WASHINGTON — A major fertilizer producer from California’s San Joaquin Valley who pleaded guilty to fraud charges this week ran into what appears to be a newly aggressive federal effort to crack down on organic-farming cheaters.
Once one of the largest organic-fertilizer operators in the Western United States, Bakersfield resident Kenneth Noel Nelson Jr. faces prison time and a big fine after his guilty plea to four counts of mail fraud. The 59-year-old businessman will be sentenced in early November.
Nelson is the latest fake-organic-farming businessman to be caught by Agriculture Department enforcement efforts. Once blasted for inaction, department investigators are embarking on what officials describe as an “age of enforcement” in a climate where the organic label can bring a big price premium.
“I think anything that will increase the integrity of organic fertilizer and organic agriculture is very important,” Steve Beckley, the president of the Organic Fertilizer Association of California, said in a telephone interview Thursday.
Investigators, moreover, are having to cover more turf as the organic sector grows. Some 16,000 certified organic operations have sprouted nationwide, with organic agriculture production pegged at about $29 billion a year.
Operating through his company Port Organic Products Ltd. as well as a number of affiliates, Nelson sold an estimated $40 million worth of purportedly organic fertilizer from 2003 to 2009, according to the Department of Justice. He didn’t tell his customers he was using chemicals that included aqueous ammonia and ammonium sulfate. This cost less than using true organic materials such as fish meal or bird guano. He secured his valuable organic certification with false applications
Nelson could face up to 20 years in prison and a $250,000 fine for each of the four mail-fraud counts to which he pleaded guilty, though his plea agreement and cooperation mean it’s almost certain that Fresno, Calif.-based U.S. District Judge Anthony Ishii will be less severe at the sentencing Nov. 5.
Nelson’s attorney couldn’t be reached Thursday.
Nelson’s guilty plea follows the April sentencing of an Oregon man to 27 months in prison for selling millions of pounds of corn falsely labeled as organic. In February, ending a two-year investigation, the proprietor of a company called California Liquid Fertilizer likewise pleaded guilty to fraud for using banned chemicals in the “Biolizer XN” fertilizer he sold as organic. Businessman Peter Townsley awaits sentencing as officials figure out what his scheme cost customers.
“Growers likely would not have bought (Townsley’s) fertilizer at all if they had known it was simply a conventional, synthetic fertilizer,” San Francisco-based U.S. District Judge Charles Breyer noted Aug. 1, court records show, adding that “this put the customers at a great financial risk if discovery of the fraud had led to a decertification of their status as organic farms.”
Agriculture Department inspector general investigations pertaining to the organic agriculture program have resulted since 2009 in "five indictments, five convictions and approximately $524,000 in monetary results," Paul Feeney, deputy counsel of the office, said Thursday.
The prosecutions appear to set a different tone from the first years of the Agriculture Department’s National Organic Program, which was conceived by Congress in 1990 and established by a final federal rule in 2001. In its early years, investigators joined farmers in complaining about inaction and lax enforcement.
The Agriculture Department’s internal watchdog found in 2010 that organic program officials had waited an average of 15 months to take any action against several businesses that knowingly had marketed non-organic products as organic. Nearly half the complaints forwarded to the organic program were not resolved “within a reasonable time frame,” with some taking up to three years, investigators noted.
“The former (program) director attributed the agency’s inability to effectively act on investigations and issue enforcement actions to a lack of resources,” the Agriculture Department’s Office of Inspector General noted in a May 2010 report.
Office of Inspector General special agents joined the FBI in investigating Nelson’s fertilizer operations, which he managed through affiliated companies bearing names such as Sail On Ag Products Inc., Desert Organic Express Inc. and Microbial Assisted Soil Health Inc., according to the Justice Department. The agents first raided Nelson’s factory in January 2009 after Kern County environmental health inspectors found synthetic chemicals at the site.