Unfit Contractors Said to Profit From Trump-Era Food Program

  • Yearlong probe cites questionable deliveries, false records
  • Subcommittee chair suggests reimbursement by companies

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A yearlong probe by House Democrats into a Trump-era pandemic food program to feed hungry Americans found three unqualified companies received multimillion-dollar contracts and other instances of program mismanagement.

The investigation led by Select Subcommittee on the Coronavirus Crisis Chair James Clyburn (D-S.C.), which he launched last August, focused on a now defunct Agriculture Department initiative that bought boxes of produce, meat, and dairy for distribution to food banks in an effort to help families put food on the table and give agriculture producers an economic boost.

Wednesday’s staff report listed Yegg Inc., Ben Holtz Consulting Inc., and CRE8AD8 LLC — a Texas event manager that specializes in weddings — as three contractors that warranted further scrutiny due to their lack of relevant experience. Ben Holtz Consulting’s $40 million contract was canceled soon after it was awarded.

CRE8AD8 and Yegg were also able to “profit steeply” from the program, according to the report, which also pointed to possible fraud by Yegg, citing questionable deliveries and false records submitted to the Agriculture Department.

Gregorio Palomino of CRE8AD8 countered that his company was a top performer among contractors, and was among the few who delivered to their entire territory.

“We’re not concerned about the USDA asking for funds back as we did not use any funds inappropriately,” he said in an emailed statement, adding that his company was also fair in price.

Ben Holtz, a fourth-generation California farmer, contested the findings, adding that he wasn’t asked to provide input in the subcommittee’s investigation.

“I am competent, capable, and was performing on my contract award when USDA terminated it for convenience,” Holtz said in an emailed statement.

“I’m all in favor of accountable spending of taxpayer dollars, but unfortunately, these discussions with regard to my contract are skewed.”

Representatives from Yegg said the report doesn’t show appreciation for the atmosphere of crisis that prevailed at the time, or the speed with which Yegg and other program participants were able to stand up a brand new supply chain.

USDA Also Reviewing

The Farmers to Families Food Box program “was marred by a structure that prioritized industry over families, by contracting practices that prioritized cutting corners over competence, and by decisions that prioritized politics over the public good,” Clyburn said.

He urged USDA Inspector General Phyllis Fong to complete her office’s review of the food box program and evaluate both contract performance and the vetting process.

“If the investigation determines funds were inappropriately paid to Food Box Program contractors, USDA should request that those funds be returned to taxpayers,” Clyburn said in a Wednesday letter.

Agriculture Secretary Tom Vilsack ended the program on May 31, telling lawmakers about “a lot of problems,” including differences in administrative costs and food waste. The program lasted about one year, as its first round began in May 2020.

Food-Aid Politics Take Stage as Vilsack Cancels Trump Program

The initiative delivered more than 173 million boxes of produce, dairy, meat, and milk in five contracting rounds.

Photographer: Daniel Dreifuss/Bloomberg
A volunteer places a bag of food into a truck at a Food Bank of Santa Barbara County distribution site in Carpinteria, California, U.S., on Wednesday, April 21, 2021.

Subcommittee Republicans separately asked Clyburn Wednesday to hold a hearing on various Covid-19 relief programs that have been susceptible to fraud and cybercrime. They criticized Democrats’ focus “on plowing forward with massive government spending and reckless expansions of the currently flawed programs” in a letter.

Program Controversies

The food box program, an element of the Agriculture Department’s $19 billion Coronavirus Food Assistance Program, was initially funded by two coronavirus relief laws (Public Law 116-127 and Public Law 116-136). Congress allotted an extra $1.5 billion to the food box initiative in December as part of the Covid-19 relief and fiscal 2021 omnibus spending bill (Public Law 116-260).

Controversy revolved around the program from its onset. Absentee suppliers left some food banks scrambling to meet demand.

Food Banks With No-Show Suppliers Scramble to Feed Hungry

Twelve states — among them Alaska, Kentucky, and West Virginia — lacked locally headquartered companies with program contracts in the initiative’s first round, the Midwest Center for Investigative Reporting reported.

A note from former President Donald Trump that was stuffed into boxes days before the November presidential election also sparked an outcry among Democrats.

To contact the reporter on this story: Megan U. Boyanton in Washington at mboyanton@bgov.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com

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