GAO-01-521R Resolving Discrimination Complaints

United States General Accounting Office

Washington, DC 20548

April 12, 2001

The Honorable Larry Combest

Chairman, Committee on Agriculture

House of Representatives

Subject: U.S. Department of Agriculture: Resolution of Discrimination 

Complaints Involving Farm Credit and Payment Programs

Dear Mr. Chairman:

Discrimination complaints by minority farmers—including African-Americans,

Hispanics, and American Indians—who were denied benefits under the U.S.

Department of Agriculture’s (USDA) farm assistance programs1 have been a longstanding issue. Compounding this concern has been USDA’s inability to address

discrimination complaints through its administrative processes in a timely manner.

These issues came to a head in 1997 when a group of African-American farmers

consolidated their claims of racial discrimination in farm lending and benefit

programs into one class action suit against USDA—Pigford v. Glickman. On April 14,

1999, a federal District Court approved a consent decree between the parties for

settling the suit that included a framework for resolving the individual claims. USDA

continues to operate its internal administrative process for resolving discrimination

complaints that are outside the class action settlement.

Concerned about certain aspects of the class action settlement and about USDA’s

administrative process for resolving program-related discrimination complaints, you

asked us to examine (1) the status of claims under the class action settlement and (2)

the results of the Department’s efforts to resolve discrimination complaints by

minority farmers through its administrative processes.2

 As requested, in addressing

the second objective, we focused on minority farmers’ discrimination complaints

involving USDA’s farm credit and payment programs, which are operated by USDA’s

 1

A program complaint might allege, for example, that a USDA official discriminated against a minority

farmer on the basis of race by failing to process a loan application.

2

There have also been long-standing concerns about USDA’s treatment of minority employees. As

requested, however, this report focuses on program-related discrimination complaints and not on

employees’ discrimination complaints. In U.S. Department of Agriculture: Problems Continue to

Hinder the Timely Processing of Discrimination Complaints (GAO/RCED-99-38, Jan. 29, 1999), we

reported on the problems in processing discrimination complaints by both program participants and

employees.
Page 2 GAO-01-521R Resolving Discrimination Complaints

Farm Service Agency (FSA). This report summarizes the information we provided

during a March 2, 2001, briefing of the Committee’s staff.

In summary, we found the following:

With regard to the class action settlement, the consent decree approved in April

1999 provides for various parties outside the federal government to make

decisions on the individual claims on the basis of information submitted by the

claimants and USDA. Although USDA participates in the process, it does not

make decisions on the individual claims. As of January 17, 2001, more than 25,000

people had filed claims under the consent decree; of these, more than 10,300

received settlement payments totaling approximately $520 million. Many claims

are still being processed, which will likely result in substantially more payments

to resolve this class action. At the same time, however, more than 3,600 claimants

(about 15 percent of those who filed claims) were rejected as not being eligible

class members, and more than 7,900 who met the class eligibility criteria were

found not to be entitled to a payment. As provided in the consent decree, many of

these people appealed these decisions to a court-appointed party. Furthermore,

the court extended the deadline for filing a claim, and more than 57,000

individuals have submitted written requests to file late claims. While most of the

costs of settling the class action are paid from a fund maintained by the

Department of the Treasury for paying judgments against the federal government,

some are made from USDA’s funding accounts, including FSA’s salaries and

expense account.

The resolution of discrimination complaints through USDA’s administrative

process differs significantly from the resolution of the class action. In particular,

for cases handled under USDA’s administrative process, USDA makes decisions

on the discrimination complaints. Its Office of Civil Rights (OCR) investigates

allegations of discrimination, decides if there is evidence of discrimination, and

negotiates settlements with complainants when it finds that discrimination has

occurred. USDA’s Office of the General Counsel reviews the cases in which OCR

found evidence of discrimination to determine the legal propriety of the finding

and of the proposed award. Finally, FSA implements settlement agreements in

which discrimination was found to have occurred in the programs that the agency

operates. From fiscal year 1999 through January 31, 2001, FSA made settlement

payments to 28 complainants that totaled $3.2 million; 25 of these payments were

made in fiscal year 1999. The payments in settling these complaints were made

from FSA’s farm loan program accounts. In addition, 11 of these 28 complainants

received debt relief on existing farm loans totaling $2.6 million.

Process for Settling and Status of Discrimination Cases Under the Class

Action Consent Decree

Process Established Under the Consent Decree

The following material summarizes four key aspects of the class action consent

decree, which was approved by the U.S. District Court for the District of Columbia on
Page 3 GAO-01-521R Resolving Discrimination Complaints

April 14, 1999,3 as well as the status of the claims filed and payments made under the

decree as of January 17, 2001.

