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  • From: "Tradingpost" <tradingpost@lobo.net>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] Tomato Industry Corruption in California - and more
  • Date: Wed, 09 Apr 2008 18:45:43 -0600


>From the Los Angeles Times
State Tomato Board is dissolved
http://www.latimes.com/news/local/la-me-boards9apr09,1,3234278.story

The California agency's demise after an audit found financial and
other improprieties draws attention to similar farm programs.
By Jordan Rau
Los Angeles Times Staff Writer

April 9, 2008

GONZALES, CALIF. — Melanie Horwath phoned the California Tomato
Board with what she assumed was a simple request. She needed
promotional materials that her family's tomato packing company could
display at a Salinas Valley agricultural event called Taste of the
Valley.

Do you have posters or recipes? she asked.

We don't have that.

What kind of promotion do you guys do?

We don't do that kind of promotion.

That's odd, Horwath thought. Her company paid thousands of dollars a
month in mandatory dues to finance the board's research and
marketing efforts: its legal purpose. She started digging into the
board's business to find out how it was spending her money.

More than a decade later, the tomato commission has shut down after
her findings prompted a state audit.

The commission misspent members' dues on lavish conferences in
Arizona and Mexico, where its families traveled free, according to
the audit. It bought perks for directors and employees -- thousand-
dollar dinners, a $653 Hummer stretch limousine ride, $190 bottles
of wine -- and made other questionable expenditures.

The audit also detailed how the commission abetted a group of
Horwath's competitors intent on setting the prices and rules for
California's $505-million tomato market.

"They ran it like it was . . . their own little fiefdom," said Brian
C. Leighton, the attorney for Horwath's company, Gonzales Packing Co.

The attorney general's office is investigating. Meanwhile, audits of
other marketing programs within the Department of Food and
Agriculture have also revealed conflicts of interest, sloppy
accounting, possible Internal Revenue Service violations and
activities beyond the authority the state granted them.

These 54 obscure programs, which collect a combined $200 million a
year from farmers and shippers of crops and livestock, can have
great sway over the price, availability, variety and quality of
produce, meat and nuts that Californians buy.

The first boards were created in 1937 to help farmers survive the
Great Depression by controlling the supply and price of their crops.
Alfalfa seeds, almonds, beef, cling peaches, dried plums, figs,
garlic, sea urchins, sheep and wine grapes are some of the food
industries with marketing boards or commissions that are established
by lawmakers but financed and run by the industries.

Today the organizations focus on research, public education,
economic studies and generic promotion of their product through
campaigns such as the "Got Milk?" advertisements. Nineteen entities
also have federal or state "marketing orders" that restrict the
amount, size or appearance of what can be sold.

The agriculture department did not audit any of the marketing
programs before 2006. Its first examinations have yielded troubling
details.

An audit of the Kiwi Fruit Commission established that a former
manager used the commission's credit card to pay off her husband's
car lease and to buy plane tickets for him to accompany her on
business trips. She reimbursed most of the $19,000 in expenditures
but charged $3,400 to the commission as payment to her husband for
compiling a kiwi cookbook and coordinating a kiwi conference. State
auditors couldn't find evidence that the husband's earnings were
reported to the IRS.

Another department audit found that the California Milk Processor
Board paid its executive director $291,361 in his first seven months
on the job -- including a $50,000 signing bonus, free health
insurance and $73,478 in reimbursed expenses -- without a finalized
contract.

A third audit found that the staff and resources of the Forest
Products Commission were also misused and that the agency at times
exceeded its legal authority.

"California and the Legislature need a wake-up call that these
programs are either corrupt or easily corruptible," said Leighton,
who also represents growers and packagers in lawsuits against
programs for cherries, cut flowers and raisins. Agriculture
department spokesman Steve Lyle said in a statement that the agency
has hired more auditors and plans to improve its supervision.

"Generally, the department is committed to doing full fiscal
compliance audits of all state commissions," the statement said.

The tomato commission's most controversial actions date to 1995,
when lawmakers agreed to transform it from a board, which can only
make recommendations to the department, into a commission, which can
act without approval from state agriculture officials.

