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Summary of AMS Audit of NPPC

Prepared by Hugh Espy,
Iowa Citizens for Community Improvement
Des Moines, Iowa

Compliance staff from the Unites States Department of Agriculture's (USDA) Agricultural Marketting Service (AMS) conducted a limited review of a complaint that the National Pork Producers Council (NPPC) had used checkoff funds collected by the National Pork Board to pay Mongoven, Biscoe and Duchin (MBD), Washingson D.C. public relaltions firm, for information on the activities of certain activist (family farms) groups and individuals.

The reviewers were able to determine that NPPC used non-checkoff funds to pay for the report in question, but that the NPPC did not pay for thc report until after the media and the USDA began questioning the funding subject matter of the report.

The review also disclosed that the NPPC had an existing agreement with MBD to routinely monitor groups and individuals, A total of $51,300 was paid by checkoff funds for these services.

The AMS review focused on four main questions:

  1. Did NPPC use checkoff funds to pay for thc MBD report entitled "Overview of Farm Groups"?
  2. Was the material produced by MBD consistent with the project description (provided by NPPC to the USDA) that USDA had approved?
  3. Was the material produced by MBD under the "contract" allowed under the Pork Promotion, Research and Consumer Order?
  4. Was the "contract" between NPPC and MBD entered into properly?


Question #1:

Did NPPC use checkoff funds to pay for the $3.449 MBD report entitled "Overview of Farm Goups?

Conclusion from AMS compliance staff:

NPPC ultimately paid $3,449 for the MDB report from unrestricted funds (noncheckoff funds). However, the check to pay for this report was issued on February 6, 1996. alnost a week after the report began to generate interest from the media. In addition, the check was backdated about three weeks. Coincidentally, the check was issued shortly after the media and AMS questioned the principal people involved (Charles Harness, Mike Simpson, etc.).

Other findings related to Question #1

In early December l996, Charles Harness at NPPC asked Ron Duchin at MBD to prepare a report on .several organizations that had taken positions critical of the large-scale hog operations and chages in the pork industry. The request was; made by telephone and there was no evidence that it was ever confirmed in a written contract or letter.

MBD prepared a report entitled "Overview of Various Organizations Concerned with Rur~al/Hog Industry Issues." The report contained "ovenviews of organizations concerned with rural issues that we (Mongoven) have determined will be the leaders of continuing anti-hog, anti-corporate livestock production in the coming year." The organizations named in the report were: Iowa Citizens for Community Inprovement, the Missouri Rural Crisis Center, the Land Stewardship Project, the Center for rural Affairs, the National Farmers Union, and the Corporate Agribusiness Research Project. the report was sent to about 30 state pork producer groups.

NPPC officials claim that they received MDB's invoice for the report shortly after they received the report on December 17, 1996. They also claim that the invoice was not paid within several weeks (as was NPPC's usual practise) because it was "misplaced" on a "manager's desk" for more than 45 days. Harness claimed he backdated the check for accounting purposes, but NPPC's Chief Financial Officer (Jim Stavneak) said the backdating was irrelevant from an accounting standpoint.

Duchin claimed the MDB invoiced NPPC on December 16 following the completion of its report. But MBD's invoice for the report is out of sequence with other MBD invoices. Four other invoices sent by MBD to NPPC are sequentially ordered in chronological order. Only the MBD invoice for the $3,449 report is out of order.

Member groups of the Campaign for Family Farms and the Environment (which inludes Iowa CCI, LSP and MRCC) think that NPPC was planning to use checkoff funds to pay for the $3,449 rport. NPPC was forced to use non-checkoff funds when the report became public.

Question #2:

Was the material produced by MBD consistent with the project description (provided by NPPC to the USDA) that USDA had approved?

Conclusion from AMS compliance staff:

No. The information provided by MBD to NPPC through the checkoff-funded agreement was not consistent with the objectives and methods of the project description (Strategic Communications Inititative) approved by the USDA. NPPC told USDA that the objective of its 1996 Strategic Communications Inititative was to encourage positive reporting by "targetting" certain writers in order to encourage positive reporting. NPPC led USDA to believe that it was going to launch a positive promotion campaign.

