An irreverent Wall Street Blog
by Bill Singer
Join BrokeAndBroker blog on Facebook  Follow the BrokeAndBroker blog on Twitter  Connect with BrokeAndBroker on LinkedIn  Join Bill Singer on Google+  Subscribe to RSS Feed

Organic Crap Sends Executive Up A Federal Creek Without A Paddle
Written: November 9, 2012

Labeling for products that meet the USDA-NOP s...

Labeling for products that meet the USDA-NOP standards (Photo credit: Wikipedia)

This “Street Sweeper” column is about a lot of crap – figuratively and literally; so, maybe you want to get one of those green paper pine tree things to hang near you while you’re reading this?  You know, given what this creek is filled with, you also might want to get yourself a sturdy, long paddle.

Congress enacted the Organic Foods Production Act of 1990 to regulate the organic agriculture industry, and out of that pile of legislative mulch, the National Organic Program (“NOP”) was created to ensure that integrity of organic agricultural products through the implementation and administration of national production, handling and labeling standards.

When you stroll down the aisles at Whole Foods and you see all the organic foods, now you know what’s behind all that. In fact, the whole organic foods sector is now big biz — just look at the likes of Hain, United Natural Foods, Sun Opta, Green Mountain Coffee Roasters.

All of which takes us to a pile of warm, steamy, organic fertilizer – ah yes, a natural, organic segway from a brief discussion about Congress and lawmaking!

In California, in order to be licensed as an organic fertilizer manufacturer, your products must be approved by Organic Materials Review Institute(“OMRI”), a non-profit Oregon institution that purportedly provides independent review of materials and processes used in producing, processing, and handling organic food and fiber.  Imagine that, government oversees the quality of . . . lemme clean this up here . . . crap!  It’s gotten to the point where you can’t even take a . . . well, ummm, you know . . . you can’t even take a crap without having to get certification from some state of federal agency. Wonderful. In any event, this OMRI certification is a big deal in the organic biz and if it’s on your label, that’s a plus; more to the point, organic farmers rely upon that certification to ensure their own compliance with NOP standards.

All of which now leads us to the crap storm (you like how I cleaned that one up?) surrounding Peter Townsley, 50, British Columbia, Canada. Seems that Townsley was the president of California Liquid Fertilizer (“CLF”), formerly located in theSalinas Valley in Gonzales, CA.

Fascinating concept if you think about it: Liquid Fertilizer.  Not exactly the business that I imagine too many young kids aspire to enter these days but, hey, it’s a living, right?  On the other hand, a lot of what Wall Street sold a few years back sort of turned out to be pretty similar to liquid fertilizer, so, maybe there is a future in this sector.

In 1998, Townsley signed and submitted applications to OMRI to certify his Biolizer XN as a bona fide organic liquid organic fertilizer composed of ocean-going fish and fish byproducts, feathermeal, and water. In February 1999, OMRI certified Biolizer XN; and starting around April 2000, CLF sold the Biolizer XN organic fertilizer to California organic farms.

Then came the dark days of May 2000 when Townsley knowingly changed the chemical ingredients in Biolizer XN.  Gone was the fish. Gone was the feathermeal. Except, oops, he didn’t exactly notify all those acronyms involved in certifying the organic industry about the deletions or the substitutions.

Feathermeal SIDE BAR: As part of Street Sweeper’s tireless efforts to get to the bottom of every story – although getting to the bottom of a fertilizer story does present unsettling imagery – we thoroughly researched “feathermeal,” having absolutely no idea as to what the hell that was or why it wound up in organic liquid fertilizer. Apparently feathermeal is made from rendering poultry feathers in high heat, and then grinding and drying the byproduct: yielding a high nitrogen level product used in animal feed and fertilizer.

Alas, Biolizer XN was bereft of fish and chicken feathers.  No, of course I didn’t mean fish feathers and chicken feathers, I meant chicken feathers and fish, okay? Worse, the new liquid fertilizer parading under the organic Biolizer XN label contained ammonium chloride and ammonium sulfate, dastardly synthetic chemicals!  Needless to say, the OMRI folks would likely have had a coronary when asked to certify the product lacking the fish faces and chicken lips.

