DFA finds improper $1 million payment

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SALEM, Ohio — Dairy Farmers of America has discovered two of its former senior representatives were involved in an unauthorized transfer of $1 million.

In 2001, Gary Hanman, DFA’s former CEO, arranged for a $1 million payment to be made to Herman Brubaker, DFA’s former board chairman. The money was paid through an unidentified affiliate and never approved by the co-op’s board of directors.

Auditing

The payment came to light in the past couple of months during an auditing process with the affiliate. DFA spokesperson Heather Schofield said the co-op has been trying to take a greater ownership role with the affiliate and while auditing the affiliate’s books, the $1 million payment was discovered.

The transaction was not recorded in DFA’s financial records.

“We still have complete confidence in our own auditing process,” Schofield said.

Letter

In a May 8 letter to DFA members, CEO Richard Smith and Chairman Tom Camerlo said the co-op moved quickly to secure repayment of the funds. The $1 million, plus interest, has already been returned.

A special committee has been formed to look into whether any similar transactions have taken place. The committee will also decide if there are any standards or practices that could enhance internal controls at DFA.

The committee is expected to report its findings to the board within the next few months.

DFA’s past and present board of directors were not aware of or involved in the transaction. The current board and managers just recently learned about the situation, according to the letter.

Brubaker, of West Alexandria, Ohio, stepped down from the chairman position in 2003 after five years on the job. He had also served as a chairman of Milk Marketing Inc. in Ohio, one of DFA’s predecessor cooperatives. Attempts to reach Brubaker were unsuccessful.

No civil or criminal charges have been filed in the matter. Schofield said the co-op doesn’t know if there will be any charges in the future.

About the Author

Former reporter Janelle Skrinjar wrote for Farm and Dairy from 2005 to 2009. More Stories by Janelle Skrinjar

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