Thursday, April 7, 2016
Capital Public Radio
Assembly Bill Quickens Overtime Pay For Farm Workers
By Ben Bradford
A bill moving through the California Legislature would require farm laborers to receive overtime pay when they work more than eight hours in a day. Current law allows them to work up to ten hours a day, six days a week, before companies must pay overtime.
The agriculture industry opposes the bill, which passed an Assembly committee Wedneday.
Brian White of Western United Dairymen says workers will receive fewer hours instead of overtime pay.
“We think this bill will hurt our workers, 50 percent which have already left the state due to excessive labor and economic challenges, including the price of milk, which we don’t control,” White said. “So, if this bill were to pass, we cannot pass that on to our consumers.”
Democratic Assemblywoman Lorena Gonzalez authored the bill.
“When my father came to this country, would he have worked 20 hours a day if you let him? Yes. Would he have worked for less than the minimum wage? Yes, he would,” Gonzalez said. “But we are a state that’s decided there are regulations to keep workers safe.”
The bill next moves to the Assembly Appropriations Committee.
Drought woes continue at New Melones
By Alex Breitler
In another sign that the drought isn’t over in this neck of California, state officials are considering temporarily loosening water quality standards on the Stanislaus and San Joaquin rivers for the third year in a row.
The request by the U.S. Bureau of Reclamation is intended to hold back more water upstream in New Melones Lake, which remains depleted at 26 percent of capacity, or 41 percent of normal.
The request is “prudent and necessary because of the extraordinarily dry conditions of the past several years,” says a written request filed by Reclamation, which operates New Melones as part of the Central Valley Project and is responsible for making sure downstream water quality standards are met.
Loosening those federally approved, science-based standards is controversial, though. The existing standards already contain a range of flows for wet, dry and normal years, and were arrived at after lengthy hearings. They should not simply be shoved aside, opponents say.
“(The number) is what it’s supposed to be. There’s no ‘if’ or ‘maybe’ or ‘change it if you like,’” John Herrick, an attorney for downstream Delta farmers, told the State Water Resources Control Board in a meeting about the proposal on Tuesday.
The rules have been loosened repeatedly during the drought. The process, which normally would require hearings, has been accelerated under Gov. Jerry Brown’s emergency authority.
The situation shows that while the water supply picture on the Sacramento River has brightened, the San Joaquin River still has problems. There’s not enough in New Melones, the river’s largest reservoir, to satisfy everyone, the feds say.
On Wednesday, New Melones held about 623,000 acre-feet of water. With this year’s improved snowpack, another 600,000 acre-feet or so might drain into the reservoir in the months to come.
Even then, New Melones would be only about half full. And many have a claim to that water.
The South San Joaquin and Oakdale irrigation districts, which have senior rights, are entitled to an especially large share — the first 600,000 acre-feet of water that drains into New Melones. Complying with the water quality standards downstream would require hundreds of thousands of acre-feet of additional water, which would leave New Melones with little water to carry over into next winter.
That’s why the bureau wants to bypass those environmental standards and hold back more water in the reservoir. Specifically, the feds would lower flows on the San Joaquin River at Vernalis, and also would lower the required amount of “dissolved oxygen” for fish migrating along the Stanislaus.
For their part, the water districts would release about 75,000 acre-feet of water down the Stanislaus as part of a water sale to the parched San Luis & Delta-Mendota Water Authority. That water would boost river flows before the water is pumped south, but flows still would be lower than normally allowed.
“Is it a great solution? Probably not, depending on where you sit. It’s probably middle of the road,” said Tim O’Laughlin, an attorney for the water districts. “But if we let a whole lot of water (out), and next year turns dry, things are going to be a whole lot worse than they are now.”
For fish, things might get worse right away under the bureau’s plan, environmentalists warned. Large numbers of salmon turned up the Stanislaus to spawn last fall, in part because the other San Joaquin River tributaries were so dry; now, their offspring need help swimming out to the ocean.