Sometime around December 2006, Townsley stopped selling Biolizer XN as an organic product but by then some $6 million bucks of this crap was fraudulently sold as in compliance with its certified organic provenance. It seems the crap hit the fan (yeah, nice euphemism) after the California Department of Food & Agriculture launched an investigation of the product. Townsley and his company were in trouble — about to get flushed down the criminal justice toilet.

On June 1, 2010, a federal grand jury in San Francisco, CA indicted Townsely on:

  • 8 counts of mail fraud;
  • 2 counts of making false statements; and
  • 1 count of conspiring to commit mail fraud.

The Indictment was unsealed on October 13, 2010, after Townsley was arrested at Los Angeles International Airport on October 9, 2010.  TheIndictment charged Townsley with engaging in a scheme to defraud purchasers of organic fertilizers, and the agency that approves fertilizers as organic, by falsely representing his company’s fertilizer to be an organic product when he knew that the product contained prohibited synthetic materials. If convicted, Townsley faced the following maximum statutory penalties:

  • Mail Fraud and Conspiracy To Commit Mail Fraud (per count): 20 years of imprisonment, $250,000 fine; restitution
  • Making False Statements (per count): 5 years of imprisonment; $250,000 fine

Following the filing on July 7, 2011, of a Superseding Indictment charging one count of conspiracy to commit mail fraud and seven counts of mail fraud,  Townsley pleaded guilty to two counts of mail fraud on February 22, 2012.  On November 7, 2012, Townsley was sentenced to:

  • 364 days in prison;
  • 6 months of community confinement during which time he must perform 1,000 hours of community service in one or more community organic farming projects;
  • 3 years of supervised release with he first six months of that term in a halfway house
  • $125,000 fine.

The fraud initially came to the attention of the California Department of Food and Agriculture through a whistle-blower employed at Townsley’s company. Apparently, the organic liquid fertilizer business is a cutthroat one.  You better watch where you step.


Previous Entries
May 26, 2015
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Page Jobs#wallstreetjobs @brokeandbrokerNOTICE TO EMPLOYERS: Brok... Read On
May 23, 2015
SEC Commissioner Stein Stands Alone In Her Defense Of The Investing Public And IndustryOne, and only one, Securities and Exchange Commissioner got it ... Read On
May 22, 2015
One, and only one, Securities and Exchange Commissioner got it right. To her ever-lasting credit and to the shame of her colleagues, Commissioner Kara... Read On
May 21, 2015
Yesterday, I tried to predict the future. A few hours before the United States Department of Justice announced its settlement with JPMorgan Chase, Cit... Read On
May 20, 2015
It is now 8:30 a.m. EDT on May 20, 2015 and I am posting this Blog without much enthusiasm – I think the fancy French word for ho... Read On
May 19, 2015
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Jobs#wallstreetjobs@brokeandbrokerNOTICE TO EMPLOYERS: BrokeAndBr... Read On Job Search

