FOR IMMEDIATE RELEASE

October 26, 2004

For more information contact Carrie Longwood at:

605-342-0429 or carrie.sdsga@midconetwork.com

www.southdakotastockgrowers.org

Stockgrowers Board Agrees to Brand Board Offer

Directors vote to renew old contract with just two changes

The South Dakota Stockgrowers Association voted unanimously Monday night to go ahead with the S.D. Brand Board’s offer to renew the current contract with two amendments.

South Dakota Stockgrowers Association President Ken Knuppe , Buffalo Gap, S.D., says the two changes to the contact are sensible and simple.

“The first change is to eliminate the current requirement of the Stockgrowers’ payment to the Brand Board of $.03/head to help fund a state investigator,” Knuppe said. “Secondly, we added an auditing committee of three people that the Brand Board will appoint. The Stockgrowers requested this provision earlier, in order to maintain trust and openness between the two entities.”

Knuppe says both changes are positive for the Stockgrowers and he hopes to move forward with the new contract. “We hope to put the past behind us and continue to work with this new Brand Board to benefit the cattle industry.”

According to Knuppe, the Brand Board’s offer is positive for the entire industry. “It keeps producer costs at a minimum, while providing effective ownership inspection - the name of the game. The Stockgrowers have always remained focused on one thing: good brand inspection to prevent theft and return strays. This benefits every producer, and in turn, the state’s economy. Renewing the contract with minimal changes should allow us to continue providing the same good quality brand inspection South Dakota knows and believes in.”

Knuppe said the Stockgrowers expect both parties to sign the contract on October 27, 2004 , the next regular meeting of the Brand Board.

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October 22, 2004

For more information contact Carrie Longwood at:

605-342-0429 or carrie.sdsga@midconetwork.com

www.southdakotastockgrowers.org

SD Stockgrowers Consider Brand Board Offer to Renew Contract

The South Dakota Brand Board voted Wednesday to offer the South Dakota Stockgrowers Association a renewal of their current contract with two minor changes, according to South Dakota Stockgrowers Association Executive Director Carrie Longwood.

“They approved a motion to continue with the current contract, adding one provision and taking one out,” she said. “They want to eliminate the Stockgrowers’ payment of $.03/head to the Brand Board and add a fee audit committee to the current system.”

According to South Dakota Stockgrowers Association President Ken Knuppe, Buffalo Gap., S.D., the South Dakota Stockgrowers Association agree that the $.03/head payment should be ended. “We’ve been paying that for years now, to help fund a brand investigator. However, the Stockgrowers have had no input regarding the investigators or their handling of cases. The Brand Board oversees the investigators, and although the Stockgrowers have always employed and overseen the inspectors, we do not have any authority to manage the investigators. Since the Brand Board is responsible for hiring and overseeing the investigators, it seems fair to us that they also pay their salaries. We’re glad that the Brand Board agrees.”

The South Dakota Stockgrowers Association asked for the inclusion of a fee audit committee in the new contract, says Knuppe. “We are as honest and open as we know how to be with our books,” said Knuppe. “An outside party, like this committee that will be appointed by the Brand Board is a good way to provide an unbiased report to the board, and to clear up questions and rumors about the Stockgrowers’ finances.”

It has always been the Stockgrowers’ policy to maintain a brand inspection program that provides optimum benefits for producers at a minimal cost, says Knuppe. “Ranchers have continually tweaked and improved the program for over a hundred years to develop a unique system that works for us. Are there more improvements that can be made? I’m sure there are. We hope producers will continue to bring us their ideas for improvements so we can discuss implementing them.”

If ranchers have questions, concerns or suggestions about the brand recording or registration process or the investigators, Knuppe reminds them to contact the S.D. Brand Board as the Stockgrowers do not have authority over those issues.

Knuppe says the Stockgrowers appreciate the Brand Board’s patience and persistence throughout the last few months of negotiations.

