Mark French knows his milk. As a former auditor and executive director of the Nevada State Dairy Commission, he also understands federal dairy regulations.

When Republican Assemblyman and Ponderosa Dairies manager Ed Goedhart recently cut a dramatic and emotional commercial vilifying Senate Majority Leader Harry Reid for helping Southern Nevada’s Anderson Dairy, French could barely believe his ears. He’s sure Goedhart was either playing politics or was painfully ignorant of the facts behind Reid’s effort, and now French has stepped up to set the record straight.

He writes, “There are many factual untruths presented by Mr. Goedhart that demand a response.

“During the time that deliberations were being made to change the Federal Milk Marketing Order that impacted Southern Nevada, a consortium of milk producers, processors, Teamsters Union and the Nevada State Dairy Commission united together to remove Nevada dairies from onerous Federal regulations that put Nevada dairies at a competitive disadvantage within our own markets. Ponderosa Dairy (the very dairy where Ed Goedhart is the manager) was in full support of the Federal Exemption and indeed was signatory to the letter recommending that Nevada be exempted! It is incredible that Mr. Goedhart claims that Ponderosa Dairy is somehow the victim of legislation they supported — in person and in writing!”

French went on to shred Goedhart’s argument Reid hurt Ponderosa when he helped Anderson. French gave Goedhart the rhetorical equivalent of a body slam.

Complicating Goedhart’s portrayal is the fact his commercial was plucked from YouTube and added to Republican Senate candidate Sharron Angle’s website. Early last week, GOP sources confirmed the commercial was about to be aired on television. French’s bruising retort might make the commercial’s sponsors think twice.

Now back to the pummeling.

French writes what he calls “some of the salient points exposing the untruth’s of Mr. Goedhart’s statements.” For one, in 1999 a group of Nevada dairy interests, including Ponderosa, approached Sens. Richard Bryan and Reid for help in winning an exemption from the 2000 Farm Bill. The senators came through. Clark County “was ultimately exempted from the Arizona Federal Milk Marketing Order (Of which Clark County was to be a part), which kept Clark County dairies from being placed at an industry killing price disadvantage. Prior to that time, Clark County was the only county in Nevada with milk producers and processors being federally regulated,” French said.

He also called disingenuous Goedhart’s claim that the senators’ efforts somehow resulted in Ponderosa being forced to ship its milk from Amargosa Valley 280 miles into California.

“This has unfortunately become a political issue,” French said. “Notwithstanding how it is perceived, it should be understood that at its foundation, the whole purpose of the exemption was to maintain the viability of the Nevada dairy industry. This allowed the milk industry in Nevada to survive in the face of Federal Regulations, which would have decimated Nevada dairies and likely crippled the industry. It is ironic that Senator Reid is being maligned in this instance for lessening Federal regulations, which in this instance, has directly allowed Nevada dairies to survive.

“Federal milk price formulations are complicated. The issues and truth behind the above explanation is not. Having Clark County removed from the Federal Milk Marketing Order has been a positive development for both Nevada consumers and the entire Nevada dairy industry, and has created a more positive environment for other dairy processors, such as Dean Foods (Meadow Gold) to establish operations in Clark County. Mr. Goedhart’s narrative is misleading and appears to be politically motivated.”

It’s enough to give voters mad cow disease, but the fevered pitch of the rhetoric speaks volumes about the Reid-Angle race.

Meanwhile, a browbeating this severe could leave Goedhart lactose intolerant.

John L. Smith’s column appears Sunday, Tuesday, Wednesday and Friday. E-mail him at Smith@reviewjournal.com or call (702) 383-0295. He also blogs at lvrj.com/blogs/smith.

Sep. 28, 2010
By John L. Smith
Copyright © Las Vegas Review-Journal

Just days ago Senate Majority Leader Harry Reid’s great milk mission on behalf of Southern Nevada’s Anderson Dairy seemed consummately wholesome and politically pasteurized.

Reid scored a coup when he helped clear some federal regulations that enabled the dairy to better compete with, if not cream, the competition. Facing a tough re-election, his campaign team cut a warm and compelling television commercial that made him look like Anderson’s Holstein hero.

Read orignal here: http://www.nevadaappeal.com/ARTICLE/20100924/NEWS/100929799/-1/RSS

Posted by Chuck Muth on Sep 23rd, 2010 and filed under Politics.

(Chuck Muth) - When Democrat Sen. Harry Reid’s campaign ran that recent TV commercial featuring Anderson Dairy telling everyone how Sen. Reid “saved” the company, I’m pretty sure they never expected it would blow up into a full-scale dairy war. But that’s exactly what has happened.

According to Anderson Dairy, Sen. Reid pushed through a special piece of legislation that exempted it from federal pricing regulations in 1999, resulting in higher profits that the company otherwise wouldn’t have received. Sounds good…on the surface.

However, a competing dairy – Ponderosa Dairy out of Amargosa Valley, Nevada – the largest in the state, which is managed by Republican state Assemblyman Ed Goedhart – maintains that what benefitted Anderson hurt Ponderosa. And Goedhart – who, in the interest of disclosure, also happens to be a client of mine – hasn’t been shy about letting everyone and their uncle know about it.

And if this was just Anderson vs. Ponderosa, some would chalk the whole brouhaha up as crying over spilled milk. But Harry Reid’s ongoing, some might legitimately say extraordinary, efforts on behalf of Anderson have hurt others, as well, including Nevada consumers who are paying artificially higher prices for their milk, butter and cheese.

