USDA Gets Tough With School Milk Bid-Riggers
Aug. 17, 1993
WASHINGTON (AP) _ Dozens of dairies that have cheated school districts by overcharging for milk face possible suspensions from school food programs.
The Agriculture Department said Monday it had notified two companies they would be banned from the federally subsidized school milk program for three years unless they took steps to protect against future abuses. Federal official say similar action could be taken against other dairies.
Dairy Fresh Inc. of Greensboro, Ala., and Coble Dairy Products Cooperative Inc. of Lexington, N.C., said they would contest the proposed bans. They have 30 days to respond.
The two companies were among 45 dairies convicted so far of bid-rigging as a result of an ongoing Justice Department investigation into the activities of dairies that supply school lunch program. The federal program spends $5 billion a year to feed about 24 million students.
''It's really important to be as aggressive as possible in dealing with problems of bid-rigging, and this is just the beginning,'' said Ellen Haas, the assistant secretary of agriculture for food and consumer services.
She said more companies will be subject to ''debarment'' actions if they don't agree to take steps to prevent future abuses.
Major companies, including Borden Inc., Pet Dairies and Flav-O-Rich, are among those already convicted of bid-rigging charges.
Until this year, the USDA declined to suspend convicted companies as long as they reimbursed losses caused by bid-rigging. The department may suspend companies up to three years from supplying dairy products to schools.
Betty Gist, an assistant to the president of Dairy Fresh, said the company just received the notice. She could not comment except to say the company would contest the action, which it has 30 days to do.
Dairy Fresh was assessed $1.4 million in federal penalties in April after pleading guilty to rigging school milk bids in Mississippi, south Alabama and the Florida panhandle. It also was hit with $800,000 in state penalties.
On July 21, the department took steps to bar Coble, which pleaded guilty in October 1991 in North Carolina, South Carolina and Georgia. Coble paid $1.15 million to the three states and $450,000 to the federal government.
Galen Dean, who just took over as chief executive officer, said the company will contest debarment.
''Our farmer-owners have suffered severely and they didn't really have anything to do with it,'' he said. Membership has dropped by half, to about 100, since the conviction, he said.
The department said it continues to do business with two other convicted companies, Borden Inc. of Columbus, Ohio, and Kinnett Dairies Inc. of Columbus, Ga., because they have signed agreements with the Defense Department's Defense Logistics Agency to prevent future violations in dealing with schools and military installations.
Sen. Patrick Leahy, D-Vt., chairman of the Senate Agriculture Committee, last month introduced legislation that would require debarment and help local and state authorities combat violations.