Episode 478: The Raisin Outlaw : Planet Money A farmer wanted to sell all his raisins, but the federal government said no. So he took it to the Supreme Court.
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Episode 478: The Raisin Outlaw

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Episode 478: The Raisin Outlaw

Episode 478: The Raisin Outlaw

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ROBERT SMITH, BYLINE: Hey, everyone. It's Robert Smith. This week, the Supreme Court ruled on a case that we have been following around here for years. Officially the case is Marvin Horne v. the Department of Agriculture. But at PLANET MONEY, we just call it the case of the raisin outlaw. It is one of my favorite PLANET MONEY episodes from one of my favorite reporters. We'll let Zoe Chace take it from here.

(SOUNDBITE OF ARCHIVED BROADCAST)

ZOE CHACE, BYLINE: Meet Rocky Pipkin, private eye. He's got a burly, ex-cop-type presence, stocky, bald, shiny head, big, fat ring on his hand. The inscription - Rocky Pipkin Detective Agency written in diamonds. He gave me a tour of his headquarters in Fresno, Calif.

ROCKY PIPKIN: We have weapons throughout the building, and we have an escape route. And we have safe rooms and things of that nature in the event that something does go crazy.

CHACE: So we go into his little office to sit down. He tells me to look behind the door.

PIPKIN: And look what's behind the door.

CHACE: What is that?

PIPKIN: It's called a Defender 12-gauge shotgun. You notice the note in the barrel that says loaded.

CHACE: That's a Post-it note on it. In addition, just in this room - three other guns - the pistol that he always carries on his hip, another in his desk drawer. In a Filofax case, he has a .22. So that's Rocky. He sat me down to tell me about a big case he worked on a few years ago - some farmers out in the Central Valley suspected of an elaborate illegal scheme. Rocky sent a couple agents out to do surveillance, recorded the whole thing. We sit down, and we watch the tape.

(SOUNDBITE OF VIDEO)

UNIDENTIFIED MAN #1: So they indicate that they arrived with this vehicle yesterday afternoon.

CHACE: The footage is grainy. It's early morning. An agent is sitting in his car filming trucks going in and out of this gate. And there it is - the evidence of the criminal activity.

(SOUNDBITE OF VIDEO)

UNIDENTIFIED MAN #1: A large man has pulled into the plant.

PIPKIN: This truck is hauling packed raisins. Packed raisins are typically ready for human consumption. So that means these were sold.

CHACE: Raisins, raisins in boxes ready to be sold - that is the crime, the selling of the raisins. And these are ordinary raisins. These are homegrown California raisins. And what these people are doing in almost any other industry, it would be perfectly legal. But raisins, as you're about to find out, are very different.

(SOUNDBITE OF MUSIC)

CHACE: Hello, and welcome to PLANET MONEY. I'm Zoe Chace.

CAITLIN KENNEY, BYLINE: And I'm Caitlin Kenney. Today on the show - the upside down world of raisins...

CHACE: And raisin growers in California and the laws we have in this country. The act of growing grapes and then drying them into raisins and then packing them up and selling them, that can be verboten. That can be a criminal act.

KENNEY: Here in the world of raisins, it turns out that what's illegal in most industries - syndicates, cartels, supposed competitors, colluding, conspiring - in the world of raisins, this is totally legal. In fact, it's encouraged, enforced by the government. What's illegal is legal.

CHACE: What's legal's illegal. This is what it's like with raisins.

UNIDENTIFIED WOMAN #1: Support for this podcast comes from Scion. Scion has teamed up with the founders of Kickstarter, Threadless, Sprinkles Cupcakes and more for the Scion Motivatour, a program dedicated to entrepreneurs. Episodes and event information can be found on scion.com/motivatour. That's M-O-T-I-V-A-T-O-U-R.

CHACE: Let's start this story here where raisins come from - Central Valley, Calif. Picture the front cover of "The Grapes Of Wrath" - bright sun, rows of vineyards, thick, rich soil.

MARVIN HORNE: This is going to be a little dusty on you.

