Feds Say Cattlemen Bilked Uncle Sam

KANSAS CITY, Mo. (CN) - Two men abused a federal drought relief program by exporting and selling the 28 million lbs. of free cattle feed they received, federal prosecutors say. Uncle Sam spent more than $1 million to ship the men the free nonfat dry milk, and they allegedly made more than $5 million from it before the ruse was discovered.

The United States claims Richard Carter and Jerry Goodwin, through their companies Carter Livestock and R&J Feed, received 19.9 million lbs. of free feed through the 2002 Cattle Feed Program. The USDA spent $810,000 to ship the feed, according to the complaint.

In 2003, the defendants received more than 8 million lbs. of free feed - nonfat dry milk (NDM) - through a similar program, the complaint states. This time it cost the government $238,000 in shipping.

An investigation in 2004 showed that the defendants did not use the feed as the programs required, but exported it for profit. They had made more than $5 million through their illegal exports by the time of the investigation, prosecutors say.

"On the basis of the January 2004 R&J warehouse examination and the information provided to him by Smith, [USDA warehouse examiner Rod] Prather determined that at the time of the warehouse examination, R&J had an inventory of 9,311,225 pounds of 2002 NDM and 990,000 pounds of 2003 NDM, for a total inventory of 10,301,225 pounds of USDA drought relief program NDM," the complaint states.

"The information provided by Smith indicated that R&J had exported or participated in the exportation of 14,838,059 pounds of NDM between November 4, 2003 and January 23, 2004."

Richard Carter and Carter Livestock operate out of Ten Sleep, Wyo. Carter is a partner with Jerry Goodwin in R&J Feed Co., of Ogden, Utah, according to the complaint.

"Use of the NDM provided in the three programs was subject to well-defined and well-publicized restrictions," the government says. "All of the programs had the common feature that the NDM had to be used in feed for livestock within the states to which the programs applied ('the Drought States'). The usage restrictions were important to the government for several reasons, including that unpermitted use could disrupt domestic markets in currently produced milk products; that the exportation of the NDM could cause complications in international relations; and that because of USDA milk price support programs, to the extent that the NDM provided in the drought relief programs were sold for a purpose that displaced commercial purchases of currently produced milk products, the CCC [Commodity Credit Corporation] could be required to buy up more of such products."

The government seeks damages and penalties for violations of the False Claims Act.

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