Fraud Alleged Over Organic Corn Sale

Date Posted: November 15, 2011

A Springfield, OR man is charged with adding $193,169 to his profits by misrepresenting 75,000 bu. conventional corn as certified organic

Eugene, OR (Nov.15/Register-Guard) -- A rural Springfield, Oregon man faces a federal wire fraud charge for allegedly selling Grain Millers more than 4.2 million pounds of conventional corn falsely labeled as organic.

Harold Allen Chase reaped an additional profit of nearly $200,000 by passing off the grain as organic, the government charged in documents filed this month in Eugene’s U.S. District Court.

Chase has not yet appeared in court to enter a plea, although U.S. District Judge Ann Aiken has set an arraignment and change of plea hearing for Dec. 6.

Such combined hearings typically are scheduled when the government and the defendant already have negotiated a plea deal. Wire fraud is a felony punishable by up to 20 years in prison.

Chase declined comment on Monday.

His alleged fraud came to light after Grain Millers found “inconsistencies” while auditing the corn to verify that it complied with the U.S. Department of Agriculture’s National Organic Program regulations, said Keith Horton, vice president of milling for the Eugene company.

“We have to have a good paper trail for organics,” he explained.

Horton said Grain Millers did not actually process the 2,253 tons of corn it bought from Chase.

“We have a commodities division that just buys and trades grain,” he said. “We would buy from a farmer and resell to different milling companies and seed companies.”

In this case, Grain Millers sold the corn as organic feed for livestock to customers that included CHS Nutrition Inc. of Harrisburg and Danish Dairy in Coquille.

“It definitely was not sold for (direct) human consumption,” Horton said. Under Grain Millers’ sales agreement with Chase, he delivered the corn directly to those customers, who already had it by the time Grain Millers discovered and reported to the USDA discrepancies in Chase’s reported certifications and volumes, Horton said.

The government charges that Chase was acting as a grain broker when he conducted the elaborate scheme between November 2009 and May 2010, according to court documents. He first used several aliases — including Allen Rein, Stewart Lamb and Thomas Wyheart, to buy approximately 2,253 tons of conventional corn from four grain suppliers based in Idaho and Eastern Washington.

“To trick Grain Millers into believing that the conventional corn was organic,” the government complaint charges that Chase then faxed the Eugene company paperwork falsely representing that he had purchased the corn from a USDA-certified organic grower in Milton Freewater.

Chase further tried to conceal the true source of the corn by having it delivered to “transloading sites” in Washington, where it was placed in different trucks for delivery to the end buyers, the complaint says. Chase personally supervised the transloading, which is not common practice because it’s cheaper to have the same truck pick up and deliver the corn, the complaint alleges.

Grain Millers paid Chase $217 a ton for the corn because he’d falsely labeled it as organic, court documents charge. Conventional corn was then selling for $123.50 a ton — meaning Chase wrongfully earned $193,169 in the transaction, the government alleges.

USDA-certified organic foods are grown without synthetic pesticides, insecticides, herbicides, fungicides, hormones, fertilizers or other “synthetic or toxic substances.”

Oregon Secretary of State’s Office business records show that from 1984 until earlier this year, Chase operated Blue Star Farms on M.J. Chase Road, along the Walterville Canal off Camp Creek Road. The company was dissolved administratively in July 2011, according to state records.

Information posted on www.localharvest.org in 2007 said the company grew and sold “gourmet organic produce” to local organic distributors. It listed the Lane County Farmers’ Market in Eugene as a location for purchase of its daikon, onions, parsnips, radishes and sun chokes. It also stated that all the company’s fields were certified organic by Oregon Tilth.

A spokeswoman for Oregon Tilth said the farm has not been certified by the nonprofit organic certification group since 2009. Blue Star Farms was not among participants in the 2011 Lane County Farmers’ Market, according to a representative of that group.

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