CHACE: OK.

M. HORNE: We can - it's hot, almost too hot to go barefoot. My wife goes barefoot out here all the time.

CHACE: This is Marvin Horne, a raisin grower. He says they've been making raisins the same way for decades - the green grapes get fat and sweet on the vine. At harvest time, pickers come through and cut the bunches down.

M. HORNE: And it's kind of labor-intensive. They have to spread them out, pull the leaves out and then they lay. They lay like that for 15 to 20 days. And they swivel down into what everybody knows as a raisin.

CHACE: And that's it. The sun does a lot of the work - simple. And that is the last simple thing that happens with raisins. After this, it gets pretty complicated.

KENNEY: You might think that what happens next is that the raisin grower would take all his raisins and sell them - as many as he can to whoever wants to buy them. But that's not what happens at all. What actually happens is that a lot of the decisions about buying and selling raisins are made off the farm. They're made on the second floor of this nondescript, red brick office building in downtown Fresno.

CHACE: Right here in this room.

UNIDENTIFIED MAN #2: All those in favor say, aye.

UNIDENTIFIED PEOPLE: Aye.

UNIDENTIFIED MAN #2: Opposed? Motion carries. Thank you, Bob.

CHACE: Welcome to the Raisin Administrative Committee.

KENNEY: (Laughter) I'm sorry, Zoe. Every time you say that, it just kills me. I mean, raisin and administrative are not two words that were meant to be next to each other. Like, why do raisins need to be administrated?

CHACE: So what goes on in here is three basic things. The first two are not that weird. They're totally common, actually, when it comes to food. Like, they administer grades and standards, you know, keeping the raisins safe and fine for all of us to eat. And the other thing is marketing the raisins - meaning that a raisin is a raisin is a raisin. More people eating raisins, that is good for the whole industry. So they explore markets together.

KENNEY: But the third thing they do - that is pretty unusual. This is where the illegal becomes legal. This is where investigators like Rocky Pipkin get involved because the third thing that happens at this meeting is that they decide on something called diversion.

UNIDENTIFIED MAN #2: The recommendation that a diversion program not be recommended for the 2014-2015 crop year. And I would like to put that in the form of a motion.

KENNEY: So diversion - it sounds boring. But it's actually really important. So, Zoe, let's just talk about what this is.

CHACE: Yeah. So a lot of times at this meeting, the growers assemble, and they will decide not to sell a portion of their raisin crop. They will decide to divert some of it into a raisin reserve. Whatever they don't sell goes into this reserve.

KENNEY: And the reason that they do this is to limit the supply of raisins so they can get a better price for them. Less raisins for sale means you can charge more for the ones that are for sale.

CHACE: Generally, they only do this when there's a big crop. Like, they know lots of raisins are coming online. They're worried the price could collapse and that farmers could go out of business.

KENNEY: And this brings us back to Marvin Horne. Horne is also the guy that Rocky Pipkin - the detective with the diamond ring - was investigating.

CHACE: Right, it was Marvin Horne's operation that was in the grainy footage that we watched in Rocky's office. So a couple years ago, Marvin Horne did the unthinkable. He sold his whole raisin crop when the Raisin Administrative Committee had told him not to. That was more than 10 years ago, but people meeting in this room have not forgotten.

UNIDENTIFIED MAN #2: And with that, thank you guys for your patience. We are adjourned.

CHACE: In fact, right as the meeting ended, these two farmers came rushing up to me.

Hi, I'm Zoe.

UNIDENTIFIED MAN #3: Zo (ph)?

CHACE: Zoe, yeah.

UNIDENTIFIED MAN #3: Zoe? Where are you from, Zoe?

CHACE: NPR, National Public Radio.

UNIDENTIFIED MAN #3: Oh, OK.

CHACE: That was exciting. That was my first marketing committee.

UNIDENTIFIED MAN #4: Well, I wanted you to know that Marvin Horne's a crook. I'll leave you with that.

CHACE: (Laughter) What's your name?