“They were assigned the difficult task of finding a problem that didn’t exist. We certainly appreciate them digging deep to discover that the best way to manage the program is the same way it’s been managed – by ranchers. Of all the options we discussed, the current contract is the most affordable for producers, and provides the best service. Our brand inspectors do a heck of a job – the cattle industry confirmed that last spring when they showed up in droves to defend the current inspection program. They deserve good brand inspection, and they’ll continue to get that under this agreement.”

The South Dakota Stockgrowers Association has invited the S.D. Brand Board to a meeting in Rapid City to conclude negotiations on a contract to carry out the S.D. Ownership Inspection Program, according to Stockgrowers Vice President Rick Fox, Hermosa , S.D.

“We’ve discussed contract ideas at numerous meetings, but never hammered out details of a contract,” Fox said. “The Stockgrowers have been ready to negotiate from day one, and had hoped to be finished with negotiations by now. The Governor promised us that we would work out a deal by October 1. That day has come and gone, and we need to finish this deal as soon as we can.”

Ken Knuppe , Buffalo Gap, South Dakota Stockgrowers Association President, says that the Brand Board and Stockgrowers agreed at the last meeting on an idea that could work well for the industry and for the South Dakota Stockgrowers Association. “We’ve come to terms on a concept, and now it’s time to see if we can agree on the specifics. If we can, we can. If not, then let’s move on.”

The Stockgrowers asked the Brand Board to hold a public meeting on either October 15, 2004 or October 19, 2004 at the South Dakota Stockgrowers Association office at 426 St. Joseph St. , Rapid City , S.D. They hope for a response from the Brand Board soon.

“There is no reason to keep holding meeting after meeting,” Fox says. “We think the Brand Board will agree that action is needed.”

In a late night meeting that ran into the early morning of March 15, 2004, the last legislative day, the South Dakota Stockgrowers Association came to terms with Governor Rounds and other Republican leaders on a deal that will renew the Stockgrowers/Brand Board ownership inspection contract at least until April 1, 2005.

Both the Senate and House of Representatives overwhelmingly supported legislation to implement the changes agreed upon. Secretary of Agriculture Larry Gabriel and South Dakota Stockgrowers Association President Ken Knuppe, Buffalo Gap, S.D., testified before each legislative body in favor of the proposed legislation.

The Stockgrowers had been asked previously to sponsor legislation to change the brand board makeup, but had not been given any assurances that they would subsequently be offered a contract.

"Our contract had been canceled, effective August of this year, and our concern was that we would have no chance of negotiating another one," Knuppe. "Our goal has always been and remains: effective, consistent brand inspection that benefits producers and works for the auction markets. The agreement made late Sunday night addresses those concerns because it gives us another year to manage the brand inspection program, and assures us the opportunity to negotiate a new contract with the new brand board that the Governor appoints."

Knuppe said that the Stockgrowers feel comfortable negotiating a new contract now, because if they hit a roadblock with the new brand board, they will have the opportunity to go before the 2005 legislative body and work on legislative changes if necessary. The April 1 extension gives them that flexibility.

According to Knuppe, the legislature approved a couple changes to the current law that dictates the Brand Board selection process. "The Brand Board members will now serve for three years instead of five. Previously, the Governor had been required to choose people who own registered brands, and who make a living in the livestock business. Now only three of the five members need to meet that criteria. He also isn’t required to utilize nominations made by ag organizations."

"The Stockgrowers are pleased that we will continue to have the opportunity to provide quality, consistent and efficient brand inspection to the producers in this state," Knuppe said. "Our loyalty lies with cattle producers. We weigh each and every decision we make as an organization to determine the best way to represent and benefit the cattle industry. South Dakota producers were telling the Governor and the Stockgrowers that we provide the best brand inspection possible. We are happy to see that it will continue that way. We applaud our brand inspectors for their conscientious work and their attitudes of service. They are the backbone of this system, and they deserve a thank you."

