Nov 4: You be the Judge. Is Palin's Mat Maid team misleading Alaskans?

On Friday, November 2, 2007 DNR Commissioner Tom Irwin and Creamery Board Chair Kristen Cole appeared on a local talk radio program hosted by Dan Fagan, to answer questions about the state's trouble dairy Matanuska Maid. During the show, Cole anaounced the dairy lost $170,000 during the month of September.

Due to the time constraints of the talk radio format, many of Irwin's and Cole's statements didn't get the proper cross examination they deserved. I have posted some of the highlights of the discussion below as well as posted a link so you can hear the interview in its original format.

Dan Fagan (DF): Commissioner, Senator Lyda Green has ordered an audit on Matanuska Maid, what's your take?

Commissioner Tom Irwin (CI): In August, the Creamery Board came to the governer and me and appropriately asked for an audit. On August 31, I drafted a letter to the legislature asking for an audit.

We highlighted several things about the significant cost changes leading up to 2007. We asked for things like why were there so much travel by management, why were select buyers of water products given discounts during a period of losses and why sales opportunities including Kaladi Brothers and others missed?

Fact: The water portion of Mat Maids's business was the only profitable segment of their portfolio. Discounts were given to remain competitive against low cost competition. In addition, most of these concerns (Kaladi Brothers and travel expenses) were voiced before the Irwin's Board took over in June, so why the 2.5 month delay?

Coincidentally, I had an unscheduled and contentious debate with both Board Chair Kristen Cole and Governor Palin on August 29th on live talk radio where I pointed our several flaws in their excuses regarding Mat Maid. (link below)

Two days later they asked Irwin to do an audit of previous management to deflect attention away from their own mismanagement.

The truth is the first two months they were in control, Cole and others did an extensive audit of Mat Maid's management. they turned over every paper clip and reviewed every travel expense and found no problems.

In fact in August, Cole told outgoing CEO Joe Van Treek, "You've passed the test."

Board Chair Kristen Cole (KC): We've hired Mikundra-Cottrell for $27k and they started on October 27.2007.

DF: But you've had control for how many months now?

KC: We took over on June 19, 2007.

DF: Why didn't you order it initiially?

CI: We asked the legislature's budget and audit committee. (According to Irwin's earlier response, he didn't formally ask for the the audit until September 4. So again, why did they wait almost four months?)

DF: Board Chair Kristen Cole, for all practical purposes you are running Mat Maid, is that fair to say?

KC: No, that is not fair to say, I'm not the CEO of Mat Maid.

DF: So where does the buck stop at Mat Maid?

KC: Well, it stops at the Board.

DF: And you're the Chair of the Board?

KC: That's correct.  

DF: Does anyone have any experience on the board of running a dairy?

KC: No

DF: If the dairy sells to a buyer who closes the dairy and uses the assets for other means, doesn't that confirm Mat Maid should have been shut down months ago?

KC: We didn't know for sure if the business model was broken. I can tell you that had the milk prices not continued to escalate throughout the summer, we may not be in this situation.

Fact: The previous Board along with Mat Maid's own accounting firm in early June predicted skyrocketing milk costs and continued record losses if the dairy was kept open. In addition, I posted a blog dated June 16, three days before Palin's group took over managing the dairy and predicted higher milk costs.

"According to the American Dairy Products Institute, "the biggest dairy price spikes are likely to come later this summer in the areas farthest from the Midwest corn and grain fields, which feed most of the country's dairy cattle." With 72% of Mat-Maids milk being imported from west coast producers, the costs and pressure would only continue to grow." andrewhalcro.com 6/16/07

Irwin and Cole and Governor Palin were well aware of the cost pressures, they simply choose to ignore them to protect their friends and neighbors.

DF: Don't you think the previous Board took into consideration and predicted that milk prices would go up?

CI: When you go in as a Creamery Board and find a whole list of things that should have been cost cut and measures put in place and improving sales volume, your first step as a business man is to immediately start digging into costs.

Fact: After two months of what only could be called a witch hunt audit, the new Board found no signs of mismanagement. In fact, after accusing a Manager at their Palmer plant of theft, they found the equipment in question stored in a shed out back. and after stating they found $1 million dollars in savings, nobody has yet to see an itemized list of those expenses. And again, Board Chair Kristen Cole directly told outgoing CEO Joe Van Treek (after they had gone through every shred of paper work) he had passed the test.

