In the Paycheck Protection Program, $800 billion of loans were made to more than 10 million borrowers through banks, fintechs and the Farm Credit System. Lenders were urged to approve these loans quickly to help people affected by the COVID-19 shutdown.
One unintended consequence was that
But one PPP loan fraud case that’s scheduled to get its first hearing in U.S. District Court in Minneapolis on March 29 stands out for an unusual reason. It highlights allegations of animal abuse pervasive in the factory farms that produce more than 99% of food in the country.
The Animal Legal Defense Fund, based in Cotati, California, has brought a False Claims Act lawsuit against Northfield, Minnesota-based Holden Farms, which received a $2.57 million PPP loan that was ultimately forgiven.
On a copy of Holden Farms’ PPP loan application that American Banker obtained, President Blake Holden certified that the company was “not engaged in any activity that is illegal under federal, state or local law.” But according to the ALDF, this certification was false. An undercover investigation completed by Animal Outlook just before Holden Farms submitted its PPP loan application found that Holden was engaged in systematic and ongoing violations of a Minnesota anti-cruelty law, the federal Swine Health Protection Act and a Minnesota anti-garbage-feeding law, according to the ALDF’s amended complaint.
The ALDF says these violations make Holden Farms ineligible for the PPP loan. Under the False Claims Act, a third party like the ALDF has the power to file suits on behalf of the government against those alleged to have defrauded the government.
“We’re sort of stepping in the shoes of the government and trying to recover money that we think was the result of a false certification to receive that money,” Danny Waltz, managing attorney at ALDF, said in an interview.
Holden Farms did not respond to a request for comment for this article.
The case offers a reminder that PPP fraud cases are still working their way through the courts. It also shows that animal welfare law violations can be prosecuted, and lenders need to keep a watchful eye on their borrowers’ compliance with such laws.
Going undercover
An undercover investigator for the Washington, D.C., animal advocacy group Animal Outlook named Lance — who asked American Banker not to publish his last name to protect his cover — was driving down County Road 115 in Utica, Minnesota, when he passed a building with a picture of a pig on it. As an animal advocate, he was curious about what the building was. When he pulled in, a woman told him it was a farm equipment maintenance facility and they were hiring. Lance applied for and got a job there.
What he witnessed inside, he said, has haunted him ever since.
“Thank God there’s
As is common in factory farms, pigs in this Holden Farms facility are housed in crates the size of their bodies, so that for their entire lives, they cannot move, not even so much as to turn around, according to Lance and photos and videos from the Animal Outlook investigation.
During his five months of working at Holden Farms, Lance said he documented many forms of animal abuse forbidden by state law, including: keeping sows immobilized in farrowing crates; depriving them of food; kicking, beating, and torturing sows and piglets; and leaving severe injuries untreated.
These practices were occurring systematically, in plain view of, and with full awareness and approval of the Utica facility manager and several of Holden’s supervisors and management officials, according to ALDF’s complaint.
In Lance’s view, two of the worst practices at the facility were castrating pigs without anesthesia and very slowly cooking pigs to death in euthanasia boxes.
“It takes a while, they slowly suffocate them and you can hear them scratching at the walls of the box and struggling to breathe,” Lance said. “They’re trying to get out.”
To save money,
“Workers would turn the gas level down because we could adjust the amount of gas per use of the box,” Lance said. “Sometimes there would still be pigs alive after the box was run, so we’d have to run it a second time. And it was just heartbreaking that they went through that slow suffocating.”
When he could, he would turn the gas level back up to where it was supposed to be.
“I couldn’t believe that they were going so low as to let baby pigs suffer to save a few cents,” Lance said.
Another practice at Holden Farms that Lance documented with
“I don’t know how common of a practice that is,” Lance said. “I thought the practice was disgusting and disturbing. It was cannibalizing these animals.”
According to the ALDF, Holden’s feedback practice violates the federal Swine Health Protection Act, which forbids farms from feeding animals “waste material derived in whole or in part from the meat of any animal (including fish and poultry) or other animal material,” and Minnesota’s anti-garbage feeding law, which prohibits feeding food waste to livestock unless it is heated to 212 degrees Fahrenheit for 30 minutes and tested for dangerous pathogens. The law is designed to prevent the spread of zoonotic disease.
“The irony here is that Holden obtained funding via a government PPP loan made necessary by a zoonotic disease, so that Holden could keep violating anti-garbage feeding laws designed to prevent zoonotic disease,” said Tamara Bedić, a New York attorney who chairs the animal rights committee at the National Lawyers Guild.
Animal Outlook’s attorneys tried to get Minnesota law enforcement departments to enforce the state’s animal welfare laws at Holden Farms.
In a memo to several county sheriffs and state agencies, the group pointed out that Minnesota’s animal cruelty law covers pigs and prohibits the conduct documented at Holden Farms. None of the government officials acted on the information, according to staff attorney Jareb Gleckel.
“It’s not altogether surprising, because law enforcement departments have historically been pretty reluctant to enforce laws against agricultural facilities, even though the laws definitely apply to those facilities,” he said.
Holden Farms responded when New York Times journalist Nicholas Kristof
“We recognize the concerns over what is portrayed in the video but believe many of the images shared have been intentionally taken out of context and do not represent how we normally care for animals,” the company told Kristof.
The PPP loan
Holden Farms is one of the 20 largest pork producers in the U.S., with more than 70,000 sows under direct ownership or contract.
The ALDF alleges and the undercover investigation provided evidence that Holden’s leaders “not only knew — but also expressly authorized — ongoing and systematic core agricultural practices in direct violation of criminal laws designed to protect public health and safety and prevent extreme animal cruelty,” according to the ALDF complaint.
“If the SBA knew of Holden’s illegal, unsanitary and inhumane practices in breeding and raising its pigs for distribution and the attendant threat to food safety, the SBA would have been legally prohibited from guaranteeing, and ultimately forgiving, the PPP loan,” the ALDF stated.
The company that approved Holden’s PPP loan was Compeer Financial in Blue Earth, Minnesota, the third-largest cooperative of the Farm Credit System. Compeer did not respond to a request for comment.
But ALDF’s complaint only briefly mentions Compeer.
“I don’t know what the scope of the conversation is between the loan recipients and the lender,” Waltz said. “As far as I know, the law didn’t impose any obligation on them to verify the claim.” Holden Farms signed the certification and therefore culpability falls on the company itself, the ALDF reasons.
A federal judge will hear oral arguments at the end of the month on Holden Farms’ motion to dismiss the case. If Holden Farms’ lawyers prevail, the lawsuit will be dropped. If ALDF prevails, the lawsuit will move on to the next phase, which is discovery.
ALDF aims to recoup the government’s money. If the group ultimately wins the case, the government could receive treble damages, which would be three times the amount of the PPP loan, or around $8 million.
ALDF could get a small piece of the recovered funds. But more importantly, the group says, such a win would signal a willingness to hold a factory farm accountable to some kind of law.
“It’s really rare to get a judicial decision laying down what the law is with regard to factory farms, and especially whether they’re violating any animal protection laws, like animal cruelty laws,” Waltz said. “Local law enforcement is so reluctant to bring these types of animal cruelty cases that it’s incumbent on groups like us to find creative ways to get that question before a judge.”