Farmer Reparations

A Reparations bill Obama and Hillary just love.

It is not often that the federal government gives away a billion dollars in fraudulent claims under the guise of curing racial discrimination. But when it does, and two presidential contenders support it enthusiastically — it’s worth examining it and why it’s permitted to continue.

At issue is almost a billion dollars paid out by the Department of Agriculture (USDA) for alleged racial discrimination by local offices administering farm loans under the Farm Service Agency. Dan Glickman, Bill Clinton’s Secretary of Agriculture, following public complaints and even a White House demonstration by African American farmers in the 1990’s confessed the USDA’s guilt. He declared in a 1997 publication of the USDA news that local officials had “discriminated against some of the very people we were meant to help.”

What followed was a class action lawsuit (originally named Pigford v. Glickman) and a settlement by the Clinton administration in 1999. The consent decree which ended the lawsuit provided that farmers who had suffered discrimination could come forward to present claims and receive compensation.

However, the seeds of a vast scam were sown: with only a simple affidavit signed by someone who alleged he had applied for a loan or merely that he had “attempted to own or lease farm land,” $50,000 (tax free no less) would be paid out. Upon a slightly greater showing of proof (“a preponderance of the evidence”) even more money could be claimed.

Claimants did not need to prove that they ever actually farmed — or ever applied for a loan, only that they “attempted to farm” explains USDA’s General Counsel Marc Kesselman. Could someone sitting on their couch get money by saying they thought about farming in the 1990’s? Kesselman says that “folks have to sign an affidavit with sufficient detail” to describe how they attempted to farm. Well, people wouldn’t lie, would they?

At the time of the consent decree, attorneys for the government assured concerned legislators that the settlement would be manageable. After all, in 1982 there were only an estimated 33,000 African American farmers. In 1997 there were an estimated 18,500 African American farmers. The total number of potential claimants was estimated at between 2500 and 5000.

What happened next was an extraordinary example of fraud on a massive scale. The USDA did its job under the consent decree. It provided notice to potential claimants and took steps to advertise the class settlement. Nearly a half a million dollars was spent to advertise on cable TV and in newspapers, with special attention to African American press. Kesselman says forcefully that USDA “went well beyond the provisions of the consent decree” in alerting potential claimants about the settlement. In addition to all the advertising and community outreach, he points out that the USDA contacted every individual who picked up a claim form at a USDA office but hadn’t returned it to make sure the individual knew of the impending deadline.

Within the original time period for claimants to come forward some 22,440 claims were made. Only 1420 of these were actual borrowers. Employees of USDA and others privy to the details of the settlement are blunt: they consider the vast majority of the claims to have been fraudulent. They suspect that so-called civil rights activists and by class action lawyers eager to sign up as many potential claimants as possible simply rounded up as many individuals as they could find, even if they never farmed, never applied for a loan and never seriously pursued farming. With the minimal proof needed for a $50,000 settlement 67% of the claims were approved by an independent arbitrator.

Did people just make up a story and get cash? Kesselman demurs that it is “hard to opine” on the question but that “we’ve heard some of the stories too.” He concedes that attorneys may have gone “around the countryside hoping to get folks into the process.”

Pursuant to the terms of the settlement more than $700M in claims were paid out and more than $100M in administrative costs have been rung up, for a total of nearly a billion dollars. But that was not enough.

After the initial time period for the settlement ran out in October 1999 the consent decree provided for another period of eleven months whereby claimants upon “extraordinary circumstances” could still file claims. More than 65,000 additional claimants stepped forward to file claim requests. Another 8000 then came forward with their late claims. (So in a universe of 18,500 farmers in 1997, 96,000 individuals managed to make claims.) But there had been a court-imposed deadline. Wasn’t this the end of the road? Not by a long shot.

Plaintiffs’ lawyers and activists began the hue and cry, claiming notice to potential class members had been inadequate and there was no remedy for those who missed the deadline. These arguments were made despite the USDA’s extraordinary steps to advertise the settlement and fact that 4 times the estimated number of claimants had come forward during the original consent decree period. So the activists turned to Congress.

Under HR 3073 and a companion bill in the Senate, these activists sought to extend the deadline, in essence overruling the consent decree. Another 75,000 claimants could possibly prevail if new claims could now be brought. (Of those identified only 85 have been confirmed as actual borrowers.) An estimated $3B more could be required to administer and pay out these claims.

The farm bill currently caps the amount for paying out additional Pigford claims at $100M. Kesselman says that “the math doesn’t add up” and we “need to be honest in the accounting.” He also stresses that USDA and the federal courts, which have already weighed in with concerns about the effect on their docket should the legislation pass, need to be given adequate resources if they are expected to administer thousands of new claims. Furthermore, Kesselman advises that there “is a degree of ambiguity” in the potential legislation which could allow not only late filers but brand new claimants to step forward

Who has championed this legislation? Senators Barack Obama and Hillary Clinton for starters, but also GOP veteran Chuck Grassley.

After multiple hearings on the House and Senate side, the bills to open up Pigford have now been lumped into the conference bill for USDA’s appropriations. No legislator on the conference committee seems interested in challenging the measure.

Congressman Steve King (R-Iowa) is one of the few legislators who has attempted to question this boondoggle. He terms this a case of “significant fraud.” King contends that at least 75% of the claims are fraudulent, the work of plaintiff’s counsel and activists who spread the word in African American communities that individuals, many of whom had never even farmed, were entitled to these monies. Asked if any of his colleagues seem inclined to rock the boat and challenge this give away, he says bluntly, “No.”

Although the evidence is plain, the fear of being labeled as “insensitive” or “opposing civil rights remedies” has kept most every legislator from stepping forward to challenge the gravy train of cash give away. After all, it’s only your money.

After all the money paid out in highly questionable claims, isn’t enough enough? Kesselman stresses that the USDA has not taken a position on the Pigford legislation but that he, the courts and even plaintiffs’ counsel in court filings have deemed the Pigford settlement a “resounding success.” He notes that “plenty of folks” believe that it is time “to leave this chapter behind us” and concentrate on the USDA’s many programs which would benefit minority farmers (including more focus in the farm bill on specialty crops which minority farmers disproportionately farm and on outreach to new and economically disadvantaged farmers).

But with billions of dollars potentially still on the table and plaintiffs counsel roaming the country, it is unlikely that everyone will be content to leave well enough alone. And, at least until now, practically no one in Congress seems willing to blow the whistle.

This scam is another window into the way Clinton or Obama would govern if elected president.  Call it “reparations”, call it what you will.  This program should be shut down forthwith.