DF: You talked about missed sales opportunities like Kaladi brothers, have you since secured that business since you took over managing the dairy?

KC: "We actually have called those folks", but as you can imagine they wanted guarantees which we aren't able to give them now.

Fact: Dan's questions wasn't "Have you called these folks", it was have you secured that business? Cole is being misleading because the issue of missed sales opporunities with Kaladi brothers had been floated since June 1, giving the new Board plenty of time to sell to the account.

The reason why Mat Maid doesn't sell to smaller accounts is because of their business model. When was the last time you saw a Mat Maid eighteen wheeler pulling up to a coffee shop or coffee stand?

The reason for the lack of penetration at smaller accounts is Mat Maid goes through local distributors and the economic reality is their price has not been competitive for years due to higher costs. That's why sales have dropped since June, when the Board raised the price paid to local milk producers in the Valley.

In addition, the excuse of Mat Maid not being able to give guarantees is nonsense. The new Board tool over over June 19th and as late as August 23rd, the acting CEO Ralph Carney was talking about selling milk to cruise ships in the summer of 2008. In fact, the Board didn't decide on a hard closure date until their October meeting.

Caller to the show: How did the current Board get appointed?

KC: I don't know what the appointment process.

Fact: This is a blatant falsehood. Cole knows darn well that Governor Palin fired the previous Board and handpicked the entire Board without an application process. It was headline news for the an entire week in June.

In the end, all appointees ended up being Palin's friends and neighbors from the Valley.

In fact the Valley Frontiersman referred to the Board in August as the “all Mat-SU Valley replacement” (Frontiersman 8/19/07). As Fagan's previous question was answered by Cole, none of these appointees had any experience running a dairy.

Andrew Halcro (AH): I have heard consistently for five months about the mismanagement of the previous Board, including travel costs. I have a very simple and clear question for you; Please tell me how much they were spending on travel.

CI: Actually that's exactly why we wanted to have an audit.

AH: Commissioner, your Board has been in place for almost five months. And you continuously use bad management in labeling the previous Board. (Actually Governor Palin referred to them as incompetent in June) If you are sitting here today, 4.5 months after your Board has had complete and unfettered control of the dairy and you can't back up your statements (allegations). For those of us who have been paying way too much attention to this issue, it highlights the point that this was an exercise in cronyism and protecting a handful of Valley farmers, because obviously you can't give us a clear answer (regarding your allegations).

CI: I think I gave you a very clear answer and we will have the numbers once the audit is done. It's hard to go back and get those numbers.

Fact: Commissioner Tom Irwin is lying when he says it's hard to go back and get historical numbers. This email is from a former Chair of the Creamery Board:

"The commissioner is lying. When I was Chairman of the Creamery Board we had annual audits by bonded audit firms. All of the financial were submitted to the BAC and the division of Ag. I know that the board that Mrs. Boyle chaired did the same. This information has always been available to Tom Irwin."

AH: Having said what you just said, then why are you and Board Chair Cole continuously blaming the previous Board for misallocation of resources, if you cannot, on this radio program, definitively tell me how much they were wasting?

For me, after you've been in charge for 3.5 months. that's not the time to do an audit. We understood, the public understood and it was well publicized (Palin's pep rally with Valley milk producers on 6/5/07) that an audit was going to me immediate.

CI: And maybe we're finding more then we could handle with all the other issues. But they're going in the right direction and I feel comfortable with it.

Fact: If Irwin is comfortable with the direction of the Board, that means he is comfortable with almost a half a million dollars in losses since his group took over. He's comfortable with a Board that has no experience running a dairy. He's comfortable with making serious allegations of mismanagement against the previous board even though he pubicly admitted he has no factual support. He's comfortable lying to the public about how he had no knowledge of the finances at Mat Maid.

KC: What I can share with you is that after 30 days when we started requesting documentation that there was more than we could wrap our arms around. Two folks in management at Mat Maid had been spending five to six thousand dollars a month on travel. That's the tip of the iceberg of what we were finding.

Fact: Cole states that thrity days into her term (mid-July) they realized they were in over their heads.So why wait until August 31 to request a audit if you state you were under water in mid July?

