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An unpublicized scandal in Alaska is something voters should know about.

Update #1: A poster questions who I am.  I'm an Obama supporter who maxed out in the primary, who is putting all this together on weekends, at night, and occasionally at work (like right now).  If someone from KOS wants to contact me for more info, I'm fine with that.

Update #2: I really appreciate Alaskans, especially locals, commenting.  I don't think, however, because this wasn't seen as a scandal at the time in Alaska that it isn't an important revelation now that Palin is seeking national office.  It's easy to get headlines, and kudos, for supporting an "Alaskan industry", even if that translates into getting earmarks to benefit a few well-placed individuals (if your neighbor profits from Federal handouts, who care?).  The incompetence and mismanagement and deception involved, the additional hundreds of thousands of dollars of taxpayers money squandered, will play a lot differently on the national level. (Judging by bloggers on Halcro's website, though, people on the ground had a good idea what was happening and were steamed, esp dairy farmers out of the loop.)  That the end result was one particular guy sitting pretty in the place of a long-revered state dairy was indeed "off the media landscape" - that's not the kind of headline local media anywhere is likely to print.

Update #3: Matanuska Maid and Matanuska Creamery are collectors/processors of milk, as opposed to the dairy farmers who actually own the cows.

Update #4: Thanks everybody for this incredible support, including the people that are skeptical about me and the Mat Maid story.  I'm just a citizen journalist here - vet me to your heart's content.    I'm sure the story, as represented by the summary, is solid and has legs.

Update #5: I want to also thank everybody that dugg me.  While I'm trying to develop additional material on this story, I'm not in AK.  I hope some of the reporting herd on the ground in Wasilla start scrutinizing this, and are able to break through that small-town taboo on talking dirt to strangers.  For this reason, I'd love to see more native or ex-Alaskans with knowledge about Mat Maid, BAC, Kyle Beus and the other players involved post their observations and comments here or in their own diaries.  This is a critical election, and the more we know about the "Dairy Queen", the better.

Several people have requested I repost a diary from this weekend.  Today seems a particularly good day to bring it back to life.

Tonight, the Republican party will give its solemn endorsement to John McCain’s impulsive, reckless, irresponsible and cynical choice for Vice-President, a less-than-half-term governor of a state with a population less than Austin, Texas or Columbus, Ohio, the former mayor of a town where a landslide victory can be had for 200 votes.

We, and John McCain, have learned a lot in the last few days about Sarah Palin.  We now know about her strange political affiliations, her complicated personal life, but, most importantly, we have seen how she has treated people, managed resources, and wielded power while holding public office.  It is abundantly clear that, even within the small scale and limited scope of her experience, Sarah Palin has been an abject failure as a chief executive.

Her vindictive firings of staff and her hiring of unqualified but loyal cronies in their place, both as mayor and as governor, betray Palin’s lack of leadership skills and any higher purpose.  Wasilla, whose annual budget of $5 Million is just at John McCain’s income threshold for a single middle-class family, was debt-free when Palin became mayor.  When she left six years later, the town was over $20 Million in debt despite receiving $27 Million in earmarks.  As governor, the same troubling pattern of fiscal irresponsibility continued.  Alaska took on debt, even as budget surpluses mounted from oil revenues and hundreds of millions of dollars poured in from Washington.  Friends of Sarah benefited, even as taxpayers in Alaska and the lower 48 picked up the tab.

We know this now.  So why do voters need to hear about yet another Palin political scandal, especially one involving the deeply unsexy world of Alaskan dairy farming?

Here’s why.

Casual listeners can be too easily convinced by a relentless Republican noise machine that the media is biased, focusing on a few trivial exceptions in an other stellar career that are being blown out of proportion for political purposes.

People grow tired of the same old stories, regardless of how revealing or emblematic.  Without fresh details to capture the imagination, they quickly lose interest.  

A ceaseless barrage of Northern Exposure is needed to get the public to firmly grasp beyond a shadow of a doubt just who Sarah Palin is, not as a mother, but as a holder of public trust.

The Mat Maid scandal – or, more wryly, Dairygate – hasn’t yet attracted wide national attention.  Still, it is a perfect microcosm of Sarah Palin’s entire stint in public office.  Its small-town absurdities highlight the ludicrousness of John McCain’s first important decision as his party’s nominee.

Mat Maid in brief:

Palin fired the whole state Agriculture and Conservation board in July 2007, ostensibly to save a mismanaged state-owned dairy, and replaced it with her usual gang of cronies.

As a result, the dairy lost more money than it had in twenty years.  

The dairy, an Alaska icon, closed anyway in two months, taking hundreds of thousands of dollars of additional state money with it.  

Millions of dollars in dairy equipment ended up, at a steep discount, in the hands of a local Palin ally, who now runs a remarkably similar operation with the help of a Ted Stevens earmark.