UNIDENTIFIED MAN #4: I haven't got a name.

UNIDENTIFIED MAN #3: (Laughter).

CHACE: (Laughter) OK.

KENNEY: A crook. All right, so this bad blood against Marvin Horne started in 2002. That year, the Raisin Administrative Committee voted on a particularly big diversion program. Instead of letting the farmers sell all their raisins, they decided to divert some of them into the Raisin Reserve. Actually, they decided to divert a lot of them.

CHACE: Actually almost half of them. Here's Marvin Horne.

M. HORNE: Forty-seven percent.

CHACE: OK.

M. HORNE: A lot of us, we all jumped up and yelled and said, no, that's crazy. What's the matter with you guys? And it was of no avail. And that's when I came home, and I talked with my wife. And we said, no, we're not going to deliver. We're going to figure out what we can do.

KENNEY: Marvin Horne and his wife thought this was crazy and unfair. How can you ask us not to sell half our raisins? How can you ask us to hand half of them over to the Raisin Reserve? But they also knew that if they didn't do it, they might be breaking the law. They weren't sure, though. They aren't lawyers. So they got a hold of the actual legislation and started researching.

LAURA HORNE: We sat many nights reading through it. And I'd read it, and he'd read it, and then we'd discuss it between us. You know, and I would have maybe a different plaint on some things than he would, and then we'd work it out to what we thought it meant.

CHACE: Marvin and Laura Horne say they found a loophole in the law after staying up all these late nights. And so they decided to sell all their raisins. And the only problem after they made that decision was how to get them packed into boxes. The Hornes, like many growers, didn't pack their own raisins. They took them to a big packing operation. But all the packers in the Central Valley, they had been at that meeting, too. If the Hornes brought their raisins to these packers, the packers would not sell them all. They would automatically send about half of the crop to the reserve.

KENNEY: And so the Hornes bought their own equipment, set up their own operation to clean and stem and wash their raisins, then pack them into boxes and sell them to customers they could find on their own. And a couple other farmers joined with them.

CHACE: The heavies at the Raisin Administrative Committee, they did not agree with the Hornes' interpretation of the law. To them, there was no loophole. The Hornes were just criminals. And to gather evidence of the criminal behavior, they hired Rocky Pipkin.

KENNEY: That's when the stakeout happened. And the Hornes knew about it, and they did not like it. In fact, in one of the tapes, you can see Laura Horne's mother approaching one of Rocky's agents. She's a short, white-haired lady wearing sandals and shorts.

(SOUNDBITE OF VIDEO)

UNIDENTIFIED MAN #5: Hello.

DURBAHN: What the hell are you here for?

UNIDENTIFIED MAN #5: I don't think it's any of your business, ma'am.

DURBAHN: Well, I think it is because that's my property there, and I'd like to know why you're filming it.

UNIDENTIFIED MAN #5: I can film anything I want.

KENNEY: Rocky Pipkin and his detectives were trying to gather evidence to prove that the Hornes were breaking this one specific law. The law they're accused of allegedly breaking is called Marketing Order Part 989. And this gives raisin farmers some exemptions from antitrust laws. It has its roots back in 1937 - the Great Depression. Things were really bad for farmers, so the federal government decided to let them get together to work together on some things. Then World War II happened. The GIs loved their raisins. The raisin guys were golden. But when the war ended, there were too many raisins out there. So the raisin guys got together and said, we need to organize our market so that there's not too much supply.

CHACE: So they did - 1949, Marketing Order 989 - means that every so often, these guys get together, make recommendations to the USDA, and the USDA generally does what the raisin guys recommend. And I assume that most other raisin growers felt the same way - that the reserve is an awesome piece of protection for their industry, and Marvin Horne is a crook for selling more than he was supposed to.

