Hog dealer fires Iowa-based employees over buying violations
IOWA CITY, Iowa (AP) — An influential hog dealer sanctioned twice for defrauding pork producers out of hundreds of thousands of dollars says it has fired employees responsible for its latest violations and paid restitution to affected sellers.
Lynch Livestock, based in Waucoma, Iowa, also announced that pork industry veteran Dan Sutherland would lead the company going forward "as a further safeguard against future violations," citing Sutherland's experience in compliance matters.
Lynch announced those moves in a press release posted online Wednesday, after The Associated Press reported that the U.S. Department of Agriculture had taken enforcement action against the company for illegal buying practices for the second time since 2017.
The company's longtime owner, Gary Lynch, a top booster of Iowa State athletics and political donor to Iowa Republican elected officials, hasn't returned messages seeking comment.
In the press release, his company said the USDA received a complaint in January that employees at its Waucoma buying station were manipulating the scale and issuing false tickets to artificially lower payments to producers.
Lynch said it investigated the allegations and terminated an unspecified number of employees who engaged in those practices.
"Although this situation arose due to the actions of a few employees at one buying station, we take this matter very seriously," Gary Lynch, 74, was quoted as saying. "We have already made great strides in establishing new processes and procedures to empower employees and ensure producers receive fair compensation."
USDA said its investigation found the practices went on for three years, from January 2018 through 2020. The agency ordered Lynch Livestock to pay $445,626 in penalties and restitution, and to stop recording false weights, altering classifications of hogs delivered, and creating false scale tickets.
The company said restitution has already been sent to producers who were underpaid for their hogs.
The USDA had ordered Lynch to pay a fine and restitution and to stop the same practices in 2017, after an investigation found the company "willfully violated" the Packers and Stockyards Act. Company employees arbitrarily lowered weights for delivered hogs, downgraded their classifications, fictitiously claimed dead hogs to lower prices and created false scale tickets to back up altered weights.
The USDA has resolved more than 100 legal actions against businesses and individuals for alleged fair trade violations in the livestock industry in the last five years. Lynch Livestock and meat giant JBS USA are the only companies that have faced sanctions twice during that period, according to data on its website.
The USDA has not revoked Lynch's dealer license and praised the company in a press release last week for its cooperation and voluntary corrective actions. The company operates 39 buying stations across eight Midwestern states, and markets hogs to major packing plants across the country.
Gary Lynch's brother, John Lynch, has alleged in a wrongful termination lawsuit that he discovered weighing and sorting violations in April 2017 and was fired almost immediately after reporting them to company executives. Gary Lynch then reported the irregularities to the USDA, which launched its investigation.
In its press release, the company said it had recently "established an internal whistleblower process" to allow employees to report violations without retaliation.
Gary Lynch expressed confidence that positive changes will be made under Sutherland, who spent decades as an executive with Johnsonville Sausage.
"We expect Dan will not only help us move forward with these initiatives, but also help Lynch Livestock innovate further in this area," he said.
The company did not publicize another change to its corporate structure. On July 15, two days after signing the USDA consent order, Gary Lynch filed paperwork with the Iowa Secretary of State to change the company's name to Lynch Family Companies Inc. The same day, a new Lynch Livestock was incorporated.