South Dakota Stockgrowers Association Vice President Rick Fox, Hermosa, S.D., says he appreciates the producers, legislators and auction market owners statewide who stood up for the Stockgrowers and the current inspection program. "I personally would like to thank each and every producer and salebarn operator who called, e-mailed and wrote our state leaders and legislators - showing overwhelming support for an inspection program in the hands of cattle people. I also want to extend my thanks to the legislators for their support. Several testified that they would not be comfortable with a government-run inspection program that is currently managed well by an industry whose livelihood depends on effective theft prevention. We are fortunate that our legislators truly understand and represent the people of this state. Their commitment to a viable cattle industry is evident, and does not go unnoticed."

The South Dakota Stockgrowers Association will not support Governor Rounds’ request to strip the Brand Board of its long-standing ties to the livestock industry.

South Dakota Stockgrowers Association Brand and Theft Committee Chairman Bill Hutchinson, White River, S.D., says that currently the Governor must select Brand Board members who own brands recorded in S.D., and who derive the major portion of their income from the livestock industry. "A Brand Board made up of people why rely on the livestock industry and who possess a working knowledge of hot brands is vital," Hutchinson said. "The Brand Inspection Program is paid for only by producers, and therefore should be governed by producers. A lawyer or a banker, while well intentioned, wouldn’t have the hands-on experience with brands to make informed decisions. They could accidentally issue conflicting brands or allow a brand to be recorded that might look good on paper but wouldn’t work in a real-life situation."

Hutchinson, a brand inspector himself, says that maybe the Governor hasn’t attended enough Brand Board meetings to know exactly what the Board members do. "They are responsible for dealing with the public on all brand-related matters, like making judgment calls on brands that are issued or not issued. They also have to understand brand inspection in order to carry out the contract."

"It is illogical to expect the South Dakota Stockgrowers Association, a producer-run organization, to support a proposal to potentially eliminate producer input into the brand inspection and brand recording programs," Hutchinson said. "I don’t understand where the Governor was coming from when he asked us to carry legislation to give him the authority to choose Brand Board members with no ties to the livestock industry. The South Dakota Stockgrowers Association has a responsibility to the cattle producers in this state. Without representation, even though we fund the program, we would have no say in the way the brand laws are administered. We as producers would be cutting our own throats."

South Dakota Stockgrowers Association Executive Director Carrie Longwood says that the Governor’s staff told her that the Governor will not consider allowing a brand inspection contract with the Stockgrowers unless the Stockgrowers support the amendment to the brand laws.

Longwood told Rob Skjonsberg, Governor Rounds’ Chief of Staff that the South Dakota Stockgrowers Association does not support the elimination of livestock people from the Brand Board.

Even though the Governor had originally told the Stockgrowers Board of Directors that he would meet with them to discuss negotiating a new contract, yesterday Skjonsberg told Longwood that, "Given your decision, we will continue to plan and make preparations to administer the livestock inspection program through the brand board."

South Dakota Stockgrowers Association Vice President Rick Fox, Hermosa, S.D., says he is curious how much time and taxpayer money the state has spent in battle with the South Dakota Stockgrowers Association. "The Brand Inspection Program has always been funded completely by brand inspection fees - paid by producers. But the state’s continual confrontation of the Stockgrowers has burdened taxpayers. The accusations about our finances and the follow-up by the legislative auditors office that proved that our books are in order; the DCI investigation and report that showed very few instances of concern, no criminal intent, and no activities punishable in the court system; and now the plan to run the brand inspection program under state control - how much taxpayer money has the state used in the last 8 months just to prove that the Stockgrowers are doing a good job?"

Governor Rounds said in a press report last week that he hopes to change the method by which the S.D. Brand Board is selected, so he can choose people who are "independent" of the South Dakota Stockgrowers Association.

South Dakota Stockgrowers Association President Ken Knuppe, Buffalo Gap, S.D., says that it is imperative that the Brand Board members are involved in the livestock industry. "Of course the Brand Board shouldn’t consist of five prominent Stockgrower members - we’ve never even suggested that, but they should have first-hand knowledge and experience in the cattle business."

