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How Rancho’s insider scheme cost others millions of dollars

And left a famous rancher caught in the cross fire

While the owners of the Petaluma slaughter house were running a scheme to collect a few hundred dollars at a time from area ranchers by harvesting an occasional condemned cow and pocketing the money, the same facility was also being used by BN Ranch on its mission to create “the best-tasting, most wholesome humanely raised meat in the world.”

cowongrass_406x250BN Ranch is the latest project of Bill Niman of Niman Ranch fame. He left there in 2007, after setting bar high for raising grass-fed beef without antibiotics or growth hormones.   Niman got caught in the proverbial crossfire between Rancho and USDA because he’s done business with the Petaluma slaughterhouse for about 30 years.

But he was not just selling cattle to a slaughterhouse,  he was harvesting his own animals and taking the speciality meat with him.

As the criminal defendants are now moving through sentencing, some court documents filed recently show how costly Rancho Feeding Corp’s recall was for the grass-fed cattle ranchers who used the slaughter facilities  and how hard and long they worked against it.

But USDA’s Food Safety and Inspection Service (FSIS) was not only un-moved, it was prepared to take harsher action. William Smith, who headed the investigation, said had Rancho not immediately agreed to a voluntary recall, as originally announced on Feb. 8, 2014, USDA was prepared to detain and seize the products.

Rancho owners and two of its employees were at that time being investigated for processing cows that were condemned by USDA inspectors, mostly for eye cancers; and pocketing the money.

The recall, mostly for beef and veal, involved about 8.7 million pounds of meat produced at the Petaluma slaughterhouse in 2013 and the first month of 2014.

Niman and other ranchers were caught in-between. With the recall underway, Niman on Feb. 19, 2014 explained in detail to FSIS how the 427 head of BN Ranch cattle that were slaughtered at the Petaluma facility were never co-mingled with other cable and how USDA inspectors were on hand at all times to work with BN Ranch personnel who supervise the “Tuesday kills.”

Try as he might, however, Niman could not persuade USDA to carve BN Ranch’s production out of the “blanket” recall. “Unfortunately, this includes ours, along with several other local ranchers and meat companies, “ Niman told BN Ranch customers.

RanchoRancho_406x250BN Ranch—a network of “like-minded” ranches—used the Rancho Feeding Corp. slaughter house once a week or so because it allowed Niman “full transparency.” BN Ranch personnel were able to oversee the process “from live animal to carcass.”

Trying to move USDA to his view of the situation, Niman wrote: “We are very hopeful that you will find our safeguards and proactive involvement at so many critical control points more than adequate to exempt BN Ranch Beef from this recall situation.”

For at least 3 months after the recall, Niman kept the beef not already shipped to customers in cold storage in Richmond, CA. When USDA did not budge, he suggested another possibility.

Niman sent a May 23, 2014 email to Dr. Dan Engeljohn, who heads the powerful Office of Policy and Program Development (OPPD) at USDA’s Food Safety and inspection Service (FSIS).

“We were just informed by one of the USDA/FSIS veterinarians  that we could give our beef that was subject to the recall away as long we didn’t take money for it,” Niman wrote.

Engeljohn said he was sorry to inform Niman that he was misguided by the Vet.

“All product impacted by the recall is considered unwholesome and unfit for human consumption due to the product being produced without the full benefit of inspection. Thus, your product cannot be donated for human consumption regardless of whether you accept payment or not,” Engeljohn responded.

The exchange of emails ended with Engeljohn advising Niman “to properly dispose of the product so it does not inadvertently get into the human food chain.” Niman said BN Ranch was unwilling to destroy the recalled product until the investigation was over.

Only about 20 percent of BN Ranch production remained at the time of the recall and no illnesses were ever associated with its beef that was consumed. “We consider it immoral to kill healthy animals then take so much to their meat to the dump,” Niman wrote Engeljohn.

BN Ranch and others caught in the collapse of Rancho Feeding Corp. were ultimately left with two options: suing for damages in state court or waiting for restitution in the federal criminal case. Full disclosure of the costly recall is not possible because state and federal courts have allowed some documents to be sealed to protect proprietary business information.

But enough is known to paint the big picture. Rancho owner Jesse J. Amaral was free for almost a year before being sentenced, largely to allow him to settle claims that were made against he and Rancho Feeding Corp.

Ranchocow_406x250When he was sentenced on Feb. 10, to one year and one day in federal prison, plus two years of supervised release including one year in a residential re-entry program, the amount of restitution imposed was just $1,484.

The modest amount for restitution suggests that U.S. District Judge Charles R. Breyer is satisfied with the settlements Amaral has reached mostly in state courts with the parties making claims.

The amounts sought have not been small.

Irwin Miller, president of Vernon, CA-based RBR Meat Company Inc. filed a declaration claiming direct losses of $27,372,641.

A Rancho Feeding Corp. customer since the early 1990s, RBR is a cow boneing operation. It mainly sells meat mostly to companies that grind hamburger.

BN Ranch out-of-pocket costs totaled $726,385.17; including $306,163.27 for that beef it held in cold storage. It was all destroyed under USDA supervision on Aug. 1, 2014.  Like others, Niman filed an estimate for future business losses and damages due to public perception. He puts these intangible injuries at $5.5 million.

In a filing on the “impact of our business and personal lives,” Niman says being included in the Rancho recall has cost each of the BN Ranch partners thousands of dollars and it will now “be difficult to manage and survive.” He says the wealth of the defendants should be “redistributed to those of us damaged by their actions.”

In an interview with prosecutors, a risk manager for Advance Pierre Foods claimed a lost of $584,921.99. Other claims in state court that might have been settled involved Custom Foods LLC, and S&S Food LLC.

Three other defendants in the Rancho criminal case will be sentenced in March, including co-owner Robert Singleton and employees Eugene D. Corda and Felix Cabrera. Each has plead guilty distribution of adulterated beef.

The scheme cheated local farmers and ranchers out of the value of the condemned cows, estimated at $16,677.14.

 

 

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