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February 16, 1973.—Payne summarized this activity and decision in a report issued February 16, 1973 (attachment 8).

U.S. DEPARTMENT OF AGRICULTURE,
OFFICE OF THE INSPECTOR GENERAL,

November 9, 1970.
File No. T-121-14.
Memorandum to: John P. Cunningham, ARIG, Temple, Tex.
From: W. W. Griffin, Special Igent.
Subject: Cook Grain Co. Grain Inventory Reductions—Bayside

Elevator. During the examination of records at Cook Industries, Inc., Memphis, Tenn., in relation to the investigation entitled Cook Grain Co., Reserve, La., I discovered the attached six copies of records of inventory reductions (I/R) five from Bayside Elevator, Reserve, and one involving the shipment of Cook Grain Co. grain from Mississippi River Grain Elevator, Inc., Myrtle Grove. La. These six copies are representative of other similar documents in the files and are submitted for consideration of future action.

Copies of these documents have been referred to J. Lee Helton, District Director, Southern District, Grain Division, C&MS, New Orleans, La., and D. G. Dempewolf, Supervisory Grain Inspector, CEMS Grain Inspection Field Office, New Orleans for assistance in analyzation of the information contained.

Michael Ragen, vice president, Cook Grain Co., Memphis was queried as to the meaning of the documents and asked if the described grain on the inventory reductions sheets represented the grain actually loaded on the respective vessels.

Ragen denied that it represented the grain loaded on the vessels and stated it represented the grain taken into the elevator, processed and later exported. He advised that the grain was cleaned, demoisturized and that foreign material was removed to meet the required grade standards. He had no explanation as to why the I/R sheets would relate to a particular vessel and stated he knew very little about the export market.

Because this was not directly related to the assigned investigation no further inquiries were made. However, an investigation conducted by Special Agent Joel Gibson (deceased) came to mind and because of this the information was referred to Helton for his consideration.

Helton after consulting with Dempewolf was unable to offer a definite opinion as to whether an irregularity may exist but offered the following information:

The figures entered on the bottom of the listing of grain markoffs identified as average factors are correct figures for the weighted averages of each factor as computed by the methods recognized by the USDA Grain Inspection Division.

That if the grain shown on each inventory sheet did represent the grain loaded on the vessel that it would be impossible to arrive at the grade shown at the top of the pare which in each instance is the same as the official grain inspection certificate related to the named vessel with the same date.

In the instance of the vessel V/V Younally and other vessels he noted that figures appearing in the right hand column of the I/R

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could represent a discount figure for that particular portion of grain but stated this was conjecture only.

He intended to submit the documents to officials of the Grain Inspection Division in Hyattsville, Md., for their study and

recommendation. It is my own opinion that if the amount of grain of low grade or sample grade with such high total damage as shown in the six examples is representative of the average incoming grain (as represented by Ragen) then no amount of processing or blending can achieve the No. 2YCgrade being represented on the official grain inspection certificates. This raises multiple questions, that is: Is the grain shown in the documents incoming or outgoing! If incoming how is it binned! If binned (stored) separately how is it processed before binning?

If outgoing, how is the grain blended in order to achieve No. 2 grade and particularly how is the high total damage removed or accounted for in the overall grade of the outgoing grain?

To be classified and/or graded as No. 2 YC the grain must meet certain criteria of each grading factor used to establish the grade, that is, test weight, moisture, total damage, foreign material, and heat dama ge as well as determination of odor, weevils, or live insect infestation. Of particular interest in these shipments is the percentage of total damage. In order to meet the standards of No. 2YC the grading factor for total damage must not exceed 5.0.

Examination of the I/R sheets shows a total of 4,904,487 bushels of grain under consideration, all of which has been classed as No.2 YC on the official inspection certificates as indicated at the top of I/R sheets. However of the 4,904,487 bushels only 2.235.624 bushels falls within the factor limitation for the grade. This is inclusive of the total bushels of Nos. 1, 2, 3, and 4 YC shown on the I/Rs.

Whether the grain is incoming or outgoing there still remains 2,868,863 bushels of corn which does not meet the requirements for total damage factors for the grade of No. 2YC. To the best of my knowledge and information received from competent grain inspectors, there is no way to reduce or improve the total damage factor in corn with the exception of blending enough good corn to meet the factor requirements.

In the shipments concerned the total amount of grain represented on the I/R sheets as meeting or exceeding all factor requirements for No. 2YC amounted to 1,841.884 bushels. It is inconceivable that any blending operation could achieve a No. 2YC grade if the grain described on the I/R sheets did in fact represent the grain loaded on the named vessel regardless of processing or blending unless a large amount of good grain was introduced.

In many instances remarks have been made to me that indicates that all Grain Inspection Field Offices receive complaints that incoming grain is graded hard and outgoing grain is graded easy. I have no basis of fact for this and make no representation as to the merits of the matter other than even were this true it could hardly account for the disparitv in amounts or identification by grade. It is noted that a high percentage of the described corn is samnle grade corn because of two or more factors as well as being described as sour or must v (odor). It is known that with proper conditioning and/or blending that odor may be removed from grain or render it indetectable so that it is eli

gible for the proper grade, however some 12.897,480 bushels of grain shown on the I/R sheets is identified as screenings or less than sample grade.

It is further noted that the grain shipped on the M/V Trans Gulf consisting of 602.000 bushels of No. 2YC with 14.0 maximum moisture allowed under the contract is under the auspices of Commodity Credit Corporation with the amount financed by CCC amounting to $739,417.01.

