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Changes Proposed in Farm Debt Rules

May 18, 1998

FARGO, N.D. (AP) _ Federal regulators are demanding new rules that could force state agriculture mediation services to change the way they work with financially strapped farmers.

The federal Office of Inspector General, prompted by suspicions of misused money in some states, is ordering the Agriculture Department to adopt stricter rules on using federal funds for mediation services.

North Dakota Agriculture Commissioner Roger Johnson and Tim Kingstad, who administers the state’s Agriculture Mediation Service, said the proposed changes could hamper the effectiveness of North Dakota’s program.

``I think when this is all said and done, we’ll be forced to make some fairly big changes in how we operate,″ Johnson said. ``You’re likely to see probably fewer activities provided to farmers.″

``It simply makes no sense to us that they would impose this,″ Kingstad added. ``Especially given how well our mediation has worked.″

North Dakota’s mediation service was created 13 years ago to help farmers avoid foreclosure. Advisers help them restructure their debts and improve operations with the goal of allowing them to remain on the land.

In 1987, Congress began providing federal money to state mediation services, but it said each state could develop its own service and decide what programs it would provide.

Many states, including North Dakota, use a lot of the federal money to help pay for special negotiators who work one-on-one with farmers to get their financial statements in order before any formal mediation hearing.

But about five years ago, allegations arose in Texas that negotiators there were applying improper influence on lenders to relieve or restructure loans.

``They had some allegations that certainly needed to be investigated,″ Kingstad said. ``But no indictments ever resulted. The inspector general looked at other states, too, and found nothing that even suggested there was anything improper.″

Still, he said, the inspector general has decided the use of federal money in mediation programs should be very limited and should not pay for negotiators. The inspector general has told USDA to adopt such a policy.

``The extreme position that the inspector general has taken is: `We don’t think the government should be paying for a negotiator to assist the farmers in this process,‴ Kingstad said. ``The inspector general is basically saying that when the federal government is paying for the mediation, they should simply be paying to have someone schedule a meeting and preside over that meeting.″

Johnson, who was the state’s mediation administrator before he was elected agriculture commissioner, said the negotiators hired to help farmers are an integral part of the mediation service in North Dakota.

``Every state thinks that their program is the best. I certainly think ours is,″ he said. ``And one reason is we have (negotiators) who take the time to put together good, solid information before we ever sit down at the mediation table.″

Kingstad said the negotiators often are able to resolve credit issues early, without the need of a mediation session with lenders.

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