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American National CattleWomen Respond To Lawsuit

For Immediate Release

August 20, 2012 Contact: ANCW at 303-694-0313 or ancw@ancw.org

American National CattleWomen Responds to Beef Checkoff Lawsuit

Denver, CO.–The American National CattleWomen, Inc. (ANCW) responded today to the announcement by the Organization For Competitive Markets (OCM) that it has filed a lawsuit in partnership with the Humane Society of the United States (HSUS) against the U.S. Department of Agriculture (USDA), the Cattlemen’s Beef Board (CBB) and the Beef Promotion Operating Committee (BPOC) seeking an injunction to halt the flow of beef checkoff funds to the National Cattlemen’s Beef Association (NCBA). OCM leadership announced its lawsuit on Thursday, August 9, citing audits that have uncovered the misappropriation of checkoff funds as well as an Inspector General’s report that found fault with USDA’s administration and oversight of commodity checkoff programs.

ANCW does not support this lawsuit or OCM’s willing involvement of HSUS, a known opponent of U.S. ranchers and animal agriculture, in this lawsuit partnership,” said Tammi Didlot, ANCW President, Moore, OK. “HSUS long-term goal is to eliminate animal agriculture, and OCM’s lawsuit threatens the complete demise of commodity checkoffs and this supports that plan. Any concerns of cattle producers regarding the checkoff would be better handled within the industry.”

HSUS has been questioned on their fund-raising programs, for grossly misrepresenting their efforts and accomplishments. We are disappointed OCM has chosen to align themselves with a group that has certainly demonstrated their animosity to animal agriculture and cost our industry countless dollars.

“We must move forward with a solution-oriented approach,” states Didlot, “and ANCW stands ready to work with the CBB and USDA as this process moves forward. We have complete confidence in the Beef Industry Check-Off, all theircontractors and the positive benefits it has had for our industry.” ###

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Posted by on August 30, 2012 in Uncategorized

 

CICA Ends Affiliation With OCM Over HSUS

FOR IMMEDIATE RELEASE

Colorado Independent CattleGrowers Association (CICA) announced Thursday, Aug. 23 that it will no longer be affiliated with the Organization for Competitive Markets (OCM) because of its association with the Humane Society of the United States (HSUS).

The decision follows in the wake of the OCM’s announcement Aug. 10 that, with the help of lawyers staffed by the HSUS, it was seeking an injunction of the Beef Checkoff, filing suit against the USDA, U.S. Secretary of Agriculture Tom Vilsack, The Cattlemen’s Beef Promotion and Research Board, the Beef Promotion Operating Committee, and the Agricultural Marketing Service.  

Amid criticism of the partnership between OCM and HSUS, Mike Callicrate, President of OCM, countered that the two organizations have a lot in common.  In an interview with AgriTalk Radio, Aug 14, Callicrate asserted “I don’t care where they’ve been, I care where they’re going.”

CICA, as represented by the Board of Directors, identified the OCM’s partnership with HSUS as the crux of the matter. “It is because of HSUS association that we’re choosing to drop our affiliation with OCM,” said CICA President Gerald Schreiber.  

One of the chief reasons CICA has taken a staunch opposition to HSUS is its promotion of Agenda 21, an action plan created through the United Nations (UN) which many view as the beginning of the end for private property rights.  In 2009, CICA implemented policy stating that it adamantly opposes Agenda 21 because it alienates individuals from owner rights in private property and functions as a collectivist planning document. 

Agenda 21 and the historical friction between private livestock producers and the HSUS are the two main grounds CICA cited in the decision to no longer be affiliated with OCM.  Speaking in reference to the HSUS, President Schreiber emphasized the need for caution as he stated, “Based on the HSUS track record and past history, we don’t want to have anything to do with it.”

 

 
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Posted by on August 30, 2012 in Uncategorized

 

Courts vs Consensus

U.S. Cattlemen’s Association Responds to Beef Checkoff Lawsuit
USCA (August 13, 2012) – The U.S. Cattlemen’s Association (USCA) responded today to the announcement by the Organization For Competitive Markets (OCM) that it has filed a lawsuit in partnership with the Humane Society of the United States (HSUS) against the U.S. Department of Agriculture (USDA), the Cattlemen’s Beef Board (CBB) and the Beef Promotion Operating Committee (BPOC) seeking an injunction to halt the flow of beef checkoff funds to the National Cattlemen’s Beef Association (NCBA). OCM leadership announced its lawsuit on Thursday, August 9, citing audits that have uncovered the misappropriation of checkoff funds as well as an Inspector General’s report that found fault with USDA’s administration and oversight of commodity checkoff programs. The Inspector General is expected to release in the near future a separate audit report examining specifically the beef checkoff, its contractors and checkoff oversight.

USCA will not support OCM’s willing involvement of HSUS, a known opponent of U.S. ranchers and animal agriculture, in this lawsuit partnership,” said Leo McDonnell, USCA Director, Columbus, MT. “We doubt that HSUS has any true concerns about how checkoff dollars are administered and, in fact, if the organization’s long-term goal is to eliminate animal agriculture, then the complete demise of commodity checkoffs supports that plan. While cattle producers have serious concerns about the beef checkoff, these issues would be better handled within the industry and by the industry itself.”

“Unfortunately, language in the Beef Act and Order requires that checkoff work be conducted by industry organizations through contracts with the CBB, rather than allowing the CBB to contract directly with service providers for promotion, research and education about beef,” noted Jon Wooster, USCA President. “USCA has worked diligently over time to facilitate changes in the law so the program is more responsive to a changing beef industry, more efficient and more transparent. In fact, today USCA will be involved in ongoing meetings with other national groups and USDA officials in Denver about accomplishing exactly that.”

“We are disappointed that OCM has felt the need to work cooperatively with The Humane Society of the United States, an organization that reportedly already faces charges under RICO statutes on racketeering, obstruction of justice and malicious prosecution in a law suit brought by Ringling Brothers Circus’ parent company Feld Entertainment, Inc.,” continued Wooster. “HSUS has been increasingly questioned on their fund-raising programs that apparently misrepresent their efforts and accomplishments and we are disappointed than OCM has chosen to align themselves with this group which has certainly demonstrated their animosity to animal agriculture and cost our industry countless dollars.