Cutting flows and reducing the dissolved oxygen that fish need to breathe might make that already perilous journey even harder.
“There’s a reason for the water quality standards that we have,” Gary Bobker, program director for The Bay Institute, told the water board Tuesday. “You can’t just change them and think there’s no impact.”
The water board has not yet taken action on the bureau’s request to bypass the standards. Reclamation warns that even if its request is granted, drought recovery in the San Joaquin River basin “will be a slow process.”
— Contact reporter Alex Breitler at (209) 546-8295 or firstname.lastname@example.org. Follow him at recordnet.com/breitlerblog and on Twitter @alexbreitler.
Los Angeles Times
Pact reached to remove four Klamath River dams that block salmon migration
By Bettina Boxall
California, Oregon and a private utility Wednesday signed an agreement that could finally take down four hydroelectric dams that block salmon migrations on the Klamath River.
The pact, signed by the governors of both states and federal officials at the mouth of the Klamath in Northern California, spells out a road map for pursuing the dams’ demolition without congressional approval.
It amends part of a complicated 2010 pact that gave the U.S. Interior Department a major role in the decommissioning and required Congress to sign off on the removal. Congress failed to act on authorizing legislation by last year’s deadline, throwing the deal into limbo.
The new version eliminates direct federal involvement, sidestepping the need for congressional authorization.
“This historic agreement will enable Oregon and California and the interested parties to get these four dams finally removed and the Klamath River restored to its pristine beauty,” Gov. Jerry Brown said.
Under the amendment, PacifiCorp, the private utility that owns the dams, will transfer title and license to a recently created nonprofit that will seek permission from the Federal Energy Regulatory Commission to remove the dams by 2020.
Funding outlined in the original agreement remains in place. California will contribute up to $250 million in state bond money, and a surcharge on PacifiCorp customers in Oregon and Northern California will provide up to $200 million. That would cover the estimated decommissioning costs of $300 million.
The new organization, called the Klamath River Renewal Corp., will manage the decommissioning process and also assume liability for any problems associated with the removal.
Originally backed by many tribal, farming and fishery interests in the Klamath Basin, the agreements ran into opposition on a variety of fronts. Some conservationists complained that the pact gave too much water to irrigators and not enough to fish. California’s Siskiyou County, where three of the dams are located, fought the loss of property taxes and a power source.
Rep. Doug LaMalfa, a farmer and Richvale Republican who represents much of Northern California, complained Wednesday that state and federal officials had made an end-run around Congress.
“The overwhelming majority of residents of the Klamath Basin, those who are actually impacted, have been cut out of this process in favor of environmental extremists, bureaucrats in Sacramento and Washington, and a taxpayer bailout for billionaire Warren Buffett,” LaMalfa said in a statement.
Part of Buffett’s Berkshire Hathaway Inc. empire, PacifiCorp has portrayed the dismantling as a prudent business decision. To meet federal relicensing requirements for the aging dams, the company says it would have to spend about $400 million on fish ladders and water quality improvements.
Under a second agreement signed Wednesday, federal officials promised to help upper Klamath Basin irrigators adjust to the arrival of the salmon, which are under federal legal protection. For instance, the U.S. Bureau of Reclamation, which supplies water to Klamath farmers, would determine if they need to install fish screens on irrigation diversions — and help growers find funding.
Other farmer-friendly parts of the original pact still need to go before Congress, which backers suspect will be more receptive now that the proposals don’t include dam decommissioning.
New Times SLO
Water fight: A look at the proposed Paso Robles Basin Water District’s resounding defeat
By Jono Kinkade
It was an electoral massacre.
By the evening of March 8, preliminary results of a special mail-in election for a tax and the formation of the Paso Robles Basin Water District showed overwhelming defeat, with “no” votes hitting more than 70 percent.
Even to Tommy Gong, San Luis Obispo County’s impartial clerk-recorder, the results were a bit of a surprise.
“I don’t think anyone expected the result the way it turned out,” Gong said.