However many of the reports submitted by MBD provided information on organizations and people with critical views of the pork industry. NPPC's project describes "targetting" writers, but the reports rarely (if ever) identified writers. Instead they focused on the activities of organizations.

Question #3:

Was the material produced by MBD under the "contract" allowed under the Act and the Order?

Conclusion from AMS compliance staff:

No. The subject matter of MBD's report fell outside the generally-recognized limits on the use of checkoff funds. Areview of the subject matter contained in MBD's checkoff funded reports for November 1996 through January 1997 reveals that the reports were primarily concerned with groups opposed large-scale agricultural operations. These reports were separate from the $3,349 report completed in December 1996.

The AMS told National Pork Board executive director Mike simpson in a May 1990 letter that checkoff funds could not be used to monitor or discredit activist organizations. Despite this, NPPC used checkoff funds to pay MBD for monitoring groups or individuals that were largely critical of large scale hog operations, including groups that have members who are hog farmers.

Other findings related to Question #3

NPPC's relationship with MBD's began in 1995 when NPPC entered into an agreement with MBD to provide information on a particular ogranization. On or about May 1, 1996, Harness (NPPC) and Duchin (MBD) entered into an oral agreement whereby NPPC would pay MDB for gathering information, during a 3-month trial period, on individuals and groups that might be critical of pork industry practises and/or large scale hog operations. NPPC sent MBD a check for $14,4000 on May 17, 1996 for the 3-month contract. This money came from checkoff funds.

After the 3-month trial period, Harness requested that MDB continue to monitor and report as it had during the trial period. MDB agreed, and Duchin wrote Harness on July 12, 1996, confirming their oral agreement to continue MDB's monitoring and reporting services. The monthly fee was $4,100, which would be paid for with checkoff funds.Between mid-May 1996 and late January 1997, NPPC paid MDB a total of $51,300 from checkoff funds for monitoring activist groups and individuals.

MBD produced checkoff-funded reports for NPPC on the following organizations: Pew Charitable Trusts, National Wildlife Federation, Wilderness Society, National Audobon Society, Sierra Club, League of Conservation Voters, Natural Resources Defense Council, Environmental Defense Fund, World Wildlife Fund, Friends of the Earth, World Wide Fund for Nature Gulf and Caribbean Campaign, and activist senior citizen and student groups that may be active on local environmental issues.

The AMS findings directly contradict earlier statements made by Harness and AL Tank, NPPC's CEO. Both Harness and Tank had said that NPPC monitored issues, not organizations.

Question #4:

Was the "contract" between NPPC and MBD entered into properly?

Conclusion from AMS compliance staff:

Probably not. In December 1995, NPPC contracted with the National Pork Board to perform the Pork Board's administrative functions. Therefore, when NPPC enters into contracts using checkoff funds, NPPC is acting either as a de facto Board, or, at the very least, as the Board's agent. As such, NPPC and those it contracts with are required to comply with the same law and regulations as the Pork Board.

The unwritten agreement between NPPC and MBD was a contract. It contains the general terms for the service and products to be provided, and the consideration to be paid for them. On the other hand, it lacks specificity, and omits many of the normal business terms found in written contracts, including provisions for governing law, waivers, indemnity, termination, and the like.

The Order requires that every contract the Pork Board enters into must contain certain specific provisions. Because the contract in this case is oral, it cannot fulfill the Order's requirements. The NPPC-MBD agreement is also at aodds with the agreements between the Pork Board and NPPC. For example, Pork Board-NPPC agreement states that all contracts the NPPC enters into that are for more than $10,000 must contain certain provisions relating to affirmative action and civil rights. The Order requires that all Pork Board contracts specify that the contractor's records are to be made available to the Secretary (of Agriculture Glickman)'s representatives for inspection (MBD refused to give AMS compliance staff access to its billing and collection records). The NPPC-MBD agreement does not contain many of these required terms.

Published in In Motion Magazine April 12, 1999.

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