In particular, Reid’s efforts have put the royal screws to another dairyman, Hein Hettinga, who operates a string of dairies throughout the West, including one in Pahrump.

According to a December 2006 story in the Washington Post, Hettinga, operating a dairy out of Arizona in 2003, “started bottling his own milk and selling it for as much as 20 cents a gallon less than the competition, exercising his right to work outside the rigid (federal government) system that has controlled milk production for almost 70 years.”

Joe Benoliel, a senior vice president for Costco Wholesale Corp at the time, told the Post that milk producers in southern California were “gouging the public on price” and were “unresponsive to our call for lower prices.” Until Hein Hettinga entered the market.

“As Hettinga’s milk began reaching Costco stores, there was a snowball effect as other milk suppliers were forced to lower their prices,” Benoliel said. This, of course, upset the “brazen” big dairy profiteers who didn’t like competition coming from outside the government-controlled Soviet-style system.

Hein Hettinga had to be stopped!

So according to the Post story, “a coalition of giant milk companies and dairies, along with their congressional allies, decided to crush Hettinga’s initiative.” For three years, they spent “millions of dollars on lobbying and campaign contributions and made deals with lawmakers, including incoming Senate Majority Leader Harry Reid.”

The ultimate deal was cut between Reid and Arizona Republican Sen. Jon Kyl. “Kyl agreed to back removing all of Nevada from federal milk regulation,” reported the Post, “and Reid agreed to support legislation cracking down on Hettinga.”

On December 16, 2005, “with the Senate chamber nearly empty,” Reid “brought up the milk bill, which passed a few minutes later by ‘unanimous consent,’ a procedure that requires no debate or roll call vote if both political parties agree.”

In March 2006, it passed in the Republican-controlled House “without a single congressional hearing.”

Under the new law Hettinga was allowed to continue selling his milk at the lower price; however, the difference between his price and the higher price set by government regulation had to be paid into a “pool” shared by other dairy operators rather than into his own pocket – “a ‘crippling’ sum of up to $400,000 a month.”

All in a bi-partisan scheme to “save” one of Harry Reid’s major campaign contributors.

At least Mr. Hettinga kept a little sense of humor over getting this Reid-Kyl royal screwing. “I still think this is a great country,” the Dutch-born immigrant told the Post. “In Mexico, they would have shot me.”

But in America, Hettinga and Goedhart could end up having the last laugh on November 2nd if Nevada voters put the old special interest bull from Searchlight out to pasture.

Read Original Here: http://nevadanewsandviews.com/2010/09/23/harry-reid%E2%80%99s-dirty-dairy-diary/

This won’t make the national news, but this kind of thinking hurts every last one of us!

Harry Reid’s New Dairy Commercial Only Tells Half the Story

What About the Jobs Killed by “Saving” Anderson Dairy?

( Amargosa Valley , Nevada ) – In response to the new campaign television ad released by U.S. Sen. Harry Reid today which claims to have saved jobs at Anderson Dairy, Assemblyman Ed Goedhart ( R-Amargosa Valley ) released the following statement:

As I watched Harry Reid’s ad on ‘saving’ Anderson Dairy and the jobs of 130 employees, I felt the need to explain the total ramifications of exempting Las Vegas from the federal milk marketing order referenced in the ad.

I manage the Ponderosa Dairy , Nevada ’s largest dairy, which milks over 9,000 cows twice a day. We produce 12 semi-tankers of milk each day, or one every two hours, and directly employ 145 employees while indirectly contributing to the employment of over 1,000 Nevadans. Our economic output for Nevada is over $90 million.

When Sen. Reid carved out an exemption for Anderson Dairy – which, by the way, milks NO cows – he allowed cheaper ‘overbase’ milk – drinking milk produced in excess of government caps – to flow into Nevada from California, Arizona and Utah, which allows Anderson Dairy to pad their profit margin.

That’s a great deal for Anderson Dairy; however, Ponderosa Dairy – an actual production dairy, not a processing-only dairy – now has to truck its milk all the way to California in order to get the full “Class 1” allowable price for drinking milk (as opposed to milk used for making cheese and butter). Then some of our same trucks pick up cheap overbase milk from California and bring it to Anderson Dairy in Las Vegas .

Yes, you read that correctly.

Ponderosa Dairy now has to ship its milk to California , while California ships its cheaper overbase milk to Nevada . We call it the ‘Milk Loop’ – and it eats up over a million gallons of diesel fuel, costing us millions of dollars a year in higher trucking costs. The Ponderosa is only 80 miles from Las Vegas , but now we have to ship our milk 280 miles to southern California .

Because of the special deal Sen. Reid cut for Anderson Dairy – the Milk Money Compact – our business is now at a competitive disadvantage with others in the milk producing businesses in our region. As such, we shelved all expansion plans in Nevada and instead invested over $100 million in Texas, Oklahoma and Kansas where we now directly employ hundreds of workers and generate much-needed tax revenue and economic activity which otherwise would have benefited Nevada.

When a rock is thrown into a pond, don’t look at just the splash. Also look at the ripples that extend across the entire pond. In this case, the jobs ‘saved’ at Anderson Dairy were at the expense of thousands of other jobs in Nevada .

Government does not “create jobs.” Government jobs are financed by taxes levied on the backs of private citizens and private businesses. And when government, at the behest of elected officials such as Sen. Reid, picks winners by carving out special exemptions in the law for favored businesses, it has a ripple effect that costs all of us in the form of market inefficiencies and reduced competition.