It took years of planning; more than $1 million in taxpayer dollars and campaign funds; and a long road winding to Sacramento, the SLO County Board of Supervisors, and the Local Agency Formation Commission. Now the water district is dead, and people are pondering and pontificating about what’s next.
Politics plagued and polarized the proposal from the start. It attracted heated opposition from groups against new regulations and taxes—like the Paso Robles Water Integrity Network (PR-WIN) and the SLO County Cattlemen’s Association—and groups concerned that the district would unfairly represent and benefit large land owners, including North County Watch, and the Santa Lucia Chapter of the Sierra Club. Supporters included the viticulturalist group Paso Robles Agricultural Alliance for Groundwater Solutions (PRAAGS), the rural residential group PRO Water Equity, and Citizens Advocating for Local Management, and the SLO County Farm Bureau, which all said the district was the best route for maintaining local control.
The idea came up during a crisis. A major political battle erupted in 2013 after dozens of rural residential wells went dry. All around them, vineyards were being planted and new wills drilled. It angered people, and their voices were loud.
Supervisors narrowly passed an urgency ordinance banning new wells unless certain requirements were met. The ordinance became permanent.
During that time, PRAAGS proposed the formation of a California water district to facilitate the funding and construction of supplemental water to replenish the basin.
To form that district, voters would get one vote per acre, giving large landowners the ability to sway the outcome.
The residential group PRO Water Equity said this wasn’t fair, and lobbied for one vote per person.
In December 2013, with the help of Supervisor Frank Mecham (his district partly overlies the basin), the groups devised a hybrid district with a nine-member board, including three seats elected by registered voters and two seats each for small, medium, and large landowners. The district required legislation in Sacramento, so Assemblymember Katcho Achadjian sponsored Assembly Bill 2453.
Meanwhile, California lawmakers passed the Sustainable Groundwater Management Act (SGMA), requiring management of high priority basins in severe overdraft, including the Paso basin. A Groundwater Sustainability Agency (GSA) must be formed for those basins by June 30, 2017, and a Groundwater Sustainability Plan must be created by 2020 to chart a course for the basin to be balanced by 20 years later. If requirements aren’t met, the state may intervene, bringing what many consider a like-it-or-not management method (the details on when and how that would happen are still fiercely debated).
For supporters, the proposed district was considered to be the best anchor for a GSA, which would also include the county and other agencies and cities over the basin.
Those supporters, including a couple of supervisors, say that the Board of Supervisors dropped the ball too many times and that local control—where basin overliers represent themselves—was optimal. They said it was either that or eventual state intervention.
“We wouldn’t be where we’re at if something had been done in the past,” said Sue Luft, president of PRO Water Equity, which folded after the election. “I don’t see that the decision makers are going to make the decisions that are needed.”
Cody Ferguson of PR-WIN, which campaigned against the district, disagrees and said the county should be the GSA. He said that it’d be cheaper for the county to do so.
Opponents said the district would have favored larger landowners and pumpers, helping them gain control of the groundwater. They said it was a costly and unnecessary body to do a job that the supervisors, sitting at the head of the county’s Flood Control and Water Conservation District, already do.
Even if that’s the case, new funds are still needed for a GSA, and it isn’t clear where they’ll come from or who will pay.
Those details might come to the fore as supervisors Debbie Arnold (who also has an overlying district) and Lynn Compton prepare an effort for the county to take the lead.
“We’re making it more complicated than it has to be,” Arnold said. “I’m hoping we can get everyone together at the table and say, ‘Let’s get together and manage the basin.’ Done.”
That’s made a lot of people nervous, because Arnold and Compton vociferously opposed the countywide water conservation ordinance, a measure designed to slow increasing water demand.
That’s one reason Supervisor Mecham is reluctant to keep control in the county. At the board’s March 15 meeting, supervisors Bruce Gibson and Adam Hill suggested it was time the county began talks with the state to consider the options. Mecham said he was interested but is still looking to learn more before charting a course.
