Newport Man Runs into Controversy, Again

The federal government has begun a criminal investigation into improper farm subsidy payments of more than $8.5 million in Jackson County.

The bulk of those funds, more than $7.7 million, was paid to farming operations associated with John Conner Jr. of Newport.

The prominent agribusinessman is no stranger to controversy, and this isn’t his first dispute with the U.S. Department of Agriculture concerning overpayments. Conner, 52, also has had run-ins with the U.S. Army Corps of Engineers and the federal Environmental Protection Agency over the destruction of wetlands.

The current investigation revolves around subsidy payments administered by the Jackson County Farm Service Agency. It is the latest in a a long-running series of investigations into the FSA office in Newport.

The first involved employee misconduct in late 1997 and early 1998. That investigation was conducted by the U.S. Department of Agriculture at the request of the FSA’s Southeast Area office.

In the course of investigating employee misconduct, irregularities in farm program administration were brought to light. This resulted in the national FSA office conducting a special investigation conducted by a three-man team of reviewers from outside Arkansas. It exposed additional concerns including conflicts of interest.

The state FSA office conducted a followup review of these concerns and reported in April 1998 there were no problems out of the ordinary. Because of the conflict in findings between the special review and the state review, the national FSA office in June 1998 asked the USDA’s Office of Inspector General to perform an audit.

Officials were concerned about improper payment of farm subsidies. The OIG audit began in June 1998 and was completed in February 2000.

The findings addressed activities dating back to 1992 that affect farm program years through 2002. The OIG audit report, dated September 2000, led to the current criminal investigation.

Conner said he was unfamiliar with the criminal investigation and an OIG audit report. He referred questions about his farm operation’s involvement with FSA and the OIG report to his farm manager, Shelley Evans.

“It would be best if I referred questions about that to our attorney,” Evans said.

Pine Bluff attorney Bill Bridgforth said he was unaware that his client is undergoing scrutiny.

“All of the allegations I’ve seen involve the county personnel,” he said. “Time will tell whether anything the county office did was wrong.

“If there were mistakes made by the county office, I hope no producers will be adversely affected by whatever is decided.”

Most of the farms benefiting from the FSA actions now under the microscope were operations having connections to Holden-Conner Farms, which oversees more than 40,000 acres of owned and leased farmland in east Arkansas.

“During this audit, many of these entities were reorganized into 33 new corporations to replace the corporate or individual cash-rent tenants on farming units that received the questioned payments,” the OIG audit said.

“Similar reorganizations occurred after FSA established debts of about $2.8 million against the payment entities as a result of a prior audit, and subsequent payments were made to the new entities without offset,” the audit continued.

“However, in that case a former FSA administrator subsequently forgave the entire debt. The FSA now has procedures to hold new entities liable if the reorganizations were done to avoid offsets.”

The earlier dispute involved subsidy overpayments in 1986 and 1987. The Agriculture Department contended that Conner used 17 relatives, 10 employees, 13 corporations, three partnerships and six trusts to get around the maximum subsidy payment of $50,000 to a single farmer.

Conner was also investigated by the Corps of Engineers and the EPA for more than 20 instances of alleged wetlands destruction during the early 1990s. Conner reached a settlement with the agencies that included restoring, and preserving 231 acres of wet lands and paying a $400,000 fine.

The current dispute with the Agriculture Department encompasses a variety of subsidy programs, outlined in the OIG audit.

That review indicated that the FSA staff in Newport or Jackson County farmers or both violated or took deliberate actions to circumvent farm program provisions.

“The audit generally confirmed the [special review] findings and identified serious problems in program administration,” the OIG audit reported.

“Widespread program abuse and irregularities existed, including improper planted and considered planted [credit] and disaster credit; improper farm reconstitutions; unauthorized crop acre base and yield increases; and unsigned, incomplete and/or backdated program documents,” the audit said.

“The total improper payments resulting from these actions were over $8.5 million,” the audit said.

“We attributed most of these problems to the willingness of the county office staff, including [Floyd Campbell, head of the Newport FSA office] and county committee, to accommodate producers’ requests and to disregard FSA procedures in order to maximize government benefits to producers,” the audit said.

“The extent of irregularities and abuse was so pervasive that we concluded the Jackson County operations were mismanaged and that state office oversight and supervision were inadequate,” the audit said.

“Specifically, responsible state office program specialists, [Campbell] and a county office reviewer did not identify and correct longstanding irregularities.”

The OIG audit took the state office to task for not uncovering such glaring problems after performing its own audit in 1998. n

“We concluded that the [state] review was deficient and distorted the situation in that it did not disclose any problems,” the OIG audit reported. “Our review generally confirmed the existence of all the problems reported in the [special FSA county operations] review.”

Mike Dunaway, state executive director for FSA since October 1997, declined to discuss the OIG findings.

“We’re in the process of answering the OIG audit, and I’m really not at liberty to discuss that,” he said.

The OIG audit also reported that Campbell, who exited as head of the Jackson County FSA office in the aftermath of the audit, profited from the improper payments.

The audit said: “[Campbell] and a relative also benefited from improper rice [crop acreage base increases] and yield increases in that they received or were scheduled to receive about $490,000 in questioned payments on farms owned by corporations controlled by [Conner].

“Additionally, [Campbell] did not report all financial interests as required by FSA procedures, so that FSA could make informed decisions concerning potential conflict-of-interest situations.

“Further, [Campbell] approved farm reconstitutions for farms in which he and a relative had interests.

“These actions, together with the widespread irregularities and abuse disclosed by the [special FSA county operations] review and this audit, raise serious questions concerning the operations of this office for which [Campbell] and the county committee must be held accountable.”

The county committee is composed of Michael Honey, Bryan Runsick and Mike Jones. All three have business connections with Conner.

The findings of the OIG audit report serve as the starting point for the criminal investigation and leave little to the imagination about its concerns.

Bridgforth, who represented Conner in his wetlands battle, indicated that his client doesn’t personally receive any FSA payments. But the OIG believes most of the disputed funds have flowed to corporations and other entities controlled by Conner, placing him at the center of the controversy.

The Agriculture Department was able to pierce the use of various corporate identities in its earlier overpayment dispute with Conner and stake a $2.8 million claim against him.

The USDA withheld farm subsidy payments that reduced the claim to $2.3 million

“The producers subsequently reorganized to evade the indebtedness and, in November 1992, the [former] agency administrator forgave any remaining debt,” the OIG audit reported.

The OIG audit notes that during 1998, Conner and/or his family members were stockholders in four entities that owned 14 farms encompassing 27,000 acres in Jackson County.

“In recent years, [Conner] has not received program payments as an individual,” the OIG audit reported.

“However, he received program payments through the ownership interests in various corporations which were presented in records at the [Newport FSA office] as the entities performing the actual day-to-day farming operations or owners or operators of the farmland,” the OIG audit reported.

“Our review of financial records of eight of the farming corporations showed that corporations owned by [Conner] and his family members received a majority of the program benefits paid to the farming corporations.”