February 4, 2023

WASHINGTON — James Wolf was growing corn, soybeans and wheat on a family farm in Cottonwood County for decades when he did what many farmers in Minnesota do — applied for certification to sell his crop as organic, which would fetch a lot more money per bushel .

From 2014, when he received his certification, through 2021, Wolf made $46 million selling what he advertised as organic grains to buyers in Pennsylvania and elsewhere. The money enabled Wolf, 65, to buy a “winter home” in Arizona and two Chevy Corvette convertibles. But the FBI says the crops Wolf sold as organic were not.

The Minnesota farmer was indicted by US Attorneys in Minnesota last year for involvement in an increasingly common agricultural crime — organic fraud — that could result in jail time and millions of dollars in damages. Wolf has pleaded not guilty.

On Thursday, another farmer accused of conspiring with Wolf, Adam Clifford Olson, 45, will make his first court appearance Thursday in U.S. District Court in St. Paul and is expected to plead not guilty.

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The booming organic market is worth at least $63 billion a year. The increasing demand for organic grains has pushed their prices up to double or even triple the cost of conventionally grown grains with synthetic fertilizers, pesticides and herbicides. But for those who buy grains, it’s difficult, if not impossible, to distinguish organic grains from non-organic grains, making fraud difficult to detect and prosecute.

And some find it difficult to resist the temptation to sell the harvest at a much higher price.

“There are incentives to cheat,” said Kate Mendenhall, executive director of the Organic Farmers Association and an Iowa farmer.

This has led to the USDA’s National Organic Program being published final rules this month aimed at curbing organic food crime. The USDA said the stricter regulations may have prevented much of the fraud accused of Wolf.

“This rule incorporates more robust traceability and verification practices that would have helped detect and stop this type of fraud earlier, prevent further sale of the fraudulent products, and reduce the impact of the fraud,” the USDA said.

Wolf’s is a high-profile organic fraud prosecutor’s office involving the FBI, the US Attorney’s Office in Minnesota and the US Department of Agriculture. But it’s not the largest case of this type of agricultural crime.

In 2021, South Dakota grain broker Kent Duane Anderson was accused of buying conventionally grown grains and fraudulently selling them as organic grains for a huge profit, generating approximately $71 million in proceeds, according to court documents.

Anderson, who used the profits from his scam to fund a lavish lifestyle in Florida, pleaded guilty.

“I Bought thousands of tons of small grain and seed products from non-organic suppliers and then resold those products at inflated prices to wholesalers, brokers and other buyers, falsely claiming the products were organic,” Anderson said in his guilty plea in court. “The buyers who thought the grain I sold them was organic were scammed.”

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Meanwhile, Missouri grain broker Randy Constant was prosecuted for involvement in an even bigger scam. Like Wolf, Constant Scheffel sold conventionally grown grain and falsely labeled it as organic. The grain sold between 2010 and 2017 was constant used primarily as feed for cattle and chickens to produce high quality meat and eggs marketed as organic.

Prosecutors said Constant used the proceeds of his fraud to travel to Las Vegas more than 20 times, where he stayed in luxury hotels, hired escorts and gambled. He died by suicide in 2019 after being sentenced to 11 years in prison.

Scams damage the credibility and integrity of the organic food industry, which is largely based on trust, and harm consumers and legitimate organic farmers, whose credibility is at stake.

“There are a lot of farmers who are working really hard to produce good organic food,” Mendenhall said.

The dumping of non-organic grains and other foods in the organic market is also depressing prices for these farmers, she said.

The USDA is stepping up its fraud prevention efforts

Alongside the temptation to make a lot more money on conventionally grown crops, there is the opportunity to cheat that arises from the booming and complex organic food industry.

The USDA says the rapid growth of this industry “has attracted many companies to the USDA organic seal and has increased the complexity of global organic supply chains.” It has also overwhelmed the organic food industry watchdogs.

“The complexity makes organic supply chains more difficult to monitor and enforce, as organic products are credibility commodities, meaning their organic attributes or ‘integrity’ cannot be easily verified by consumers or companies that use or sell organic products Buy resale,” the USDA said in its release of new rules last week. “The elements required to ensure organic integrity—transparent supply chains, trusted interactions between companies, and mechanisms to verify product legitimacy—are more difficult to achieve in the increasingly complex modern organic industry.”

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The USDA has accredited dozens of organizations that issue organic certifications. These include for-profit corporations, non-profit organizations, and government agencies.

Mendenhall of the Organic Farmers Association said the transition from conventional to organic farming typically takes three or four years. Once this is complete, an inspector from a certification body will usually visit the farm, check the fields and check invoices and receipts. But some inspections are stricter than others.

Wolf and Olson received their certifications from the Organic Crop Improvement Association, a certification company based in Lincoln, Nebraska.

The association revoked Wolf’s organic certification on June 2, 2020. Prosecutors allege Wolf continued to sell conventionally grown grains as organic using Olson’s certification, which was revoked just over a year later on August 9, 2021. The Organic Crop Improvement Association did not respond to requests for comment, but it is likely that it eventually notified the USDA of non-compliance at Wolf and Olson’s farms, and the USDA subsequently contacted federal law enforcement.

The USDA’s new organic regulations tighten certifications for grain imports sold as organic and require certifiers to do so conduct unannounced inspections for at least 5% of the facilities they certify annually.

Record keeping for organic farmers and their certifiers has also been improved and there is a new requirement for certifiers to develop fraud prevention plans and conduct ‘chain’ audits of farms deemed ‘high risk of fraud’.

The rule to strengthen organic enforcement is the biggest update to organic regulations in 30 years. The new rules come into effect on March 20, and those affected have one year to comply with the changes.

In its public comments on the new regulations, the Organic Farmers Association said they were a “long overdue first step toward the robust enforcement we need to protect the integrity of the organic label and the viability of organic farms that are growing.” rely on consumer confidence in this seal.”

Still, the association said: “There is still more to be done to prevent fraud in the organic sector.”

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After Wolf was charged with fraud last year, the FBI seized the farmer’s Corvette, a long list of farm equipment and more than $3 million in cash in multiple accounts.

But Wolf, who is awaiting trial, wanted to continue farming. His request for the temporary return of his farm equipment so he could harvest his crops last year was denied by the FBI, but an appeal was granted by a US District Court judge.

“The court system has let him farm until the case is decided. It’s fair that they do,” said Paul Engh, who is Wolf’s attorney.

Engh also said he wasn’t surprised by the federal prosecutor’s strong stance against Wolf and Olson.

“It’s a big case for them,” he said.

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