“USCA urges the CBB and USDA-AMS to react to this lawsuit proactively by moving immediately to develop short-term plans that will ensure a seamless continuation of current checkoff programming by other contractors in the event the plaintiffs in this case successfully obtain the injunction they are seeking from the court,” said Wooster. “We must move forward with a solution-oriented approach in order to achieve the sort of meaningful revisions to the overall program that will finally restore producer trust and confidence in beef checkoff. USCA stands ready to work with the CBB and USDA as this process moves forward.

 
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Posted by on August 30, 2012 in Uncategorized

 

R-CALF Contemplates Joining OCM-HSUS Checkoff Lawsuit

August 28, 2012

The Honorable Tom Vilsack
Secretary of Agriculture
U.S. Department of Agriculture
1400 Independence Ave., S.W.
Washington, D.C. 20250

Sent via facsimile and U.S. Mail: 202-720-6314

Re: R-CALF USA’s Demand for the Immediate and Permanent Suspension of all Contracts Between the Beef Checkoff and the National Cattlemen’s Beef Association

Dear Secretary Vilsack:

R-CALF USA hereby demands that you fulfill your statutory and regulatory duty to enforce the Beef Promotion and Research Act of 1985 (Act) and the Beef Promotion and Research Order (Order), which together govern the Beef Checkoff Program (Beef Checkoff), against the ongoing, unlawful expenditure of producers’ Beef Checkoff funds by immediately ordering the permanent suspension of any and all contracts between the National Cattlemen’s Beef Association (NCBA) and the Beef Checkoff.

For longer than two years: beginning May 24, 2010, and subsequently on Aug. 4, 2010; Dec. 14, 2010 (to Deputy Secretary Merrigan); Jan. 17, 2011; Jan. 20, 2011; Feb. 3, 2011; Feb. 28, 2011; and Aug. 22, 2011, R-CALF USA sent formal letters, replete with researched evidence of NCBA’s unlawful use of Beef Checkoff funds, that urged you to fulfill your statutory and regulatory responsibility by immediately suspending all contracts between the NCBA and the Beef Checkoff.

During that longer than two-year span, you abrogated your statutory and regulatory duty to preserve the integrity of the Beef Checkoff for U.S. cattle producers, despite your receipt of evidence from us that demonstrate the Beef Checkoff is being unlawfully abused under your watch. Instead, you and your Department have played the role of NCBA’s patsy. You have continued to allow the Beef Checkoff to unlawfully award tens of millions of dollars to NCBA, which enabled that organization to continue its unlawful use of Beef Checkoff funds to successfully undermine your Administration’s stated goals concerning country-of-origin labeling (COOL) and the competition rule proposed by the Grain Inspection, Packers and Stockyards Administration (GIPSA), just to name two.

Because you shirked your responsibilities under the Act and Order and to U.S. cattle producers, a lawsuit was necessarily filed against you by an R-CALF USA member, Mike Callicrate. That lawsuit, Michael Callicrate v. USDA et al., makes nearly all the allegations we made to you during the past two years; references nearly all the evidence we provided you during the past two years; and, it seeks the same remedy we urged you to grant our industry during the past two years.

R-CALF USA is outraged by your inaction – particularly following your receipt of our evidence that showed NCBA had misappropriated hundreds of thousands of cattle producers’ Beef Checkoff funds – and fully supports the merits of the Michael Callicrate v. USDA et al. lawsuit. The lawsuit was filed against you because you failed to stop the NCBA from unlawfully using Beef Checkoff funds to continually undermine the policy goals of independent U.S. cattle producers, which has effectively reduced their economic opportunities. A summary of the lawsuit that highlights the meritorious arguments R-CALF USA fully supports is attached.

We demand that you, by your own fruition, immediately put a stop to the NCBA’s ongoing abuse of the Beef Checkoff by fully implementing the entire remedy sought in the lawsuit, which is the remedy we have unsuccessfully sought from you for longer than two years. We are calling on you to act, and to act appropriately, without the lawsuit having to proceed any further.

Individual cattle producers should not have to file a lawsuit to ask a federal court to order you to enforce statutes and regulations that you know are being violated. And, you should not be assigning your responsibilities to individuals and federal courts in hopes that they will do what you lacked the courage to do.

As part of our demand we call your attention to an allegation that R-CALF USA did not previously articulate, but which is contained in the lawsuit. That allegation is that the “prohibition on the use of checkoff funds applies equally to any trade/producer organizations funded wholly or in part by a particular board or contractors to the board.” We believe this language expresses the clear intent of both the Act and Order as it unequivocally bars any trade association that may receive Beef Checkoff funds from also engaging in activities to influence governmental action or policy. In other words, no policy-oriented trade association can continue its lobbying activities if it is a recipient of Beef Checkoff funds. Your Department must initiate a rulemaking to make it crystal clear that organizations that contract with the Beef Checkoff are barred from engaging in lobbying activities.

Your Department’s August 24 announcement indicating that you are now expanding the contracting authority for the Beef Checkoff is void of any mention that recipients of Beef Checkoff funds cannot engage in lobbying activities. Essentially, your Department’s announcement suggests that you intend to perpetuate the ongoing, unlawful use of Beef Checkoff funds by authorizing groups in addition to NCBA to compete directly with policy groups like NCBA for available Beef Checkoff funds. This is unconscionable.

We trust that you will carefully consider our demand and choose to comply in full. Doing so will negate the need for R-CALF USA to formally join in a complaint against you.