1. Class eligibility criteria: In summary, to be eligible for the class, a farmer must be

African-American and have

farmed or attempted to farm between January 1, 1981, and December 31, 1996;

applied to USDA during that time period for a farm loan (credit) or a farm

payment (noncredit benefit) but did not receive what he or she had requested; and

filed a racial discrimination complaint by July 1, 1997, regarding USDA’s

consideration of the application.

Also, the consent decree provided claimants the opportunity to opt out of the class

action resolution procedure and continue their individual cases through

administrative or judicial avenues. Claimants had until August 12, 1999, to exercise

this option.

2. Court-appointed parties in the decision process: Four parties—a facilitator,

adjudicator, arbitrator, and monitor—are involved in the decision-making process

under the decree on the basis of information that they received from the claimants

and USDA. The first three parties were designated by the court in the consent

decree; the court appointed the monitor in January 2000. While USDA provides

information that it has on the claimants, it does not make decisions on the individual

claims. The following summarizes the functions of the four parties.

Facilitator—the Poorman-Douglas Corporation—processes claims and decides if

a person is eligible to be in the class.

Adjudicator—JAMS-Endispute, Inc., with some assistance from the PoormanDouglas Corporation—decides if claimants who select the resolution of their

claims under one procedure, referred to as Track A and described below, are

entitled to receive a payment.

Arbitrator—Michael K. Lewis of ADR Associates—decides if claimants who select

the resolution of their claims under an alternative procedure, referred to as Track

B and described below, are entitled to receive a payment and, if so, the award

amount.

Monitor—Randi Ilyse Roth, Executive Director of the Farmers Legal Action

Group, Inc.—reviews appeals of eligibility or award decisions. The monitor can

direct the other parties to reexamine a claim when the monitor determines that a

significant error occurred in the decision. The monitor is also to report on the

implementation of the decree to, among others, the court and USDA.

 3

A complete copy of the court-approved consent decree and the court’s opinion paper can be found at

http://www.dcd.uscourts.gov/district-court-1999.html.
Page 4 GAO-01-521R Resolving Discrimination Complaints

To support that a discrimination complaint was filed, the decree states that the

claimant must provide the facilitator with one of the following: (1) a copy of either

the complaint filed with USDA or a USDA document that references the complaint;

(2) a copy of correspondence to a Member of Congress, the White House, or some

other government official stating that the claimant had been discriminated against;

(3) a declaration by a nonfamily member stating that he or she has first-hand

knowledge that the claimant filed a complaint with USDA and describing the manner

in which the complaint was filed; or (4) a declaration by a nonfamily member stating

that he or she has first-hand knowledge that a USDA official told the claimant that the

claimant’s oral discrimination complaint would be investigated.

3. Resolution procedures: Claimants who meet class eligibility requirements select

one of the following two tracks for processing their claims.

Track A—Under this procedure, an adjudicator reviews the claim and information

submitted by USDA regarding the claim. Specifically, to support a claim of

discrimination involving farm credit, the person must show the adjudicator that

(1) he or she owned, leased, or attempted to own or lease farmland; (2) he or she

applied for a farm loan or loan servicing during the 1981 through 1996 period; (3)

his or her loan or servicing application was not approved as requested and such

treatment was less favorable than the treatment that specifically identified,

similarly situated, white farmers received; and (4) USDA’s treatment of the

application led to economic damage to the person. To support a claim of

discrimination involving a farm payment program, the person must show the

adjudicator that (1) he or she applied for the program payment during the 1981

through 1996 period and (2) his or her application was not approved as requested

and such treatment was different from the treatment received by specifically

identified, similarly situated, white farmers.

Under this track, claimants who provide substantial evidence of discrimination

involving farm loans are entitled to receive, among other things, a payment of

$50,000. Claimants who provide substantial evidence of discrimination involving

farm payments are entitled to receive a payment of $3,000. (The $3,000 payment

amount was approved by court order dated Feb. 7, 2001.) The consent decree

defines “substantial evidence” as relevant evidence that a reasonable person

might accept as adequate to support a conclusion after considering other evidence

that detracts from the conclusion.

Track B—This alternative procedure offers claimants who believe they have

suffered extreme damages a more detailed review through an arbitration hearing.

This track has a higher standard of proof than the evidence required in Track A

and provides for a tailored award based on the individual’s proof of damages.

Specifically, a preponderance of evidence is required, which the consent decree

defines as relevant evidence necessary to prove that something is more likely true

than not true.