Want to learn more?  Please read on - I've reworked my entry somewhat for clarity and added some new information.  

In the summer of 2007, Matanuska Maid, the 70-year-old dairy the state had taken over in the 1980’s, was probably beyond saving.  The rising cost of milk, and price competition from national brands, made it unlikely the struggling dairy would ever make its way back to profitability.  

Giving out precious tax dollars so a few well-connected dairy farmers could make products most Alaskans couldn’t afford to buy didn’t make much sense to the Creamery Board, the Board of Agriculture and Conservation(BAC) subcommittee that had direct oversight of the state-owned company.  They refused a $600,000 state grant to keep Mat Maid going, and did what they felt was in the public's interest: put the troubled dairy out of its red-ink-drenched misery.

Palin was outraged at this callous disregard for the well-being of local farmers, particularly her friends from the Wasilla area.  The dairy, she insisted, simply needed to be properly managed.  Radical measures needed to be taken, so Palin fired the whole BAC.  The new Board Palin appointed quickly designated itself as the new Creamery Board.  This group of local notables was much more likely to keep Mat Maid alive: it was composed of relatives and associates of the Wasilla-area dairy farmers who directly benefited from continued milk purchases by Mat Maid.

The incestuous connections ran deep: Franci Havermeier, Director of the BAC's Division of Agriculture, was the real estate agent for BAC chair Kristen Cole.   This connection was apparently sufficient to qualify Havermeier, a housewife, for her position over a well recognized agriculture industry expert and a UAF Professor with a degree in agricultural economics.  Franci’s father in law, Bob Havermeier, also just happened to be one of the Wasilla-area dairy farmers benefiting from the continued state payouts by Mat Maid.  

Havermeier's lack of qualifications isn't surprising, given that none of Palin’s appointees to the BAC had any actual expertise in the dairy field.  Family ties to Palin or the Wasilla-area farmers was the only requirement.

Once the new Board was seated and the death sentence on Mat Maid lifted, Palin immediately authorized paying out the $600,000 state grant to Mat Maid the prior board had refused.  The money disappeared into the corporation’s general funds, where it was used to fund operations.  Payments to Wasilla-area dairy farmers continued uninterrupted, even as other bills piled up. In fact,the Board raised the price of milk Mat Maid paid to dairy farmers, only making Mat Maid’s economic predicament worse, but shifting even more taxpayer dollars into the pockets of the well-connected.

Of course, this naked income redistribution - from hard-strapped Alaska taxpayers to well-connected dairy farmers - needed camouflaging.  So the new Board spent several months, and tens of thousand of dollars, investigating the prior Board’s behavior, hiring an accounting firm (Mikunda, Cottrell and Company) to review the financial records of Mat Maid in search of the classic mismanagement trinity: waste, fraud and abuse.  No significant improprieties were ever found.

In August, Palin and the Board claimed Mat Maid was profitable again for June, making $62,000.  Seven days later, the Board revealed that Mat Maid had suffered the worst financial loss in July in over twenty years, almost $300,000.  The June profit was also reduced to $2,000.  By September, the Board regretfully decided to close Mat Maid down, the same decision the prior board had come to three months, and about $900,000, earlier.

The assets of Mat Maid now had to be disposed of, and some arrangement made for dairy farmers that would no longer have an outlet for their milk.  A group of Wasilla-area locals, including Kyle Beus and Franci's father-in-law Bob Havermeier, came forward as a co-op, the Southcentral (sic) Dairy Joint Venture, and proposed leasing Mat Maid equipment and taking over many of its operations if no outside buyer could be found.  Other dairy operations, such as Northern Lights Dairy, were also interested, but had no chance to get involved:  Franci Havermeier (who as Director supervised the state’s assets manager, Ray Nix) went so far as to meet with the co-op in her office, a violation of conflict of interest rules (but nothing out of the ordinary in an administration where Sarah Palin’s husband would often sit in on official government business).  Havermeier was later alleged to have threatened an employee who was suspected of disclosing these activities.

The Board decided that fall to discontinue operations at Mat Maid in December, based on the Southcentral group’s assurance that they would be in a position to purchase and process milk from local farmers by then if the whole company couldn't be sold intact.  Once the outside buyer option vanished, a favorable lease deal on Mat Maid equipment was made behind closed doors, and an additional state grant of $200,000 was dispensed on the understanding the group would be up and running by December.  This money was used to compensate farmers who, having no outlet for their product, were now forced to dispose of it.  

The taxpayers of Alaska, in other words, were now paying top dollar to pour thousands of gallons of raw milk into the ground around Wasilla.

