Nations Largest Retailers Accused of Organic Fraud

SEATTLE, WA/ DENVER, CO/MINNEAPOLIS, MN ­ In a scandal now ensnaring 
some of the nations leading retailers, a series of lawsuits have been 
filed accusing Wal-Mart, Costco, Target, Safeway, and Wild Oats of 
consumer fraud for marketing suspect organic milk.

The legal filings in federal courts in Seattle, Denver, and in 
Minneapolis, against the retailers, come on the heels of class action 
lawsuits against Aurora Dairy Corporation, based in Boulder, 
Colorado.  The suits against Aurora and the grocery chains allege 
consumer fraud, negligence, and unjust enrichment concerning the sale 
of organic milk.  This past April, Aurora officials received a notice 
from the USDA detailing multiple and “willful” violations of federal 
organic law that were found by federal investigators.

“This is the largest scandal in the history of the organic industry,” 
said Mark Kastel of The Cornucopia Institute, a Wisconsin-based farm 
policy research group.  Cornucopia’s own investigation and formal 
legal complaint, in 2005, first alerted USDA investigators to the 
improprieties occurring at Aurora.  “Aurora was taking advantage of 
the consumer’s good will in the marketplace toward organics, and the 
USDA has allowed this scofflaw-corporation to continue to operate,” 
Kastel added.

Law firms based in Seattle, St. Louis, and New York, in addition to 
other cities, have filed at least eight lawsuits against Aurora, 
representing plaintiffs in over 30 states.  Five lawsuits against the 
retailers have been filed so far.

Attorneys are seeking damages to reimburse consumers harmed by the 
company’s actions.  Some of the lawsuits request that the U.S. 
District Courts put an injunction in place to halt the ongoing sale 
of Aurora’s organic milk in the nation’s grocery stores until it can 
be demonstrated that the company is complying with federal organic 
regulations.

Aurora, with $100 million in annual sales, provides milk that is sold 
as organic and packaged as private label, store-brand products for 
many of the nation’s biggest chains.  In addition to Wal-Mart, 
Target, Costco, Safeway, and Wild Oats, Aurora serves as supplier to 
15 other national and regional chains.

Independent investigators at the USDA concluded earlier this year 
that Aurora—with five dairy facilities in Colorado and Texas, each 
milking thousands of cows—had 14 “willful” violations of federal 
organic regulations.  One of the most egregious of the findings was 
that from December 5, 2003, to April 16, 2007, the Aurora Dairy 
“labeled and represented milk as organically produced, when such milk 
was not produced and handled in accordance with the National Organic 
Program regulations.”

Cornucopia’s own research, since confirmed by the two-year 
investigation by federal law enforcement agents, found that Aurora 
was confining their cows to pens and sheds in feedlots rather than 
grazing the animals as the federal law requires.  Furthermore, Aurora 
brought conventional animals into their organic milking operation in 
a manner prohibited by the Organic Food Production Act, a law passed 
by Congress in 1990 and implemented in 2002 by the USDA.

The stores sell Aurora’s milk under their own in-house brand names, 
such as Costco’s Kirkland and Target’s Archer Farms, in cartons 
marked “USDA organic,” typically with pictures of pastures or other 
bucolic scenes.

“That’s not even close to the reality of where this milk was coming 
from,” said Steve Berman, a Seattle lawyer whose firm is among those 
suing. “These cows are all penned in factory-confinement conditions.”

 “This is the perfect example of modern-day Agri-business bullies 
literally stealing the milk money from an unsuspecting public,” said 
Washington state consumer Rachael Doyle.  “We have been willfully 
deceived by corporations motivated solely by greed.”

Cornucopia points out that Aurora is a “horrible aberration,” and 
that the vast majority of all organic dairy products are produced 
with high integrity.  In a scorecard published last year, and 
available on their web site, Cornucopia rates over 90% of organic 
name-brand dairy products as truly subscribing to the letter and 
spirit of the law (available at www.cornucopia.org).

“Aurora’s actions have injured the reputation of the more than 1500 
legitimate organic dairy farmers who are faithfully following federal 
organic rules and regulations,” noted Kastel.  “We cannot allow these 
families to be placed at a competitive disadvantage.”

Mark Pepperzak, Aurora CEO, said, “The allegations in this smear 
campaign against AOD are based on false information and, therefore, 
completely unfounded.”  The company has said that their business has 
yet to be affected by the high-profile controversy.  However, some of 
Aurora’s largest customers have now switched to alternative suppliers.

“We have learned that Wild Oats and the Publix supermarket chain in 
Florida are no longer buying milk from Aurora,” stated Kastel.  “In 
addition, the nation’s largest distributor of natural and organic 
products, United Natural Foods, Inc. (UNFI) has also secured an 
alternative source for their Woodstock Farms brand.”  Kastel also 
said that although he was unable to publicly disclose the names of 
retailers at this point in time, a number of others have contacted 
Cornucopia for their listing of six other private-label organic milk 
processors.

Many industry observers feel that the USDA’s enforcement mechanism 
broke down in the Aurora case.  After career USDA staff drafted a 
Letter of Proposed Revocation, seeking to prevent Aurora from 
engaging in organic commerce, political appointees at the agency 
intervened, crafting an agreement allowing the politically connected 
company to remain in business.

“It is unconscionable that the USDA allowed Aurora to continue, after 
making millions of dollars, in this ‘ethics-based’ industry, when 
they had concluded that Aurora willfully violated the law,” Kastel 
added.  “However, there is a higher authority in terms of organic 
integrity than the USDA—that’s the organic consumer.  And they are 
about to make their voices heard through the courts.”

“I feel cheated by Aurora’s organic misrepresentations,” said Sandie 
Regan, an organic consumer from Crown Point, Indiana, and one of the 
parties to the lawsuits.  “I am willing to pay more at the grocery 
store for organic milk because I believe the milk is healthier for 
me.  But it doesn’t look like I was getting what I paid for,” Regan 
added.

“Although the USDA did not strip Aurora of their right to engage in 
organic commerce, between the consumer fraud lawsuits, and the exodus 
of a growing number of their customers, it looks like consumers and 
retailers might strip them of their ability to continue in the 
marketplace,” Kastel observed. “

Copies of the lawsuits are available upon request.  A photo gallery 
of the Aurora factory-farm operation can be viewed at the Cornucopia 
web page at www.cornucopia.org.

The Cornucopia Institute, a nonprofit farm policy research group, is 
dedicated to the fight for economic justice for the family-scale 
farming community.  Their Organic Integrity Project acts as a 
corporate and governmental watchdog assuring that no compromises to 
the credibility of organic farming methods and the food it produces 
are made in the pursuit of profit.