State Tomato Board is dissolved

GONZALES, CALIF. -- Melanie Horwath phoned the California Tomato Board with what she assumed was a simple request. She needed promotional materials that her family's tomato packing company could display at a Salinas Valley agricultural event called Taste of the Valley.

Do you have posters or recipes? she asked.

We don't have that.

What kind of promotion do you guys do?

We don't do that kind of promotion.

That's odd, Horwath thought. Her company paid thousands of dollars a month in mandatory dues to finance the board's research and marketing efforts: its legal purpose. She started digging into the board's business to find out how it was spending her money.

More than a decade later, the tomato commission has shut down after her findings prompted a state audit.

The commission misspent members' dues on lavish conferences in Arizona and Mexico, where its families traveled free, according to the audit. It bought perks for directors and employees -- thousand-dollar dinners, a $653 Hummer stretch limousine ride, $190 bottles of wine -- and made other questionable expenditures.

The audit also detailed how the commission abetted a group of Horwath's competitors intent on setting the prices and rules for California's $505-million tomato market.

"They ran it like it was . . . their own little fiefdom," said Brian C. Leighton, the attorney for Horwath's company, Gonzales Packing Co.

The attorney general's office is investigating. Meanwhile, audits of other marketing programs within the Department of Food and Agriculture have also revealed conflicts of interest, sloppy accounting, possible Internal Revenue Service violations and activities beyond the authority the state granted them.

These 54 obscure programs, which collect a combined $200 million a year from farmers and shippers of crops and livestock, can have great sway over the price, availability, variety and quality of produce, meat and nuts that Californians buy.

The first boards were created in 1937 to help farmers survive the Great Depression by controlling the supply and price of their crops. Alfalfa seeds, almonds, beef, cling peaches, dried plums, figs, garlic, sea urchins, sheep and wine grapes are some of the food industries with marketing boards or commissions that are established by lawmakers but financed and run by the industries.

Today the organizations focus on research, public education, economic studies and generic promotion of their product through campaigns such as the "Got Milk?" advertisements. Nineteen entities also have federal or state "marketing orders" that restrict the amount, size or appearance of what can be sold.

The agriculture department did not audit any of the marketing programs before 2006. Its first examinations have yielded troubling details.

An audit of the Kiwi Fruit Commission established that a former manager used the commission's credit card to pay off her husband's car lease and to buy plane tickets for him to accompany her on business trips. She reimbursed most of the $19,000 in expenditures but charged $3,400 to the commission as payment to her husband for compiling a kiwi cookbook and coordinating a kiwi conference. State auditors couldn't find evidence that the husband's earnings were reported to the IRS.

Another department audit found that the California Milk Processor Board paid its executive director $291,361 in his first seven months on the job -- including a $50,000 signing bonus, free health insurance and $73,478 in reimbursed expenses -- without a finalized contract.

A third audit found that the staff and resources of the Forest Products Commission were also misused and that the agency at times exceeded its legal authority.

"California and the Legislature need a wake-up call that these programs are either corrupt or easily corruptible," said Leighton, who also represents growers and packagers in lawsuits against programs for cherries, cut flowers and raisins. Agriculture department spokesman Steve Lyle said in a statement that the agency has hired more auditors and plans to improve its supervision.

"Generally, the department is committed to doing full fiscal compliance audits of all state commissions," the statement said.