Thursday, August 22, 2019

In the largest prosecution of organic fraud in U.S. history, Iowa grain seller sentenced to 10 years in prison

UPDATE 8/21/2019, 7:46 a.m. The Associated Press is reporting that Randy Constant was found dead, apparently by suicide. He was found by police in a vehicle in his garage in Chillicothe, Missouri, according to the AP. The coroner in Livingston County said that he had died of carbon monoxide poisoning, which was confirmed by a post-mortem exam at the University of Missouri Medical Center. The New Food Economy will work to confirm these details.
Shade-grown coffee. Pastured chicken. Organic milk. What do these foodstuffs share in common? Each one comes with an elevated origin story, helping to fetch a higher price at the grocery store. Perhaps more importantly, these items require a degree of consumer confidence that their backstories are legitimate. As such, they are susceptible to fraud.
“Any time there’s a claim of a certain pedigree, an origin that the consumer is not equipped to verify independently, the market is ripe for fraud,” says Doug Moyer, PhD, a professor of public health at Michigan State University, and a researcher at MSU’s Food Fraud Institute.

The only assurance the public has that a product is actually organic is a USDA certification label.
Case in point: Last Friday, as part of an ongoing federal investigation, the perpetrator of the largest case of organic fraud in United States history was sentenced to more than 10 years in prison. Between 2010 and 2017, court documents show that farmer Randy Constant ran a massive Iowa grain brokerage, selling more than $142 million in supposedly “organic” animal feed to livestock farmers throughout the Midwest. In turn, the products those farmers sold to the public under the USDA-certified organic label—meat, dairy, and eggs—were virtually indistinguishable from their conventionally produced counterparts.
“Thousands upon thousands of consumers paid for products they did not get and paid for products they did not want,” U.S. District Judge C.J. Williams said at Friday’s sentencing, according to court documents. “This has caused incalculable damage to the confidence the American public has in organic products.”
In 2018, U.S. organic food sales topped $47.9 billion, up almost $3 billion from the previous year, and following a steady annual increase since at least 2009. At retail, the price markup for organic over conventional products can run as little as 5 or 6 percent for produce items, to well over 100 percent for beef and other meats.
There is a range of factors for the price differential, but put simply, growing organic food requires additional costs on the part of the farmer. This is due to both more labor-intensive operational costs and the inability to apply the easy-touch pesticides and insecticides often required in conventional farming (a limited number of chemicals are approved for use by organic growers.)
The only assurance the public has that a product is actually organic is a USDA certification label. This indicates that the food producer in question successfully went through a lengthy application process, and is subject to at least one inspection per year. 
One of the strictest requirements for organic-certified meat, dairy, and eggs is that grain-based animal feed must have been grown without synthetic pesticides, the same as crops grown for human consumption. With the USDA’s animal welfare standards for organic producers eroding, this feed requirement is arguably the most important distinguisher between conventional and organic meat products.

Prosecutions of organic fraud are fairly uncommon, especially at this scale.
Court documents show that Constant purchased his grain through a brokerage he owned called Jericho Solutions, then sold it to livestock farmers. Three grain farmers were given lesser sentences alongside Constant, all of whom were found guilty of knowingly growing fraudulent corn and soy for the grain brokerage (the DOJ predicts more arrests to come). DOJ claims that Constant’s products accounted for 8 percent of all organic soybeans grown in the U.S. in 2016, and 7 percent of comparable organic corn.
Constant exploited the organic/conventional price differential by selling faux-organic feed at prices that couldn’t be matched by competitors. In fact, other, presumably honest organic feed producers allegedly reported Constant to federal investigators, claiming his prices were simply too low for the crops to have been produced organically. Other grain farmers couldn’t compete. 
“The only reason this investigation ever happened was that others in the industry reported [Constant],” says Mark Kastel, founder of the organic watchdog organization Cornucopia Institute, which has been assisting the Department of Justice (DOJ) in its investigation. 
Indeed, prosecutions of organic fraud are fairly uncommon, especially at this scale. Factors include dwindling resources at USDA’s National Organic Program, paired with an inspection system rife with loopholes. For instance, organic certifiers are often hired by farmers themselves. Inspections are usually made with days or weeks of advance notice. And pesticide testing on the grains themselves is rarely done. Additionally, monitoring imported organic grains, which have been in the spotlight recently for repeated cases of fraud, has been a drain on federal resources.
Moyer suspects there’s less of an appetite to prosecute organic fraudsters, especially when it comes to animal feed, as there is little risk to human health. He points out instances of food adulteration like antifreeze in wine and melamine in baby formula that had serious public health consequences. “It may be that [organic fraud] seems like more of a victimless crime,” says Moyer. “Unless of course, you’re the consumer who’s been paying extra for fake products.”
This sentiment is echoed by the Organic Trade Association (OTA), the organic industry’s biggest lobbying group. “Trust in the organic seal is critical, and the Organic Trade Association supports actions by the USDA to uphold the integrity of organic,” said OTA’s executive director, Laura Batcha, in a statement to The New Food Economy.  “The vast majority of organic producers and stakeholders work hard every day to abide by the standards, but for the ones who don’t, there are consequences. We hope this ruling serves as a deterrent for future attempts at fraud. Enforcement of the organic standards is critical for the continued success of organic.”
Constant’s particular scam involved a process Moyer refers to as “salting,” wherein a small proportion of legitimate product—in this case, organic grain—is mixed with fraudulent product, a simple means of throwing inspectors off the scent. Another form of salting comes in the reverse—for instance, a small amount of a cheaper item is mixed in with the legitimate product, producing large savings in the aggregate. This type of fraud is prevalent with spices like oregano and olive oil, and can have dire public health consequences as in the 2014 case of cumin salted with peanut shells.
Despite the lack of precedent for cases like Constant’s, Moyers hopes this is a watershed moment for organic authenticity. “This has been devastating for an industry that is largely built on consumer confidence,” he says. “I’m thrilled this conviction happened, though. This is how you rebuild trust.”
We reached out to USDA for comment, and will update if and when they respond.