“I think no matter what, there has to be some sort of cost component to whatever we’re going to have to,” Mecham told New Times. “It would be put back in our lap to figure out—is there staffing? Is there funding? And if this is going to be specific to an area, is it fair to the rest of the county for taxpayers to pay for us to figure this out up here?”
Paso voters faced three choices on their mail-in ballots: Measures A and B, and candidates running for the board, should one be created.
Measure A would have created funding for district management, whether or not the district itself was created. It needed a two-thirds majority for approval; 77.3 percent of voters said no.
Measure B, which would have created a water district, saw 73 percent of voters say no.
Voter turnout was high, showing 64 and 65 percent of voters, respectively.
It’s abundantly clear: Voters above the basin don’t want a water district, nor do they want to pay more taxes.
Many say an ideological aversion to taxes and government was a large factor. More than half of voters are registered Republicans, 21 percent Democrats, and 19 percent are non-partisan or have no party preference.
That the annual cost for many people would be less than $100 didn’t matter.
Each parcel would have been assessed a $15 flat fee, with additional fees of $20 per single-family residence, $40 per multi-family residence, and $10 per vacant parcel.
Non-irrigated properties were 25 cents per acre, while irrigated parcels were $18 an acre. By design, most of the expenses would have been borne by irrigated agriculture, the basin’s biggest water user, paying an estimated 89 percent of the total $950,689 annual operating cost.
The vote still has Dana Merrill, vice chair of PRAAGS and owner of Mesa Vineyard Management and Pomar Junction Vineyard and Winery, scratching his head.
“Small landowners made the decision, but they were going to pay a very small portion of the cost,” he said. “It’s very interesting because I can’t imagine whatever comes in the future you’re going to be able to get agriculture to pay for 85 percent of it.”
Luft, of PRO Water Equity, also sees the missed opportunity.
“It’s crazy because the big agricultural guys were ready to do that,” she said. “Not happy to do that, but willing to do that.”
Willing indeed, Merrill said.
“I don’t want to sound like sour grapes, so to speak, but if we were to have won I would have gladly accepted it,” he said.
But for many rural residents, it wasn’t that simple.
Cindy Stevens, a Geneseo area resident profiled by New Times in 2013 after she had to drill a new well, wouldn’t say how she voted but said deciding how to vote was tough.
“The majority of people, myself included, really struggled with figuring out which way to vote,” she said. “We all voted, we wanted to be responsible, but we weren’t sure if we were going to vote the right way.”
She said that a lot of voters had concerns with either option.
“On one side, no water district, we’re keeping everything in the hands of our Board of Supervisors, which quite frankly have not done a great job,” she said. “On the other hand, voting for a water district means more taxation.”
Stevens said it wasn’t the dollar amount but the concept of another tax that caused unsettling feelings.
“This is a really hard time for most people that we know,” she said. “On top of that, a lot of people have had brand-new wells drilled.”
Many residents harbored resentment toward the wine industry and were uncomfortable funding a district backed by the people often blamed for causing the problem.
PR-WIN’s Greg Grewal said there’s a fundamental issue there.
“Where was the incentive for me to be a part of something that I don’t benefit from?” Grewal said.
During public meetings, Grewal often got fiery and didn’t shy away from calling out people or double standards. But when he and fellow PR-WIN member Ferguson were interviewed in a booth at the Loading Chute in Creston, he calmly discussed the topic.
He pointed out that landowners already have to pay for their own wells and all the other components of personal water delivery, and now they’re being asked to fund a management district that would service those who’ve used the resource irresponsibly.
“It’s like you buy a car, you keep it full of gas, you make sure that the tires and the oil is good, and I’ll use it. And if it runs low on gas, you just give me a credit card and I’ll keep it full,” Grewal said, raising his hands and exhaling with a chuckle of disbelief. “Give me a break. How does that work?”
That was a concept many voters had trouble with, overshadowing the fact that no matter what they think, more taxes may be inevitable.
