Sometimes There Are Frauds in Seeds

E. R. CLARK.

SOMETIMES frauds occur in seed transactions.

Unusual conditions of supply and demand may tempt an unscrupulous dealer. A short supply of hardy northern-grown seed and a surplus of cheap, nonhardy seed may create an abnormal price spread. The popularity of hybrid corn may suggest to a dishonest advertiser that the term "hybrid" might attract the unwary if he applies it to something else. The need for oil-bearing crops during the war years stimulated interest in "new" varieties alleged to be superior in oil content. At all times a racketeer may exploit the public interest in a new crop.

Sometimes no seed is delivered. The racketeer disappears with the down-payment or the total purchase price. If he can be located, he may be bankrupt, or the so-called contract proves to be only an option.

The loss to farmers and gardeners through frauds in seeds has been enormous. Besides the exorbitant purchase price, the farmer loses from lower yields and sometimes failure of a crop. The loss may extend over several years if it is seed of a perennial.

Seed-control officials have done much to curb these rackets. State seed laws and the Federal Seed Act prohibit false advertising and mislabeling of seed and generally are effective. Other laws, such as the postal fraud law, may apply. The vigilance of the extension agents, postal inspectors, farmers, and legitimate seed dealers has been helpful. Unfortunately, though, the victims of fraud often fail to report their losses promptly through fear of ridicule or loss of prestige.

Promotion schemes sometimes are organized by unscrupulous operators to exploit the demand for superior varieties of grain. The varieties offered may be recent releases from State and Federal or Canadian agricultural experiment stations, but oftener they are old varieties with mediocre records of performance and poorly adapted to the localities where they are sold. Sometimes discarded varieties are offered under new names.

Exploitation of demand for new varieties may be carried on by mail, but such operations more frequently are conducted by sending solicitors or peddlers to visit farmers at home or in the field. The peddlers offer to take orders for "elite" and "foundation" seed. They carry attractive samples of threshed and unthreshed grain and salesmen's kits, which include reports from agricultural experiment stations. They also carefully avoid leaving any printed advertisements, which may come sooner or later into the hands of the seed inspector.

The buy-back contract is a feature of the schemes. The salesman represents that his firm will purchase from the farmer all grain produced from seed furnished by that firm (except a limited amount that the farmer may retain for his own planting) at "50 cents a bushel above the Chicago market price at the date of delivery."

Actually, the contract reads: "The Company agrees to pay the Grower for all grain purchased" at the premium price. This so-called contract to purchase is only an option, which provides that the company may purchase the farmer's crop if it desires. It does not obligate the company.

The peddler's approach to the farmer usually includes the announcement that a limited number of growers, usually two in each township, have been selected to increase this seed and that they have been chosen because of their excellent records as owners and managers of fertile, well-tilled farms. There is, of course, no such limit. Later it may transpire that a dozen neighbors have signed orders for "foundation" seed.

Invariably the scheme calls for a substantial cash payment, at least one-third of the purchase price, with the order. A small discount is allowed if the total amount is paid at the time of the order. The specified time for delivery may be many months distant.

Shortly before planting time, the peddler goes into the open market to buy the seed required to fill his orders. Any standard variety is acceptable. By this time, the "new variety" promised to his customer is no longer available, if it ever existed. Deliveries are made by local railway freight or truck, and the farmer is compelled to pay any balance of the purchase price, plus less-than-carload freight charges and c.o.d. fee.

No attempt is made to buy the farmer's crop. The peddler disappears. Even if he can be located, his financial rating leaves no hope for readjustment.

Peddlers move from place to place, shifting from Minnesota to Oklahoma, from Ohio to North Dakota. They avoid established seed dealers, county agents, and members of crop improvement associations. They speak grandiosely of "our warehouses in all the large cities," "our New York office," and "15 or 20 carloads sold to this firm." Actually, they have neither warehouse nor office only an order book in their coat pockets.

By the exchange of information among State and Federal seed-control officials, known racketeers may be recognized and identified soon after they begin their operations in a new location.

The Department of Agriculture, in cooperation with State officials, maintains a list of peddlers whose activities have been investigated in any part of the United States. Any suspicious circumstances that may indicate violation of seed laws should be reported promptly to the State seed commissioner or another official.

GOOD RULES for avoiding losses from seed-peddling rackets, to be observed by prospective purchasers, are:

Purchase seed only from established dealers.

Never make cash payments to a stranger for seed for future delivery.

Consult your county agricultural agent in regard to the merits of crop varieties.

Beware of the "salesman" who says: "You have been selected as one of a limited number of farmers in your county to receive this foundation seed."

Be cautious when a seed salesman promises to buy the crop produced from his seed at a premium. Although seedsmen obtain certain kinds of seed from contract growers, no reliable dealer could afford to purchase the crops from all his customers. The so-called contract may bind the farmer but not the dealer.

IT IS ALWAYS difficult and often impossible to prevent seed rackets by enforcing seed laws. The Federal Seed Act and most State seed laws govern the labeling and advertising of seed, but they do not pertain to false promises to buy the crop.

Seed-control officials have found it necessary therefore to work with other enforcement officials in the application of criminal statutes that pertain to fraud. Investigation of advertising and labeling by State and Federal seed inspectors is a deterrent, because rackets do not thrive when brought to light.

RECENT legislation in several States makes it unlawful for a seed salesman to enter into a contract with a purchaser of seed whereby the seedsman agrees to repurchase the seed crop produced at a premium price, unless a bond of 10 thousand dollars has been posted with the State to insure performance of such contract. Seedsmen who file financial statements that show an acceptable degree of accountability are exempt. Since the enactment of this legislation, peddlers have avoided those States, for few of the racketeers are adequately financed.

POSTAL FRAUD LAWS provide severe penalties for using the mails to promote an enterprise that is fraudulent.

Since most businesses use the mails, violation of postal fraud laws sometimes occur. Seed racketeers mail postcard notices of arrival, circular letter announcements, and occasional correspondence, but the direct solicitations usually are made only by personal visits.

The use of interstate telephone and telegraph wires in furthering a fraudulent scheme likewise is unlawful. This feature of Federal laws has been overlooked by racketeers, who were familiar with the risks of using the U.S. mails. The use of the wires may be only incidental and still may constitute a felony. The mail fraud statute is applicable, however, only when the mails or wires were used in furthering a scheme devised and intended to be devised to defraud, and when such mails or wires were used before the consummation of the transaction with the victim.