4. Time frame for entering the class: The consent decree states that a claimant must

have submitted a completed claim to the facilitator within 180 days of the decree

(that is, by Oct. 12, 1999). Should that deadline be missed, a person could ask the
Page 5 GAO-01-521R Resolving Discrimination Complaints

court for permission to file late but must show that his or her untimely submission

was due to extraordinary circumstances beyond his or her control.

The court ruled on July 14, 2000, that timely, but defective, claims that were

corrected and resubmitted to the facilitator after October 12, 1999, are to be treated

as though they had been properly filed. Also, since many people either filed late

claims or requested claim forms after the filing deadline, the court delegated to the

arbitrator the authority to approve or deny petitions for late filings. The July 14th

order also required that late claims had to be submitted to the facilitator by

September 15, 2000.

Status of Claims Filed Under the Class Action Consent Decree

As table 1 shows, more than 25,000 people had filed claims with the facilitator under

the consent decree as of January 17, 2001; the facilitator accepted 85.5 percent of

these claims for processing by the adjudicator or the arbitrator and rejected 14.5

percent on eligibility grounds.

Table 1: Status of Claims Filed Under the Class Action Consent Decree, as of January 17, 2001

Status category Number of claims

Claims accepted for processing

 Under Track A 21,202

 Under Track B 198

 Total claims accepted for processing 21,400

Claims rejected for processing (claimant not an eligible class member) 3,636

Total claims filed under the consent decree 25,036

Source: USDA.

On the Track A claims that were accepted for processing, the adjudicator ruled in

favor of 12,076 claimants and against 7,919. Through mid-January 2001, as table 2

shows, more than 10,300 claimants who prevailed on Track A farm loan claims

received payments, which totaled more than $517 million. The amount of money to

be paid on the remaining Track A claims will likely be substantial, since the

adjudicator ruled that 1,529 claimants are eligible for a $50,000 farm loan award and

204 claimants are eligible for a $3,000 farm payment award. Also, 1,207 cases are still

under consideration by the adjudicator. In addition to receiving payments, 130

claimants have also received debt relief on existing farm loans that totaled $8.3

million.
Page 6 GAO-01-521R Resolving Discrimination Complaints

Table 2: Status of Claims Accepted for Processing Under Track A, as of January 17, 2001

Status of claims Number of claimants

Adjudicator’s decision

 In favor of claimant 12,076 (57 percent)

 Against claimant 7,919 (37 percent)

 Total completed decisions 19,995 (94 percent)

Adjudicator’s decision not completed 1,207 (6 percent)

Total Track A claimants 21,202 (100 percent)

Track A farm loan claims

 Claimants who received a $50,000 payment 10,343a

 Claimants ruled eligible by the adjudicator to receive a payment 1,529

Total found eligible for a $50,000 payment 11,872

Track A farm payment claimsb

 Claimants who received a payment 0

 Claimants ruled eligible by the adjudicator to receive a payment 204

a

The payments to these claimants totaled $517.2 million.

b

A February 7, 2001, court order provides that the payment on approved Track A farm payment claims is to be

$3,000 per claimant.

Source: USDA.

Also, through mid-January 2001, according to the arbitrator, there had been rulings in

favor of seven Track B claimants with award payments totaling $3.6 million; two

other Track B claimants settled their discrimination complaints late in 2000 before an

arbitration hearing was held—their award payments totaled about $150,000.4 In

addition, the number of remaining Track B claimants has been reduced for several

reasons: For example, some switched their claims to Track A; some had their

complaints dismissed by the arbitrator; and after going to hearings, some had

arbitration rulings against them. According to the arbitrator, in early April 2001,

about 100 Track B cases still needed to be resolved.

As stated above, the consent decree authorizes the monitor to review the appeals of

eligibility or award decisions and to direct the other court-appointed parties to

reexamine a claim when the monitor determines that a significant error has occurred

in the decision. Many of the people who the facilitator ruled were not eligible to be

admitted to the class or who the adjudicator ruled were not entitled to a payment

award have appealed those decisions. According to USDA, more than 5,500 claimants

have requested reviews by the monitor. Also, USDA appealed some decisions that

were in favor of claimants. Specifically, an attorney in USDA's Office of the General

Counsel told us that USDA has almost 500 requests for reviews by the monitor. In

commenting on a draft of this report, the USDA attorney told us that the monitor

issued four decisions during March 2001—two directing the adjudicator to reexamine

decisions and two ruling that the decisions did not need to be reexamined.

 4

The arbitrator told us in early April 2001 that 25 additional Track B cases with award payments

totaling about $3.5 million were resolved through settlement agreements negotiated by the Department

of Justice in February 2001.
Page 7 GAO-01-521R Resolving Discrimination Complaints

Furthermore, many late requests to participate in the resolution process still need to

be processed. According to USDA, the facilitator has received more than 57,000 late

claim petitions, which the arbitrator needs to review to decide if the people will be

allowed to file late claims.