The government can’t give anything to anybody – including Anderson Dairy – it first doesn’t take away from somebody else. For every winner as a result of Harry Reid’s deal-making, there are a lot more losers.

Sen. Reid can claim that no one can do more for Nevada ‘til the cows come home. But the fact is, whether it’s the Louisiana Purchase , the Cornhusker Kickback or the Milk Money Compact, other people continue to pay for what Sen. Reid does for a chosen few. And it stinks worse than anything you’ll ever smell from the back end of one of my cows.

What the ad fails to mention is that Reid supported price gouging and profiteering in the dairy industry by passing the Dairy Law, has had a long relationship with Anderson Dairy, having listed Anderson as a soft money contributor to Reid’s Searchlight Leadership Fund and having Anderson’s vice president David Coon to a meeting about the bill in Sen. Feinstein’s conference room on the hill, along with the fact that Reid, the Milk Lobby, and the Dairy Industry crushed a maverick dairyman named Hein Hettinga (who had the audacity to bottle and sell milk for less, outside the coalition of giant milk companies and dairies, and let the free market decide) by passing a law that reshaped the Western milk market and ended Hettinga’s experiment without a single congressional hearing.

Dan Morgan, Sarah Cohen and Gilbert M. Gaul wrote a great article back in December of 2006 at The Washington Post detailing the history of how the Dairy Bill be came law.

In short, a Dairy farmer and bottler went outside of the Federal Milk Pools in order to provide supply for increasing demand for lower milk prices and when his competition (in what should have been a free market) started to infringe on overpriced coalition pool members (like Anderson Dairy and others) Politicians, like Harry Reid, Kyl, and Milk Lobbyists used their power and influence to target a single company and shore-up the Federal regulation to put an end to free enterprise within the dairy industry.

On the evening of Nov. 2, 2005, lawmakers and several dozen lobbyists squeezed into the conference room of Sen. Dianne Feinstein (D-Calif.) to seek common ground in the milk dispute. Lewis brought Hettinga and McGrath. Reid came with Anderson’s Coon. Shamrock Foods’ McClelland was with Kyl.

“Jerry, if it wasn’t for you, we’d have taken care of this a long time ago,” Reid said, according to several participants.

Lewis bridled. It seemed as if Reid was calling him a “liar,” he said. If that was so, he might as well leave, he added.

Hettinga told the group how he had built his plants, arguing that the other dairy farmers “didn’t pay me when I started the business, why should I start paying them when the business is successful?”

At the end, participants said, Reid was plainly exasperated. “I’m not listening to any more of this,” he said. “I’m out of here.”

And in typical Reid fashion, set out to make sure his will be done by ramming this bill through without debate… sound familiar?

Reid made his move on Dec. 16, with the Senate chamber nearly empty. He brought up the milk bill, which passed a few minutes later by “unanimous consent,” a procedure that requires no debate or roll call vote if both political parties agree. Reid and Kyl said in recent statements that their goal was to level the playing field for milk producers.

Bravo Senator Reid, you made sure that an innovator, who’s only crime was to create competition in what should have been a free market, was forced to pay his competitors!

“I had an awakening,” the 64-year-old Dutch-born dairyman said. “It’s not totally free enterprise in the United States.”

This is why price-controls and socioeconomic engineering, despite best intentions, continue to fail and keep prices for goods and services artificially high.

http://liberty.com/2010/09/09/new-reid-ad-forgets-to-mention-he-supported-price-gouging-and-profiteering-in-the-milk-industry/

Senate Majority Leader Harry Reid (D-NV) has a new ad out, featuring a Nevada businessman boasting that Reid used his clout to save jobs in the state.

“Federal regulations were driving us out of business. There was a lot of worry in the faces of our employees,” says David Coon, head of Anderson Dairy, which according to the ad employs 130 Nevadans.

The on-screen text then tells us: “Harry Reid changed the Dairy Law so Anderson could compete. And save the jobs.” David Coon then chimes in again: “Because of Sen. Reid, we continue to stay in business.

A nice touch is that the ad concludes with text of Reid’s slogan, “No one can do more,” along with a visual of an Anderson truck leaving their building. The truck then incorporates the company’s slogan into the ad: “Too cool to pass up.”

Read original: http://tpmdc.talkingpointsmemo.com/2010/09/reid-ad-he-saved-too-cool-to-pass-up-dairy-jobs-video.php

Harry Reid released a new ad today entitled “Staying in Business”. The ad touts Reid as the savior of Anderson Dairy, by passing the Dairy law, the inference is that Harry Reid saved 130 jobs at Anderson Dairy… seems like a good thing on it surface, right?

What the ad fails to mention is that Reid supported price gouging and profiteering in the dairy industry by passing the Dairy Law, has had a long relationship with Anderson Dairy, having listed Anderson as a soft money contributor to Reid’s Searchlight Leadership Fund and having Anderson’s vice president David Coon to a meeting about the bill in Sen. Feinstein’s conference room on the hill, along with the fact that Reid, the Milk Lobby, and the Dairy Industry crushed a maverick dairyman named Hein Hettinga (who had the audacity to bottle and sell milk for less, outside the coalition of giant milk companies and dairies, and let the free market decide) by passing a law that reshaped the Western milk market and ended Hettinga’s experiment without a single congressional hearing.

Dan Morgan, Sarah Cohen and Gilbert M. Gaul wrote a great article back in December of 2006 at The Washington Post detailing the history of how the Dairy Bill be came law.

