SACRAMENTO -- For up to seven years, California Liquid Fertilizer sold what seemed to be an organic farmer's dream, brewed from fish and chicken feathers.
The company's fertilizer was effective, inexpensive and approved by organic regulators. By 2006, it held as much as a third of the market in California.
But a state investigation caught the Salinas-area company spiking its product with ammonium sulfate, a synthetic fertilizer banned from organic farms.
As a result, some of California's 2006 harvest of organic fruits, nuts and vegetables -- including crops from giants like Earthbound Farm -- wasn't really organic.
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According to documents obtained by The Sacramento Bee through a Public Records Act request, California Department of Food and Agriculture officials were notified of the problem in June 2004 but didn't complete their investigation and order the company to remove its product from the organic market until January 2007.
State officials knew some of California's largest organic farms had been using the fertilizer, the documents show, but they kept their findings confidential until nearly a year and a half after it was removed from the market. No farms lost their organic certification.
The nonprofit California Certified Organic Farmers, which certifies about 80% of the state's organic acreage, decided not to penalize farms that had used the product on the grounds that farmers did not know they were using an unapproved chemical.
The state could have pursued harsher penalties against California Liquid Fertilizer, including violation of the California's organic product law, which carries fines of up to $5,000, according to agriculture department spokesman Steve Lyle. It also could have referred the case to the Attorney General's Office for civil action as an unfair business practice.
"We did not pursue those courses of action because our priority was to remove the product from the market," Lyle said. "More process would have delayed that." The investigation took as long as it did, he said, because the case was complex.
The trouble has continued. In November 2007, the distributor of another organic liquid fertilizer, representing about 5% of the market, pulled its product in the middle of another state investigation. Rumors in the industry point to another major disclosure as soon as this month.
Synthetic fertilizers don't present food safety risks, but the organic movement has always opposed them because they take a great deal of energy to produce, decrease natural soil fertility and can pollute water.
Above all, the California Liquid Fertilizer case shows how much the organic regulatory system depends on trust.
With farms under pressure to cut costs and deliver big harvests, demand has grown for a new class of potent liquid fertilizers that help crops thrive.
"Organic agriculture is becoming very dependent on these amendments," said Thaddeus Barsotti, who runs Capay Organic farm in Yolo County. "If you don't use them, and your competitor is using them, you're going to suffer."
Liquid fertilizers work particularly well for cool weather crops like strawberries and salad greens, and market leaders Earthbound and Driscoll's became big customers for California Liquid Fertilizer, according to executives from those companies.
But liquid fertilizers are used on farms producing virtually every variety of organic fruit, nut and vegetable.
The state learned of the problems at California Liquid Fertilizer from a whistleblower. In a June 18, 2004, complaint, the former employee alleged that for five years ammonium sulfate had been used in the company's liquid fertilizer.
A year later, according to state records, state Department of Food and Agriculture inspector Pierre Labossiere took the first sample of Biolizer XN, the company's leading product, from Tanimura & Antle Inc., an Earthbound Farm partner in Salinas.
Laboratory analysis supported the allegations, and in July 2005, Labossiere asked California Liquid Fertilizer to explain why, the records show. He never got an answer, and during multiple follow-up visits to the firm's factory near the town of Gonzales was told that the fish and feathers used to make the product were unavailable for sampling.
Over the next year, Labossiere followed up, finding indications of ammonium sulfate in six more samples at farms and fertilizer dealers across the state. In February 2006, he twice intercepted tank cars of ammonium sulfate in a Salinas railyard.
Receipts showed the liquid had been shipped to California Liquid Fertilizer from a plant in Decatur, Ill.
California Liquid Fertilizer's then-president, Peter Townsley, did not respond to repeated phone calls from The Sacramento Bee or to a written request for a comment.
Labossiere had caught the fertilizer maker red-handed. But the product remained on the market for nearly six more months before state officials took action.
The state had other things to worry about that fall. In September, an outbreak of a deadly strain of E. coli was traced to Salinas Valley spinach packaged by the parent company of Earthbound Farm. For weeks, national news media scrutinized the government's oversight of the produce industry.
In January 2007, the Agriculture Department agreed to a settlement with Townsley that removed his product from the market but kept the reasons obscure. The violation was recorded as "improper labeling." In a letter to the Eugene, Ore.-based nonprofit Organic Materials Review Institute, which had approved the product for use on organic farms, Townsley said he was pulling the product because of an inadvertent chemical substitution.
The state Department of Food and Agriculture can issue fines as well as tell manufacturers to remove products from the market. Spokesman Lyle said staff members recently have stepped up oversight of the organic fertilizer sector. In 16 inspection visits since February 2007, officials have found only minor violations, he said.
Though the state forced California Liquid Fertilizer to pull its leading product, Townsley stayed in business at the Gonzales plant.
In January 2008, the factory was sold to Converted Organics Inc., a publicly traded fertilizer maker headquartered in Boston. Townsley is now a technology officer for Converted Organics.