To organic farmers, Kenneth Noel Nelson Jr. was the man with the golden manure: It was rich with Mother Nature's finest waste, robust for the soil and cheap in price.
But to federal prosecutors in California, Nelson's organic fertilizer empire had developed a stench.
On Thursday a federal grand jury indicted Nelson on 28 counts of mail fraud in connection with an alleged years-long scheme to dupe farmers and agriculture product distributors. The indictment accused Nelson, 57, of selling premium-priced liquid fertilizer touted as made from all-natural products such as fish meal and bird guano that instead was spiked with far cheaper synthetic chemicals.
The scheme, according to the federal indictment, enabled Nelson to become the largest purveyor of organic fertilizer to farmers in the western half of the U.S. and pull in at least $9 million in sales from 2003 to 2009.
This is the second indictment of an organic fertilizer producer in California in the last five months. It also has fueled fears among some farmers about possible contamination of their pristine fields and has raised questions about whether consumers bought produce that was billed as organic but may not have met federal organic requirements. Many consumers who opt to pay a premium for organic goods do so because they don't want pesticides and synthetic chemicals to be used in the production of their food.
Neither Nelson nor his attorney could be reached for comment Thursday. An arrest warrant has been issued for Nelson. Prosecutors with the Justice Department office in Sacramento said they expected Nelson to surrender to authorities soon.
The indictment is part of a growing effort by the U.S. Department of Agriculture's Office of the Inspector General to crack down on fraud and corruption in the organic industry — a segment of the food sector that has grown to more than $24 billion in the U.S. and has emerged as a lucrative business in the Golden State.
The agency has seven open investigations involving the federal National Organic Program, officials said.
In the Nelson case, the allegations highlight an industry whose regulatory system has relied heavily on trust. Those who don't follow the rules, prosecutors allege, have reaped plenty: Among other things, prosecutors are seeking the forfeiture of Nelson's 2006 Chevrolet Silverado, 2005 Mini Cooper, 2004 Porsche Cayenne and 2003 BMW 330.
"The motive in these types of cases is economic," U.S. Atty. Benjamin B. Wagner said. "Consumers pay a premium for organic products, and they should not be misled."
In the tight-knit world of organic farming, Nelson and his company, Port Organic Products Ltd., were well-known. He owned several ventures to sell fertilizer to the green-farming community, including Kern County-based AgroMar Inc., Sail-On Ag Products Inc., Desert Organic Express Inc., Action Fertilizer and Microbial Assisted Soil Health Inc.
The federal National Organic Program was established in 1990 to regulate the organic agriculture industry and make sure that the fruits, vegetables and other edible products being sold as organic were produced in a way that met certain standards.
The government requires that farmers not put any synthetic chemicals on their land for three years prior to harvesting — and selling — an organic crop. According to Justice Department officials, federal law also states that, with limited exceptions, organic crop producers cannot use fertilizers with synthetic ingredients such as aqua ammonia or ammonium sulfite to infuse nitrogen into the soil.
If farmers used such chemical fertilizer, they could lose their organic certification.
The federal government relies on two outside groups to ensure that certain farm supplies meet organic standards: the Washington State Department of Agriculture and the Organic Materials Review Institute, a nonprofit based in Eugene, Ore. Once certified, the product is added to a list of approved supplies maintained by these organizations — a list upon which organic farmers say they rely.
According to Thursday's indictment, Nelson was able to get both groups to certify his companies' fertilizers as organic — even though they included synthetic ammonia and other chemicals — by allegedly lying in his applications about the ingredients he was using.
Compounding the issue was the lack of a reliable test at the time to determine whether the nitrogen in such fertilizer came from synthetic or natural sources, industry analysts said. A spokesperson from WSDA could not be reached for comment Thursday. A spokeswoman from OMRI declined to comment.
Earlier allegations of wrongdoing in the organic fertilizer industry prompted Earthbound Farm, the nation's largest producer of organic greens, to roll out new internal testing programs. And in 2009, California Certified Organic Farmers, the state's top organic certifier, started requiring inspections of fertilizer makers that sell to its farmers.