In short, a Dairy farmer and bottler went outside of the Federal Milk Pools in order to provide supply for increasing demand for lower milk prices and when his competition (in what should have been a free market) started to infringe on overpriced coalition pool members (like Anderson Dairy and others) Politicians, like Harry Reid, Kyl, and Milk Lobbyists used their power and influence to target a single company and shore-up the Federal regulation to put an end to free enterprise within the dairy industry.

On the evening of Nov. 2, 2005, lawmakers and several dozen lobbyists squeezed into the conference room of Sen. Dianne Feinstein (D-Calif.) to seek common ground in the milk dispute. Lewis brought Hettinga and McGrath. Reid came with Anderson’s Coon. Shamrock Foods’ McClelland was with Kyl.

“Jerry, if it wasn’t for you, we’d have taken care of this a long time ago,” Reid said, according to several participants.

Lewis bridled. It seemed as if Reid was calling him a “liar,” he said. If that was so, he might as well leave, he added.

Hettinga told the group how he had built his plants, arguing that the other dairy farmers “didn’t pay me when I started the business, why should I start paying them when the business is successful?”

At the end, participants said, Reid was plainly exasperated. “I’m not listening to any more of this,” he said. “I’m out of here.”

And in typical Reid fashion, set out to make sure his will be done by ramming this bill through without debate… sound familiar?

Reid made his move on Dec. 16, with the Senate chamber nearly empty. He brought up the milk bill, which passed a few minutes later by “unanimous consent,” a procedure that requires no debate or roll call vote if both political parties agree. Reid and Kyl said in recent statements that their goal was to level the playing field for milk producers.

Bravo Senator Reid, you made sure that an innovator, who’s only crime was to create competition in what should have been a free market, was forced to pay his competitors!

“I had an awakening,” the 64-year-old Dutch-born dairyman said. “It’s not totally free enterprise in the United States.”

This is why price-controls and socioeconomic engineering, despite best intentions, continue to fail and keep prices for goods and services artificially high.

Ready for a government horror story? Here’s a doozy. A massive milk cartel now holds sway over American supermarkets, thanks to a maze of regulations enacted during the Depression to keep struggling dairy farmers in business. These anachronistic, anti-competitive rules cost U.S. consumers at least $1.5 billion a year.

But instead of accepting a tidy guaranteed profit by staying within the system, a Riverside County, Calif., dairyman, Hein Hettinga, saw a better way – one that would give consumers a much fairer deal.

Almost all dairy farmers ship their raw milk to plants for conversion into jugs of milk, ice cream, cheese and other dairy products, accepting a fixed, government-set payment in return. Hettinga realized that if he cut out the middleman and owned both dairies and production facilities, he could provide much cheaper milk operating outside the federal system. “Producer-handlers” willing to risk free-market competition were specifically exempted from the 1937 federal milk -price support law.

And so beginning in the early 1990s, Hettinga built a network of dairies from California to Texas and set up two processing plants in Yuma , Ariz. By 2002, his Sarah Farms milk – at least 30 cents cheaper per gallon than price-support milk – was a hugely popular fixture at Costco, Sam’s Club and other grocers in Southern California and Arizona .

So what did Hettinga’s rivals do: Upgrade and streamline their own operations? Pursue new efficiencies and innovations? Go the “producer-handler” route so their milk also would be cheaper? Nope. They asked Congress to punish Hettinga for the sin of not joining in their rigged game – and, according to a recent Washington Post report, got their way without a single hearing in the House or Senate.

The article detailed a three-year, multimillion-dollar lobbying and campaign contribution blitz by the dairy cartel. With key assists from Senate Minority Leader Harry Reid, D-Nev., Sen. Jon Kyl, R-Ariz., and Rep. Devin Nunes, R-Calif., the blitz paid off this spring with the passage of a bill that forced Hettinga to give much or most of his profits to one of the cartel’s regional pools – in other words, to his competitors. A dairy industry lobbyist openly bragged to the Post that he helped write the measure.

Even by the debased standards of Washington politics, this stinks. A cartel that’s been ripping off people for decades finally faces a little competition and squashes it by buying off Congress. Talk about banana republic politics.

The sliver of hope for justice in this matter resides in Article 1 of the U.S. Constitution. It forbids “bills of attainder” – legislative acts that single out individuals or groups for punishment without benefit of trial. Hettinga is suing the federal government on these constitutional grounds. Given that none of the arrogant milk industry lobbyists or their hired lawmakers bothered to pretend that the milk Regulatory Equity Act of 2006 had any goal besides harming the maverick dairyman, he appears to have a case.

Reprinted from The San Diego Union-Tribune.

For three years, starting in 2003, a coalition of milk companies and dairies lobbied to crush an initiative by a maverick Arizona dairyman. Hein Hettinga chose to work outside the rigid system that has controlled U.S. milk production for almost 70 years. The milk lobby said he presented unfair competition because he chose to operate without federal price control. Hettinga fought back but was outgunned on the Hill. In March, Congress passed a bill that effectively ended his experiment.

Click to enlarge image below

In the summer of 2003, shoppers in Southern California began getting a break on the price of milk.

A maverick dairyman named Hein Hettinga started bottling his own milk and selling it for as much as 20 cents a gallon less than the competition, exercising his right to work outside the rigid system that has controlled U.S. milk production for almost 70 years. Soon the effects were rippling through the state, helping to hold down retail prices at supermarkets and warehouse stores.

