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

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.

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.”

UPDATE 8/21/2019, 5:06 p.m. A USDA NOP spokesperson emailed The New Food Economy with quotes and statistics, including:

“Organic farmers and consumers are the foundation of the $52 billion [organic] sector. We are committed to helping good producers meet the standards, and to enforcing against those who break the law. The work of the U.S. Attorney’s Office in this case, and others, has a profound and lasting impact,” writes NOP deputy administrator Jennifer Tucker.

•Between October 2018 and March 2019, NOP received about 260 complaints and inquiries.

•Simple inquiries are now handled by intake staff, providing customers with answers faster and focusing analyst time on more complex investigations. NOP resolved 113 inquiries using this approach between October 2018 and March 2019.

•Complaints about uncertified businesses selling products as organic are handled by a team trained to reduce case processing times and to compel compliance faster. These cases continue to account for more than fifty percent of complaints received by NOP.

•Complex cases are assigned to more experienced NOP investigators. This specialization allows the team to initiate investigations more quickly than in the past. NOP has also increased its work with the USDA Office of Inspector General (OIG), referring cases that include potential criminal activity for investigation by other Federal law enforcement partners.

•By focusing resources on the most complicated cases with the highest risk to the market, NOP closed 175 complaint investigations and inquiries between October 2018 and March 2019.