Steve Crouch, a Jardin area resident who manages a dry-farmed vineyard on the west side, said he watched ideology overcome factual analysis, describing it as a “nobody is going to tell me what to do with my water” kind of attitude.
“So we all suffer,” he said.
Sue Harvey, president of the land-use watchdog North County Watch, disagrees, saying that the lopsided results show it was more than ideology or one key issue.
“If it had just been an ideological thing, and it was Republicans versus whatever or environmentalists versus whatever, it wouldn’t have had that kind of result,” said Harvey, who opposed the district.
Still, for Crouch, there were reasons to support it.
“It’s nice to have individual rights, but this water is not an individual issue, it’s a community issue,” he said. “It’s not over yet. The aquifer is decreasing, and big government is headed our way. It’s just a matter of time.”
Another factor that swayed many to the no side—the fear that powerful outside interests wanted to move, store, and privatize water.
Not long after the water district was first pitched by PRAAGS, people began drawing connections between the group and the arrival of new companies that are supposedly in the water-selling business.
For those loathing this plot, there was one specific acquisition that heightened fears.
In 2010, Justin Winery & Vineyard was bought by Beverly Hills billionaire Stewart Resnick, owner of the agricultural empire The Wonderful Company (formerly known as Roll Global). The company owns Fiji Water, POM Wonderful pomegranate juice, the cut flower brand Telaflora, and the ever-expanding Paramount Farms, the world’s largest almond, pistachio, and pomegranate producer and a major citrus producer.
Resnick has serious influence in California water politics and has a reputation for using heavy legal muscle when it comes to water policy and accumulation.
When he purchased Justin, people got nervous. Stories about his various involvements circulate like folktales, along the way being exaggerated or changed.
In 2013, the company bought the 742-acre Hardham Ranch in the El Pomar area east of Templeton. Residents said their wells declined after new wells began pumping there. The company became the poster child for all that was and could go wrong.
Eventually people started connecting the dots and identified several big players that raised suspicions. Another suspect is Brodiaea Inc., a subsidiary of Harvard University’s in-house investment management firm Harvard Management Company, which purchased existing vineyards and planted several parcels near Shandon, Highway 46 and Geneseo Road, and Cuyama. The Shandon properties, where several deep wells were sunk, are very close to the state water pipeline, raising suspicions of a plan to connect the groundwater to the pipeline.
There are others, too, including the agribusiness and real estate company Limoneira—known for their citrus and avocados, and for having connections to the water wheeling company Candiz Inc.—which purchased Windfall Farms, the once-lush Creston Valley horse ranch formerly owned by Jeopardy host Alex Trebek.
“The business plan is clearly to plant grapes, create an agricultural history, and then fallow it,” Ferguson with PR-WIN said.
Once it’s fallowed and a water use history has been established, he said, it could be sold off to the highest bidder.
Many members of the wine industry downplay these concerns however, and say that buying and running vineyards is just a good investment, not part of a ploy to deal in water. Representatives for Justin and Brodiaea both say they supported the district because they want to be part of the solution to stabilize the basin.
“We are fully committed to being part of a long-term solution that meets the needs of our neighbors as well as our region’s rich agricultural heritage,” wrote Mark Carmel, associate director of corporate communications for The Wonderful Company, in a statement. “We supported formation of a water district because there is no question that our water basin is in trouble and we believe that decisions to solve the groundwater challenge require involvement by government, business owners, and private citizens alike. Formation of a water district represents a fair approach to managing this precious resource.”
Matt Turrentine, of Grapevine Capital Partners, the local agent for Brodiaea, had a similar response.
“Our investments are purely agricultural in nature,” he wrote in an email. “Our business is growing wine grapes. We have no plans connected with the State Water Project, and the acquisition of any properties in close proximity to any infrastructure is coincidental.”
Still, Turrentine and Resnick are constantly attacked, as is anyone connected to them.