That was when a coalition of giant milk companies and dairies, along with their congressional allies, decided to crush Hettinga’s initiative. For three years, the milk lobby spent millions of dollars on lobbying and campaign contributions and made deals with lawmakers, including incoming Senate Majority Leader Harry M. Reid (D-Nev.).

Last March, Congress passed a law reshaping the Western milk market and essentially ending Hettinga’s experiment — all without a single congressional hearing.

“They wanted to make sure there would be no more Heins,” said Mary Keough Ledman, a dairy economist who observed the battle.

Hettinga, who ran a big business and was no political innocent, fought back with his own lobbyists and alliances with lawmakers. But he found he was no match for the dairy lobby.

“I had an awakening,” the 64-year-old Dutch-born dairyman said. “It’s not totally free enterprise in the United States.”

Most U.S. dairy farmers work within a government system set up in the 1930s to give thousands of small dairies a guaranteed market for their milk and to even out prices for consumers. Farmers who participate in regional pools operated by the federal government or the states deliver raw milk to cooperatives or food processors. They get a guaranteed price, whether the milk ends up in a gallon jug, cheese, butter or ice cream. In Arizona and other federally regulated regions, the Agriculture Department uses a formula to set the price processors pay for raw milk, issuing “milk marketing orders.”

Developed for a bygone era of small dairies and decentralized milk plants, the system lives on when 3,000-cow dairies are not uncommon and huge cooperatives and food companies dominate the business.

Business groups, fiscal conservatives and some dairy organizations have called for Congress to overhaul the complex system of protections and subsidies, which they say is costly to taxpayers and consumers. A recent USDA study acknowledged that “dairy programs raise the retail price” of milk. The watchdog group Citizens Against Government Waste estimates that the programs cost U.S. consumers at least $1.5 billion a year.

The 1937 law allowed “producer-handlers” — dairy farmers who bottle milk from only their own cows — to operate outside the pools. But it was risky for a farm to do this because it might end up with more milk than it could sell. Most of these outsiders were small.

Hettinga started out as a hired hand in the Dutch American dairies of Southern California, where his family emigrated after World War II. He soon figured out he could buy cows with injured hooves, then fix and sell them at a profit that exceeded his weekly paycheck.

By the early 1990s, Hettinga was working with partners and relatives and had half a dozen dairies in Arizona and California. Then he decided to build his own bottling plant in Yuma, Ariz.

His first customers were in Mexico. Later he made a deal with a chain of Arizona stores catering to the fast-growing Hispanic population. In 2002, he and his son began building a second Yuma plant to supply Costco stores in Southern California.

For Costco shoppers, it was a good deal, according to an e-mail sent last year to Reid’s office by Joel Benoliel, Costco Wholesale Corp.’s senior vice president. The arrangement lowered the average price of milk “by 20 cents a gallon overnight and it stayed that way for three years,” Benoliel wrote in the e-mail, made available to The Washington Post. “Milk suppliers in southern California were gouging the public on price (20 cents a gallon higher than N. California) for years and were unresponsive to our call for lower prices. It was a brazen case of price gouging and profiteering by the strongest, largest market suppliers simply because they could.”

In Arizona, Hettinga was competing for retail sales against Arizona’s biggest milk company, Shamrock Foods Co. of Phoenix. He “wasn’t by any stretch a more cost-effective operator than we are. He just didn’t have the same rules apply,” said Shamrock’s general manager, Michael A. Krueger.

United Dairymen of Arizona, a cooperative that handles 85 percent of the state’s milk, complained that by keeping his milk outside the Arizona pool, Hettinga was affecting the USDA price-setting formula, lowering returns for other dairies.

In California, the Hettingas were taking on the two biggest players in the U.S. milk industry: Dean Foods Co., the largest processor of dairy products, with $10 billion in annual sales and five California plants, and Dairy Farmers of America, a co-op that controls nearly a third of the nation’s liquid milk.

In Southern California, the co-op sells to Dean Foods, which in turn sells to retailers. As Hettinga’s milk began reaching Costco stores, there was a snowball effect as other milk suppliers were forced to lower their prices, Costco’s Benoliel said.

Dean Foods recently said that Hettinga was unfairly exploiting a “regulatory loophole” and that his actions led to lower milk prices for California dairies.

Hettinga’s operation was “damaging to the marketplace,” said Elvin Hollon, director of economic analysis for Dairy Farmers of America. “Nobody ever envisioned there would be such large handlers” outside the pool.

“So,” Hollon said, “the regulations had to change.”

Political Education

The first challenge to Hettinga came in late 2001, when Sen. Jon Kyl (R-Ariz.) proposed a measure that would have forced Hettinga to pay in to the pool that Shamrock was governed by.

Shamrock’s chairman, Norman P. McClelland, had contributed thousands of dollars to Kyl, beginning with Kyl’s first House campaign, in 1986.

Hettinga fought back by printing labels saying that Kyl wanted to “limit competition and raise the cost of milk to the Arizona consumer” and putting them on 50,000 gallons of milk shipped around Arizona.

In the House, Devin Nunes , a new Republican member from California’s Central Valley, introduced a bill to close what he called the “regulatory loophole” that let Hettinga ship unregulated milk into California. Nunes’s district is No. 1 in milk production in the nation. Nunes and Sons dairy, located a few miles north of Tulare, was started by Nunes’s grandfather and was still in the family.

In Nunes’s first run for Congress, in 2002, he pulled in $130,000 from dairy interests, second only to President Bush among federal candidates, election records show.

