungry for donations and just as importantly, a story on their actions that will play as a cover story for their cronyism. With respect to the revolving door we not only have Patrick Boyle and the AMS but some other notable players in the behind the scenes fraud of captured public agencies. With respect to poultry, for many years we had Senator Arlen Spector who was head of the Judiciary Committee for many years. Before becoming Senator for Pennsylvania, he represented chicken magnate Frank Perdue in a drunk driving case where Frank Perdue killed one person and seriously injured another. The public case against Perdue was thrown with the help of Arlen Spector who made sure (he was previously a district attorney) that the government did not file the case against Frank Perdue in the statutory time limit. The case never went anywhere.
Perhaps it was Arlen Spector who influenced legislation in the Packers and Stockyards Act so that poultry farmers would not have the same protections of USDA oversight because they “were not defined under the act as “livestock””.
Perhaps it was Arlen Spector’s influence to make sure that federal cases against the meat packers had to be litigated in the federal courts where the abuses occurred. This allowed judge planting for specific cases that threatened the illegal actions of meat packers.
Does Washington work outside the influences of the puppetmasters of money or are the tools of corrupt government so embedded that we have already lost the purpose of regulatory agencies? To most who deal with the regulatory agencies on a regular basis, the answer to that question is not even close. It is why they call these regulatory agencies captured by the very interests they are intended to regulate. It is why crony capitalism has subverted the rule of law with the rule of gold.
The sad thing is that this reality isn’t only affecting farmers dealing with meatpackers. It is so prevalent in our nation’s lawmakers that the “Beacon on a hill” has become real estate long ago sold by politicians who have ended up being the largest threat to our economy and our democracy. Meat packing undue influence is only a small part of the cancer that has engulfed our political elite. It too easily metastasized into the largest problems the nation has faced.