The Grain Scandal

When he moved into Sudan, Texas (pop. 1,400) about four years ago, Offie Shannon was hardly noticed. A 46-year-old Texas farmer, Shannon went into the grain business, and he and his wife helped pour the concrete for his first grain elevator. But before long, he was the talk of the town. A one-man building boom, Shannon built close to $750,000 worth of warehouses, stores and houses. He was elected president of the local chamber of commerce. In his spare time, Shannon wrote and started to film a movie on the life of Christ, with a cast of townspeople. He also laid plans to build a $125,000 theater that would have an indoor swimming pool. Sudanites sometimes wondered where Shannon got all his money, but nobody ever made a real inquiry.

Last week the secret was out. Shannon was charged by the Government with fraudulently selling $869,161 worth of grain which he had stored (for pay) for the Agriculture Department's Commodity Credit Corporation. Even though he was the first to be nabbed and one of the biggest, Shannon wasn't the only one. Lindsay Warren's General Accounting Office last week reported that CCC was short more than $3,800,000 in stored grain.

Horseplay. After Warren's report, Secretary of Agriculture Charlie Brannan piously cried "politics." The uproar was as noisy and as flimsy, he said, as "crackers thrown into a fan."

But last week, after GAO filed its report, Brannan appeared before a Senate agriculture committee in a humbler mood. He apologized for his earlier crack about politics, admitted that CCC had known about the shortages at the time. They were worse than GAO had estimated; Brannan testified that they, might run as high as $5,000,000 to $7,000,000. Some 30 warehouse operators are involved. Twelve have been hauled into court already, and investigation of the rest is in the works. The Agriculture Department also revealed that one Nebraska grain-elevator owner shot himself two days after he had been asked to deliver Government corn he was supposed to be storing.

The operators had a wonderful setup for their scheme. Every year, CCC lends billions of dollars to farmers on their crops. CCC also buys crops, for the support price, holds them in Government-leased warehouses until the market price rises above the support price, then sells them. A handful of warehouse operators had been selling the grain when prices were high, hoped to replace it later with cheaper grain. But like the bank teller who borrows money from the till to play the horses and plans to pay it back when he hits a winner, many a warehouseman never got around to making up the shortage. Explained one grainman: "It has been going on for years. It just sort of crept up on 'em. Fellow would start out and maybe borrow a car of grain. Before you know it, he's involved and can't square up. CCC never was a business operation--too much of a family affair."

Bad Management. When the grain crop fell off last year and prices rose, the Government began reclaiming its crops to sell. When it found that some warehouses couldn't honor their receipts, the scandal broke. To Brannan the shortages seemed piddling compared to the $10 billion in crops stored by CCC during the past three years. Said Brannan lightheartedly: "Five million dollars worth [of grain] could almost slip through cracks in the floor." Furthermore, he was pleased that no one in the committee had accused Agriculture of skulduggery. Said he as he left the hearing: "Our case is made. They don't claim fraud--just bad management." The committee was far from satisfied. It ordered a thoroughgoing investigation into the CCC to find out why the shortages were not discovered sooner.

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