Throughout the last painful days of Mat Maid’s terminal illness, Palin and the Board’s intention was clearly never to minimize the state’s losses from Mat Maid and to realize the greatest return possible from a disposal of its assets.  The comical attempt to auction off Mat Maid whole, a fiasco resulting in no bids at all that I covered in my last post, was most likely a delaying tactic to allow the Southcentral group to organize. From that point on, only a few local parties were kept in the loop, and benefited from the decisions made.  Outside parties were actively discouraged from any involvement.  Alaskan auction firms, with specific knowledge of the Alaskan market, were even excluded from bidding on the right to hold the Mat Maid asset auctions, which were finally conducted by out of state firms: apparently in this one instance just being local wasn’t good enough.

The pattern here, of incestuous insider dealing and total disregard of public interest and fiduciary responsibility,  is clear as a glacial lake. This is corruption that runs so deep it looks as natural a part of the landscape as moose and snow.  

As it turned out, Kyle Beus and the Southcentral group were still setting up and learning how to operate their new machinery in December.  Actual purchases of local milk didn’t begin until March, by an entity now known as Valley Dairy/Matanuska Creamery.  The $200,000 mentioned earlier, conditional on a fully functional operation, was paid out anyway, in violation of the prior understanding.  The Wasilla-area farmers who directly benefited had meanwhile made no capital commitment of their own to the new venture.  They had "no skin in the game". The "skin" came exclusively from state taxpayers.

Mat Maid’s books were officially closed in March 2008, even though they contained pending law suits, in order for the Palin Board to claim the dairy had closed "in the black" (thanks mainly to cash remaining from the $600,000 and $200,000 state grants).  The state was then left to pick up any additional payouts that might result. But the prolonged agony of Matanuska Maid was finally over.

As Palin and her friends might have proclaimed: Mission Accomplished.

Who really came out on top, in the end? Obviously not the state of Alaska and its taxpayers.  One primary beneficiary of the Mat Maid closing was Kyle Beus, at one time Alaska’s largest dairy farmer.  According to press reports he now owns the Matanuska Creamery with Mat-Su Borough Assemblyman Robert Wells. There doesn't appear to be any legal record of the Southcentral co-op, but a blogger on Andrew Halcro’s site said he did find a business license for a "Valley Dairy", issued January 8, 2008 to Kyle Beus as sole proprietor. This suggests the Southcentral Dairy Joint Venture was simply a front organization that Kyle Beus used to take over Mat Maid’s dairy operations, lending a faux-populist flavor to a personal power play.  The involvement of yet another local politician (Wells) in the whole sordid affair should shock no one.

Beus has a spotty record at best as a businessman.  The same blogger quoted above reports that the ARLF [Agricultural Revolving Loan Fund] had previously charged off approximately $500,000 in a Deed in Lieu of Foreclosure Settlement and had a $40,000 IRS lien. In addition, his own brother, Kevin, reported him in 2002 for failure to make Worker's Compensation payments. The brothers apparently reconciled, because Kevin now works with his brother at the Creamery.

Beus’ spotty record for financial acumen and integrity, however, has never bothered Sarah Palin - or Ted Stevens.  Beus has personally received significant grant money in recent years.  In April 2007 he received a $175,000 Federal grant for an ice cream production facility in Wasilla that was part of a $22 Million grant Ted Stevens arranged to support Alaska’s dairy industry.  As I mentioned in my prior post, Stevens arranged a $634,000 USDA grant for Beus’ new venture Matanuska Creamery in March of 2008.  

Thanks to Palin and Stevens, U.S. taxpayers have now stepped in to prop up a well-connected, if not totally trustworthy, Wasilla-area businessman, in a venture likely doomed to failure without additional infusions of taxpayer support.  Exhausted Alaskan taxpayers must be breathing a deep sigh of relief that Uncle Sam's deep pockets are now being picked instead of their own.

A final, rather comical note: in order to raise money to pay farmers for milk before they had any actual product to sell, Kyle Beus and Robert Wells entered into an agreement with several local mining concerns to sell  "cheese futures" – people would pay now to receive Matanuska Creamery cheese products several months later.  According to a 7/31/08 Halcro post, however, "Matanuska Creamery has 30,000 pounds of cheese sitting in their cooler that the DEC[Department of Environmental Conservation] has found to contain e-coli, listeria and staph."  Having sold $250,000 in cheese futures without any insurance, Halcro wasn’t sure how Beus and Wells were planning to get out of another fine mess of their own making.

I really want to know what happened to all that cheese.  I’ll let you know what I find out.

My prior post:
(contains many links to local media)


Updated:  I'm sorry the adrewhalcro links aren't working.  I thought I was copying the whole url from my prior post.  Here's the link to the original version of this post, with the workable links:
[Tom Irwin is Commissioner of Natural Resources, another one of Palin’s minions involved in Mat Maid]

Originally posted to RobertoW on Wed Sep 03, 2008 at 06:59 AM PDT.

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