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Thursday, Feb. 6, 2014 12:01 am

Flawed farm law

Divernon farmers pay millions

Dowson Farms paid more than $5.3 million to the government to end a federal investigation, but admitted no liability or wrongdoing.
Photo BY METRO CrEAtIVE CONNECtiON

 

The U.S. attorney’s office in Springfield last week announced a deal reached more than a month earlier to settle allegations that one of the state’s biggest farming operations collected millions of dollars in undeserved farm subsidies.

Dowson Farms of Divernon, the government alleges, created a series of partnerships involving straw men that wrongly received government checks. The family on Dec. 20 agreed to pay more than $5.3 million to end the U.S. attorney’s probe. The government got the second of two payments a few days before the Jan. 31 deadline.

The Dowsons in a press release protested that they hadn’t done anything wrong.

“It was time to bring this governmental invasion to an end,” John Dowson, a company owner, said in the release. “We did all that we could to ensure that we complied with the complex rules and regulations with every program we participated in, but the federal government has unlimited resources and we simply decided to bring a final conclusion to this so that we can focus on farming for our landlords, employees and business partners.”

Part of the case centered on a long problematic clause in farm-subsidy legislation that says individuals and entities must be “actively engaged in farming” to collect subsidies. The government says that the Dowsons had falsely claimed that partnerships that collected subsidies were actively engaged in farming independently of Dowson Farms, which was subject to caps on subsidy payments.

The Dowsons, however, say that they told the United States Department of Agriculture about the partnership structure before government money flowed. Federal approval prior to the U.S. attorney’s involvement was critical in the case, according to one of the family’s lawyers.

“In my opinion, it was one of the most important facts, that my clients did everything they could to be in compliance,” says Rodger Heaton, a former U.S. attorney himself who represented the Dowsons.

Federal regulators quoted in a 2007 State Journal-Register story that raised questions about the Dowsons’ penchant for subsidies said that the family was playing by the rules.

“I’ve sat with John (Dowson) and talked with him about payment limits before,” Steve Hendrix, a USDA farm specialist whose office determined eligibility for subsidies, told the newspaper in 2007. “There’s not a thing wrong with him.”

Farm subsidy legislation isn’t for beginners.

“I think the law had many aspects that were very complex and very difficult to understand and, in my judgment, certainly some that were not clear,” Heaton says.

The General Accountability Office agrees.

Twice since 2004, the GAO has reported that vagaries in the statute invite abuse, waste and fraud. In addition, the GAO in 2007 found that the USDA during a six-year period had paid $1.1 billion in subsidies and crop insurance payouts to dead people, and the GAO repeated concerns last June, finding that nearly 1,800 dead people had received $3.3 million in benefits from the USDA in 2011 and 2012.

Farmers who are alive don’t have to pull weeds or drive tractors or otherwise work to collect subsidies. Rather, the USDA gives subsidies to people for providing “active personal management” to a farming operation, which creates an incentive for farms to create managers, each of whom is subject to payment limits. There is no bright-line test for determining what constitutes “active personal management,” according to the USDA, and so the farm subsidy system is crowded with recipients whose claims to government money are rooted in a standard that the USDA acknowledges is squishy.

“We recognize the difficulty in determining the significance of a management contribution under the current definition and the appeal of a measurable, quantifiable standard,” USDA officials wrote in response to demands for tighter eligibility standards when the farm bill was renewed in 2008. “However, unlike labor, the significance of a management contribution is not appropriately measured by the amount of time a person spends doing the claimed contribution.”

In order to get around payment limits, farms can, either in real life or on paper, divvy up management responsibilities so that one person is responsible for acquiring labor, another is in charge of securing land, another does marketing, someone else keeps financial records and so forth, with each manager eligible for a government check.

The GAO last fall illustrated the possibilities using the example of a Midwest farm that cultivated 25,000 acres in 2012 and received $400,000 in government payments. The farm’s management structure included a half-dozen corporations and 11 family members ranging in age from 18 to 88, each of whom received subsidies. The eldest recipient and the youngest both lived in Florida and received government money based on claims that they had provided “active personal management,” according to the GAO, which reported that the 18-year-old had first received a farm subsidy check in 2010.

In Divernon, population 1,100, corporations, limited partnerships and other entities have helped boost the number of farm subsidy recipients to at least 110 since 1995. That includes more than a dozen individuals and entities with connections to Dowson Farms that collected more than $7.1 million in subsidies between 2002 and 2008, when the U.S. attorney says that Dowson Farms engineered a management structure to circumvent payment limits. Sharon Paul, spokeswoman for the U.S. attorney’s office, said that she had no information on how the $5.3 million penalty was calculated.

One thing, at least, is clear: The Dowsons have managed to make a living without government checks.

Since 2008, entities and individuals associated with Dowson Farms that averaged more than $1 million a year in subsidies before the U.S. attorney stepped in have collected less than $20,400 in crop subsidies, according to a database maintained by the Environmental Working Group, an interest group based in Washington, D.C., that says farm subsidies are too generous.

“The Dowsons voluntarily decided not to participate in the farm program anymore after 2008,” Heaton writes in an email. “They were never asked or told by the USDA…that any of the individuals or entities involved could not participate in the program.”

On the same day the U.S. attorney’s office in Springfield announced the deal with the Dowsons, the House in Washington, D.C. approved a farm bill without fixing vague language about management that the GAO says has led to abuse.

Contact Bruce Rushton at brushton@illinoistimes.com.

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