to the recordable contracts, in units of 160 acres or less Divizich was told on numerous occasions by representatives of the Bureau of Reclamation in 1957 that he would be compelled to sell substantial acreage under the recordable contracts which would amount to over one half of his acreage in the year 1962, the year when a portion of the recordable contracts expired, with the balance expiring on lesser acreage each year thereafter through 1971. In direct response to this concern regarding the loss of substantially all of Divizich's vineyards and open lands which would leave Divizich with an expensive cold storage and packing house facility at Ducor, California, without the necessary income from his vineyard lands to service the operation, Divizich then embarked upon a land acquisition program with Divizich's money and with the use of Bank of America financing, to replace the vineyards which he would be compelled to sell under the Bureau of Reclamation's recordable contracts. Divizich desired to obtain ownership of other lands which would develop into vineyards commensurate in size and quality to those subject to sale so that Divizich would be in a position to continue to operate farming properties of comparable size to his existing total farming operation. As a direct result of this policy of forcing a sale ...of the property on the market, Divizich was forced to put his entire 2,600 acres of reclamation property on the market at a time when the 4,500 acre DiGeorgio table and wine grape properties were also forced on the market by order of the Bureau of Reclamation. Since there were no initial buyers for the DiGeorgio properties which were first offered in 1964, it is not unreasonable to assume that Divizich would find the same market resistance for his properties. As a matter of fact, the last of the DiGeorgio properties were finally sold in 1971. In spite of the efforts of Divizich to market the properties under the rules and regulations of the "160 acre limitation law" requiring a sale of 160 acres to one person or 320 to a husband and wife, the Bureau permitted corporate giants to cut up the property in 20 undivided interests to the individual members of the Marguleas and Thomas families. Many of these buyers consisted of women and minor children totally unfamiliar with and incapable of carrying on a farming operation. 160 acre law is to remain on the books, then let it be enforced properly and let us require the Bureau of Reclamation to purchase the land under its recordable contracts at not less than its appraised prices in the event the land cannot be sold, rather than forcing farmers into a bankruptcy proceeding triggered by foreclosures from nervous banks, anxious to realize on their security without regard for their customers' economic well-being. If the 160 acre law is to be used by corporate giants as If the a means to obtain federal water by fractionalizing undivided interests in land then let us erase the law from the books. Respectfully submitted William P. Irwin, Attorney for Peter J. Divizich -7 Mr. IRWIN. Now I have Mr. Divizich present with me. He has given a statement to you and he will be glad to answer whatever questions you feel are appropriate. Senator STEVENSON. First let me say that your statement, Mr. Divizich, will be entered in the record. Are there any other statements for the record by any other witnesses? Mr. IRWIN. Mr. Garabedian of Peters & Garabedian has given you a statement as well as Mr. Lipoma. Senator STEVENSON. Would you gentlemen like to add anything to what Mr. Irwin has said before we get into some questions? Would you care to add to his testimony by summarizing your written statement? STATEMENT OF S. P. LIPOMA, OF S. P. LIPOMA CO. Mr. LIPOMA. I have a personal observation, Senator. I feel that the counselor neglected to bring up one of our main complaints as to competition, and that is the fact that they can work with oil money and work that in direct competition with some of us that are compelled to depend wholly on the value of our crops, and we have found in our particular case where this has been done. They have actually sold below the cost of production in direct competition with us. Senator STEVENSON. Is this the result of a deliberate effort to depress prices and force losses upon you which might in turn force you out of business? Mr. LIPOMA. Senator, in our particular case it was in order to gain a foothold in this particular marketplace. Senator STEVENSON. Which particular marketplace was that? Mr. LIPOMA. Our company, of which I am one of the principals, specializes in growing processing potatoes. I would say in the district we are the largest shipper of processing potatoes. They are a particular type of potatoes used for the manufacture of potato chips or french fried potatoes. Since the advent of Tenneco getting into the picture, they had indicated a keen interest of wanting to get into the business and when they found that they couldn't sell at a competitive price they sold, in some cases, at a third less than what we were selling for and I am sure below the cost of production. Senator STEVENSON. Are your potatoes by any chance in competition with potatoes produced in the State of Maine? Mr. LIPOMA. Senator, at different times of the year. Our potatoes are shipped from California during the months May, June and July, and at that time hopefully the old crop is gone and the trade is looking for the new crop, and they will pay the additional freight, but I wouldn't say that we were in direct competition with Maine because as a general rule Maine is practically through shipping when we start. Senator STEVENSON. I have been told that in Maine, which is of course a potato producing state and has many other resources, 12 corporations now own 52 percent of all of the land. It seems to be a pattern emerging everywhere. What the reasons are for it I don't know. Maybe what you have just said is one of the causes of this pattern which is apparently emerging throughout the country. Thank you, Mr. Lipoma. (Information supplied by Mr. Lipoma follows:) FEDERAL TRADE COMMISSION, (Attention: Mr. Joseph Martin, Jr., General Counsel). NOVEMBER 4, 1970. MR. MARTIN: Our company pioneered the concept of selling processing potatoes on preseason contracts to processors, mostly potato chip companies. We started this business in 1953 and at the present time grow and ship approximately 500,000 hundredweight of processing potatoes from Kern County, California during the months of May, June and July. Our processing potatoes are grown on about 1,800 acres of land. The terms of our contractual arrangements with land owners are, our company furnishes the seed, fertilizer and