Three Iowa farmers to plead guilty in organic grain fraud scheme
IOWA CITY, Iowa - Three Nebraska farmers will plead guilty to knowingly marketing non-organic corn and soybeans as certified organic as part of a lengthy, multi-million-dollar fraud scheme, federal prosecutors revealed Thursday.
Tom Brennan, his son James Brennan and family friend Michael Potter have each agreed to plead guilty to one count of wire fraud. Their plea hearings are scheduled for Friday in federal court in Cedar Rapids, Iowa.
Prosecutors allege that the three conspired with the owner of a large Iowa-based company to dupe customers nationwide who thought they were buying grains that had been grown using environmentally sustainable practices.
All three operated an organic farm in Overton, Nebraska, that was certified through the U.S. Department of Agriculture's National Organic Program, which requires crops to be grown without the use of fertilizers, sewage sludge and other substances. They also farmed other fields that weren't certified.
From 2010 through 2017, the trio sold non-organic grain directly to customers and to an Ossian, Iowa-based company, which is identified in court papers only as "J.S." and as being owned by an unidentified co-conspirator. They knew the grain was mostly non-organic because it came from non-certified fields or from certified fields where they applied pesticides and nitrogen in violation of USDA standards, prosecutors contend in court documents. Any organic grain was mixed with non-organic grain, rendering all of it non-organic.
Court documents indicate that the Brennans and Potter are cooperating, signaling that additional charges may be forthcoming against the owner of "J.S." Prosecutors said in court documents that the certification for the Nebraska farm was owned by "J.S." and would have been revoked had its third-party certifier known of the chemicals that were used.
Holly Logan, an attorney for James Brennan, declined to comment. USDA records show that he voluntarily surrendered an organic certification last month. Attorneys for the other two defendants didn't immediately reply to messages.
The charges were praised by the Cornucopia Institute, an organic industry watchdog group that has been critical of the USDA for being too lenient with producers who violate its standards.
Violations are typically handled through USDA enforcement action that can bring fines, revocations and bans, and federal criminal charges are rare, said the group's director, Mark Kastel.
He said the prosecution will send a message to farmers who may have the opportunity to profit by defrauding the growing organic market.
"These large-scale problems have an impact on the entire market and the reputation of the organic label. It's really very fortuitous that the prosecution is taking place," he said. "We want these cases to act as a really strong deterrent. They are not the rule. They are the exception. Now that this is almost a $50 billion industry, it's so lucrative. Fraud opportunities exist."
Victims of organic fraud include farmers who buy grain to feed their animals so they can market their meat and milk under the organic label and the consumers who pay a premium for those products, Kastel said. Fraud in U.S. grown crops is believed to be a much smaller problem than those imported from abroad from countries like Turkey, he said.
Each defendant received more than $2.5 million for grain marketed as organic during the scheme, and prosecutors say they are seeking the forfeiture of at least $10.9 million. Wire fraud carries up to 20 years in prison, but the three would be expected to face far less prison time under federal sentencing guidelines. Details of their plea agreements have not been made public.