Aid to Ranchers Was Diverted For Big Profits

Flory Eutzy walks past bags upon bags of powdered milk, part of the federal government's stockpile, stacked in her company's warehouse in Chambersburg, Pa. (By Bill O'leary -- The Washington Post)

A spokesman for Monte Roble, Jesus Cazare, said the small firm was in the business of brokering "food products and nourishment for human consumption." He added that he had no "recollection" of the purchases of powdered milk and had been at the firm only a short time. "There have been big changes in the company," he said. "I am not aware Monte Roble was buying from this company."

Schreiber also said he sold millions of pounds of milk to brokers whom he declined to name. Records show that all of that product went abroad.

"Can I account for what those people did to the product once it left my control? No," Schreiber said in one of a series of interviews. "Do I know some of our customers sold elsewhere? Yes. Do I know it left the country? . . . Yes. Do I know where they took it? No."

'It Will Get Ugly'

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When Utah's Stephens learned that brokers in his state were diverting the government's powdered milk, he turned the findings over to USDA officials, who in turn shared them with the department's office of inspector general.

In January 2004, Schreiber met with USDA inspectors at a Comfort Suites hotel in Salt Lake City. Separately, Robinson and Kunz also met with inspectors.

Schreiber said he was "completely open" about where the powdered milk was going. He said one of the inspectors even applauded him for his creativity. But later, Schreiber said, the tone of the inspectors changed and he started to worry that he was in trouble.

"As far as I know, it's still an ongoing case," he said. "I don't know what is going to happen, but I know at one point it will get ugly."

In July 2004, then-Agriculture Secretary Ann M. Veneman announced that the USDA would once again dip into its stockpile of powdered milk to help ranchers. But this time, the agency included specific restrictions on feed dealers and a more explicit prohibition on exports.

A spokesman for the USDA inspector general declined to comment on the status of any investigations into diversion of the government's powdered milk. Last fall the agency issued an audit report on government drought-relief programs that noted abuses in powdered-milk trading, including that some of the product went abroad. But the report named no names.

Schreiber said he stopped buying and selling powdered milk in 2004. Since then, his firm has gone from five employees to one, he said: "As soon as this is over, it will cease to exist."

Today, Schreiber, 42, said he is trying to sell commercial real estate while waiting for the other shoe to drop. The government "is trying to turn things inside out," he said. "Here I was trying to do something positive. They wanted to reduce their stockpile. Ranchers got feed. Now they want to say I did something wrong."