Sincerely,

Bill Bullard, CEO

 
 
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Posted by on August 30, 2012 in Uncategorized

 

Court Filing: Callicrate v USDA et al

MICHAEL P. CALLICRATE, ) ) Plaintiff, ) v. ) ) UNITED STATES DEPARTMENT ) OF AGRICULTURE, ) 1400 Independence Avenue, S.W. ) Washington, DC 20250 ) ) SECRETARY OF AGRICULTURE ) TOM VILSACK, ) U.S. Department of Agriculture ) 1400 Independence Avenue, S.W. ) Washington, DC 20250 ) ) CATTLEMEN’S BEEF PROMOTION ) AND RESEARCH BOARD, ) 9000 E. Nichols Avenue, Suite 215 ) Centennial, CO 80112 ) ) BEEF PROMOTION OPERATING ) COMMITTEE, ) 9000 E. Nichols Avenue, Suite 215 ) Centennial, CO 80112 ) ) AGRICULTURAL MARKETING ) SERVICE, ) U.S. Department of Agriculture ) 1400 Independence Avenue, S.W. ) Washington, DC 20250 ) ) Defendants. )

Case No. 12-CV-2521 RDR/KGS

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

FIRST AMENDED COMPLAINT FOR PERMANENT INJUNCTION

This is an action to permanently enjoin violations of the Beef Research and Information Act of 1985 (the “Act”), 7 U.S.C. §§ 2901 et seq. and 7 C.F.R. §§ 1260 et seq. by the U.S. Department of Agriculture, the Secretary of Agriculture, the Cattlemen’s Beef Promotion and Research Board, the Beef Promotion Operating Committee, and the Agricultural Marketing

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Service (collectively, “Defendants”). These statutes and regulations govern the national “Beef Checkoff,” which generates over $80,000,000 from beef producers annually to be allocated by Defendants, with the express proscription that none of the “funds collected [may be] used in any manner for the purpose of influencing governmental action or policy.” 7 U.S.C. § 2904(10). Defendants violated the Act and the implementing regulations, 7 C.F.R. §§ 1260 et seq., by giving the National Cattlemen’s Beef Association’s (“NCBA”) hundreds of millions of dollars in Beef Checkoff funds even though the NCBA is a policy and lobbying organization and uses the Beef Checkoff funds to influence governmental action and policy in ways that serve the NCBA and are often against the interests of the very cattle producers who pay the Beef Checkoff. For this reason, Plaintiff respectfully asks the Court to permanently enjoin Defendants from giving any more Beef Checkoff dollars to the NCBA.

JURISDICTION AND VENUE

1. This Court has jurisdiction pursuant to 28 U.S.C. §§ 1331 & 1361 and 5 U.S.C. §

2. Venue in this Court is proper pursuant to 28 U.S.C. § 1391(e) because a substantial part of the events giving rise to the claim occurred in Kansas. Kansas had 6.1 million cattle on ranches and in feed yards as of January 1, 2012 (third among U.S. states) and 6.5 million head of commercial cattle processed in 2010 (also third among U.S. states). Kansas cattle producers pay millions of dollars per year to the Beef Checkoff. Plaintiff Michael Callicrate sells a majority of his cattle in St. Francis, Kansas, and the Beef Checkoff for that cattle is remitted in Kansas.

THE PARTIES

3. Plaintiff Michael Callicrate, a U.S. citizen and resident of Colorado, is an individual who has raised cattle since 1973. He has paid the Beef Checkoff since it became

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required under the Act and continues to pay the $1 per-head-of-cattle assessment mandated by the Act.

4. The United States Department of Agriculture (“USDA”) is an agency of the United States government.

5. Defendant Tom Vilsack is the Secretary of Agriculture (the “Secretary”) and is sued here in his official capacity only. The Secretary is charged with administering the Act, 7 U.S.C. §§ 2901-11, which establishes the beef promotion program through per-head assessments on cattle producers. This program is known in the industry as the “Beef Checkoff.”

6. Defendant Cattlemen’s Beef Board (“CBB”) is an organization authorized pursuant to the Act, 7 U.S.C. § 2904(1), and created pursuant to the Beef Research and Promotion Order, 7 C.F.R. §§ 1260 et seq. (July 18, 1986) (the “Order”). The CBB is charged with administering the Act and the Beef Research and Promotion Order.

7. Defendant Beef Promotion Operating Committee (“BPOC”) is an organization authorized pursuant to the Act, 7 U.S.C. § 2904(1), and created pursuant to the Beef Research and Promotion Order, 7 C.F.R. §§ 1260 et seq. Defendant BPOC consists of twenty members, and is responsible for approving projects and funding to carry out Beef Checkoff programs. Ten members of Defendant BPOC are NCBA representatives (described in ¶ 9, below).

8. Defendant Agricultural Market Service (“AMS”) is an agency of the United States government, and a division of Defendant USDA, that oversees the research and promotion boards for 18 separate commodities, including Defendant CBB.

9. Third Party National Cattlemen’s Beef Association (“NCBA”) is a Delaware non- profit corporation. Its primary place of business is located at 910 E. Nichols Ave., #300, Centennial, CO, 80112. NCBA is a contractor of Defendant CBB that receives tens of millions

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of checkoff dollars each year and has received approximately $200,000,000 in Beef Checkoff funds in the past six years. The NCBA was formed in January 1996 after a merger of the Beef Industry Council of the Meat Board, primarily a non-policy research and promotion organization, and the National Cattlemen’s Association, primarily a policy and lobbying organization. BACKGROUND

STATUTORY AND REGULATORY STRUCTURE

10. The Beef Research and Information Act, 7 U.S.C. §§ 2901-11, originally enacted in 1976, is intended to strengthen the beef industry’s position in the marketplace through a coordinated program of promotion and research. 7 U.S.C. § 2901(b).

11. The Beef Checkoff is funded by mandatory producer contributions known as “Checkoffs.” Currently, there are eighteen other producer-funded promotion and research “checkoff” programs for various agricultural commodities, such as pork and soybeans, similar in many of their functional respects to the Beef Checkoff.

12. The Act directs the Secretary of Agriculture to promulgate a Beef Promotion and Research Order (the “Order”) to be financed through one-dollar-per-cattle-head assessments and that must be paid by all cattle producers and importers. 7 U.S.C. § 2904(8)(C). This Order was promulgated in July 1986, and the national $1 per head Beef Checkoff program went into effect on October 1, 1986.