Table 3 shows the various funding sources that are used to make payments to the

claimants, their counsel, and the other parties involved in this matter.

Table 3: Sources of Funds for Payments Under the Class Action Consent Decree

Party to receive payment Funding account for payments

Track A claimants with approved farm loan claims Judgment Funda

Track A claimants with approved farm payment claims USDA’s noncredit program funding account or FSA’s

salaries and expense (S&E) account if noncredit

program account funds are not available

Track B claimants with favorable rulings Judgment Fund

Class counsel and related attorney’s fees Judgment Fundb

Facilitator, adjudicator, arbitrator, and monitor FSA’s S&E accountc

Otherd FSA’s S&E accountd

a

The Judgment Fund is a Treasury account that is generally available for payment of most court judgments and

Department of Justice compromise settlements of actual or imminent lawsuits against the federal government.

b

According to Justice officials, a total of $8 million had been paid through mid-February 2001.

c

A total of about $17.7 million was obligated in fiscal years 1999 and 2000; FSA estimates that obligations will

total more than $13 million in fiscal year 2001.

d

Two contractors are providing administrative assistance with the class settlement. Also, FSA is reimbursing

Justice and USDA’s Office of the General Counsel for certain class-related expenses. FSA’s obligations totaled

$4.5 million in fiscal years 1999 and 2000; FSA estimates that obligations will total $2.5 million in fiscal year

2001.

Source: Information obtained from USDA and Justice.

Information on Claimants Who Opted Out of the Class Settlement

The consent decree allowed claimants who met the class eligibility criteria to opt out

of the resolution procedure and to continue their cases through administrative or

judicial avenues. According to USDA, more than 200 claimants have exercised this

option. Two of these cases have been resolved through settlement agreements

negotiated by Justice; one through an arbitration ruling; and five through USDA’s

administrative process. The payment awards for these eight claimants totaled about

$3.1 million. The payments in the cases settled by Justice came from the Judgment

Fund. The payments in the arbitration case and in the cases settled by USDA were

from FSA’s farm loan program accounts, which, as discussed below, are accounts for

paying the costs associated with the agency’s loans. In addition, two of these

claimants received debt relief totaling slightly over $350,000.

Settlement of Discrimination Cases Under USDA’s Administrative Processes

Unlike the class settlement procedure in which reviews and decisions are made by

court-appointed parties, the process for resolving discrimination complaints

administratively resides within USDA. Specifically, USDA’s Office of Civil Rights

investigates allegations of discrimination, decides if the evidence supports the
Page 8 GAO-01-521R Resolving Discrimination Complaints

allegations, and reaches settlement agreements with complainants when

discrimination is found to have occurred. USDA’s Office of the General Counsel

reviews discrimination cases and agreements to ensure the legal propriety of the

finding and the proposed award. FSA implements the agreements by making

compensatory damage payments to the complainants and, if provided for, by writing

off existing loans and paying complainants’ legal expenses.

In making payments, FSA uses funds in its farm loan program accounts. FSA uses

these accounts on the basis of guidance that USDA received from the Office of

Management and Budget (OMB) in the early part of fiscal year 1998. Specifically, if

the complaint involves fiscal year 1991 or earlier loans, funds in the liquidating

account (a funding account to pay costs associated with such loans) are used to

make the payment; if the complaint involves fiscal year 1992 or later loans, funds in

the financing account (a funding account to pay the costs of post-fiscal year 1991

loans) are used. However, GAO issued a legal opinion in October 1999 concluding

that the farm credit program’s financing and liquidating accounts, which are the

subsidy accounts for the farm loans, are not available for paying compensatory

damages in settling discrimination claims against USDA.5

 Notwithstanding GAO’s

position, FSA continues to follow OMB’s guidance and use these accounts for making

settlement payments.

From the start of fiscal year 1999 through January 31, 2001, FSA made payments

totaling $3.2 million on 28 administratively settled discrimination complaints.

Settlement payments totaling $2.8 million were made to 25 complainants in fiscal

year 1999. Payments totaling about $400,000 were made to two complainants in

fiscal year 2000 and to one complainant in the first 4 months of fiscal year 2001.

The payments for administratively settled complaints were made from FSA’s

subsidy accounts that support the farm loan programs. Of the $3.2 million, 28

percent ($900,000) was paid from the financing account and 72 percent ($2.3

million) from the liquidating account.

