Owner of Kern County Fertilizer Business Sentenced for Organic Fertilizer Fraud
|U.S. Attorney’s Office November 19, 2012|
FRESNO, CA—Kenneth Noel Nelson, Jr., 59, of Bakersfield, was sentenced today by United States District Judge Anthony W. Ishii to six-and-a-half years in prison, to be followed by three years of supervised release, for his scheme to defraud organic farmers and other customers of his organic fertilizer businesses, announced United States Attorney Benjamin B. Wagner. The judge also ordered the forfeiture to the United States of Nelson’s 2006 Chevrolet Silverado, 2005 Mini Cooper, and 2004 Porsche Cayenne and ordered Nelson to pay a personal money judgment of $9 million. Additionally, Nelson will owe restitution to victims in an amount that remains to be determined by the court.
According to court documents, between 2003 and 2009 Nelson defrauded customers such as organic farmers and distributors through his company Port Organic Products Ltd. and affiliated businesses such as AgroMar Inc., Sail On Ag Products Inc., Desert Organic Express Inc., Action Fertilizer, and Microbial Assisted Soil Health Inc. He did this by manufacturing and selling fertilizers that he falsely represented were organic products permitted for use in organic agriculture. The fertilizers included “Agrolizer,” “Marizyme,” and “Fishilizer” products, among others. Nelson represented that these fertilizers were made purely with materials authorized for organic agriculture, such as fish meal and bird guano, and had the fertilizers’ labels state that the products complied with organic certification standards and could be used by certified organic growers. Nelson admitted that he actually caused large amounts of synthetic materials not permitted in organic fertilizers or organic agriculture to be used in the fertilizers.
Under the Organic Foods Production Act of 1990, the United States Department of Agriculture (USDA) established the National Organic Program (NOP) to ensure that agricultural products being sold as organic are produced according to NOP standards, including without the use of synthetic chemicals. Under NOP rules, organic farms are required to be free from synthetic chemicals, such as synthetic fertilizers, for a minimum of three years before they can be certified to produce organic crops.
According to court documents, as part of Nelson’s scheme to defraud, he submitted false applications and documentation to have his fertilizers listed as organic by the Washington State Department of Agriculture (WSDA) and the Organic Materials Review Institute (OMRI). OMRI and WSDA provide independent listing of fertilizers and other products that meet NOP requirements, and organic growers rely on OMRI and WSDA listings in determining which products are permitted to be used in organic agriculture. Nelson failed to disclose that he was actually using synthetic materials including aqueous ammonia, ammonium sulfate, and urea to make the fertilizers. If he had disclosed the actual ingredients, OMRI and the WSDA would not have approved the fertilizers as organic or included them in lists of approved organic products.
By using synthetic materials, Nelson was able to produce his fertilizer products at a lower cost than if he had used permitted organic ingredients. Through this scheme, Nelson caused customers to pay over $40 million for purportedly organic fertilizers that actually contained synthetic materials not permitted to be used in organic agriculture. From 2003 through 2008, through Port Organic and affiliated businesses, Nelson received profits of over $9 million from the scheme.
This case is the product of an investigation by the USDA Office of Inspector General and the Federal Bureau of Investigation. Assistant U.S. Attorney Kirk Sherriff prosecuted the case.
U.S. Attorney Wagner said, “This sentence holds the defendant responsible for his flagrant fraud in the labeling and marketing of his fertilizer products as ‘organic.’ Consumers pay a premium for organic products, and they should not be misled by companies that seek to profit by falsely categorizing their products as organic. We will continue to work with USDA investigators and with the FBI in examining production and labeling practices in organic agriculture.”
“USDA-OIG is committed to upholding the integrity of the National Organic Program (NOP) by bringing violators to justice and protecting the consumer from mislabeled organic products,” said Special Agent in Charge Lori Chan. “This is the second NOP investigation that has been brought to justice in California, which is the leading state in the nation to produce organic products. We would like to thank the Federal Bureau of Investigation and the U.S. Attorney’s Office for their assistance in this investigation and look forward to their continued support in combating fraud in the organic industry.”