Nunes’s bill and Kyl’s amendment initially went nowhere. So Kyl, a conservative Republican, found an unlikely ally in Reid, then the Senate’s fiercely partisan Democratic whip.

Reid was no newcomer to dairy issues. Nevada’s population was growing faster than its dairies could supply milk, so prices tended to be high. Milk plants that had to import milk from far away thought they could get it cheaper if they did not have to pay regulated prices. In 1999, Reid helped them out. He slipped an amendment into a spending bill exempting milk plants in the Las Vegas area from federal pricing rules.

David Coon, vice president of Anderson Dairy Inc., then the area’s largest milk plant, hailed Reid’s amendment as a “good example of the good we feel he has done fighting for our state.” Reid later listed Anderson as one of 51 “soft money” donors to his Searchlight Leadership Fund, which funds Democratic candidates in Nevada.

The 1999 provision still left the Las Vegas area subject to some federal milk regulations. By 2003, fixing that had become a pressing concern as Dean Foods began construction on a $40 million, state-of-the-art milk plant outside town.

That year, Reid and Kyl saw they could make a deal. Kyl agreed to back removing all of Nevada from federal milk regulation, and Reid agreed to support legislation cracking down on Hettinga and protecting Arizona dairies from competition from low-priced Nevada milk. In 2003, the senators co-sponsored an amendment with both provisions. In effect, Nevada bottlers would get some of the same rights that were being taken away from Hettinga. Under this arrangement, the money the Yuma dairyman would save by operating outside the federal system would have to be paid in to the pool.

Getting Around Lewis

In 2003, Hettinga still looked the part of a hard-working dairy farmer. He wore jeans, lunched on fried chicken and salad at the Hometown Buffet in Yuma, and seldom took a vacation. But he was no longer a little guy. He owned a private plane and kept a pilot on standby. His 16 dairies stretched from Texas to California, and his company, Sarah Farms, supplied nearly a fifth of Arizona’s liquid milk.

As Kyl and Reid were putting together their deal, a milk-industry friend put Hettinga in touch with a Washington lobbyist, former representative Raymond J. McGrath (R-N.Y.). McGrath, who was president of the National Republican Club of Capitol Hill, had retained good connections in GOP circles.

During a swing through Capitol Hill with McGrath, Hettinga pitched his cause to House Appropriations Committee Chairman Jerry Lewis (R-Calif.).

Lewis’s district was home to some large dairies, including a Hettinga dairy in San Jacinto. The two men had never before met or talked, according to Lewis’s spokesman. But Lewis was sympathetic. “This is not right, taking a rifle shot at one individual,” Hettinga recalls Lewis saying.

A few months later, Lewis used his power to kill the Kyl-Reid measure. “Congressman Lewis did it strictly on behalf of a constituent and because he thought Hein’s deal was good for consumers,” said Lewis’s deputy chief of staff, Jim Specht.

Hettinga said that at Lewis’s request he chipped in $2,000 to the Bush-Cheney campaign later that year. He also gave $4,000 to Lewis’s campaign war chest between 2003 and 2006, records show.

But the big milk producers and dairy trade groups were already at work in Washington. Through its employees and political action committee, Dean Foods, with nearly 100 plants around the country, spent more than $600,000 on political contributions in 2005 and 2006, including $5,000 to Kyl and $3,000 to Nunes. Reid got $5,000 in 2004.

Eight groups with an interest in the legislation reported overall lobbying spending of more than $5 million in 2005 and the first half of 2006. Dean Foods reported spending almost $2.5 million, including $500,000 for outside lobbyists. One was Charles M. “Chip” English Jr. of Thelen Reid & Priest. English also represented Shamrock Foods, United Dairymen of Arizona and the Dairy Institute of California.

During 2005, English fine-tuned the language in the milk bill. “My hand can be seen throughout the bill,” he said in an interview. Pick a paragraph in the legislation, he said, and “either I wrote it or I commented on it.”

Among others in the lobbying effort were the International Dairy Foods Association, the National Milk Producers Federation and the Western United Dairymen. Dairy Farmers of America, with members in 47 states, mobilized a grass-roots campaign for the legislation.

At every turn, Lewis’s office was “barraged by calls and faxes from dairy owners,” recalled Specht, Lewis’s aide. “It seemed clear that all the skids had been greased for this legislation.”

An Angry Meeting

On the evening of Nov. 2, 2005, lawmakers and several dozen lobbyists squeezed into the conference room of Sen. Dianne Feinstein (D-Calif.) to seek common ground in the milk dispute. Lewis brought Hettinga and McGrath. Reid came with Anderson’s Coon. Shamrock Foods’ McClelland was with Kyl.

“Jerry, if it wasn’t for you, we’d have taken care of this a long time ago,” Reid said, according to several participants.

Lewis bridled. It seemed as if Reid was calling him a “liar,” he said. If that was so, he might as well leave, he added.

Hettinga told the group how he had built his plants, arguing that the other dairy farmers “didn’t pay me when I started the business, why should I start paying them when the business is successful?”

At the end, participants said, Reid was plainly exasperated. “I’m not listening to any more of this,” he said. “I’m out of here.”

Reid made his move on Dec. 16, with the Senate chamber nearly empty. He brought up the milk bill, which passed a few minutes later by “unanimous consent,” a procedure that requires no debate or roll call vote if both political parties agree. Reid and Kyl said in recent statements that their goal was to level the playing field for milk producers.

That set the stage for a bitter battle in the House, pitting Nunes, the new California-dairy-district congressman, against Lewis, then a 14-term veteran with friends on both sides of the aisle.

