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Friday, July 21, 2006

Senator Harkin's Letter to USDA regarding Packers and Stockyards Act Enforcement

This is the text of Senator Tom Harkin's letter to Phyllis Fong, USDA Inspector General, requesting follow-up investigation of USDA's efforts to address serious problems in enforcing the competition provisions of the Packers and Stockyards Act. Several readers wanted to see Senator Harkin's letter in order to pen letters of their own to Congress and USDA.

The Honorable Phyllis K. Fong
Inspector General
U.S. Department of Agriculture
Room 117-W, Jamie L. Whitten Building
Fourteenth Street and Independence Avenue, SW
Washington, DC 20250

Dear Ms. Fong:

The audit report you released on January 18, Grain Inspection, Packers and Stockyards Administration’s Management and Oversight of the Packers and Stockyards Programs, along with your testimony before this Committee on March 9, contained a good deal of valuable information and sound recommendations for remedying serious problems at the Department of Agriculture in enforcing the competition provisions of the Packers and Stockyards Act. These problems became so extensive that they included deliberate actions in the Grain Inspection, Packers and Stockyards Administration (GIPSA) to conceal its failure of enforcement.

GIPSA has promised to make administrative and organizational changes to remedy the problems that were described in your audit report, and which had previously been identified by OIG and the Government Accountability Office (GAO) going back nearly a decade. On July 13, GIPSA Administrator James E. Link provided a 90-day status report to the Committee on the agency’s reform efforts, as promised at the March 9 hearing.

Given USDA’s long history of failure in enforcement of the Packers and Stockyards Act’s competition provisions, it is obvious that continuing oversight by your office, as well as by this Committee, is essential. It is also clear this oversight must encompass both GIPSA and USDA’s Office of General Council (OGC) since both have responsibilities in enforcing the packers and Stockyards Act. Insofar your January 18 audit report focused almost entirely on GIPSA, it is now important that your office examine OGC’s actions, capabilities and commitment regarding enforcement of the Packers and Stockyards Act competition provisions, particularly the extent and quality of coordination and cooperation between GIPSA and OGC.

Previous descriptions by OIG and GAO of problems in the enforcement of Packers and Stockyards Act competition provisions clearly encompass both GIPSA and OGC. In its 1997 audit report, OIG urged GIPSA and ODC to improve coordination in such enforcement, but GAO found in its 2000 report that these problems in the working relationship of GIPSA and OGC still continued. At this time, GAO recommended involving OGC lawyers at earlier stages of the investigation process, enhancing the role of GIPSA legal specialists, developing a teamwork approach to investigations similar to that of the Department of Justice and the Federal Trade Commission (where economists and attorneys work closely together without an investigation) and adopt a more systematic approach to selecting cases and planning and conducting investigations.

The Honorable Phyllis K. Fong
July 18, 2006
Page two

There have also been questions about OGC’s interpretation of the Packers and Stockyards Act’s competition provisions and attitude toward enforcing them. OIG stated in its 1997 audit that Packers and Stockyards program officials were concerned that OGC did not want to litigate competition cases “because they are complicated and time consuming” and OGC had limited expertise with them. In 2000, GAO found “disagreements” between OGC and GIPSA regarding interpretation of the Act’s competition provisions. OGC has said that court decisions have made it difficult for the department to succeed in competition cases, while anecdotal reports suggest that OGC follows a strict or narrow interpretation of the Act’s competition provisions and does not pursue such cases because it fears the Department will lose.

It is essentially undisputed that USDA failed to implement longstanding OIG and GAO recommendations for improving enforcement of the Packers and Stockyards Act’s competition provision. In making this observation in its latest audit report, OIG noted that in particular the recommendations by OIG and GAO for improving the working relationship between OGC and GIPSA were not implemented. IN GAO’s testimony at our March 9 hearing, it was likewise stated that the past recommendation had not been carried out, “especially in regard to integrating OGC attorneys into the investigative process and developing a teamwork framework for its investigations.” The profound lack of communication and coordination between OGC and GIPSA was clearly evident in testimony at the hearing by the OGC Assistant General Council in the Trade Practices Division.

Earlier this year, GIPSA issued a directive to empower the agency’s legal specialist to consult with OGC and to increase communication and coordination between GIPSA and OGC at the early stages of competition investigations. If this closer communications and coordination to occur, however, it is essential for OGC to do its part, to make a genuine commitment to pursue competition cases and work in good faith with GIPSA. Past experience suggests there is reason for concern. As OIG’s January 18 audit report notes, OGC has filed no competition actions since 1999. To be sure, only two competition cases were referred by GIPSA to OGC in this period, but OGC’s inaction in the face of ongoing problems at GIPSA, despite the specific recommendations of OIG and GAO, has engendered persistent questions about OGC’s commitment to enforcing the Packers and Stockyards Act’s competition provisions.

In sum, it is important that OIG determine whether OGC will henceforth work with GIPSA to enforce the Packers and Stockyards Act’s competition provisions and whether there are any obstacles to prevent OGC and GIPSA from working together on such enforcement in accordance with the OIG and GAO recommendations. In addition, I ask you to examine the following:

The Honorable Phyllis K. Fong
July 18, 2006
Page three

Does OGC have the staffing and professional expertise to handle complex investigations and enforcement actions under the competition provisions of the Packers and Stockyards Act? Will OGC and GIPSA cooperate to assign lead roles to OGC attorneys specifically for more complex competition investigations, as suggested by GAO?

Do conflicts or disagreements over interpretations of the Packers and Stockyards Act exist between GIPSA and OGC that could undermine the development and execution of competition investigations and enforcement actions?

Did problems in the working relationship and communications between OGC and GIPSA prevent GIPSA from referring cases to OGC or cause GIPSA to develop bureaucratic systems to avoid even having to work with OGC? Have OGC personnel at any time pressured or discouraged present or former GIPSA employees from pursuing investigations of anti-competitive practices?

Does OGC interpret too strictly or narrowly the Packers and Stockyards Act’s competition provisions and relevant case law? Is OGC too cautious or hesitant in pursuing Packers and Stockyards Act competition cases?

Please review the issues I have identified above and confirm within 30 days whether your office will be able to examine them. If there are any problems in doing so, or any issues that you cannot pursue, please let me know and provide the reason or explanation. Please communicate with John Ferrell on the Committee staff regarding this request. Thank you in advance for your assistance on this request and for your previous work on this important subject matter.

Sincerely yours,

Senator Tom Harkin
Ranking Democratic Member
Senate Committee on Agriculture, Nutrition and Forestry

post a question or comment here or contact John Crabtree,

Center for Rural Affairs
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