13. Under the Order, each person receiving a payment from a producer is designated a “collecting person,” 7 C.F.R. § 1260.311(a), and is required to remit the assessments either to a qualified State beef council or directly to the CBB. 7 U.S.C. § 2904(8)(A); 7 C.F.R. §§ 1260.172(A)(5), 1260.311(a) & 1260.312(c).

14. Historically, the State beef councils have collected the Beef Checkoff and remitted 50 cents to Defendant CBB. The Beef Checkoff raises approximately $80,000,000 each year. Of

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this amount, approximately $40,000,000 remains with the State beef councils, and the other $40,000,000 is remitted to Defendant CBB.

15. The State beef councils have the choice of using a portion of the funds they do not remit to Defendant CBB to purchase seats on Defendant CBB.

16. Pursuant to the Act, Defendant BPOC is required to enter into “contracts or agreements for implementing and carrying out the activities authorized by this chapter with established national nonprofit industry-governed organizations . . . to implement programs of promotion, research, consumer information, and industry information.” 7 U.S.C. § 2094(6).

17. Beef Checkoff funds may not be used to influence governmental action or policy: “The order [required to be issued by the Secretary under 7 U.S.C. § 2904(1)] shall prohibit any funds collected by the [CBB] under the order from being used in any manner for the purpose of influencing governmental action or policy, with the exception of recommending amendments to the order.” 7 U.S.C. § 2904(10); see also 7 C.F.R. § 1260.169(e).

18. The Beef Checkoff was established over 25 years ago, with more than $1.6 billion collected and spent. During these 25 years, beef producers have lost market share, downsized the domestic cattle herd, and suffered from a drastically reduced producer’s share of the retail beef dollar. Nearly 500,000 beef cattle operations have gone out of business, including 35,000 feeders, since 1996.

NCBA’S POLICY ACTIVITIES 19. NCBA “works to advance the economic, political and social interests of the U.S.

cattle business and to be an advocate for the cattle industry’s policy positions and economic interests.” (NCBA, About Us, available at http://www.beefusa.org/aboutus.aspx) (last visited August 7, 2012) (emphases added).

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20. According to the Beef Industry Long-Range Plan for 2011-2013 posted on NCBA’s website (available at http://www.beefusa.org/CMDocs/BeefUSA/Media/APPROVED- 2011-2013-Long-Range-Plan-ONE-PAGE.pdf, last visited on August 6, 2012), “Core Strategies and Strategic Initiatives” include:

• Educate policy makers and regulators on structure, operation and value of the beef industry; and

• Coordinate lobbying efforts among like-minded beef industry advocates.

21. The NCBA’s 2012 Policy Book, which is currently 161 pages and contains over 500 legislative positions, is a statement that, according to the NCBA, guides “NCBA’s actions on behalf of the cattle industry in influencing the government relating to agriculture.” (Beef USA 2012 Policy Book, June 2012, available at http://www.beefusa.org/CMDocs/BeefUSA/Issues) (last visited August 6, 2012).

22. As stated in the 2012 Policy Book, NCBA’s priorities include: (a) achieving a reduction in federal spending and the deficit; (b) minimizing direct federal involvement in agriculture; (c) preserving the right of individual choice in the management of land, water, and other resources; (d) providing an opportunity to compete in foreign markets; and (e) opposing Farm Policy that favors one producer or commodity over another.

23. The 2012 NCBA Policy Priorities include lobbying regarding the death tax, farm dust regulation, the Equal Access to Justice Act, and the 2012 Farm Bill. (NCBA Policy Priorities, available at http://www.beefusa.org/2012ncbapolicypriorities.aspx) (last visited August 6, 2012).

24. The NCBA’s website has a “Political Action” page. The page states: (a) “Call to Action – Find out what legislation NCBA is currently paying close attention to in the Legislative

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Watch”; (b) “Or, contact your Elected Officials using the Capwiz online advocacy tool to send messages to legislators and other key people”; and (c) “Stay Informed with the Beltway Beef weekly report from Washington, D.C., for an up-to-date summary of top policy initiatives concerning the cattle industry.”

25. The NCBA has a “Public Policy Internship,” through which, according to NCBA, “Interns work alongside NCBA’s lobbying team, regulatory experts, communications team and political action committee to ensure legislative and regulatory actions taken inside the nation’s Beltway don’t cause harm to the cattle industry.” (available at http://www.beefusa.org/ncba publicpolicyinternship.aspx, last visited on August 7, 2012).

26. A cattleman on the NCBA’s website proclaims: “NCBA is our voice in Washington.”

27. The NCBA reported income of $69,298,644 in its 2006 Form 990. Of this amount, $46,239,644 (approximately 67%) was attributed to Defendant BPOC contracts.

28. The NCBA reported income of $65,583,483 in its 2007 Form 990. Of this amount, $42,681,347 (approximately 65%) was attributed to Defendant BPOC contracts.

29. The NCBA reported income of $56,694,160 in its 2008 Form 990. Of this amount, $35,832,980 (approximately 63%) was attributed to Defendant BPOC contracts.

30. The NCBA reported income of $58,678,003 in its 2009 Form 990. Of this amount, $37,000,615 (approximately 63%) was attributed to Defendant BPOC contracts.

31. The NCBA, a lobbying organization, benefits from the Beef Checkoff funds paid by cattle producers.

THE NCBA EFFECTIVELY CONTROLS DEFENDANT BPOC

32. The NCBA effectively controls Defendant BPOC and its allocation of Beef Checkoff funds through its Federation Division because Defendant BPOC, the organization that

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awards Beef Checkoff contracts, is composed, by regulation, of ten members appointed by the NCBA’s Federation Division, and the majority of the remaining ten members of Defendant BPOC are also NCBA members.

33. Defendant BPOC has twenty members by regulation. 7 C.F.R. § 1260.161(a).

34. Under the Order, the Defendant BPOC is composed of ten Board members elected by Defendant CBB and ten producers elected by the “Federation.” 7 C.F.R. § 1260.150(d) & 7 C.F.R. § 1260.161. The ten Federation members are the Federation chairperson, vice- chairperson, and eight representatives of the Federation Board of Directors who are members or ex officio members of the boards of directors of a qualified State beef council. 7 C.F.R 1260.161(c).

