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Former dairy coop head has been active political contributor

by Ivan Foley
Landmark editor

A rural Platte City man finds himself in the middle of a federal investigation into alleged price fixing of milk.

Gary Hanman, who lives along Hwy. N at Humphrey’s Road, a short distance south of the city limits of Platte City, is the former chief executive officer of the Dairy Farmers of America (DFA), a cooperative with headquarters in Platte County along Interstate 29 near KCI Airport. Hanman retired from DFA in 2006 at the age of 71.

In addition to his name being mentioned in the price fixing probe, Hanman is also targeted in a recent letter from the DFA’s new chief executive. In that letter to members of the cooperative, it is alleged Hanman arranged an improper and “unauthorized transfer” of DFA money to a DFA board member, believed to be in the amount of $1 million. An investigation is planned.

Hanman is widely credited with helping drive the consolidation of the dairy industry, leading the merger of four large coops to create the DFA in 1998. DFA represents some of the more recognizable names in milk, including Borden, Roberts, and Highland Dairies. It controls about a third of the nation’s milk supply.

A DFA spokesperson has said the cooperative believes it has done nothing wrong and has not answered specific questions about the investigation.

In recent years, Hanman has been a large contributor to Republican political candidates. Political insiders say Hanman was among the largest contributors to Gov. Matt Blunt when Blunt was elected in 2004. After Blunt was elected, Sandra Davis, a relative of Hanman's, was awarded operation of the license bureau fee office in Platte City, seen as a lucrative assignment that many insiders believe Blunt handed to Hanman's family as a reward for his contributions to the Blunt campaign.

Hanman has also given to other prominent Republican campaigns, including recently to the failed presidential effort of Mitt Romney.

The area just south of Platte City where Hanman resides was part of an involuntary annexation effort in recent years by the city. Hanman spoke against the annexation attempt at a public hearing on the issue at that time.

Hanman’s local property was described as a “sprawling horse ranch” in a Channel 41 report Monday night. County records show Hanman’s 265 acre spread where he and his wife Shirley reside is valued at nearly $700,000. Nearby is a property in the name of his son, Theodore Hanman, valued at $540,000. A property at Weatherby Lake is listed in the name of Shirley A. Hanman Trust and is valued at just over $200,000.

Phone messages left on an answering machine at the Gary Hanman residence by The Landmark had not been returned at press time. Shirley Hanman told a Channel 41 reporter the couple has been advised by their attorney not to comment on the matter.

The Wall Street Journal in recent days broke the story of the investigation. The Journal says investigators are questioning whether Dairy Farmers of America artificially increased the price of milk by making large trades in cheese on the Chicago Mercantile Exchange. Cheese prices at the exchange affect milk futures and also are a key component of the complex formula used by the U.S. Department of Agriculture to set the minimum prices dairy farmers receive for their raw milk.

DFA counters by saying the trades were standard purchases to meet consumer demands and denies doing anything improper.

The Wall Street Journal reports the allegations follow six years of rapid consolidation in the dairy industry, one of the reasons milk prices have risen sharply in recent years. But it is difficult to determine how much the alleged manipulation might have affected consumer and farm-level prices “because so many other factors influence them,” the Journal reported Monday.

The Journal said the Commodity Futures Trading Commission is focusing on an alleged coordinated effort by DFA to boost prices in 2004. Hanman would have been the DFA CEO at that time.

DFA has said the coop didn’t violate the law and that it has been cooperating with the commission’s probe.

In regard to the alleged unauthorized transfer of money that was approved by Hanman and concealed through a DFA affiliate in 2001, the current DFA CEO says the coop has contacted the U.S. Justice Department about the incident, and that agency is preparing to start its own probe, according to the Wall Street Journal report.

“We don’t have all the facts, and we want to know if there was anything else. This was a severe breach of trust and we are not going to cover it up,” Richard P. Smith, current CEO of DFA, told the Journal.

The unauthorized payment has recently been repaid to DFA, with interest, the Journal said.
A Dec. 30, 2004 article in the Chicago Tribune described Hanman as “a key industry insider who has a huge stake in how much dairy farmers are paid for the milk, which in turn affects how much consumers pay for a gallon at their local store.”

The Tribune article then goes on to say: “For that insider--Gary Hanman, chief executive officer of Dairy Farmers of America, the nation’s largest dairy cooperative--the higher the price the better.”

In that same article, a dairy economist said the actions of DFA raise questions about the integrity of the system for pricing dairy products because it appears to be governed by factors other than supply and demand. When that happens, the economist is quoted as saying, someone ends up “getting ripped off,” whether it’s consumers, farmers or cheesemakers.


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