New Law Legalizes Hemp and Aims to Prevent Organic Fraud

Feb 22, 2019

After the U.S. adopted a law that aims to revive the agricultural industry by legalizing hemp and preventing organic fraud, authorities announced the largest fraud scheme to rock the organic farming sector.

Recently, federal prosecutors announced that Missouri farmer and businessman, Randy Constant, was arrested for ripping off customers nationwide by falsely promoting more than $140 million worth of corn, soybeans, and wheat as certified organic grains.

The long-running fraud scheme considered the largest ever in the organic farming industry victimized food companies and consumers by forcing them to pay higher price for grains that they thought were grown eco-friendly practices.

Constant sold more than $142.4 million worth of falsely marketed organic grain to at least 10 customers between 2010 and mid-2017. The scandal ended when Constant voluntarily when he surrendered a certificate to operate in the USDA’s National Organic Program. Though no sales figures were reported, the scheme allegedly dates back to as far as 2004.

Organic farming industry watchdogs claimed the plot showed the U.S. Department of Agriculture’s lack of oversight of the industry and unfairly tarnished the reputation of reputable organic farmers and product providers. This is also one of the reasons why organic farming advocates have pushed for greater monitoring of the industry. New language about organic farming was added to a farm bill that was signed into law in December.

Some Back Story on the Scheme

In October 2018, three Nebraska farmers pleaded guilty to selling their crops to Constant. The threesome awaits sentencing. Lawyers representing one of the farmers have said that they were recruited by Constant and admittedly looked the other way at his false marketing practices because they made more money by claiming the grains were organic.

Constant owned Organic Land Management, which held USDA certifications to grow organic corn and soybeans on farms in Missouri and Nebraska. Also, he owned Jericho Solutions in Ossian, Iowa, where he sold and marketed grain intentionally mis-labeled as organic to customers throughout the U.S.

Grains must be grown without the use of synthetic fertilizers, sewage sludge, and other substances that can be harmful to the environment to be labeled certified organic. Organic farmers must go through a three-year process to achieve certified status with the USDA. It includes reviews and on-site inspections by a USDA-accredited agent.

Constant told customers his grain was certified organic, but at least 90 percent of the grain he sold was non-organic grain that he either grew himself elsewhere or bought from other farmers. Additionally, Constant knew that the grain he purchased from other farmers was grown with pesticides and nitrogen.

How the New Farm Law May Help Limit Organic Fraud Schemes

The new farm law provides $50 million in annual funding through 2023 for the flagship Organic Research and Extension Initiative. This doubled the amount of funding the initiative received. The law also contains the Organic Farm and Consumer Protection Act which aims to prevent organic fraud and create a more transparent market. The act requires all imported organic products to have an electronic import certificate for better monitoring.

The law also provides mandatory funding for the organic certification cost-share program. It incentivizes small and beginning farmers to transition to organic by relieving some of the costs associated with certification.

Other Important Parts of the Farm Law

The farm law removes the hemp crop from the federal government’s list of controlled substances, leaving its regulation in the hands of the U.S. Department of Agriculture.

Prior to this law, the federal government prohibited the production and sale of hemp. Now, any part, extract, or derivative of the Cannabis plant that has a THC concentration of not more than 0.3 percent on a dry weight basis is considered legal. Nothing in the federal law decriminalizes marijuana, which also comes from the Cannabis plant.

 If You Need Payment Processing for Your Hemp Business

The farm law has made a financial commitment the agricultural industry, including those in organic farming. Also, it likely will encourage the creation of more CBD oil and other hemp product businesses. As this gains in popularity, expect to see CBD oil businesses to seek merchant accounts, so they can accept debit and credit card payments for their goods.

When you are ready to apply for a CBD oil merchant account, turn to eMerchantBroker.com (EMB). EMB offers a simple online application process.

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