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Nation’s largest retailers accused of organic fraud
by Mark Kastel, The Cornucopia Institute
December 23, 2007

Class action suits seek damages from Wal-Mart, Target, others

SEATTLE, WA/ DENVER, CO/MINNEAPOLIS, MN – In a scandal now ensnaring some of the nations leading retailers, a series of lawsuits have been filed accusing Wal-Mart, Costco, Target, Safeway, and Wild Oats of consumer fraud for marketing suspect organic milk.

The legal filings in federal courts in Seattle, Denver, and in Minneapolis, against the retailers, come on the heels of class action lawsuits against Aurora Dairy Corporation, based in Boulder, Colorado. The suits against Aurora and the grocery chains allege consumer fraud, negligence, and unjust enrichment concerning the sale of organic milk. This past April, Aurora officials received a notice from the USDA detailing multiple and “willful” violations of federal organic law that were found by federal investigators.

“This is the largest scandal in the history of the organic industry,” said Mark Kastel of The Cornucopia Institute, a Wisconsin-based farm policy research group. Cornucopia’s own investigation and formal legal complaint, in 2005, first alerted USDA investigators to the improprieties occurring at Aurora. “Aurora was taking advantage of the consumer’s good will in the marketplace toward organics, and the USDA has allowed this scofflaw-corporation to continue to operate,” Kastel added.

Law firms based in Seattle, St. Louis, and New York, in addition to other cities, have filed at least eight lawsuits against Aurora, representing plaintiffs in over 30 states. Five lawsuits against the retailers have been filed so far.

Attorneys are seeking damages to reimburse consumers harmed by the company’s actions. Some of the lawsuits request that the U.S. District Courts put an injunction in place to halt the ongoing sale of Aurora’s organic milk in the nation’s grocery stores until it can be demonstrated that the company is complying with federal organic regulations.

Aurora, with $100 million in annual sales, provides milk that is sold as organic and packaged as private label, store-brand products for many of the nation’s biggest chains. In addition to Wal-Mart, Target, Costco, Safeway, and Wild Oats, Aurora serves as supplier to 15 other national and regional chains.

Independent investigators at the USDA concluded earlier this year that Aurora—with five dairy facilities in Colorado and Texas, each milking thousands of cows—had 14 “willful” violations of federal organic regulations. One of the most egregious of the findings was that from December 5, 2003, to April 16, 2007, the Aurora Dairy “labeled and represented milk as organically produced, when such milk was not produced and handled in accordance with the National Organic Program regulations.”

Cornucopia's own research, since confirmed by the two-year investigation by federal law enforcement agents, found that Aurora was confining their cows to pens and sheds in feedlots rather than grazing the animals as the federal law requires. Furthermore, Aurora brought conventional animals into their organic milking operation in a manner prohibited by the Organic Food Production Act, a law passed by Congress in 1990 and implemented in 2002 by the USDA.

The stores sell Aurora's milk under their own in-house brand names, such as Costco's Kirkland and Target's Archer Farms, in cartons marked "USDA organic," typically with pictures of pastures or other bucolic scenes.

"That's not even close to the reality of where this milk was coming from," said Steve Berman, a Seattle lawyer whose firm is among those suing. "These cows are all penned in factory-confinement conditions."

“This is the perfect example of modern-day Agri-business bullies literally stealing the milk money from an unsuspecting public,” said Washington state consumer Rachael Doyle. "We have been willfully deceived by corporations motivated solely by greed.”

Cornucopia points out that Aurora is a "horrible aberration," and that the vast majority of all organic dairy products are produced with high integrity. In a scorecard published last year, and available on their web site, Cornucopia rates over 90% of organic name-brand dairy products as truly subscribing to the letter and spirit of the law (available at www.cornucopia.org).

“Aurora’s actions have injured the reputation of the more than 1500 legitimate organic dairy farmers who are faithfully following federal organic rules and regulations,” noted Kastel. “We cannot allow these families to be placed at a competitive disadvantage.”

Mark Pepperzak, Aurora CEO, said, "The allegations in this smear campaign against AOD are based on false information and, therefore, completely unfounded." The company has said that their business has yet to be affected by the high-profile controversy. However, some of Aurora's largest customers have now switched to alternative suppliers.

"We have learned that Wild Oats and the Publix supermarket chain in Florida are no longer buying milk from Aurora,” stated Kastel. "In addition, the nation's largest distributor of natural and organic products, United Natural Foods, Inc. (UNFI) has also secured an alternative source for their Woodstock Farms brand." Kastel also said that although he was unable to publicly disclose the names of retailers at this point in time, a number of others have contacted Cornucopia for their listing of six other private-label organic milk processors.

Many industry observers feel that the USDA’s enforcement mechanism broke down in the Aurora case. After career USDA staff drafted a Letter of Proposed Revocation, seeking to prevent Aurora from engaging in organic commerce, political appointees at the agency intervened, crafting an agreement allowing the politically connected company to remain in business.

"It is unconscionable that the USDA allowed Aurora to continue, after making millions of dollars, in this ‘ethics-based’ industry, when they had concluded that Aurora willfully violated the law," Kastel added. "However, there is a higher authority in terms of organic integrity than the USDA—that's the organic consumer. And they are about to make their voices heard through the courts."

“I feel cheated by Aurora’s organic misrepresentations,” said Sandie Regan, an organic consumer from Crown Point, Indiana, and one of the parties to the lawsuits. “I am willing to pay more at the grocery store for organic milk because I believe the milk is healthier for me. But it doesn’t look like I was getting what I paid for,” Regan added.

"Although the USDA did not strip Aurora of their right to engage in organic commerce, between the consumer fraud lawsuits, and the exodus of a growing number of their customers, it looks like consumers and retailers might strip them of their ability to continue in the marketplace," Kastel observed. "

Copies of the lawsuits are available upon request. A photo gallery of the Aurora factory-farm operation can be viewed at the Cornucopia web page at www.cornucopia.org.

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The Cornucopia Institute, a nonprofit farm policy research group, is dedicated to the fight for economic justice for the family-scale farming community. Their Organic Integrity Project acts as a corporate and governmental watchdog assuring that no compromises to the credibility of organic farming methods and the food it produces are made in the pursuit of profit.

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