Refusal to Pay Fees Brings USDA Knocking

May 8, 2017 06:30 AM
Shoup 2

At a seasoned 75 years old, Jack Shoup stepped from the comfort of relative farming anonymity and placed himself squarely in USDA crosshairs by claiming no taxation without compensation. Dissent carries a high price, and although Shoup knew his defiance was destined for the legal graveyard, the Midwest farmer didn’t care.

When Shoup refused to pay late fees to the Iowa Soybean Association (ISA) on tardy checkoff payments as the first purchaser of grain at Dinsdale Elevator in 2013-2014, he drew a straight line in his Reinbeck, Iowa, dirt and prepared for a legal battle. Shoup wanted to keep a fraction of the checkoff assessment he was required by law to submit to ISA. As first purchaser, Shoup believed he was entitled to remuneration through a processing fee from checkoff transactions. It was a powder-keg claim capable of waking a legal juggernaut, and as expected, USDA came knocking in 2014.

“I didn’t figure on winning, but enough is enough. I wanted the issue out of the shadows because I know there are lots of people in farming that agree with me,” he says.

Shoup, 78, runs an old-school operation at Dinsdale Elevator with heavy reliance on pencils and paper. He says the time and effort involved in extracting the obligatory one half of 1% is burdensome over the course of a season and compounded by years of record-keeping requirements related to taxes or potential audits: “Records, tracking and balancing eat up small bits of time. Then I have to get the money to the ISA or else.”

Shoup manually records grain purchases and provides settlement sheets to customers, spending a minimum of 15 to 30 minutes of work on each sheet. He adds up the bushels and after settling, takes out 0.5% of the sales value. ISA typically requests those funds within a month. “At my time and expense, I have to submit money to the soybean checkoff under penalty of prosecution,” he explains. “Why do they get every cent? It’s fair to give the first purchaser a tiny bit of reimbursement.”

Obstinate and contrary are fair adjectives for Shoup; so are unbowed and principled. “I’m not going to win but I’m taking a stand to help somebody else in the future.”

In October 2014, the Agricultural Marketing Service (AMS) filed a complaint stating Shoup, as first purchaser, was required to collect producer assessments and submit the money on time to ISA. (The complaint addressed Shoup’s inaction from 2009 to 2013.) Bottom line: AMS says Shoup was in violation of the Soybean Promotion, Research and Consumer Information Act by failing to pay late fees. AMS declined comment on the Shoup litigation.

Prior to 2014, Shoup says he spoke with ISA staff on numerous occasions, and tried to catch the ear of multiple Iowa senators and representatives to plead his case. Without variation, all of the officials pointed back to the law requiring a first purchase fee. “I tried to talk to anyone I could find, but nobody would listen to the heart of my arguments,” he says. “Instead, they hid behind the law and refused to address anything. Regular Americans can see this is not right.”

Kirk Leeds, CEO of ISA, says the issue is clear. “Under federal law, or the national checkoff, first purchasers are required to collect the soybeans when they are purchased from a farmer and then submit those payments to the qualified state checkoff board within the timelines and rules established in legislative and regulatory policies,” he notes. “Any first purchaser who fails to follow these requirements is subject to penalties.”


Shoup's failure to do so, Leeds adds, resulted in USDA imposing the appropriate fees and penalties.

Regarding the Shoup litigation, United Soybean Board (USB) officials say their role in such cases includes oversight of timely assessments and remittances by first purchasers as required by the Soybean Act: “USB collaborates with Qualified State Soybean Boards to meet this responsibility by monitoring and performing regular audits of first purchasers. When necessary, compliance matters are submitted to USDA for consideration for full resolution.”

In March 2015, Shoup hired Rickert & Wessel Law Office, P.C. as legal counsel and the law office responded to AMS’ complaint with an amended answer buttressed by three legal arguments. First, Shoup argued the complaint should have addressed J & M Farm, L.L.C. (parent company of Dinsdale Elevator, of which Shoup is majority owner), and not himself. He claimed he should not be held liable as an individual for the debts of the limited liability company. Second, on the payment checks to ISA, Shoup wrote “paid in full” on the memo line, but when the checks were processed, “paid in full” was crossed off. Shoup argued the checks had been illegally altered.

Third, Shoup claimed the complaint should be dismissed outright based on the unconstitutionality of money for public use without just compensation. “Jack is concerned for the agriculture industry, not just himself,” says Kristin Schiller, attorney with Rickert & Wessel.

“I care much more about the principle than I do about the money,” he explains. “I got tired of talking to the checkoff lawyers. Some of them don’t know what a soybean looks like.”

At the end of 2015, Administrative Law Judge Janice Bullard asked both parties for briefs. Alongside its brief, AMS filed a motion for summary judgment. On Dec. 2, 2016, Bullard ruled in favor of AMS and ordered Shoup to pay late fees to ISA totaling $2,431.13. In addition, she gave Shoup the maximum civil penalty of $5,000. Bullard didn’t address Shoup’s arguments regarding altered checks or lack of compensation. Shoup filed a request for extension of time to appeal, which was granted, but he ultimately declined to appeal Bullard’s decision.

Despite the court ruling, Shoup clings tight to his convictions: “I’m an old Dutchman and I do not care what others think about me. I care about what is right and I know damn well when something is wrong. I want people to know about this and make up their own minds.”

*On Feb. 7, 2017, Jack Shoup passed away in Reinbeck, Iowa.

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Spell Check

Mount Carmel, IL
5/8/2017 06:18 AM

  It may not be fair to the elevators to be required to do this work without compensation, but it is even more unfair to the farmer who has this money taken from him with no recourse. At least corn checkoff money can be recouped. The soybean checkoff cannot. To make it worse, many articles have pointed out how our money isn't wisely used. Why should money that I could use to pay my bills or take care of my family be used on fancy parties and luxury travel accommodations? That is what is really wrong.

Mcpherson, KS
5/8/2017 07:00 AM

  He was stealing from farmers, not withholding from a Checkoff. No different than an employer pulling out taxes out of a paycheck and then not sending them in to govt.

PJ Jahn
Ptown, IL
5/8/2017 07:09 AM

  Funny how the so called "conservatives" can support such a tax without it being reimbursable, such as the corn checkoff. Without that provision it is a unconstitutional tax/fee. Be it reimbursable would assure it, and those who run the checkoff to be accountable.


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