Knuppe says that of the previous five Brand Board members, only two were members of the Stockgrowers - Dean Strong and Ken Halligan. Since Strong just joined the Stockgrowers in the fall of 2002, he was not a member of the Stockgrowers for the vast majority of the time he spent on the Brand Board. Strong was nominated by the auction markets and represented their views on the board.

"Ken Halligan is the only member of that previous board that the Stockgrowers nominated," Knuppe says. "To say that the Stockgrowers controlled that Brand Board is simply not true. Sure, Ken Halligan was a liaison between the Stockgrowers and that Brand Board, and that’s key for good communication, but he was one of five members."

Knuppe says the South Dakota Stockgrowers Association doesn’t believe changes need to be made in the selection process. "Currently, any statewide non-profit ag organization can make nominations. The nominees must derive the major portion of their income from livestock, must own a S.D. brand, at least three must live in the inspection area, and there may be no more than three from one political party." Knuppe said the Stockgrowers believe these criteria are useful in choosing individuals who will make sound decisions regarding brand laws in S.D.

"The system requires people who depend on the livestock industry to sit on the Brand Board. That’s important, and it’s necessary that those individuals have experience with hot brands, because only those producers truly understand the need for a viable, effective brand inspection program. Ranchers are the people with the most to gain from a good program and the most to lose from a poor one. And by utilizing ag organizations to narrow down the field, the governor should have a list of informed, active individuals to choose from," Knuppe said.

The South Dakota Stockgrowers Association met Tuesday with Governor Rounds to talk about South Dakota brand inspection.

Rounds told the Board of Directors and several West River Legislators in the meeting that the Brand Board had voted to terminate the brand inspection contract with the Stockgrowers six days prior. Rounds also told the group that the reason he had dismissed four of the five brand board members the evening before was that he had concerns about harassment and intimidation regarding the Brand Board’s earlier meeting.

"The Governor’s comment seemed ironic given the fact that three of the four members he had fired last night were at today’s meeting at Ft. Pierre Livestock," said South Dakota Stockgrowers Association Brand Committee Chairman Bill Hutchinson, White River, S.D. "The former Brand Board members were thanked time and again yesterday by producers for their devotion to the cattle industry and the integrity they showed throughout their terms on the board."

A crowd of at least 300 expressed their concern about the fate of the brand inspection program by showing up at the capitol that afternoon. Ranchers and livestock market operators from across the state had met earlier at Ft. Pierre Livestock in order to gain the newest information and attempt to understand the last few days’ proceedings. The group was in agreement that the South Dakota Stockgrowers Association manages the brand inspection program effectively and efficiently. Concern about a state-run program was evident. A representative from the S.D. Livestock

Auction Markets Association reported, in a meeting two days prior, they had voted unanimously to support the South Dakota Stockgrowers Association managing the brand inspection program.

The Governor told the South Dakota Stockgrowers Association Board of Directors that he may now be interested in negotiating another contract with the Stockgrowers.

South Dakota Stockgrowers Association President Ken Knuppe, Buffalo Gap, S.D., says the Governor told the group that he believes the state can run brand inspection more efficiently. "He asked Secretary of Agriculture Larry Gabriel to share a few of his numbers with us, and when we asked Secretary Gabriel about certain expenses that are incurred by the program, it sounded like there were budget items they hadn’t included," said Knuppe.

"The Governor said although he is prepared to implement a state-run program if necessary, he is also willing to talk with us about maintaining a brand inspection contract," said Knuppe.

SD Stockgrowers Past President Bill Hutchinson, comments on DCI
Investigative Report
By: Joyce Glynn, Mellette County News Editor
reprinted with permission