Related Topics
Tag Cloud
Internet FINRA Bear Stearns Bloomberg SEC NASD NYSE Money Laundering Due Diligence Waiver Forbes China Broy Woody Allen Madoff NAC NPR Marketplace Stanford UBS Ketchum Antitrust NASDAQ RRBDLAW Schapiro Bill Singer BrokerAndBroker USERRA Morgan Keegan Arbitration Counterclaim Khuzami BrokeAndBroker Aleynikov Goldman Sachs brokeandbroker Promissory Note U4 Bill SInger EFL CFTC Huffington Post Flash Crash arbitration RBC Ponzi Affinity Fraud Wachovia Criminal Raymond James Expungement Fraud Securities Fraud Outside Business Activity Registered Rep Magazine FOREX FBI Banc of America Pro Se PCAOB Supreme Court Morgan Stanley Smith Barney E*Trade Margin email Galleon Penson U5 Defamation Protocol Wells Fargo Punitive Damages Citigroup Merrill Lynch ARS Employee Forgivable Loan Street Legal Morgan Stanley AWC Fidelity Bankruptcy Broke And Broker HFT David Sobel Day Trading Ameriprise Commissions Spouse Schwab Commission CRD Kenneth Starr IRS CNBC Complaint ATM Skimming Hacking Phishing Malware Naskovets Poteroba Koval Lincoln Financial Selling Away Outside Business Activities Rakoff 2nd Circuit Second Circuit IRA 401k Forgery Tax Email Netschi Moore Whistleblower Street Sweeper Countrywide Tran Bharara Facebook Online Severance Bonus Eligibility Rule TD Ameritrade Hedge Fund SAC 1099 Smith Barney Lehman Brothers SIPC IC3 Scottrade Lehman JPMorgan Chase Hertz Insider Trading Bank of America Department of Justice Elles Bribe Auction Rate Securities Raiding Spam Edward Jones Medicare Diabetes Dow Schumer Thain Walter Bid Rigging Real Estate Discrimination Wall Street Statutory Disqualification Form U4 Form U5 Indictment Boyland DOJ Corruption bill singer FTC Do Not Call FINRA Arbitration Costa Rica Settlement LIBOR Varney Plea Rule 8210 Eligibility RRBDlaw 8210 Appeal Fowler LPL Johnson Cellphone US Airways JPM BrokeandBroker Reg D MSSB Vault Loan SunTrust Discovery Employment Rosenthal Recruiting Lawyer Trading Platform JP Morgan Employment Tuesday Wrongful Termination Bank Guarantee WaMu Solicitation REIT Martin Credit Cards Rule 3050 Away Account Credit Repair PN Advisor Placement Group Fifth Amendment Forex Mortgage Private Placement Moon CGMI Failure to Supervise Merrill Anderson Exam Lee Borrowing Tax Lien Conversion Oppenheimer Wedbush Felony Misdemeanor Expenses ING Lien OTR Estate Jobs Florida Credit Card Elderly Flash Drive Annuity Expense Reimbursement FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker Deferred Compensation RIA Prison Disclosure NASAA Aguilar FCPA Subway Testimony Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank Hospital Due Process God HSBC Private Placements Eric Stein Wire Fraud FINOP CCO Compliance Audit Joshua Brown Backstage Wall Street Obstruction of Justice Reuters Retaliation Variable Annuity Arbitraiton Outside Account Options Telephone Wine Series 7 Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud Retirement OBA Equity Indexed Annuities EIA Disability MetLife Continuing Education Cheating OIP Tax Liens Willful CE Unregistered Impersonation Annuities BBVA Business Expenses ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Impersonator Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks RMBS AML PST Solicited Unsolicited Congress SRO Password Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement Money Market employment jobs Great Recession Chase Investment Services Arrest Barclays Liens Failure To Supervise Apple Time And Price T&P Willfully Husband Letter of Authorization LOA Sexism Debit Card Knight Test Practice Sale Unfair Competition Signature Judgments Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Charge Sexist NML Argentina Embezzlement Silver Investor Alert Evidence Judgment Bank Fraud Deceased Bill Singer BrokeAndBroker TSSB OHO Leveraged ETF Mary Jo White Trustee Motion To Dismiss Frumento Conspiracy 6th Circuit Proctor Commissioner Stein Rule 3040 Customer Files Class Action Beneficiary NYAG Schneiderman 11th Circuit Insurance Gallagher White Self Regulation Short Sale Compromise Website Rule 2010 Check TRO Supervision Vacatur Remand SDNY Rule 12206 BrokeAndBroker Bill Singer Piwowar Stifel Rule 1122 Article V signature Confidential Inside Information Reg SP VA Regulation SP Fees Cease And Desist Customer Rule 3270 Rule 3240 Annual Compliance Questionnaire OWB 2Cir Red Flags Payroll Stockbrokers ALJ Cybercrime Loans BrokerCheck Altered Records
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+