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Grand Jury Probing Cotton Subsidies, Newspaper Reports

December 19, 1995

MEMPHIS, Tenn. (AP) _ Possible abuses of a taxpayer-funded cotton subsidy program are being investigated by a federal grand jury, The Commercial Appeal reported Tuesday.

The grand jury’s work comes a month after federal agents raided offices of the world’s two largest cotton merchandising firms, Allenberg Cotton Co. and Dunavant Enterprises Inc. in Memphis.

The raids were conducted by agents of the U.S. Department of Agriculture and the Internal Revenue Service, who followed with a raid at the Yazoo City, Miss., home of cotton trader Perry Galloway.

The Commercial Appeal reported that the cotton concerns involved in the investigation include those that signed contracts with the USDA to participate in a multimillion-dollar federal subsidy program for exports.

Federal authorities have declined to discuss the probe.

On Monday, Assistant U.S. Attorney Dan Newsom accompanied Dunavant Enterprises general counsel William H. Stubblefield to the grand jury proceedings with Memphis lawyer Jim Raines.

Neither Stubblefield nor Raines would talk about what was discussed. Grand jury proceedings are secret.

Document boxes labeled ``W.G. Ripley″ and ``Suncot″ were carted into the grand jury room, The Commercial Appeal reported. They had red evidence stickers attached when they were removed later.

The contents of those boxes as well as the subjects discussed during the proceedings were not disclosed.

Galloway told the newspaper in a separate interview that he had been a business associate of Bill Ripley and Ripley’s Lubbock, Texas-based cotton firms, W.G. Ripley Inc. and Suncot.

Neither Ripley nor his wife and business partner, Ruth Ripley, answered phone calls seeking comment.

Galloway said boxes of documents were taken from his home during a Nov. 17 raid. While he doesn’t know the focus of the cotton probe, he told The Commercial Appeal, ``I’ve got to be some kind of target.″

The Department of Justice has confirmed that the investigation concerns the Upland Cotton Domestic User-Exporter Program, known in the cotton trade as ``Step 2.″ The program was begun in the mid-1980s to promote the export and use of U.S.-grown cotton.

A 1994 internal audit by the USDA’s inspector general found the ``Step 2″ program was abused by several businesses. Those firms were not identified.

A separate report in June by the U.S. General Accounting Office concluded the $3 billion put into cotton export programs had been largely wasted.

The ``Step 2″ program was targeted for cuts during debates over the 1995 Farm Bill, but ultimately the $700 million program was protected for the next seven years.

The House Agriculture Committee has assigned a full-time investigator on the subject and scheduled hearings for next year.

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