insecticides, does the planting, harvesting, grading and shipping and selling. The land owner prepares the land for our planting, does the watering and cultivation. In the form of land rent, the land owner receives a stipulated amount for each hundredweight of potatoes grown and sold from his acreage. Heretofore, our arrangement has proved highly advantageous, giving the land owner a guaranteed income and has allowed our company to enjoy a steady, moderate income. Since the prices we sell our potatoes for are predetermined, the profit factor is wholly dependent upon our automated efficiency and the per acre tonnage. With increased costs, the profit factor has become more and more precarious. For ten years we have been farming some of our potatoes under the above arrangements on Kern County Land Company land (now Tenneco). For the past five years we have paid Tenneco in excess of $200,000 annually for their land use. Our contractual arrangement with Kern County Land has permitted Tenneco access to our books and records, including the names of our customers and the prices our potatoes are sold for. We assumed that this information was made available to them strictly for auditing purposes and for which use it was put until this year. Until this year we signed our land contract with Tenneco in October or November. This year the Tenneco Company requested that we meet in July which was actually during the time we were still harvesting potatoes from their lands. At the meeting, they told us they were highly satisfied with our past performance and for corporate reasons they wanted us to sign our land contract at that time. During those same conferences, held in July, they requested that we move our packing facilities from Delano to their property located in Bakersfield. They also requested, and were almost insistent that we plant all of our potatoes on their land and forego other land owners we have done business with for years. They told us that because of the cotton situation they must find utilization for their land. In the conferences they indicated a keen interest in purchasing our entire operation. They requested that they obtain a more detailed breakdown of our assets, list of customers, prices, etc. All of this information was furnished at their insistence on the assumption that they were making an honest effort to negotiate a joint venture arrangement. As a further matter of information, they were quite insistent that they be allowed to handle, on a brokerage arrangement, the sale of our citrus. They had handled some of our citrus this past season and the prices we received were not comparable with the prices we received from other outlets. We could not acquiesce to this stipulation. At the time we signed the contract to utilize 1,268 acres of their land for our 1971 potato crop, we mentioned that we could not afford to pay them the rent stipulated in the contract if someone particularly their company, would sell processing potatoes at lower than our present contract price. In that conference we told them that we were going to ask our customers for an increase in price to offset our own increased production costs. Shortly thereafter, they made personal calls at our office expressing a continued interest in either purchasing our operation or proceeding on a joint venture arrangement. Mr. Balch, and Mr. John Thomas, vice-presidents of the company, told us that there was no need to look elsewhere for acreage since they were confident that we would proceed jointly. During August principals of Tenneco contacted our accounts of long standing and solicited their business at lower than the contract price we had been selling for. They were successful in obtaining one of our largest accounts, at least in part because of the lower selling price. The selling price is far below our production costs considering the guaranteed rental we must pay Tenneco. We have every reason to believe that their selling price will be below their own growing costs with no consideration for land rental. Upon being advised by our customers that they were soliciting business at lower prices, we wrote two registered letters to the principals of Tenneco with whom we were dealing, advising them of their oral commitment not to sell at lower prices and requesting that we be released from our land contract signed with Tenneco in July. We had received no response to our registered correspondence, copies enclosed. In a phone call to Mr. Balch last week, he told me that they expected us to live up to the contract in full. He completely disregarded our verbal understanding. He further stated that they wanted to handle our citrus on a commission basis and they were going to get into the processing potato business on their own, regardless of who they hurt. We are of the opinion that they have used privileged contractual arrangements and information to their personal advantage. We are sure that they have deceived us and their intent was not to purchase or enter into a joint arrangement but to obtain their information furnished in good faith for personal gain. We are requesting whatever help your good offices can offer. To meet the lower than growing costs prices being quoted and accepted by Tenneco makes our present land contract with Tenneco untennable and could very well bankrupt our small company. Any help we can obtain will be appreciated. Yours truly, S. P. LIPOMA, Senator STEVENSON. Mr. Bianco and Mr. Divizich, would you care to add anything? Mr. DIVIZICH. Yes. STATEMENT OF PETER J. DIVIZICH, GRAPE FARMER, SAN JOAQUIN VALLEY Mr. DIVIZICH. I came to the United States on 1920, that was 51 years ago. I worked for other farmers, on a ranch down South, and after 4 years I went to Porterville and bought me 30 acres which I started farming in this valley. I started progressing and bought more land, built a dehydrating plant, was dehydrating raisins, prunes, peaches, apricots, and so on, and I was in the farming business since then. Between 1930 and 1935 I bought some 300 acres around Porterville which I developed. From 1935 to 1939 I also built more commercial property in Porterville. I went to the Delano-Ducor district South of Porterville in 1939 when that country was practically tumbleweed country. I started there with 160 acres and built this farm up to over a 5,000 acre ranch. I was financing with the First National Bank, and also Production Credit Association, and then since 1940 with the Bank of America so that I was doing fairly well. The Bank of America. officials asked me to come over and work with them, they said they would give me a large amount of help because that country was almost desert. And so I went with the Bank of American in 1940 |