One man has begun a yearlong prison term for defrauding the organic industry by selling noncompliant fertilizer, and another is scheduled to be sentenced Nov. 19 in a similar case that could net him an even more time behind bars.
Peter Townsley, former owner of California Liquid Fertilizer, began 364 days in federal prison Nov. 9 in relation to sales of almost $7 million of Biolizer XN fertilizer. He admitted to two counts of mail fraud in a plea agreement with the U.S. Attorney’s office in San Francisco. The fraud involved mailing inaccurate certification renewal documents to the Organic Materials Review Institute.
In August, Kenneth Nelson Jr., former owner of Port Organics Ltd. and several affiliated companies, admitted to four counts of mail fraud in an unrelated case handled by the Fresno, Calif., office of the U.S. Attorney. Nelson said he earned $9 million in profit by selling nonorganic fertilizer under the guise it met regulations for organic use.
Nelson, a Bakersfield, Calif., resident, could face 20 years in prison and a $250,000 fine on each count, plus a three-year probation period, according to assistant U.S. Attorney Kirk Sheriff.
Nelson’s scheme ran from 2003 to 2009. He admitted intentionally altering the formulas of Agrolizer, Marizyme, Fishilizer and other brands of fertilizer. He sent documents to OMRI saying the products were made of fishmeal and bird guano and labeled them as such. However, Nelson’s fertilizers actually included large amounts of synthetic materials including aqueous ammonia, ammonium sulfate, and urea.
In his plea agreement, Nelson said customers paid more than $40 million for the purportedly organic fertilizers. He admitted that the total losses attributable to the scheme were between $20 million and $50 million.
Sheriff said Nelson agreed to forfeit $9 million in cash and three vehicles, which have already been seized: a 2006 Chevrolet Silverado; a 2005 Mini Cooper CV; and a 2004 Porsche Cayenne. Federal Judge Anthony Ishii will determine at sentencing Nov. 19 whether Nelson will actually have to forfeit the vehicles and cash.
In the Townsley case, Federal Judge Charles Breyer imposed two 364-day prison terms but is allowing the Canadian citizen to serve them concurrently. The judge also imposed a $125,000 fine and ordered that Townsley must serve three years’ probation after his prison time.
During Townsley’s probation, he must live the first six months in a halfway house and complete 1,000 hours of community service in the organic industry.
“It’s important that Townsley got a fairly stiff sentence,” said Will Daniels, senior vice president of operations and organic integrity at San Juan Batista, Calif.-based Earthbound Farm, one of the victims of the fertilizer fraud.
“It should serve as a clear warning to those who would violate the regulations that organic integrity is strong and that justice will be served on perpetrators of organic fraud.”
Townsley admitted to intentionally changing the formula for Biolizer XN in April 2000 from a mix of “ocean-going fish, fish by-products, feathermeal and water” to include ammonium chloride. He later changed the formula again, switching the ammonium chloride to ammonium sulfate, and continued to sell until December 2006 as certified for use in organic operations.
Before imposing Townsley’s sentence, Judge Breyer received comments from several interested parties, including Earthbound Farm; Tanimura & Antle, Salinas, Calif.; Miles McEvoy, deputy administrator of the National Organic Program; the California Department of Food and Agriculture; fertilizer company Advanced Marine Technologies, New Bedford, Mass.; and Peggy Miars, executive director of OMRI.
All of the comments stressed the ripple effect Townsley’s actions had on the organic industry because it raised doubts among consumers and undermined the public trust in the U.S. Department of Agriculture’s organic certification program.
The California Department of Food and Agriculture officials told the judge in their comments that Townsley’s scheme resulted in additional regulations in the state that annually cost the organic industry $400,000 in increased fees and testing.
In a request for a 46-month sentence for Townsley, the U.S. Attorney’s office said he not only intentionally perpetrated the fraud, but that he continued to do so while ducking investigators.
“At any time, Townsley could have made the right choice and stopped selling Biolizer XN, but it is clear that he was motivated by one thing — greed,” the U.S. Attorney’s office said in its sentence recommendation.
Breyer noted in an order related to the calculation of losses of victims in the Townsley case that “(the) defendant spends much of his briefing running away from his plea and the facts and evidence as presented in this case.”
Townsley requested leniency, saying state and federal governments were partially to blame because they failed to effectively enforce organic certification regulations.