35. The Order speaks in terms of the “Federation,” which meant the Beef Industry Council of the National Live Stock and Meat Board, a non-policy organization, when the Order was enacted in 1986. According to the Order, the “Federation” means “the Beef Industry Council of the National Live Stock and Meat Board, or any successor organization to the Beef Industry Council, which includes as its State affiliates the qualified State beef councils.” 7 C.F.R. § 1260.112.

36. In January 1996, the Beef Industry Council of the National Live Stock and Meat Board merged with the National Cattlemen’s Association, primarily a policy and lobbying organization, to form the NCBA.

37. The NCBA is now the successor of the Beef Industry Council of the National Live Stock and Meat Board.

38. The NCBA has a “Federation Division” and a “Policy Division,” both of which share many of their staff members.

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39. The Federation Division and the Policy Division are part of the NCBA. 40. The NCBA and its divisions are not distinct legal entities. 41. In 2011, the CEO of the NCBA was also the CEO of NCBA’s Federation

Division, and approximately 71% of his administrative time was paid with Beef Checkoff dollars.

42. The USDA did not envision the NCBA, a policy organization, as the primary recipient or beneficiary of Beef Checkoff funds when the Order was enacted in 1986.

43. As a result of the merger between the Beef Industry Council of the National Live Stock and Meat Board and the National Cattlemen’s Association, the NCBA’s Federation Division now appoints 10 members of Defendant BPOC, which is responsible for awarding Beef Checkoff contracts to entities like NCBA.

44. The chairperson of Defendant CBB is the chairperson of Defendant BPOC, and the chairperson of the Federation is the vice-chairperson of Defendant BPOC. 7 C.F.R. § 1260.166.

45. Ten members of Defendant BPOC are appointed by the NCBA’s Federation Division.

46. The chairperson and vice chairman of the NCBA Federation Division serve on Defendant BPOC. The other eight members appointed by the NCBA’s Federation Division are “representatives of the Federation Board of Directors who are members or ex officio members of the Board of Directors of a qualified State beef council.” 7 C.F.R. § 1260.161(c).

47. The remaining ten members of Defendant BPOC consist of the chairperson, vice- chairperson, and treasurer of Defendant CBB, and seven representatives of Defendant CBB who are elected by Defendant CBB. 7 C.F.R. § 1260.161(b).

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48. Nearly all ten members appointed by Defendant CBB to Defendant BPOC are NCBA members or members of NCBA State beef council affiliates.

49. Defendant CBB’s Chairman Wesley Grau is an NCBA member. Defendant CBB’s Vice Chairman Weldon Wynn is past president and member of the Arkansas Cattlemen’s Association, an NCBA affiliate. Defendant CBB’s Treasurer/Secretary Kim Brackett has served as chair, vice chair, and treasurer of the Idaho Beef Council.

50. Defendant CBB’s Chairman, Vice Chariman, and Treasurer serve on Defendant

BPOC.

51. Of the other seven members appointed by Defendant CBB to Defendant BPOC, one is currently the Chair of the Public Relations Subcommittee of the Public Opinion & Issues Management Group of the NCBA.

52. Another of the Defendant BPOC members appointed by Defendant CBB is currently the Vice Chair of the Product Enhancement Committee of the Research, Education and Innovation Group of the NCBA.

53. Other members of Defendant BPOC appointed by Defendant CBB include the current chairman of the Wyoming Beef Council, a past chairman of the California Beef Council, and a past president of the South Dakota Beef Council, three NCBA affiliates. Another member is the current president of the American National CattleWomen, a subcontractor of the NCBA.

RECOMMENDATIONS TO SEPARATE THE FEDERATION DIVISION FROM THE NCBA

54. On May 17, 2010, Secretary of Agriculture Tom Vilsack sent a letter to the NCBA recommending that “[t]he Federation of State Beef Councils must be an independent organization. . . . This requirement does not prohibit the Federation from contracting for its administrative or other services with other organizations. This requirement is consistent with the

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structure and administration of other checkoff programs where there is a clear distinction between policy organizations and checkoff programs.” (emphasis added).

55. Secretary Vilsack explained further, “All funding decisions relating to checkoff activities must be made only by the Federation and the Cattlemen’s Beef Board, and not policy organizations; the Federation’s members who serve on the Beef Promotion Operating Committee are to be nominated and elected only by the Federation; Federation members must not vote on policy matters, nor be required to purchase a seat to a body that votes on policy; checkoff funds cannot be used to purchase a seat in any policy organization; regardless of structure, policy organizations should not be permitted to influence, determine outcomes, or vote on checkoff decisions; AMS has statutory and regulatory and regulatory oversight of the Federation and the CBB; and,” Vilsack continued, “failure to implement all of these firewalls would raise serious legal concerns as to whether restructuring complies with the provisions of the Act and Order.”

56. On June 22, 2010, the Executive Committee of Defendant CBB unanimously approved a motion recommending separation of the Federation and NCBA. The motion states: “The federation should be a strong, independent, checkoff entity. The Federation should be separate from any policy organization, since all funds for the checkoff come from mandatory assessments of producers and importers. The checkoff is owned by, and responsible to, all producers and importers, and no specific organization.” (CBB Recommends Separating Federation and NCBA, June 24, 2010, available at http://www.beefboard.org/news/ 100624ExecCommRecOnFederation.asp) (last visited August 17, 2012) (emphasis added).

57. On June 13, 2011, one of the members of Defendants CBB and BPOC published an article titled “A CBB Member Weighs in With His Perspective . . . 70.9% of NCBA’s Total Overhead Paid by Checkoff,” available at https://beefcheckoff.wordpress.com/2011/06/13/a-cbb-

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member-weighs-in-with-his-perspective-70-9-of-ncbas-total-overhead-paid-by-checkoff-2/ (last visited August 16, 2012).

58. In the article, the Defendant BPOC member states: “Can you imagine any other governmental program where a contractor for federal funds is permitted to vote on who receives the contract?”