The next year, a number of major tomato processing companies formed
a private cooperative called the California Fresh Tomato Growers
Exchange. It was created to set minimum prices for their tomatoes,
according to a copy of its operational policy.

The exchange's members held conference calls about market conditions
and shared information about buyers in hopes of competing more
effectively against tomato producers from abroad and getting higher
prices from big buyers, such as grocery chains.

The exchange was supposed to be separate from the commission, whose
task was to look out for the state's 114 growers and the 18 handlers
who package and ship the picked fruit. Separation of the commission
and exchange was essential because the commission was not authorized
to set prices, but private cooperatives are.

But the state audit noted that many of the same people who ran the
commission also ran the exchange. Representatives of 12 tomato
producers who sat on the commission board in 2005 also belonged to
the exchange. They included the DiMare Co., Ace Tomato Co., Pacific
Triple E Produce Corp., Oceanside Produce Inc. and Live Oak Farms,
according to minutes of both groups.

The commission's executive director, Ed Beckman, earned more than
$100,000 a year from the commission and $30,000 from the exchange
for managing that entity.

The exchange operated out of the commission's office and used its
attorneys and accountants. The exchange's expenditures were recorded
in the commission's accounting books, and the exchange used the
commission's bank account. When the exchange sued several growers
for selling tomatoes without following food and worker safety laws,
the commission paid $10,169 of its legal fees.

As a government-sanctioned entity, the commission was authorized to
require all California tomato growers and handlers to report the
number and size of the tomatoes they shipped each day. Such
sensitive sales information was supposed to be kept confidential,
but the state audit concluded that the exchange "appeared to have
access to the information of all assessment payers."

Horwath said exchange members received other advantages from the
commission that were not available to everyone.

The commission periodically arranged for tomato buyers from Mexico,
Canada and Japan to visit California and tour tomato producers'
facilities in hopes that the buyers would purchase fruit from
California. But Horwath's husband, Tim, said the couple often were
not told about the opportunity to meet potential new customers.

"We were looking at these marketing programs and realized somebody's
getting the benefit, and it certainly isn't us," said Tim Horwath,
who oversees the family company's sales and packaging facility.

The Horwaths were not the only tomato processors who concluded that
the commission was undermining their businesses.

Tim McCarthy, chief executive of Central California Tomato Growers
Cooperative in Merced, said he learned that the commission was
dispatching consultants to visit some of his customers, collecting
information about McCarthy's sales and sometimes suggesting that the
customer buy fruit from one of McCarthy's competitors.

In a 55-page response to the state audit, the commission denied that
any tomato producers received preferential treatment or proprietary
information and insisted that its spending was appropriate.

The commission said it had always operated independently from the
exchange and blamed the agriculture department for a "virtual
absence of any meaningful guidance" because state officials were
aware of its activities but never protested them.

Ron Oneto, a farmer outside Sacramento who was the commission's
chairman, said in a telephone interview that the department "signed
off" on the commission's budget and financial reports every year.

Other former directors of the commission and exchange did not
respond to inquiries from The Times.

Beckman referred questions to his attorney, who declined to comment,
citing a pending lawsuit by Horwath against the commission and the
department.

In the suit, the Horwaths are demanding a refund of $202,438 in
assessments they paid from 2001 to 2005; that year, they began
withholding them.

McCarthy and two other tomato producers eventually joined the
Horwaths in withholding their dues, and California's splintered
tomato industry voted to end the commission's operation as of Feb.
29 of this year.

Oneto called its demise a loss to the industry. "We won't have any
researchers finding new treatments for diseases that keep popping up
or finding new varieties of tomatoes," he said.

The exchange has also shut down. But eight of its members have
formed a new cooperative: California Tomato Farmers, in Fresno. The
executive director is Ed Beckman.

The new group's website says its members produce most of the fresh
tomatoes grown in California, "more than enough to fill the needs of
every retail and food service outlet in North America during our
growing season."





  • [Livingontheland] Tomato Industry Corruption in California - and more, Tradingpost, 04/09/2008

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