Lewis used the muscle of his 66-member Appropriations Committee, the dispenser of billions of dollars a year in spending. But he faced the nearly unified front of the dairy lobby and its friends. Virginia dairy farmers had helped win the key support of Robert W. Goodlatte (R-Va.), chairman of the Agriculture Committee, convincing him that if Hettinga were brought into line, the threat “would be less likely to show up back here,” said lobbyist Charles Garrison. Nunes was a protege of House Ways and Means Committee Chairman Bill Thomas (R-Calif.). And he had recently backed John A. Boehner (R-Ohio) in his successful campaign for majority leader.

In late March, Boehner placed the bill on a special docket usually reserved for uncontroversial measures such as naming post offices. Under that docket, bills require a two-thirds majority for passage. But the parliamentary procedure also meant that no one could offer an amendment to slow the bill down.

McGrath, Hettinga’s lobbyist, watched the vote from the Capitol Hill Club. After Lewis came up 13 votes short and the bill passed, McGrath recalled, a large contingent of dairy lobbyists arrived, some trading high-fives. Lewis was to have had dinner at the club with his wife, but when he showed up and saw the lobbyists celebrating, he turned and left.

In an interview later, Nunes called the milk legislation a victory for “every dairy farmer in America except those who were gaming the system.” He added, “People out there were making millions of dollars a year off the backs of America’s dairy farmers . . . that was a wrong that was finally righted.”

The next morning, lawmakers in dairy districts who voted against the dairy groups got an e-mail from a lobbyist expressing “disappointment on behalf of the members of the International Dairy Foods Association for your vote.” It added: “We will be letting our member companies and their employees know of the outcome.”

Hettinga vowed to keep supplying his customers in Arizona and California even though the new law required him to pay the Arizona pool what he said was a “crippling” sum of up to $400,000 a month.

“The irony is that Hein is paying his competitors,” said Alfred W. Ricciardi, Hettinga’s Phoenix lawyer.

Hettinga and his relatives gave nearly $20,000 to Kyl’s Democratic challenger this year. Kyl won handily and got his own dairy industry support: A few weeks before Senate action on the milk bill, 11 officials of Shamrock contributed $14,800.

Hettinga also turned to the courts. In October, he filed a lawsuit charging that the milk bill was unconstitutional because it was aimed at penalizing a single individual.

“I still think this is a great country,” Hettinga said. “In Mexico, they would have just shot me.”

Research editor Alice Crites, research database editor Derek Willis and staff researcher Magda Jean-Louis contributed to this report.

SOURCES: PoliticalMoneyLine, federal lobby disclosure reports and federal campaign finance records | GRAPHIC: By Dan Morgan and Laura Stanton, The Washington Post – December 10, 2006

Long before he discovered a way to sell milk for far less than his competitors, before he enraged the multibillon-dollar dairy industry so much that Congress passed a law to stop him, Hein Hettinga clipped cow hooves for a living.

It was menial work. But it put him on a career path that, in time, would lead him to found Yuma-based Sarah Farms, one of the largest and most innovative private dairy operations in the country.

Now, 12 years after building his dairy business into a proverbial cash cow, Hettinga finds himself waging war against big-dairy lobbyists, high-profile lawmakers and the federal government.

At 64, the Dutch immigrant said he simply is defending his family business, preserving competition in the dairy industry and trying to keep milk prices low for consumers. His critics counter that Hettinga had long exploited a federal loophole that gave him an unfair leg up on his competitors.

Most in the dairy industry fall into two categories: those who produce the raw milk and those who process it into the milk we pour onto our cereal each morning.

Hettinga is different. The self-proclaimed black sheep guides his milk through all stages of production, from his dairy cows to his bottling plants to supermarket shelves. That enables him to cut out the middleman, reduce costs and pass those savings to his customers. And, of course, make a tidy profit.

Because of his producer-distributor status, Hettinga was able to take advantage of a technicality in Depression-era federal regulations. Those rules require milk processors who do business in certain geographic markets to pay into a revenue pool shared among farmers who own the region’s dairy cooperative.

Cooperatives help stabilize the dairy market, guaranteeing farmers a place to sell their perishable products at a fixed price. That helps avert price wars and milk dumping.

Some big processors, such as Shamrock Farms, use milk from their own dairies. But they also buy milk from cooperative farmers, meaning they’re still subject to federal regulations.

Hettinga bottles only his own milk, which made him exempt.

When Hettinga began seizing a larger share of the market, the $27 billion-a-year dairy industry struck back. This past spring, its most powerful members successfully lobbied Congress to support legislation targeting Sarah Farms.

The Milk Regulatory Equity Act, introduced by Republicans Rep. Devin Nunes of California and Sen. Jon Kyl of Arizona , essentially forces the Yuma farm to pay its competitors through the local dairy pool.

Because Hettinga had been trucking milk across the state line to Southern California retailers, he also had been exempt from abiding by that state’s pricing minimums. That allowed Hettinga to drop his prices below those of his competitors and secure lucrative contracts with Costco stores and local distributors.

The legislation sealed off that loophole, subjecting Hettinga to Arizona price floors.

Hettinga, whose farms have captured about 15 percent of Arizona ‘s milk market, said it was his success that made him the target of the dairy industry.

His Yuma plant was referred to multiple times on the House floor during debate of the bill. And Sarah Farms is the only U.S. business that falls within a narrow category of dairy operations targeted by the law: Arizona producer-distributors who turn out more than 3 million pounds of milk per month.