59. The article describes an instance in 2005 where the NCBA and the National Livestock Producers Association (“NLPA”) submitted proposals for a project. The NCBA’s proposal cost $2,615,000, and the NLPA’s proposal cost $1,756,905. Defendant BPOC had to choose between the two contracts. According to the article, “the tension was so thick in the room that the chairman called an executive session of the committee after polling the committee’s preferences on whether to remove the non-committee members from the room.”

60. According to the article, notwithstanding the nearly $1,000,000 in cost difference between the NCBA and NLPA contracts, only one member of Defendant BPOC voted to award the funding to NLPA.

61. The article concluded that “NCBA’s influence through membership on the Producer Communications committee and staffing of it clearly and literally directed discussion in favor of the NCBA.”

62. The article also reported that the NCBA contracts with Defendant BPOC and received approximately 93% of the Beef Checkoff funds in 2011. This included 14.2% that went to the U.S. Meat Export Federation and 1% that went to the American National CattleWomen, two subcontractors of the NCBA.

63. The article written by the member of Defendant BPOC concluded that “there are many other problems with the checkoff that result in inefficiencies and misappropriated funds,

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but the problems are so enormous that they cannot be overcome. . . . NCBA still has far too much influence over the national checkoff through its Federation of State Beef Councils and its members and directors.”

64. In June or July 2011, Tom Ramey resigned as CEO of Defendant CBB. Approximately two weeks later, Tom Jones resigned as Chairman of Defendant CBB.

65. Mr. Jones’s resignation letter states: “I am so sorry to the members of this Board who truly want what’s best for every producer. Keep doing the right thing. Doing what’s right is all that matters. Some board members put their allegiance to their chosen association before their oath of obligation to serve all producers who pay the checkoff. This is a dangerous position to take. The checkoff program could benefit from positive change and it is difficult to work for that when your allegiance causes you to wear blinders to the change that is needed. It will also be impossible to defend those attitudes if or when this program is challenged.” (emphases added).

2010 INDEPENDENT AUDIT OF NCBA

66. In February 2010, Defendant CBB conducted a routine compliance review of the NCBA.

67. Defendant CBB engaged a Certified Public Accounting firm, Clifton Gunderson, to perform the NCBA audit.

68. The audit reviewed NCBA’s compliance with its contract with Defendant BPOC and to test NCBA’s “firewall,” by which the NCBA claims to separate Beef Checkoff expenses from non-checkoff expenses.

69. The independent audit revealed a number of deficiencies, including numerous violations of the prohibition against using Beef Checkoff funds to influence governmental actions and policies.

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70. The independent auditors tested a small sample of 45 expenditures that were included in the overhead cost pool for the eligibility of those items as overhead expenses. Examples of these overhead expenses included facilities or occupancy costs, depreciation, equipment leases, office supplies, supervisory labor costs, and other general and administrative costs.

71. The independent auditor reported that five of the 45 items audited were not eligible checkoff expenses. These expenses included consulting fees incurred by NCBA to investigate a potential certified beef program for NCBA, which should have been charged wholly to the NCBA’s Policy Division, not the Beef Checkoff program.

72. For nine of the 45 items audited, the independent auditor was unable to determine eligibility of the expenses for overhead because NCBA failed to provide adequate documentation.

73. 7 U.S.C. § 2904(6)(c) requires Beef Checkoff contractors like NCBA to maintain adequate records of its transactions.

74. The independent auditor also tested a small sample of time reports for 25 employees for the months of January 2008, September 2008, April 2009, June 2009, and February 2010.

75. The time reports were compared to the employees’ job description, travel expense reports, calendars, personnel leave forums and notes in the time reporting system to verify if the coding of the time agreed with the supporting documents.

76. The independent auditor reported numerous instances of improper time coding or improper documentation for time worked for these 25 employees during the five months tested.

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77. In auditing the time records of the 25 employees, the independent auditor noted the following discrepancies: (a) in one instance, an employee’s job description contained revenue development responsibilities (i.e., membership) for NCBA’s Policy Division, but the employee coded all of his or her time to checkoff projects; (b) in six instances, the employees’ time was improperly coded based on the supporting documentation (for example, three of the employees tested indicated they participated in a membership revenue development meeting in FY 2009 and charged their time to checkoff projects); (c) in all 25 instances, the independent auditor could not determine if the employee’s time was recorded correctly (for example, three employees attended meetings in FY 2008 related to the issue of Country of Origin Labeling of beef products and charged their time to Beef Checkoff projects); (d) and a senior staff member charged all of his or her time to the Beef Checkoff since April 2009 instead of charging time to the specific areas in which he or she actually spent time.

78. The independent auditor also found that travel expenses were coded to the wrong project code in six instances. These expenses included travel expenses for NCBA’s Spring Legislative Conference, for a Governance Task Force meeting and for an executive staff member’s spouse to travel with the employee to attend the Five Nations Beef Conference in New Zealand. These expenses were improperly charged to the Beef Checkoff.

79. The independent auditor also could not determine the proper coding of the travel expenses for numerous items because NCBA provided inadequate documentation, in violation of 7 U.S.C. § 2904(6)(c).

80. According to the Executive Summary of the independent audit, NCBA violated the Beef Checkoff rules by failing to keep adequate records of transactions charged to the Beef Checkoff: “the nature of several of the exceptions and undetermined items reported by [the

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independent auditor] clearly indicates that NCBA breached the financial firewall during the periods tested and that NCBA did not maintain sufficient documentation in many instances to adequately support the separation of expenditures between the policy side of NCBA and the checkoff side of NCBA. Although not reported as such by [the independent auditor], [Defendant CBB] considers this lack of sufficient documentation to be noncompliance.”

81. As shown by the independent audit, NCBA’s so-called “firewall” did not ensure that only checkoff-eligible expenses were charged to the Beef Checkoff.

82. The audit evaluated a small portion of NCBA transactions charged to the Beef Checkoff in FY 2008, FY 2009, and the first five months of FY 2010, ended February 28, 2010. Specifically, the audit investigated only 45 expenditures and 25 employees’ timesheets for five months.