That includes Luft, who operated an environmental engineering firm in Bakersfield with her husband before retiring to this area. Years ago, they held a consulting contract with the Kern Water Bank, which Resnick controls. Now she’s constantly accused of being involved in the plot as a “former employee” of Resnick.
She’s never met the man.
“None of it’s based in facts. They’re totally lies. … These people [making the allegations] don’t even know me,” she said. “It’s so hard to disprove a conspiracy theory when people get that in their heads.”
Ferguson thinks there’s a conspiracy at work, but doesn’t think it’s a theory. He’s unapologetic that fears of a sinister bigger picture played a large role in defeating the water district, which he saw as necessary to stymie any such scheme.
“It looks more today like a conspiracy than ever before. And, that’s not just me saying so, that’s a lot of people who people underestimated as voters in the North County reading and educating themselves to that fact. It’s only a theory if there’s no conspiracy,” he said. “Here’s what happened to the water district people—we did. … All of us. We got in their way.”
Harvey also sees the looming threat.
“From a precautionary perspective, I’d rather fight against it then let it happen,” she said.
Merrill, whose vineyard management company has done work for both Resnick and Turrintine, suggested these claims were just methods of playing on people’s fear.
“The other side was more adept at scaring the living crap out of everybody that there was going to be water sales and water banking and stealing of water by mischievous forces,” he said. “They convinced [voters] that somehow the guys we got together [to propose a water district] were terrible, nefarious people; you better not vote for them.”
And he said it worked.
“I got to give it to them for pulling it off,” Merrill said.
Regardless of why the election went the way it did, it’s over now, and people like Luft are concerned about the future.
“A whole lot of us put our lives into this. And now what?” she asked.
The rocky geology underlying her property makes aquifer recharge a very slow process, and people in similar situations to hers have been hit particularly hard by the groundwater basin’s plight. She’s already seen one well go dry and has taken several measures to treat water from her new well because it’s pulling up ancient geothermal water with a high concentration of salts. That water may eventually kill her small, mostly dry-farmed 2-acre vineyard.
It’s an ominous sign of where things may be going, with or without a water district.
The view from her property shows young vineyards crawling up and over several hillsides into the horizon. Down the road, a sign posted on a fence reads “No Water District.” Up the road, a “for sale” sign went up the day after the election.
“We have a declining basin, that’s impacting property values and our ability to live here,” she said. “People don’t want a water district. What’s next?”
Contact Staff Writer Jono Kinkade at email@example.com.
Davis biotech firm plants seeds of revival after accounting scandal
By Dale Kasler
This is all Pam Marrone has ever wanted to do: Develop natural pesticides and other products to help crops flourish without wrecking the environment. “My life’s work,” she said, more than once, during a recent interview.
Good thing she feels passionate about it. Otherwise she might not have persevered when her young company, Marrone Bio Innovations Inc. of Davis, got hit with an accounting scandal and found itself deserted by investors and customers alike.
“We believe in what we are doing … and this is my life’s mission,” said Marrone, the company’s founder and chief executive. “That’s what kept us going.”
After more than a year of investigations, Marrone said the worst is over. Her former chief operating officer, Hector Absi, was indicted on fraud charges in February for allegedly inflating the company’s revenue. Marrone Bio paid a $1.75 million fine to settle an investigation by the Securities and Exchange Commission. Marrone Bio, having cut its payroll in half to save money, is ready to move forward with a portfolio of promising products designed to protect strawberries, potatoes, grapes and other crops against all manner of insects and bacteria.
“The fundamentals are there,” Marrone said. “I think the company now is stronger than it has ever been.”
The toll has been considerable, though. The company spent $13.5 million on legal fees and other expenses related to the investigation over a two-year period, a substantial sum for a firm with less than $10 million in annual revenue.
“It was very expensive, obviously – astronomically expensive, I would say, for a small company,” Marrone said. The CEO, as part of a settlement with the SEC, personally reimbursed the company $15,234 worth of incentive pay she received during the period when revenue was inflated.
