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Audit of California Avocado Commission uncovers at least $1.5 million in questionable spending

During the three-year audit period, 18 employees used commission credit cards to pay for purchases including meals, flowers, luxury spa services and clothes from high-end retailers, the report says.

January 10, 2009|Marc Lifsher

SACRAMENTO — Something has been rotten at the state agency behind a splashy $7-million annual marketing blitz on television, billboards and in food magazines to promote California-grown avocados, a new state audit indicates.

Employees and board members at the obscure, Irvine-based California Avocado Commission enjoyed lavish perks and benefited from as much as $2 million in questionable spending in the last three years, the audit concluded.

Among the benefits to staff members cited by the auditors were home remodeling projects, tickets to sporting events, gym memberships and vitamins, regularly delivered restaurant meals, clothing from high-end retailers described as uniforms, generous auto allowances and $850 hotel rooms at four-star resorts.

During the three-year audit period, the commission's 18 employees used commission credit cards to run up more than $1.5 million in charges for "a significant amount of discretionary expenses that appeared questionable at best and even personal at times," the report said.

About $17,000 was spent on gifts, meals and flowers to celebrate employees' birthdays, employment anniversaries and other special occasions, the report said. An additional $39,000 purchased clothes at Nordstrom, Talbots, Ann Taylor and other stores that the commission dubbed "uniforms" after spending $8,700 to embroider the commission's name and logo onto them.

Commission board members, their spouses, guests and employees spent thousands of dollars on "massages, nail service, facials and body treatments" during meetings at the Ritz-Carlton Laguna Niguel and at luxury spas in La Jolla and Del Mar in San Diego County.

The items "appeared to be lavish in nature," auditors said, "and may be considered gifts of public funds."

Commission board Chairman Rick Shade, a Carpinteria grower who has been on the board for a decade, defended some of the spending and disputed some of the criticism. "I don't feel it was all that lavish," he said, "but I agree that certain areas had problems."

Major changes are underway at the commission, he said. Most perks have been slashed, and reimbursements from employees are being sought.

"The board has taken control," he said, noting that it was the findings of the board's own internal audit that led to the state review.

In a statement, the commission said it "was deeply disappointed with the administrative weaknesses in some of our policies and procedures" revealed by the audit.

The commission is bankrolled by mandatory fees collected from the state's 6,000 avocado growers. Its activities are overseen by the California Department of Food and Agriculture, which referred the matter to state Atty. Gen. Jerry Brown's office for further investigation

Michael Jarvis, a spokesman for the agriculture department, said only, "The audit speaks for itself." Food and Agriculture Secretary A.G. Kawamura was unavailable for comment, Jarvis said.

Critics of the state's complex system of quasi-governmental agricultural commissions said the audit provided more evidence of the need for heightened oversight of state-backed promotional programs for dozens of California specialty crops such as apples, raisins and walnuts.

The government-backed marketing groups were created in 1937 to help farmers boost prices during the Great Depression. Nowadays, the groups' focus has shifted to doing crop research, generic promotion and setting standards for produce size and condition that some experts consider anti-competitive.

Indeed, the avocado commission is just the latest agricultural panel in which state auditors in recent years have found improprieties, including conflicts of interest, poor accounting and possible federal tax law violations. Investigators also uncovered problems at the Kiwi Fruit Commission, the Tomato Commission and the Mendocino Winegrape & Wine Commission.

The administration of Gov. Arnold Schwarzenegger should be lauded for beginning a regular program of auditing the state's crop-specific boards, said Harry Snyder, a Marin County-based consumer advocate and former West Coast director of Consumers Union.

Many growers are more interested in the prices their produce fetches and "don't look behind the curtain to see what's going on at the commission," he said. "That allows the CEO of the commission to be a little king in his own fiefdom."

Some avocado growers say they are troubled by the report.

"It's incredibly blatant," said Mike Reardon, who has 140 avocado trees in Fallbrook, a town in northern San Diego County. "They're supposed to be working for us and doing it with integrity and reasonable fees and costs."

Reardon, as all avocado growers, pays the commission 2.6% of his sales as fees.

The fees fund most of the avocado commission's $11.8-million annual budget. Advertising and promotion accounts for $7.3 million, $2 million covers administrative costs, and the rest pays for research and industry affairs.

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