Payments totaling approximately $110,000 were made to attorneys for 13 of the 28

complainants. These payments were also made from the loan subsidy accounts—

about $40,000 from the financing account and $70,000 from the liquidating

account.

Eleven of the 28 complainants received debt relief on existing farm loans totaling

$2.6 million.

The bases of the discrimination complaints by these 28 complainants varied

considerably. Some complained that they had been discriminated against because of

their race or gender; others cited more than one reason for their complaint. For

example, six African-Americans and two Native Americans filed racial discrimination

complaints; one other Native American complained of race and age discrimination;

seven females filed complaints of sexual discrimination; and six other females

 5

See GAO opinion letter B-280396.2 (Oct. 28, 1999).
Page 9 GAO-01-521R Resolving Discrimination Complaints

complained of being discriminated against because of their gender and other factors,

such as marital status (for example, divorced or widowed) or age.

USDA spent considerable time resolving the cases in which OCR found that

discrimination had occurred. On average, 3.5 years elapsed from the date of the

discrimination complaint to the payment date for the 28 complainants who received

payments. The quickest payment was made in 20 months; the slowest took over 7

years.

Agency Comments

We provided USDA with a draft of this report for review and comment. We met with

USDA officials, including OCR’s acting Director and FSA’s Deputy Administrator for

Farm Loan Programs. The Department’s officials agreed with the material contained

in the report. They also provided suggestions for clarifying the report, which we

incorporated as appropriate.

Furthermore, we provided officials in the Civil Division of the Department of Justice

with a draft of this report for review. Justice’s officials suggested various technical

corrections and clarifications, which we made as appropriate.

Scope and Methodology

In conducting this review, we interviewed, among others, OCR’s former Director and

Deputy Director, who is currently the acting Director; FSA’s farm credit program

officials, including the Director of the Loan Making Division and the Director and

Deputy Director of the Loan Servicing and Property Management Division; an

attorney in USDA’s Office of the General Counsel; and officials in Justice’s Civil

Division who are directly involved in the class action settlement. Also, to compile

information on the resolution of claims under the class action settlement, we

reviewed, among other things, the court-approved April 1999 consent decree and

other related documents, including the court’s opinion paper on the decree and the

orders and stipulations that the court has issued since then. We reviewed USDA’s

reports on the status of settlements, including payments; the most recent report at

the time of our review was as of January 17, 2001. We obtained from Treasury’s

Financial Management Service selected information on payments from the Judgment

Fund and obtained from FSA’s Budget Division information on payments to the

various outside parties that are involved in the class action settlement. The payment

information obtained included the funding accounts used for paying the claimants,

their attorneys, and the outside parties. We also obtained from the offices of the

arbitrator information on complaint cases settled through arbitration and settled

before an arbitration hearing was held.

In addition, to compile information on USDA’s efforts to resolve discrimination

complaints by minority farmers through its administrative process, we reviewed,

among other things, OCR’s guidance manual for reviewing and settling complaints

and its case files for most of the complaints settled administratively from fiscal year

1999 through the first 4 months of 2001. We obtained from FSA’s Financial

Management Division information on, among other things, payments and debt relief
Page 10 GAO-01-521R Resolving Discrimination Complaints

for each complainant whose case was resolved during this period by OCR. The

payment information obtained included the funding accounts used for the

settlements.

We performed our work from December 2000 through March 2001 in accordance with

generally accepted government auditing standards. We did not verify the accuracy of

the information contained in USDA’s status reports or in the various financial reports

that we were provided.

- - - - -

As agreed with your office, unless you publicly announce its contents earlier, we plan

no further distribution of this letter until 30 days after the date of this letter. At that

time, we will send copies to the appropriate House and Senate committees; interested

Members of Congress; the Honorable Ann M. Veneman, Secretary of Agriculture; the

Honorable John Ashcroft, Attorney General; the Honorable Mitchell E. Daniels, Jr.,

Director, Office of Management and Budget; and other interested parties. The letter

will also be available on GAO’s homepage at http://www.gao.gov.

Please call me at (202) 512-3841 if you or your staff have any questions about this

letter. Key contributors to this letter are listed in enclosure I.

Sincerely yours,

Lawrence J. Dyckman

Director, Natural Resources and

 Environment

Enclosure
Page 11 GAO-01-521R Resolving Discrimination Complaints

Enclosure

GAO Contacts and Staff Acknowledgments

GAO Contacts Lawrence J. Dyckman, (202) 512-3841

Jerilynn B. Hoy, (202) 512-9837

Staff Acknowledgments In addition to those named above, Jacqueline A.

Cook, Robert G. Crystal, Richard B. Shargots, and

Patrick J. Sweeney made key contributions to this

letter.

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