In the winter of 2010, after a decade of defending the government against bias claims by Hispanic and female farmers, Justice Department lawyers seemed to have victory within their grasp.
Ever since the Clinton administration agreed in 1999 to make $50,000 payments to thousands of black farmers, the Hispanics and women had been clamoring in courtrooms and in Congress for the same deal. They argued, as the African-Americans had, that biased federal loan officers had systematically thwarted their attempts to borrow money to farm.
But a succession of courts — and finally the Supreme Court — had rebuffed their pleas. Instead of an army of potential claimants, the government faced just 91 plaintiffs. Those cases, the government lawyers figured, could be dispatched at limited cost.
They were wrong.
On the heels of the Supreme Court’s ruling, interviews and records show, the Obama administration’s political appointees at the Justice and Agriculture Departments engineered a stunning turnabout: They committed $1.33 billion to compensate not just the 91 plaintiffs but thousands of Hispanic and female farmers who had never claimed bias in court.
The deal, several current and former government officials said, was fashioned in White House meetings over the vehement objections — until now undisclosed — of career lawyers and agency officials who argued that there was no credible evidence of widespread discrimination. What is more, some protested, the template for the deal — the $50,000 payouts to black farmers — had proved a magnet for fraud.
"I think a lot of people were disappointed," said J. Michael Kelly, who retired last year as the Agriculture Department’s associate general counsel. "You can’t spend a lot of years trying to defend those cases honestly, then have the tables turned on you and not question the wisdom of settling them in a broad sweep."
The compensation effort sprang from a desire to redress what the government and a federal judge agreed was a painful legacy of bias against African-Americans by the Agriculture Department. But an examination by The shows that it became a runaway train, driven by racial politics, pressure from influential members of Congress and law firms that stand to gain more than $130 million in fees. In the past five years, it has grown to encompass a second group of African-Americans as well as Hispanic, female and Native American farmers. More than 90,000 people have filed claims. The total cost could top $4.4 billion.
From the start, the claims process prompted allegations of widespread fraud and criticism that its very design encouraged people to lie: Because relatively few records remained to verify accusations, claimants were not required to present documentary evidence that they had been unfairly treated or had even tried to farm. Agriculture Department reviewers found reams of suspicious claims, from nursery-school-age children and pockets of urban dwellers, sometimes in the same handwriting with nearly identical accounts of discrimination.
Yet those concerns were played down as the compensation effort grew. Though the government has started requiring more evidence to support some claims, even now people who say they were unfairly denied loans can collect up to $50,000 with little documentation.
As a senator, Barack Obama supported expanding compensation for black farmers, and then as president he pressed for $1.15 billion to pay their claims. Other groups quickly escalated their demands for similar treatment. In a letter to the White House in September 2009, Sen. Robert Menendez of New Jersey, a leading Hispanic Democrat, threatened to mount a campaign "outside the Beltway" if Hispanic farmers were not compensated. The groups found a champion in the new agriculture secretary, Tom Vilsack. New settlements would provide "a way to neutralize the argument that the government favors black farmers over Hispanic, Native American or women farmers," an internal department memorandum stated in March 2010.Vilsack has said the compensation effort ushers in "a new chapter of civil rights at USDA," where "we celebrate diversity instead of discriminate against it."
In an interview, he said the payments had been fully justified and carefully controlled. Fraud has been a "really, really small part of it," he added, pointing out that so far, three of every 10 claims had been rejected and only three claimants had been convicted of fraud.
"We weren’t just writing checks for the heck of it," Vilsack said. "People were not treated fairly, and in fact, even today there are damages as a result of folks who weren’t treated fairly."
Senior White House and Justice Department officials also defended the use of the Judgment Fund. "Questions were certainly raised about whether this was something you could use the Judgment Fund to pay for," a senior White House official said. "They considered the relevant legal standards and concluded it was."
Vilsack blamed disgruntled Agriculture Department employees for the criticism of the payouts, saying some simply refused to acknowledge the pervasiveness of discrimination. "There are a lot of agendas here, and you are opening up a Pandora’s box," he said.
But critics, including some of the original black plaintiffs, say that is precisely what the government did when it first agreed to compensate not only those who had proof of bias, but those who had none.
"Why did they let people get away with all this stuff?" asked Abraham Carpenter Jr.,who farms 1,200 acres in Grady, Ark. "Anytime you are going to throw money up in the air, you are going to have people acting crazy."
The original lawsuit, Pigford v. Glickman, filed in federal court in Washington in August 1997, argued that the Agriculture Department’s credit bureau, now called the Farm Service Agency, routinely denied or limited loans to black farmers while freely distributing them to whites.
Two government reports that year found no evidence of ongoing, systemic discrimination. The Government Accountability Office reported that 16 percent of minority farmers were denied loans, compared with 10 percent of white farmers, but traced the difference to objective factors such as bad credit. An Agriculture Department study also found "no consistent picture of disparity" over the previous two years.
But the study concluded that decades of discrimination before then had cost African-American farmers significant amounts of land and income. Black farmers gave heart-rending accounts of loan officers who withheld promised money while crops withered, who repossessed their land and sold it to white cronies, who advised them to milk cows for white farmers rather than sow their own crops. Five months after the lawsuit was filed, and without the investigative step of discovery, the Justice Department opened settlement negotiations.
The presiding federal judge, Paul L. Friedman, initially limited the class of potential claimants to African-Americans who had farmed between 1981 and 1996 and had previously filed written discrimination complaints. But his final order significantly expanded the class, admitting those who had only "attempted to farm." And it threw out the requirement for a written bias complaint, stating that an oral complaint was sufficient if someone other than a family member attested to it in an affidavit.
The Agriculture Department was partly to blame for the lack of records. It routinely discarded failed loan applications after three years, and it had badly mismanaged written discrimination complaints. Ninety percent of the farmers had no records either, plaintiffs’ lawyers said.
The settlement, the judge’s opinion said, was designed to provide "those class members with little or no documentary evidence with a virtually automatic cash payment of $50,000." Those with documentary proof could seek higher awards, a tack ultimately chosen by fewer than 1 percent of applicants.
The Bush Justice Department had rebuffed all efforts to settle the parallel discrimination suits brought by Native American, Hispanic and female farmers. But now, the Obama administration’s efforts to compensate African-American farmers intensified pressure from members of Congress and lobbyists to settle those cases as well.
The Native-American case was clearly problematic for the government. The federal judge overseeing the case, Emmet G. Sullivan, had already certified the plaintiffs as a class, although only to seek changes in government practices and policies. He postponed a decision on whether they could seek monetary damages as a class.
But Justice Department litigators were far from unarmed. If they lost on damages, case law suggested that the decision might be reversed. Depositions had revealed many of the individual farmers’ complaints to be shaky. And federal judges had already scornfully rejected the methodology of the plaintiffs’ expert, a former Agriculture Department economist named Patrick O’Brien, in the women’s case.
Agriculture officials predicted that only 5,300 Native Americans were likely to file claims. The plaintiffs’ lawyers, whose fees were to be based on a percentage of the settlement, estimated up to 19,000 claims.
Only 4,400 people filed claims, with 3,600 winning compensation at a cost of roughly $300 million. That left $460 million unspent — of which roughly $400 million under the terms of the settlement must be given to nonprofit groups that aid Native American farmers.
Ross Racine, the director of the Intertribal Agricultural Council, based in Montana, said his organization, with an annual budget of just $1 million, is perhaps the biggest eligible group. But many others are lining up to share the windfall, he said.
"Everybody is looking at this money on the table and saying, ‘Give me some because I am a good guy,"’ he said.