In the much publicized 30+ page Investigative Report, conducted by the
Attorney General’s Office as it investigated allegations that the SD
Stockgrowers were not in compliance with the contract they held to
conduct the Brand Board’s Brand Inspection program, it mentions 54
complaints or minor violations of the contract occurring during the
past 15 years. However, it does not mention that Brand Inspectors have
inspected over 22 million head of cattle, horses, and mules in that
same time frame. That equates to an instance of one occurrence of error
for every 40,000 head that are inspected, or about .0025% error. After
a year long investigation at taxpayers expense, Bill Hutchinson, Past
President and Brand Committee Chairman of the SD Stockgrowers, says
he’s pleased that the state has proved to the public in this report
that the Stockgrowers were doing that good of a job. The Stockgrowers
have facilitated the brand inspection program in South Dakota for over
60 years.
Additionally, about half of the problems mentioned are complaints
about individual brand inspectors. According to Hutchinson, in roughly
ten years, there have been two actual instances when it was discovered
and proven that brand inspectors were not acting in accordance with the
contract. These two brand inspectors were subsequently released of
their positions.
Last fall, allegations were made that the Stockgrowers Association
was inappropriately profiting from brand inspection fees. An
independent accounting firm in Rapid City audits the Stockgrowers’
finances annually. The Stockgrowers then share copies of the completed
audit with the Legislative Auditor, the Brand Board and the Department
of Agriculture.
When the Stockgrowers were accused of mismanaging their finances last
fall, legislative auditors reviewed the Stockgrowers finances with
extra caution, still finding no evidence of mismanagement. After the
state auditor’s review and a review by State Attorney General Larry
Long, as to financial compliance in the contract, it was determined by
those offices that the Stockgrowers were in compliance with the
contract, and the allegations were proven to be false.
Some contention has been raised from various state offices about how
the Stockgrowers spend their money, and the organizations the
Stockgrowers help support. Hutchinson explained, “When the Stockgrowers
spend money, such as donations to R-CALF, it’s because the expense has
been approved by the Stockgrowers Directors, who are elected by the
members of the Stockgrowers, who pay dues to belong.”
“To put in perspective the amount of money the SD Stockgrowers
Association has donated to R-CALF since we joined three years ago -
we’ve given a total of $4500. This includes our yearly affiliation
dues. That is just $500 more than the annual membership dues to NCBA,
the organization we voted to disaffilate with three years ago.” He went
on to add, “When the Stockgrowers vote to raise the brand inspection
fees, it’s like a tax on themselves. They aren’t asking for state
money. They never have. And the only people paying the brand inspection
fee are the cattlemen themselves, and cattlemen have asked for a
viable, effective brand inspection program. They realize that, as in
any business, expenses are always on the rise. Almost every rancher we
visited with understood and supported the fee increase. It is also
important to note that the legislature sets a maximum brand inspection
fee - currently they’ve approved up to $.80/head. If the Stockgrowers
were really trying to ‘cash in’ on this program, wouldn’t we have asked
for the full amount possible?” (The current brand inspection fee is
$.70/head, raised from $.60/head last fall). But they have agreed to
the increase in fees, and the associated expenses, to uphold the
integrity of the organization.”
The Stockgrowers are currently in the process of negotiating a new
contract with Governor Rounds, who last week fired four long-standing
members of the Brand Board, because they began questioning their
previous alleged disassociation with the Stockgrowers. Rounds says he
is allowing the state to take control of the brand inspection program.
Negotiating for the Stockgrowers is Vice-President Rick Fox, Past
President Bill Hutchinson, and member Dan Holloway, with input from
Stockgrowers Lobbyist Mark Hollenbeck. If the state takes control of
the brand inspection program, funds will need to be appropriated by
this legislative body. Rounds has indicated that negotiations will be
concluded by March 15, the end of this legislative session.
“If the state runs the brand inspection program,” commented
Hutchinson, “I’m afraid someone not involved in agriculture will not
have the cattle knowledge or the passion for the industry to inspect
correctly, or make sure their neighbors cattle are inspected right. It
would be hard to replace the experience and expertise held by current
inspectors, the majority of whom are life-long cattlemen.”
Hutchinson concluded, “I personally promised God, when I become
involved with the Stockgrowers, that I would speak what He told me to
speak, and go where He wanted me to go. The current issue seems similar
to the story of David and Goliath. I’m very proud of the high road the
Stockgrowers Association has taken in this series of events.”