Townsley pleads guilty to mail fraud, could face up to 20 years in prison
By MATEUSZ PERKOWSKI
A fertilizer supplier has admitted to selling $6 million worth of fake organic fertilizer to farmers over six years.
Peter Townsley, 50, has pleaded guilty to two counts of mail fraud in a federal court in San Francisco.
He faces up to 20 years in prison, three years probation and a $250,000 fine at his sentencing, which is scheduled for June 13.
According to a federal indictment, Townsley obtained approval from the Organic Materials Review Institute, a non-profit that reviews organic products, to market his "Biolizer XN" fertilizer as an organic product in 1999.
His company, California Liquid Fertilizer of Gonzales, Calif., submitted information claiming the product was made of fish, fish byproducts, feathermeal and water, the indictment said.
Without informing OMRI, Townsley changed the product's formulation in 2000, substituting the ingredients with the chemicals ammonium chloride and ammonium sulfate, which are sources of nitrogen, the indictment said.
Townsley was charged with mail fraud in 2010 because he repeatedly sent forms to OMRI claiming that the formulation for Biolizer XN had not changed, as well as invoices to customers claiming the product was organic.
Peggy Miars, executive director of OMRI, said the episode threatened to undermine public confidence in the organic label, but has since resulted in several improvements in the oversight of organic products.
"Initially, it was a black eye for organic," she said. "In the long run, we've all learned from it. We're better off than we were a few years ago before this incident."
The USDA's National Organic Program now requires annual inspections of companies manufacturing organic fertilizer with more than 3 percent nitrogen content.
OMRI now also conducts unannounced inspections of fertilizer plants, and repeats the review process for organic products every five years, she said.
Previously, reviews were conducted when it was feasible, Miars said. "We've really made that a priority."
The case has changed the mentality of the overall organic industry, which has increasingly recognized that people seek organic labeling for monetary as well as philosophical reasons, she said.
The prosecution of Townsley has demonstrated to organic product manufacturers and dealers that rule breakers face real punishment, Miars said. "They know that they're being watched."
Mark Kastel, co-founder of the Cornucopia Institute organic watchdog group, said the organic industry is generally effective at self-policing.
Suppliers, customers, competitors and ancillary businesses are aware of irregularities -- such as an unusually low price for an organic product -- which means such problems tend to rise to the surface, he said.
"It's really hard to flagrantly cheat and not have anyone know about it," Kastel said.
Enforcement of organic standards should be strict to discourage people from unscrupulous practices in organic labeling, he said.
"The penalties should be quite severe so people who think about it would think twice."