83. According to NCBA’s Forms 990, NCBA had total expenses of $110,412,425 in 2008 and 2009, and of that $72,833,595 (approximately 66%) came from the Beef Checkoff. However, only a miniscule forty-five transactions that occurred during this period were audited by the independent auditor. If the average expense evaluated by the independent auditor was $1,000, the independent auditor examined approximately $45,000 of transactions. This tiny fraction—less than one percent—of the NCBA’s Beef Checkoff funds revealed numerous expenditures that violated the Act.

84. Further, according to NCBA’s 2008 Form 990, NCBA had approximately 193 employees in 2008. If each of these employees worked the two years and five months of the audit period, NCBA had a total of 5,597 “employee months” that Defendant CBB could have audited. However, only 25 employees’ timesheets for five months were audited, for a total of 125 employee months.

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85. Although the independent auditor examined less than 2.2% of NCBA employee months, the small fraction audited of the total employee months revealed numerous expenditures that violated the Act.

86. This independent audit of a small number of NCBA’s transactions during a two- year-and-five-month period revealed only the tip of the iceberg.

87. As a result of the audit, NCBA agreed to return the checkoff fund over $216,000 to settle claims of unlawful expenditures.

88. If the ratio of misappropriated or misused funds holds for the rest of the Beef Checkoff funds received by NCBA, the amount misappropriated or misused by NCBA would be in the tens of millions of dollars, if not more.

89. A follow-up audit conducted by CBB staff identified an additional $39,000 as of May 15, 2011 that was improperly billed to the Beef Checkoff during fiscal years 2008-2010. The follow-up audit of the NCBA revealed that at least $305,365 was misappropriated or misused in fiscal years 2008-2010.

90. Despite these audits’ findings, NCBA’s Beef Checkoff contract was not suspended by the Defendants.

2012 USDA AUDIT OF DEFENDANT AMS

91. The Secretary has delegated authority to oversee and monitor Defendant CBB to Defendant AMS. Defendant AMS’s primary responsibility is to ensure that Defendant CBB uses Beef Checkoff funds in accordance with legislative and regulatory requirements, including the prohibition against using Beef Checkoff funds to influence any legislation or governmental action.

92. In November 2010, Defendant USDA published Guidelines for AMS Oversight of Research and Promotion Boards (“Guidelines”). These Guidelines were revised in June 2012.

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93. The phrase “influencing governmental policy or action,” as used in the Act, is defined in the Guidelines. Under to the Guidelines, the term “influencing of governmental policy or action” means “any action the principle purpose of which is to bring about a change in existing policy or regulation or affect the outcome of proposed policy or regulation, except those actions which are specifically provided for in the act, order and/or rules and regulations.”

94. Significantly, the Guidelines also state that the “prohibition on the use of checkoff funds applies equally to any trade/producer organizations funded wholly or in part by a particular board or contractors to the board.” Therefore, no contractor of BPOC may use the Beef Checkoff funds for the purpose of influencing governmental action or policy.

95. On March 12, 2012, Defendant USDA’s Office of Inspector General (the “OIG Audit”) reported the results of an audit of Defendant AMS’s oversight of the eighteen checkoff programs.

96. According to the OIG Audit, “[Defendant] AMS program area staff did not always require the various boards, [including Defendant CBB,] to comply with agency guidelines. For example, [Defendant] AMS program area staff did not receive detailed information about boards’ administrative expenses. [Defendant] AMS needs this information in order to verify that boards are operating in compliance with regulations and legislation. . . . [P]rogram area staff did not have enough information to determine that the administrative expenses incurred by these boards were in compliance with the legislation requirements.”

97. The OIG Audit also found that Defendant AMS failed to recognize that its oversight role extends to monitoring subcontracts, such as those between Defendant CBB and the NCBA or NCBA subcontractors.

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98. Additionally, the OIG Audit found that Defendant AMS “did not ensure that independent auditor reports included required statements of assurance on board compliance with specific regulatory and legislative requirements.”

99. The OIG Audit found that none of the independent audit reports of the checkoff boards, including those of Defendant CBB, contained statements by the auditor confirming that none of the checkoff funds were used for lobbying, that internal controls over checkoff fund accounts met accounting standards, and that checkoff funds were used only for projects and other expenses authorized in a budget. The OIG Audit explained that the independent auditors had not listed these required assurances in their reports because the board had not asked them to perform such work.

100. NCBA continues to receive tens of millions of dollars annually from the Beef Checkoff, and the funds continue to be used to fund or otherwise benefit NCBA’s efforts to influence government action and policies.

COUNT I PERMANENT INJUNCTION

101. Plaintiff reiterates and incorporates by reference paragraphs 1-100 hereof. 102. Plaintiff has paid and continues to pay the Beef Checkoff. 103. The Act expressly prohibits the use of Beef Checkoff funds for the purpose of

influencing governmental action or policy. 104. Defendant BPOC has given the NCBA approximately $200,000,000 in checkoff

funds since 2006. 105. NCBA has misappropriated or misused Beef Checkoff monies and has used and

continues to use the Beef Checkoff to fund or otherwise benefit its efforts to influence governmental action or policy.

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106. Defendants’ approval of NCBA’s improper expenditures and failure to properly ensure that none of the Beef Checkoff funds given to NCBA are used for the purpose of influencing governmental action or policy or otherwise benefit the NCBA’s policy functions is arbitrary and capricious, an abuse of discretion, and is not in accordance with law, and is thus a violation of the Administrative Procedure Act, 5 U.S.C. § 706(2), and the Beef Research and Information Act, 7 U.S.C. §§ 2901 et seq.

107. Irreparable harm will continue to be caused to Plaintiff and all other similarly- situated beef producers if the Court does not issue a permanent injunction because NCBA will continue to use Beef Checkoff funds for the improper purpose of influencing governmental action or policy or otherwise benefit the NCBA’s policy functions.

108. Plaintiff has no adequate remedy at law to prevent NCBA from further misappropriating or misusing Beef Checkoff funds.

109. The balance of hardships tips in the Plaintiff’s favor, and the requested injunction is not adverse to the public interest. The public interest will be served by permanently enjoining Defendants’ violation of the Act.