Marrone Bio is still dealing with other effects of the scandal. Its stock price has sunk, closing Wednesday at 82 cents a share, and the company has been warned it could lose its prestigious Nasdaq listing because the total share value fell below the $15 million minimum. Investor class-action lawsuits are pending.
Beyond those lingering issues, Marrone Bio also is still working to regain favor with customers, some of whom left when the troubles hit.
“Competitors took advantage of our distraction, no question,” Marrone said. “We had an almost complete turnover of our sales and marketing (staff). When you have nobody in the field doing the sales, of course your sales are going to drop.”
She said Marrone Bio has been able to recapture some lost business. Revenue actually increased by nearly 8 percent last year, to $9.8 million, despite the cloud over the company.
Marrone Bio, despite a decade in business, is still essentially a startup. Naturally occurring pesticides and fungicides, while increasingly popular, still aren’t mass-market products in the farming business, and the costs of launching new products can be prohibitive. Marrone Bio lost $43.7 million last year, including some of the costs related to the accounting scandal.
Marrone Bio also needs to build back its research and development team, which took the brunt of the downsizing. Some 26 employees work in R&D, about one-third as many as before. All told, the company employs 80 workers, including 10 at a production plant in Michigan.
The cutbacks in R&D and other departments have forced Marrone Bio to slow its efforts to bring new products to market. Some ideas have been put on the back burner. “There’s lots and lots of early-stage (product) candidates there, and someday we’ll get back to those, I’m sure,” Marrone said.
Marrone said the case for “biologicals” – natural pesticides and fungicides – is obvious. Government agencies are cracking down on chemicals, while consumers are increasingly drawn toward organic and sustainably grown foods. “We believe that this is the future,” she said.
Marrone, 59, was raised on a 40-acre farm in southern Connecticut, where she developed a fascination with bugs. She vividly recalls the time her father bought a traditional chemical pesticide to deal with an infestation of gypsy moths.
“It killed everything besides the gypsy moths – lady beetles, lacewings, honeybees – and my mom was furious,” she said.
After earning undergraduate and graduate entomology degrees, Marrone worked for a while in St. Louis and moved to Davis in 1990 to start a biotech subsidary for pharmaceutical maker Novo Nordisk. A few years later, she founded a company called AgraQuest that made environmentally safe pesticides and fungicides.
AgraQuest made Marrone something of a rising star in the Sacramento-area tech community, even if things didn’t end well. Marrone was forced out in a power play by the company’s investors, and she didn’t earn a dime when AgraQuest was sold for a hefty $425 million in 2012 to Bayer CropScience.
By then, her new endeavor was well under way: Marrone Bio.
Like her old company, Marrone Bio is in the business of making eco-friendly farm products. One of its earliest offerings, Grandevo, protects strawberries and other berries against a wide variety of insects. Its Regalia product wards off fungal diseases found in grapes, lettuce and tomatoes.
The company raised $57 million in a 2013 initial public stock offering. It was the Sacramento region’s first IPO in seven years, and validated Marrone Bio’s status as a leader of a small but growing cluster of agricultural-tech companies in the area.
Then disaster struck. In September 2014 the company announced it had launched an in-house investigation of its accounting procedures. While few details were released right away, it was enough to prompt stockholders to dump their shares.
Marrone Bio was left in a kind of financial limbo. It periodically updated investors on the investigation, including the revelation that unidentified employees had secretly given certain outside distributors “inventory protection” that allowed them to return unsold goods. Aside from that, however, Marrone Bio was largely in a silent mode and went more than a year without releasing any quarterly earnings statements.
Finally, last November, the company released financial results, including the findings of its internal probe. The numbers weren’t pretty: In 2013 and the first six months of 2014, revenue had been overstated by a total of $6.7 million.
The full flavor of the scandal unfolded when U.S. prosecutors announced the indictment of Absi in February. A federal grand jury in Sacramento said the former COO, anxious to meet Marrone Bio’s sales goals and fatten his performance bonuses, made a habit of giving outside distributors the right to return products, while keeping the arrangements a secret from the accounting department. As a result, the accountants recorded millions in sales that should have been kept off the books.