The I'R sheet relating to this vessel shows the moisture factor on the weighted average grade as 11.2 and the figure is encircled. The grain inspection certificate figures entered on the sheet shows Moisture as 1-4.0 with this figure encircled also.

It is noted that the period covered by the I/R sheets is from July 11, 1969, through September 25, 1969, and does not purport to be the totals of incoming grain into the house nor the shipments of grain from the house but is furnished to show the amount of low quality grain being handled by the elevator, and to raise the question of grain inspection quality by the responsible licensed inspection agency.

Attachments,

Question 25. Mr. Otto Collins promised to provide the name of the person in the USDA who told Mr. Willard I. Griffin to back off his investigation. Please provide this name, together with a written report on the matter, for the record.

Answer. The investigation initiated following publication of the newspaper article which alluded to this matter is still in progress. The allegation, as described, has not been substantiated and all employees who exercised supervision over Mr. Griffin in 1971-72 are to be interviewed. The report, when compiled, will be made available to the subcommittee

1 Many of the attachments cannot be printed due to illegibility. However, they are available for inspection at the committee upon request and appointment.

* The above-referred to material will be printed in a separate book upon being received by the committee.

MATERIAL REQUESTED BY SENATOR DOLE FROM THE DEPARTMENT OF

AGRICULTURE, JUNE 19, 1975

During the Grain Inspection hearing, June 19, 1975 (p. 105), Senator Dole requested the Department of Agriculture to comment on a series of articles published in the Washington Post, beginning March 9, by Don Morgan.

The response was not received, by Senator Dole, in time for inclusion in the June 19 hearing record.

The reply from Under Secretary Campbell follows: RESPONSE TO SENATOR DOLE'S REQUEST OF JUNE 19, 1975, FROM UNDER

SECRETARY CAMPBELL, C.S. DISTRICT ATTORNEY-JULY 9, 1975

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DEPARTMENT OF AGRICULTURE,

OFFICE OF THIE SECRETARY,

I’ashington, D.C., July 9, 1975. Hon. ROBERT DOLE, U.S. Senator, Washington, D.C.

DEAR SENATOR DOLE: Pursuant to your request of the Department during my testimony before the Subcommittee on Foreign Agricultural Policy on June 19, I am pleased to enclose our comments on the Washington Post articles, “The Food Aid Business."

If you need additional information on this or any other topic, please let us know. Sincerely,

J. PIIL CAMPBELL,

Acting Secretary. [Enclosure.]

The Department has the following comment on the articles to which reference was made:

Varch 9, 1975, "Byzantine Il'orld of Cargo Contracts.Much of the material used in this article was derived from private sources. The Department's direct involvement in the ocean transportation of Public Law 480 commodities derives from Public Law 66+ (the Merchant Marine Act of 1936.) In accordance with that act the Department requires that at least 50 percent of all shipments are carried in U.S.flag vessels. Importing governments arrange for their ocean transportation, and pay foreign flag rates on all shipments, both U.S. and foreign. The Commodity Credit Corporation absorbs the differential” between U.S. and foreign flag rates on shipments required to be transported on U.S.-flag vessels. The Department was involved in the issue relating to arranging ocean transportation for 60,000 tons of rice sold to Korea; that incident generally was reported correctly. March 10, 1975,"Opening Markets-Program Pushes U.S. Food."

This article heavily emphasizes the private trade entity (PTE) program under title I of the act. While the PTE program often has been related to development of agricultural facilities designed to increase exports from the United States, the program has represented a relatively small portion of the volume of commodities shipped under titles I and II. With regard to the comments on section 104(e) "Cooley” loans to private enterprise, the act provides that such loans can be made to U.S. firms on their affiliates "for general business development and trade expansion ***" Loans to foreign firms are limited to the estab

" lishment of facilities for aiding in the utilization, distribution, or otherwise increasing the consumption of, and markets for, U.S. agricultural products * * *" The Cooley loan program was administered in its early years by the Export-Import Bank, later by AID, and most recently by the Overseas Private Investment Corporation. March 11, 1975, "High Rice Prices Probed-Record Crop Fails to

, Cut Cost Substantially." —Rice programing has always been an important part of Public Law 480 food assistance, with emphasis in recent years on exports to countries of major foreign policy significance, such as Vietnam, Cambodia, Korea, and Indonesia. Those recipients have not been among those countries commonly considered “relatively well-to-do," as indicated by the article. For example Indonesia's oil prosperity is still quite recent, and not large on a per capita basis. In view of the amount of U.S. acreage devoted to rice production, together with the relatively low domestic requirements for rice, Public Law 480 exports have also been an important element in facilitating the marketing of U.S. rice. The Department has attempted to minimize the impact of Public Law 480 exports on the domestic and dollar export markets. We are concerned about the small number of rice exporters, as reported by the article, and have continued our efforts over the years to increase that number.

March 12, 1957, "Impact of U.S. Food Ileary on South Korea."This article emphasizes possible disincentives to Korean agricultural production through Public Law 480 exports, possibly at the expense of the positive economic development and balance of payments assistance the program provided the Government of the Republic of Korea. It is primarily a presentation of the arguments against food aid, drawn from sources outside the Department.

March 13, 1977, "Free Food Effect Unclear.—This article concentrates on presenting difficulties experienced in the title II donations program, and highlights a GAO report emphasizing problems in commodity donations in fiscal vear 1971. At the same time, it gives little attention to the supply problems which prevailed in the United States during 1973-74, which resulted in high domestic commodity prices. No mention is made of the priority accorded to title II nutrition programs during that period, when the major quantity reductions under the program were made in title I sales programs.

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