RELIEF REQUESTED

WHEREFORE, Plaintiff respectfully asks the Court to enter an Order:

(a)

(b)

immediately and permanently suspending any contracts between NCBA and Defendants; and permanently enjoining Defendants from contracting with the NCBA under the Act or otherwise giving the NCBA any additional Beef Checkoff funds, together with awarding Plaintiff costs, attorney fees, and such other relief as the Court deems just and equitable.

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Document 4 Filed 08/17/12 Page 21 of 21

Dated: August 17, 2012

By: /s/ Daniel D. Owen Daniel D. Owen KS # 14629 G. Gabriel Zorogastua KS # 23556 POLSINELLI SHUGHART P.C. Twelve Wyandotte Plaza 120 West 12th Street Kansas City, Missouri 64105 Telephone: (816) 374-0515 Facsimile: (816) 817-0108

Counsel for Plaintiff

 
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Posted by on August 30, 2012 in Uncategorized

 

Callicrate Says HSUS Key In Filing Lawsuit

The new president of the Organization for Competitive Markets (OCM) says he could not have filed his lawsuit against the beef checkoff without the help of the Humane Society of the United States (HSUS).

Mike Callicrate, the sole plaintiff in the lawsuit filed in Kansas, that accuses the Beef Checkoff of misappropriating funds, says the HSUS did the groundwork but is NOT a party to the suit.

“I tell you what,” says Callicrate, “OCM vetted the HSUS pretty well. I’m on their Colorado ag council. We are NOT in bed together. We are NOT joining organizations.”

Callicrate tells Brownfield that the HSUS donated labor when the OCM requested and received a truckload of documents from the USDA in a Freedom of Information request about the agency’s dealings with the National Cattlemen’s Beef Association, Cattlemen’s Beef Board and the Beef Operating Board.

“HSUS and their legal staff,” Callicrate tells Brownfield Ag News, “They hired people to go through these documents and carefully analyze the information that was in them. This is what gave us the basis for this lawsuit, to be able to file it.”

Callicrate says he and his organization have one thing in common with the HSUS. “We believe that family farm and ranch agriculture is the way to feed America – and, it’s also the way that the world can feed itself – Not the Cargill, ADM, Tyson model of extraction and exploitation,” he says.

Callicrate is seeking a permanent injunction against the NCBA receiving any more Beef Checkoff dollars in the future, saying the group uses the funds to influence policies that benefit the NCBA and do not represent the cattle producers who pay into the Checkoff.

The NCBA denies the charges and accuses the OCM of wanting to destroy the Beef Checkoff and working with an anti-animal ag group (HSUS) that wants to destroy animal agriculture.

The law firm of record in the case is Polsinelli Shugart of Kansas City.

 

 

 
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Posted by on August 30, 2012 in Uncategorized

 

We’re Baaaaaaack! OCM, HSUS Go After Checkoff In Court

OCM, HSUS Go After Checkoff In Court

Joe Roybal, BEEF Magazine

Aug. 13, 2012

On Friday, August 10, a lawsuit was filed in District Court in Kansas, seeking a court order prohibiting any beef promotion program dollars to go to NCBA.

Citing lack of progress on a succession of legislative and regulatory fronts, the Organization for Competitive Markets (OCM) is now looking to the courts. During the group’s annual meeting last week, Fred Stokes, OCM president and director, announced that OCM and the Humane Society of the U.S. (HSUS) were joining forces to seek an injunction against USDA’s Agricultural Marketing Service, Cattlemen’s Beef Board and the Beef Promotion Operating Committee, with the aim of ending the use of checkoff funds by the National Cattlemen’s Beef Association (NCBA), the major contractor to the checkoff.

On Friday, a lawsuit was filed in District Court in Kansas seeking a court order prohibiting any beef promotion program dollars to go to NCBA. The lawsuit alleges that the NCBA receives a large majority of checkoff-funded projects, and alleges that the CBB operating committee awards the contracts to NCBA and that 10 of the 20 seats on the committee are held by NCBA members.

Among HSUS’s contributions to the effort were legal expertise and funding, Stokes said during a press conference last week. OCM had filed a Freedom of Information Act request for checkoff documents, following which HSUS legal experts advised a lawsuit. OCM was then able to engage the Polsenelli Shugart law firm to take on the case on a pro bono basis.

“NCBA has essentially taken all of our own money – that we have been forced to pay in to the checkoff by law – and used it to lobby Congress for an agricultural system, an industrialized cattle system that is contrary to the independent cattle producer’s interest,” Mike Callicrate, a Kansas cattle feeder and OCM vice president, told the Associated Presson Friday.

But what seemed to draw the most industry reaction was OCM’s decision to partner with HSUS in the effort. Stokes defended the move by saying that “HSUS understands the family farmer and rancher was kinder to farm animals than the corporate farms. … they want to be a party to an alliance or coalition to see that this little remnant of independent family agriculture remains and we are very eager to accept that support.”

Interestingly, however, the latest survey of producer attitudes regarding the checkoff – released just two weeks ago – found that 75% of producer respondents support the checkoff and its work, a level that’s remained fairly stable over time. What’s more, only 15% of respondents in the latest survey said they disapprove of the checkoff.

In addition, more than 80% think the program plays a positive role in influencing consumer demand for beef. And 70% agree with the idea that the program has helped contribute to the profitability of their operation over time, and two-thirds give positive marks to checkoff management as well. That begs the question, who exactly are OCM and their HSUS pals trying to save?

 

NCBA, which is the dominant producer organization in the U.S. by far, counters that it represents operations of all sizes. It responded that while OCM claims to advocate for a fair, competitive agricultural marketplace, “producers should know that OCM is working with an extremist animal rights group to disable a program dedicated to building demand for beef.”

“HSUS is an organization going state by state vowing to end production agriculture by outlawing scientifically validated production practices in animal agriculture. Their efforts put people out of business and often jeopardize the well-being of livestock,” said J.D. Alexander, NCBA president and a farmer-feeder from Pilger, NE. “Animal agriculture is vital to sustaining food production and we will not sit by and allow these organizations to stifle our ability to mitigate hunger and feed people here and abroad.”

 

 
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Posted by on August 30, 2012 in Uncategorized