Wednesday, June 14, 2006

National Pork Board to purchase "Other White Meat" brand rights for $60 million; USDA keeps financial details secret

In a deal that is scheduled to take effect July 1, the federal government's National Pork Board plans to purchase rights to the "Other White Meat" brand from the National Pork Producers Council, a private trade association, for $60 million.

The deal will not help pork producers improve demand for their product, because the Pork Board already uses the "Other White Meat" slogan in well-known national advertising campaigns.

Instead, the sale will circumvent federal restrictions on how the National Pork Board may use money that it collects in taxes or mandatory assessments on pork producers and importers. The sale will funnel $3 million each year for 20 years to the National Pork Producers Council, a private industry association whose heavy influence over the federal government's Pork Board has long been controversial. The Council, in turn, can spend the $60 million without federal government oversight.

The general description of the sale was provided in a press release from the National Pork Board in March, and the latest news was reported by Brownfield Ag News on Friday.

The National Pork Board was established by Congress in 1985, and the Board members are appointed by the Secretary of Agriculture. As with other "checkoff" promotion programs, the federal government enforces the collection of the mandatory assessments, amounting in the case of pork to more than $60 million per year. Some pork farmers oppose these industry schemes (see here and here), but even a successful referendum to end the program was overturned through the influence of the Council.

Government and industry officials sometimes describe the Board as a producer self-help organization, but its role as a government program was finally settled by the Supreme Court in a May, 2005, ruling on the related beef "checkoff" program. In this case, the federal government argued -- and the Supreme Court agreed -- that such government sponsored advertising campaigns for dairy, beef, and pork are "government speech" and farmers must pay the mandatory assessments as they would any government tax.

The National Pork Producers Council is a private trade association that gets paid as a subcontractor to the National Pork Board. A USDA Inspector General report (.pdf) in 1999 explained:
Our evaluation did not disclose material misuse or loss of checkoff funds, but it did find the Board has relinquished too much authority to its primary contractor, the National Pork Producers Council (NPPC), and has placed the NPPC in a position to exert undue influence over Board budgets and grant proposals. The Board has awarded all program grants to the NPPC since 1996. The Board itself has not hired sufficient staff to administer and provide adequate oversight of the checkoff program. The Board employs only two persons (an Executive Vice President and an assistant), to oversee $60 million in annual checkoff collections, distribution, and use. The Board's degree of dependence on the NPPC to administer subcontracts and carry out much of the Board's work resulted in a weakened accountability over contributed funds.
In response to the Inspector General's report and related litigation, USDA began to insist (.pdf) that the Board's operations be strengthened and that contracting relationships between the Pork Board and the National Pork Producers Council have an "arm's length character." For example, the Pork Board staff moved out of the National Pork Producers Council's office to a nearby location leased from the Council.

It is not clear whether the new proposed sale of the "Other White Meat" brand has an "arm's length" character. The press release from the National Pork Board claims that the $60 million sale price is based on unspecified "appraisals." The press release argues that this price reflects the cost of replacing the "Other White Meat" brand, should the Pork Board choose to develop a new brand instead.

That reasoning is questionable, however, because much of the intangible equity in the "Other White Meat" brand comes from the investment of millions of dollars per year in advertising funded by the Pork Board, not by the National Pork Producers Council. The Council has nobody else to whom it could sell the brand, so it is hard to imagine there are any competitors bidding up the price of the brand. Until the documents are made public, one has to suspect these "appraisals" are just window dressing for an insider deal to benefit the National Pork Producers Council.

Clearly, it is important for the public to see these appraisals before the deal is completed. Otherwise, the miscarriage of the public interest will be apparent only after it is too late to reverse the decision.

Unfortunately, in response to repeated inquiries of both program and public information staff at the Agricultural Marketing Service at USDA, nobody would answer my questions or provide the appraisals. Consequently, I filed a Freedom of Information Act request in April, requesting these documents.

The response I received today is clever. It says USDA has found 12 pages of documents that are responsive to my request for information, but 10 of those pages are being withheld from the public for now because they are "pre-decisional" or "deliberative." These will be shared with the public as soon as USDA finalizes the deal -- when the information will be too late to do any good.

What were the 2 pages that USDA did share with me? A photocopy of the National Pork Board's press release from March!

In the never-ending struggle between those who would share information needed for sound public policy, and those who would hide it, I feel that I have been beaten by a real talent.

Perhaps a sharper reporter will pick up this story before the USDA approval is finalized.

No comments: