Lawsuits challenge checkoff spending
Complaints say research money funneled to lobbying
By MATEUSZ PERKOWSKI
Two federal checkoff programs aimed at raising money for promoting meat have recently come under fire for allegedly misusing livestock producers' dollars.
Unlike prominent lawsuits against checkoff programs in the past, the recent cases don't seek to overturn the fundraising efforts -- instead, the complaints challenge how the money is spent.
The complaints accuse the National Pork Board and the Cattlemen's Beef Board, which administer checkoff funds, of unlawfully shifting funds intended for research and promotions into prohibited lobbying activities.
In both cases, the plaintiffs want federal courts to stop checkoff money from flowing to livestock industry groups devoted to influencing government policies.
Previous litigation has challenged the constitutionality of federal checkoff programs, said Elizabeth Rumley, staff attorney at the National Agricultural Law Center at the University of Arkansas.
The U.S. Supreme Court has resolved those questions and allowed the programs to continue, but the recent lawsuits against checkoff programs raise issues that appear unexplored in federal courts, she said.
A lawsuit filed by the Humane Society of the United States alleges that the National Pork Board unnecessarily spent $60 million on an advertising slogan, "Pork, The Other White Meat."
By purchasing the trademark from the National Pork Producers Council lobbying group, the board effectively turned the money over for "use in programs intended to influence legislation and government policy," the complaint said.
Chris Novak, CEO of the National Pork Board, said he's confident the court will find the sale to be valid, not a sham transaction aimed at shifting money into lobbying.
"Anyone can make that allegation. That doesn't make the allegation true," he said.
According to the complaint, NPPC registered itself as the trademark's owner even though the idea was voluntarily developed by an advertising agency hoping to win a contract with the newly created checkoff program in 1986.
Despite having spent $500 million promoting the slogan, the National Pork board wasn't credited with any "equity derived from its two decades of producer-funded promotion," the complaint said.
The value of the trademark was determined to be $35 million, but since NPPC agreed to finance the deal over 20 years, the total cost would come to $60 million.
The 2006 acquisition was justified as a long-term investment, but the board discontinued its use in advertising after just five years, the complaint said. The lawsuit asks a federal court to order the board to stop payments for the slogan and to recover money already turned over to NPPC.
Novak of the National Pork Board counters that the slogan's creation predates the checkoff program and it legitimately belonged to the NPPC.
"That is their intellectual property," he said.
Ordinarily, accusations of a sham transaction wouldn't be enough to invalidate a contract between two willing parties, but this case is more complicated because it involves the government and checkoff dollars, said Rumley.
The lawsuit against the Cattlemen's Beef Board takes a different approach, though the basis for the complaint is also that checkoff dollars have been misused for lobbying.
Michael Callicrate, the plaintiff and a rancher in Colorado, claims the checkoff program is effectively dominated by the National Cattlemen's Beef Association, a trade group that derives most of its funding from the program.
People in positions of power at the NCBA also steer the activities of the Cattlemen's Beef Board, which allows the group to direct checkoff funds to itself for use in lobbying, the complaint said.
The lawsuit says these assertions are backed up by an independent audit and requests that a federal court permanently sever all contracts between the board and NCBA.
Callicrate's lawsuit also seems to be treading on untested ground in agricultural law, said Rumley. "They're going to have to prove there was mismanagement of money."
The Cattlemen's Beef Board would not comment on pending litigation.
Kendal Frazier, executive vice president of the NCBA, said the lawsuit is without merit and was filed at the behest of the HSUS and the Organization for Competitive Markets, a group of which Callicrate is the incoming president.
An audit of NCBA in 2010 did not find that the group misappropriated checkoff funds for lobbying, though it did uncover some incorrect procedures, said Frazier. "All of those have now been corrected, and we think that audit is now old news."