Absi has pleaded not guilty to the charges, which could earn him 25 years in prison and a $5 million fine.
Marrone said the indictment, along with the settlement with the SEC, gave employees a sense of “closure” and enabled the company to emerge from its cocoon. Marrone Bio has begun hiring again, albeit slowly. It brought on three new sales people earlier this week, one in Washington state and two in Florida.
During a tour of headquarters with a Sacramento Bee reporter and photographer, Marrone met a new insect technician she hadn’t realized had been hired. Joking that “nobody ever tells me anything,” she said the hiring is one more piece of evidence that Marrone Bio is getting back on track –and headed in the right direction.
“Consumers are driving sustainable food production,” Marrone said. “Governments and regulatory bodies are continuing to restrict chemical pesticides. … This is, I believe firmly, the future.”
Dale Kasler: 916-321-1066, @dakasler, firstname.lastname@example.org
Wall Street Journal
Monsanto Chief Says No to Big Deals
By Jacob Bunge
Monsanto Co. said it has abandoned efforts to pursue large-scale deals, instead charting an independent path amid a steep downturn in the agricultural business.
The shift follows Monsanto’s failure to snare Swiss rival Syngenta AG and comes as several competitors pursue their own mergers, though investors expressed relief that Monsanto wouldn’t overpay to strike its own deal.
The St. Louis-based maker of Roundup weed killer last year kicked off a consolidation frenzy among global players in the $100 billion seed and pesticide business by launching a $46 billion bid to acquire Syngenta. The proposal, which Syngenta fought off, centered on Monsanto’s goal to grow in the pesticide market, having previously focused the bulk of its research over the past decade on genetically modified seeds.
Since then the agricultural sector has deteriorated, with three consecutive years of lower prices for major crops like soybeans and corn projected to send U.S. farm income to the lowest level since 2002.
“We need to get real,” Hugh Grant, Monsanto’s chief executive, told analysts on a conference call discussing Monsanto’s fiscal second-quarter earnings. “The landscape has shifted and we need to focus on driving that innovation [in pesticides] by other means.”
As the agricultural slump deepened, Dow Chemical Co. and DuPont Co. unveiled a merger plan that includes combining their agricultural businesses, while Syngenta agreed to sell itself to China National Chemical Corp. in a $43 billion all-cash deal, narrowing Monsanto’s field of potential merger partners.
Partnerships and collaborations now are a more likely path to expand Monsanto’s presence in crop chemicals, pairing its expertise in seed genetics with potential partners’ ability to zero in on new molecules to kill weeds, bugs and fungi, Mr. Grant said.
The company’s heft in emerging farm technology like beneficial microbes and data science gives it a strong position to negotiate profitable agreements, he said.
Monsanto shares climbed 0.75%, despite reporting second-quarter profits that undershot analysts’ expectations, falling 26% from the prior-year period.
Eschewing blockbuster deals in a tough business climate is a wise move, said James Zoldy, president of Halsey Associates Inc., a New Haven, Conn.-based firm that owns about $9 million in Monsanto stock. “There was a sense, I think, that the company was really hot and heavy to get a deal done, and now to take that off the table and refocus back on their primary business lines makes sense to us,” he said.
Monsanto and its competitors face numerous challenges, including currency shifts that have made seeds and pesticides more expensive in overseas markets and, in the U.S., a bruising price battle as seed companies cut prices to maintain market share.
Brett Begemann, Monsanto’s president, said he expects the price war to cool over the remainder of the year as “discipline will come back into the marketplace.”
Last month, Monsanto cut its profit outlook for this year, after outlining plans to lay off about 3,600 employees, about 16% of its global workforce, to help trim expenses.
The company reported a profit of $1.06 billion, down from $1.43 billion a year earlier. Revenue fell 13% to $4.53 billion.
—Lisa Beilfuss contributed to this article.
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