R-CALF USA Summary of Beef Checkoff Lawsuit

Summary of Beef Checkoff Lawsuit
Mike Callicrate v. USDA et al.

Prepared by R-CALF USA
Revised August 23, 2012

THE PARTIES:
Mike Callicrate is the only Plaintiff in the complaint.

Named Defendants in the complaint include:

U.S. Department of Agriculture
Agriculture Secretary Tom Vilsack
Cattlemen’s Beef Promotion and Research Board Beef
Promotion Operating Committee
Agricultural Marketing Service, USDA

A Third Party named in the complaint is the National Cattlemen’s Beef Association

THE COMPLAINT:
Mike Callicrate’s complaint alleges that Defendants violated the Beef Research and Information Act of 1985 (the “Act”), which prohibits any Beef Checkoff funds from being used in any manner for the purpose of influencing governmental action or policy. Specifically, the complaint alleges that Defendants’ gave the National Cattlemen’s Beef Association (NCBA) hundreds of millions of dollars in Beef Checkoff funds even though NCBA is a policy and lobbying organization and uses 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.

THE ARGUMENTS:

1. The NCBA unlawfully controls who receives Beef Checkoff Contracts.
1. The NCBA effectively controls the Beef Promotion Operating Committee (BPOC) that awards Beef Checkoff contracts because the NCBA appoints 10 of the 20 members of the BPOC and a majority of the remaining 10 members on the committee are also NCBA members.
2. The Beef Checkoff Program is unlawfully funding NCBA operations:
1. Approximately 65 percent of NCBA’s reported income is derived from Beef Checkoff funds.
2. In 2011, Beef Checkoff funds paid 71 percent of the NCBA CEO’s administrative time.
3. The contractor for Beef Checkoff funds was suppose to be a non-policy organization, as was the Beef Industry Council of the National Livestock and Meat Board prior to its 1996 merger with NCBA. USDA-AMS Checkoff Guidelines drafted in 2010 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 Beef Promotion Operating Committee (BPOC) may use the Beef Checkoff funds for the purpose of influencing governmental action or policy, and NCBA is doing so unlawfully.
3. The NCBA has used Beef Checkoff funds to unlawfully influence governmental action and policy.
1. A 2010 compliance audit that reviewed less than one percent of NCBA’s Beef Checkoff funds revealed that NCBA used Beef Checkoff funds to influence governmental action and policy. Improper use of Beef Checkoff funds include NCBA’s payment of expenses for:
1. participating in a Country of Origin Labeling meeting;
2. a senior NCBA staff member who charged all his or her time to the Beef Checkoff since 2009;
3. consulting fees that benefited NCBA;
4. NCBA employee participation in a membership revenue development meeting;
5. travel expenses for NCBA’s Spring Legislative Conference;
6. travel expenses for an NCBA Governance Task Force meeting; and vii. travel expenses for an NCBA employee’s spouse to travel to New Zealand.
2. NCBA returned over $216,000 to the Beef Checkoff fund to settle claims of unlawful expenditures.
1. However, if the ratio of misappropriated or misused funds hold true for the rest of the Beef Checkoff funds in NCBA’s control that were not subject to the very narrow compliance review, the amount misappropriated or misused by NCBA would be in the tens of millions, if not more.
3. A follow-up audit by the Cattlemen’s Beef Promotion and Research Board (CBB) identified an additional $39,000 in misappropriated Beef Checkoff funds, bringing the total known amount of Beef Checkoff funds that were misappropriated or misused by NCBA to at least $305,365.
4. The USDA Office of Inspector General (OIG) conducted an audit and found that Defendants failed to properly oversee Beef Checkoff contracts as required by law, including their failure to confirm that none of the Beef Checkoff funds were used for lobbying.
5. 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 governmental action and policy.
4. The NCBA failed to keep financial transaction records as required by the Act.
1. The 2010 compliance audit identified numerous instances where NCBA failed to maintain adequate records of its financial transactions involving Beef Checkoff funds.
5. USDA and other Defendants failed their responsibility to suspend NCBA as a Beef Checkoff contractor following NCBA’s known violations of the Act.
1. 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 governmental action and policy.
6. The U.S. cattle industry has suffered due to NCBA’s abuse of the Beef Checkoff.
1. Despite U.S. cattle producers’ mandatory contributions of more than $1.6 billion to the beef checkoff during the past 25 years, U.S. cattle producers have:
1. lost market share;
2. downsized the U.S. cattle herd;
3. suffered from a drastically reduced producer’s share of the retail beef dollar; and
4. Nearly 500,000 beef cattle operations have gone out of business, including 35,000 cattle feeders, since 1996.

RELIEF REQUESTED:

Mike Callicrate is not seeking monetary damages in his complaint. He is requesting the Court to enter an Order to:

1. Immediately and permanently suspend any contracts between NCBA and Defendants.
2. Permanently enjoin 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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