Nebraska Farmers Plead Guilty to Fraudulently Marketing Organic Grain
Tom Brennan, his son James Brennan, and Michael Potter recently pleaded guilty in the Northern District of Iowa to charges of wire fraud in connection with their organic farm operation. Wire fraud involves an intentional scheme to defraud with the use of interstate wires.
According to court documents, the defendants operated a certified organic farm in Nebraska. They conspired with the owner of an Iowa company who operated a business of selling and marketing organic grain. In their plea, the defendants admitted to marketing the grain as organic despite knowing the crops came from non-certified organic fields or certified organic fields where pesticides and nitrogen had been applied or knowing that the organically grown grains had been commingled with non-organic grains. The fraud took place between 2010 and 2017. The farmers netted more than $2.5 million for the fraudulently marketed grain.
Organic Regulation
An organic certification indicates that the agricultural products have been produced according to approved methods. The growth of the organic industry reflects an increasing consumer interest in having food and agricultural products produced in a certain manner.
While states and private agencies have been granting organic certifications since the 1960’s, the Organic Foods Production Act (OFPA) was not passed until the 1990 Farm Bill. This federal law allowed a federal standard for organic labeling. In general, genetic engineering and the use of pesticides and fertilizers is not allowed.
The Agricultural Marketing Service (AMS) regulates the OFPA through the United States Department of Agriculture (USDA). AMS grants organic certifications through its National Organic Program and investigates potentially fraudulent organic certificates. As of October 2018, AMS has certified 17,648 organic operations. In 2017, AMS suspended or revoked 311 organic operations’ certifications.
Penalties and Enforcement
Because the OFPA only addresses the way an organic product is produced, there are no additional requirements for food safety or nutrition beyond what is required for conventional or GMO agricultural products. Even though organic fraud does not impact the safety of the food, enforcement is necessary to protect true organic farmers and consumers from individuals wrongfully using the organic certification for improper financial gain. It does not appear that organic fraud is a common practice. However, as demand for organic crops and agricultural products continues to grow, the number of cases could increase.
The USDA may suspend or revoke an organic certification license in addition to imposing civil penalties. 7 C.F.R. § 205.662 (2018). Organic fraud cases usually end in civil penalties rather than criminal charges, although the Nebraska case demonstrates that criminal charges are possible. The wire fraud charge to which the farmers pleased guilty comes with a potential 25-year term of imprisonment and a $250,000 fine. AMS may impose up to a $10,000 penalty for knowingly mislabeling products as organic. 7 U.S.C. § 6519(c)(1) (2018). In the Nebraska case, prosecutors are seeking a $10.8 million forfeiture in connection with the alleged wire fraud.