Friday, December 14, 2007

Nation’s Largest Retailers Accused of Organic Fraud

In a scandal now ensnaring
some of the nations leading retailers, a series of lawsuits have been
filed accusing Wal-Mart, Costco, Target, Safeway, and Wild Oats of
consumer fraud for marketing suspect organic milk.

The legal filings in federal courts in Seattle, Denver, and in
Minneapolis, against the retailers, come on the heels of class action
lawsuits against Aurora Dairy Corporation, based in Boulder,
Colorado. The suits against Aurora and the grocery chains allege
consumer fraud, negligence, and unjust enrichment concerning the sale
of organic milk. This past April, Aurora officials received a notice
from the USDA detailing multiple and “willful” violations of federal
organic law that were found by federal investigators.

“This is the largest scandal in the history of the organic industry,”
said Mark Kastel of The Cornucopia Institute, a Wisconsin-based farm
policy research group. Cornucopia’s own investigation and formal
legal complaint, in 2005, first alerted USDA investigators to the
improprieties occurring at Aurora. “Aurora was taking advantage of
the consumer’s good will in the marketplace toward organics, and the
USDA has allowed this scofflaw-corporation to continue to operate,”
Kastel added.

Law firms based in Seattle, St. Louis, and New York, in addition to
other cities, have filed at least eight lawsuits against Aurora,
representing plaintiffs in over 30 states. Five lawsuits against the
retailers have been filed so far.

Attorneys are seeking damages to reimburse consumers harmed by the
company’s actions. Some of the lawsuits request that the U.S.
District Courts put an injunction in place to halt the ongoing sale
of Aurora’s organic milk in the nation’s grocery stores until it can
be demonstrated that the company is complying with federal organic

Aurora, with $100 million in annual sales, provides milk that is sold
as organic and packaged as private label, store-brand products for
many of the nation’s biggest chains. In addition to Wal-Mart,
Target, Costco, Safeway, and Wild Oats, Aurora serves as supplier to
15 other national and regional chains.

Independent investigators at the USDA concluded earlier this year
that Aurora—with five dairy facilities in Colorado and Texas, each
milking thousands of cows—had 14 “willful” violations of federal
organic regulations. One of the most egregious of the findings was
that from December 5, 2003, to April 16, 2007, the Aurora Dairy
“labeled and represented milk as organically produced, when such milk
was not produced and handled in accordance with the National Organic
Program regulations.”

Cornucopia's own research, since confirmed by the two-year
investigation by federal law enforcement agents, found that Aurora
was confining their cows to pens and sheds in feedlots rather than
grazing the animals as the federal law requires. Furthermore, Aurora
brought conventional animals into their organic milking operation in
a manner prohibited by the Organic Food Production Act, a law passed
by Congress in 1990 and implemented in 2002 by the USDA.

The stores sell Aurora's milk under their own in-house brand names,
such as Costco's Kirkland and Target's Archer Farms, in cartons
marked "USDA organic," typically with pictures of pastures or other
bucolic scenes.

"That's not even close to the reality of where this milk was coming
from," said Steve Berman, a Seattle lawyer whose firm is among those
suing. "These cows are all penned in factory-confinement conditions."

“This is the perfect example of modern-day Agri-business bullies
literally stealing the milk money from an unsuspecting public,” said
Washington state consumer Rachael Doyle. "We have been willfully
deceived by corporations motivated solely by greed.”

Cornucopia points out that Aurora is a "horrible aberration," and
that the vast majority of all organic dairy products are produced
with high integrity. In a scorecard published last year, and
available on their web site, Cornucopia rates over 90% of organic
name-brand dairy products as truly subscribing to the letter and
spirit of the law (available at

“Aurora’s actions have injured the reputation of the more than 1500
legitimate organic dairy farmers who are faithfully following federal
organic rules and regulations,” noted Kastel. “We cannot allow these
families to be placed at a competitive disadvantage.”

Mark Pepperzak, Aurora CEO, said, "The allegations in this smear
campaign against AOD are based on false information and, therefore,
completely unfounded." The company has said that their business has
yet to be affected by the high-profile controversy. However, some of
Aurora's largest customers have now switched to alternative suppliers.

"We have learned that Wild Oats and the Publix supermarket chain in
Florida are no longer buying milk from Aurora,” stated Kastel. "In
addition, the nation's largest distributor of natural and organic
products, United Natural Foods, Inc. (UNFI) has also secured an
alternative source for their Woodstock Farms brand." Kastel also
said that although he was unable to publicly disclose the names of
retailers at this point in time, a number of others have contacted
Cornucopia for their listing of six other private-label organic milk

Many industry observers feel that the USDA’s enforcement mechanism
broke down in the Aurora case. After career USDA staff drafted a
Letter of Proposed Revocation, seeking to prevent Aurora from
engaging in organic commerce, political appointees at the agency
intervened, crafting an agreement allowing the politically connected
company to remain in business.

"It is unconscionable that the USDA allowed Aurora to continue, after
making millions of dollars, in this ‘ethics-based’ industry, when
they had concluded that Aurora willfully violated the law," Kastel
added. "However, there is a higher authority in terms of organic
integrity than the USDA—that's the organic consumer. And they are
about to make their voices heard through the courts."

“I feel cheated by Aurora’s organic misrepresentations,” said Sandie
Regan, an organic consumer from Crown Point, Indiana, and one of the
parties to the lawsuits. “I am willing to pay more at the grocery
store for organic milk because I believe the milk is healthier for
me. But it doesn’t look like I was getting what I paid for,” Regan

"Although the USDA did not strip Aurora of their right to engage in
organic commerce, between the consumer fraud lawsuits, and the exodus
of a growing number of their customers, it looks like consumers and
retailers might strip them of their ability to continue in the
marketplace," Kastel observed. "

Copies of the lawsuits are available upon request. A photo gallery
of the Aurora factory-farm operation can be viewed at the Cornucopia
web page at

The Cornucopia Institute, a nonprofit farm policy research group, is
dedicated to the fight for economic justice for the family-scale
farming community. Their Organic Integrity Project acts as a
corporate and governmental watchdog assuring that no compromises to
the credibility of organic farming methods and the food it produces
are made in the pursuit of profit.

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