Also, even though all travel expenses were cut in June, losses between July and September have been worse than before. So why are Cole and Irwin blaming past travel expenses when even without them they've accumulated losses of almost a half a billion dollars in three months?

And futhermore, if Cole realized in July that the financials she was seeing weren't accurate, why did she immediately parade around to media outlets in August proclaiming that Mat Maid had turned a profit in June and predicting a profit in July while taking credit for the miraculous corporate turn around?

On August 19, the Valley Frontiersman printed this editorial after visiting with Cole:

“Today, under this new leadership, Mat Maid is running leaner and meaner and is in the black for the first time since 2005...the dairy actually made money in June ($62K) it also expects to show a profit in July.”

Six days later this was the true story about Cole's claim to profits:

On August 25th, just six days after the glowing editorial ran in the Frontiersman, the financial figures were released publicly that Matanuska Maid had suffered record losses in July of $300,000. And to add insult to injury, the $62,000 profit in June, because of an accounting error was actually $2,000." andrewhalcro.com / The Incompetence Factor/ 9/1/07

AH: But with all due respect Kristen, it took you less than 24 hours to go around and do a dog & pony show with different press outlets in August claiming you had made $62,000 in June. It really seems (listening to the answers on the Fagan show) these are just more excuses to justify keeping a dairy open that by all legitimate means and all honest economic and factual recommendations by the previous Board, should have been shut down in June.

Even today, (when you say it was beneficial to keep Mat Maid open and incur losses to buy time for the private sector to take over) what do you have?

You have a handful of people who have created the Southcentral Dairy Co-Op, the group includes 5 current or past dairy producers with 3 bankruptcies and approximately $4 million state & federal dairy loan losses, plus 1 failed State Agriculture Director and 1 current dairy producer that is the State AG Director's father-in-law with conflicts of interest.  

CI: I need to make a comment. We're just not going to agree on this and I respectfully think you're wrong. (Thank goodness for Senator Green's requested audit, Commissioner)

I need to clarify one thing; do not impinge (impugn?) any ethical issues on my Director of Agriculture (Franci Havemeister appointed by Palin in June). She has recused herself from all issues relating to dealing with her relatives.

Fact: Division of Agriculture Franci Havemeister, that Irwin defends and so readily brags about appointing, has not even filed her APOC statement required by law. She has been repeatedly reminded to get it done or she faces fines if it not received by close of business November 5th.

Additionally, Director Havemeister has been reminded repeatedly to not participate and meet with the local dairy co-op members (the SouthCentral Dairy Co-Op).

However she continues to meet with them even at the State Division of Agriculture offices.

AH: Commissioner, maybe you could speak to the qualifications of Director Havemeister.

CI: Actually I made that decison and I was the ultimate decider. 

Fact: Franci Havemeister, whose resume included stints as a Valley real estate agent (working for Kristen Cole) and a homemaker, was selected by Irwin over a Professor at UAF with a degree in Agricultural Economics and an Agriculture Industry Consultant who  had lengthy experience as a legislative aide working exclusively on agricultural legislation.

So in a time where the agriculture industry was facing a significant loss with the dairy industry, Irwin hired a director with no agricultural experience.

And one more email from another former Creamery Board Chair who took issue with Cole and Irwin's financial outlook at Mat Maid:

"The 170,000 that has been reported just can not be right. Based of the amount of information that is not forth coming from Miss Cole. We as the original Creamery Board know quite well that by December Mat Maid would be 2.2 million in the red, as it stands to date we are 3/4s of the way to meeting that projection. With the bills adding up and into Carlisle for 890,000 there is no way the amount being reported can be true."

And once more for the record, Commissioner Tom Irwin is the guy who crafted AGIA and whom Governor Palin is looking towards to get Alaskans a natural gas pipeline.

If Alaskans can't get the truth about a $15 million dollar a year dairy, how can we trust him with the largest oil & gas project in the world and Alaska's economic future?

To listen to the complete audio of Dan Fagan's show:

http://content.streamaudio.com/podcast/81/danfaganhour3.mp3

To listen to a debate over the situation at Mat Maid with Board Chair Kristen Cole and Governor Palin on August 29 (Two days later Commissioner Irwin states Cole asked for an audit):

http://content.streamaudio.com/podcast/81/danfaganhour3.mp3