“They passed a law to kill one private dairy. Does that make any sense? It’s not the way the government should conduct business, to limit competition,” Hettinga said recently as he navigated his car on Interstate 8, traveling toward his Yuma plants. “Big business shouldn’t be able to influence in this way.”

Leveling the playing field

Despite passage of the law, Hettinga isn’t backing down.

This summer, he and six other family members gave a total of nearly $30,000 to Jim Pederson’s unsuccessful campaign for Kyl’s Senate seat.

And on Sept. 21, Hettinga and his wife, Ellen, sued the federal government in U.S. District Court, claiming the legislation singles out Sarah Farms and has caused the company considerable financial loss.

Hettinga said his farms and the retailers they supply have absorbed extra costs resulting from the law, estimated at about 15 cents per gallon.

Now, it’s just a matter of time before he is forced to hike his prices or competitors put him out of business, he said. Either way, Hettinga believes consumers will be paying more.

A Justice Department spokesman said that the agency had no comment about the lawsuit but that it plans to issue a legal response at the end of this month.

Andrew House, senior policy adviser for Nunes, said that regulatory issues addressed by the law were thoroughly debated within the industry and Congress.

He and other proponents of the law said it was Hettinga who was disrupting the marketplace, supplying milk at bargain-basement prices to Food City , Sam’s Club and Costco stores in Arizona , and undercutting competitors.

Both Costco and Sam’s Club sell a 2-gallon carton of 2 percent milk for $3.99, up from $3.69 a month ago.

Meanwhile, Fry’s Food and Safeway, which buy milk from Arizona ‘s dairy cooperative, sell a single gallon of 2 percent milk for as much as $2.99 and $3.79, respectively. Such grocers, however, often offer significant discounts or 2-for-1 specials with a club card.

Several factors determine milk prices. Prices drop during the summer, when milk-guzzling children are absent from school cafeterias. And they rise during the holiday season, when large amounts of dairy products are consumed.

But Hettinga’s major competitors in Arizona said the legislation serves to “create a fair and equitable system.”

“It levels the playing field for all Arizona dairy farmers,” said Sandy Kelly, a spokeswoman for Phoenix-based Shamrock Farms Dairy.

Although Hettinga benefited from the federal loophole, critics said he received hundreds of thousands of dollars in federal subsidies.

And they scoffed at the notion that Hettinga — who drives a Lincoln Town Car, flies a private plane and owns homes in three states — is simply a small-town farmer battling the big bad dairy industry.

“(Hettinga) is the epitome of big dairy,” said House, whose boss represents the biggest dairy-producing congressional district in the country

>From 1995 to 2004, Hettinga’s farms collected $895,000 in such subsidies, just under $100,000 a year, according to Environmental Working Group, a Washington-based public watchdog. That ranked his farms third among dairy-subsidy recipients.

House, who helped draft the legislation, said it was hypocritical of Hettinga to draw federal subsidies, “but when it comes to abiding by regulations, he doesn’t want to do it because it will mean his profit margin will go down.”

‘I have no choice’

Something as simple as the price of milk does matter to families. Picking up a 2-gallon pack of 2 percent milk at a West Valley Costco store one recent afternoon, Daisy Castillo of Surprise said she will be forced to shop for a better deal or shell out more for milk if prices are boosted.

“It’s essential to our family,” Castillo, 22, said while pushing her 1-year-old daughter in a cart. Castillo’s family gulps down the $3.99 2-gallon milk pack each week. “I don’t think we’d stop buying it (if prices went up). But I’d be upset because I have no choice.”

Costco did not return several phone calls for this story. Wal-Mart Stores Inc., which owns Sam’s Club, said it is company policy not to comment on its relationship with suppliers.

But Basha’s Family of Stores, parent company of Food City , said shoppers have not seen a rise in milk prices because of the legislation.

The path to success

Hettinga’s road to riches was a long one.

After graduating from a California high school in 1960, Hettinga was faced with a choice. He could take a job driving a truck for a local grocery store or try his fortune trimming cow hooves and castrating bulls.

Hettinga chose the latter.

It paid $2 an hour, a dollar less than the trucking job. But he learned the ins and outs of the dairy industry.

More than a decade later, he bought his own dairy farm in Chino , Calif. , where like most other dairymen he shared milk profits in a cooperative.

Twelve years ago, Hettinga built a milk processing plant in Yuma where he could pasteurize and homogenize his raw milk, package it in his own bottles and ship it to stores.

“I wanted to be integrated, to have the right to sell my milk,” said Hettinga , who put all his cows up as collateral to persuade banks to loan him money for the $160,000 project

Today, he supplies about 25 million gallons of milk a year to more than 60 Food Cities and almost all the Costcos and Sam’s Clubs in Arizona , as well as to distributors in Mexico .

The dairyman raised the stakes when he built a second Yuma processing plant. This one cost $12.5 million and today supplies about 700,000 gallons of milk each month to Costco stores in Southern California , according to a recent news report.

Today, the Sarah Farms empire includes 16 dairy farms in California , Texas and Arizona , six between Gila Bend and Yuma .

Looking after Sarah Farms, a business he built from the ground up and named after his daughter, is a seven-day-a-week job. Hettinga, dressed in boots and jeans, jokes that he works half-days: 12 hours instead of 24.

Now, as the legal process unfolds, he continues to defend what he built.

“I got big enough that they can’t kill me, but it has financially crippled me,” Hettinga said. “It has stopped every independent dairyman of doing their own thing.”

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