But that was before I hung out at McCoy's Diner. You want to find raisin growers, you show up here at 5 a.m. I met with a bunch of different growers here over the course of the morning. And opinion about the marketing order and about Marvin Horne, it ran the gamut. Some guys felt like this one raisin grower. His name was Dan King. And his position was whatever you think about the marketing order, what Marvin Horne did just isn't fair. While Marvin Horne's family was selling 100 percent of their crop of raisins, lots of other farmers weren't. And the price Marvin Horne was getting for his raisins was arguably higher than it would've been had all the raisins gotten released onto the market. To Dan King, Marvin Horne benefited at the other guys' expense.

DAN KING: Well, I think that there's a set of rules that everybody was playing by during the time that he was not. You know, it's like everybody stops at the stop sign but not everybody. Somebody doesn't - it causes a problem. And we needed to have the whole industry following the rules or nobody following the rules.

CHACE: So you thought it was kind of unfair?

KING: I would think.

KENNEY: Dan King remembers that same meeting in 2002 where the raisin growers were told that half their raisins, they couldn't sell. And just like Marvin Horne, he didn't like it. He actually says when that happened, he lost a ton of money. But unlike Marvin Horne, Dan King says he went along with it for the good of the group. Better to lose some money now than for prices to collapse and for some growers, maybe even him, to go out of business.

CHACE: He sacrificed a lot for this. He says he remortgaged his farm that he just paid off, says he got a second job.

KING: You know how hard it is to get an extra job when you're 50 years old and you already work 16-hour days (laughter)? Well, I went and got a job working in a warehouse. The bank said you have to have another job, so I had to go find another job.

SIMON SAHOTA: Do you think you would've been better off if there would not have been a marketing order and you would've got more for your crop in those years or not?

JOHNNY PUPUSIA: You don't know that, though. You don't know that.

KING: You don't know. There's too many marbles in the game at that - yeah, I'm like Johnny (ph). You can't - you don't know that.

CHACE: And this is where this morning got so interesting. That other voice you hear, that's Simon Sahota. He's also a raisin grower - or at least he was a raisin grower. But he has a totally different take on Marvin Horne. Yeah, he broke the rules, but in service of a larger principle.

SAHOTA: It's like a speeding ticket. Yeah, you get a speeding ticket. Some guys will sit down and say, OK, you know what? I'll go ahead and pay the fine, but not Marvin. Not only did he go and appeal it, he had the goddang (ph) sign changed from the speed limit from 50 to 75 - or whatever it might be. So - yeah, more power to him.

KENNEY: Simon used to grow raisins. And he had the same problems with the marketing order that Marvin Horne had. But his solution was a little different. He got out of raisins almost altogether. He pulled up his vines and put in almond trees instead.

CHACE: Almond trees are good business right now in California. Demand is huge. The price is high. Almonds apparently are not as finicky as grapes. Beyond that, though, to Simon, he says it just feels more honest. The price is the price. The supply is the supply. There are no meetings in a room to limit that supply.

SAHOTA: That's the tough part about the raisin industry. There's a lot of deductions and things that go on behind the scenes. And so we want to be in something that's simple and full-speed ahead. And I found that to be the almonds.

CHACE: Around this time in the conversation, another grower comes up to the table. This guy's never been in raisins and frankly thinks what's going on with the raisins is crazy. His name is Ken Parnegie (ph). He grows lots of fruits. Like, if you had that special clementine called the Cutie.

KENNEY: I love it - tastes good and that name.

CHACE: I know. This - right here - this is Mr. Cutie. That is his brand. And he says clementines - no marketing order, no supply manipulation. He just grows his fruit and sells it - simple as that. And that's how it is for lots of fruits in California.

KEN PARNEGIE: We sell peaches, plums, nectarines, table grapes, everything in the export market. We complete with South America. We compete with a lot of people. We compete with Europe.

PUPUSIA: You started way later than the raisin industry.

CHACE: This is Johnny Pupusia (ph) - raisin grower, raisin packer - sitting next to him at the table.

PUPUSIA: Well, the raisin industry started way long time ago doing this.

PARNEGIE: What does that have to do with anything?

PUPUSIA: Well, right now...

PARNEGIE: We compete with everybody else on an even basis. We get no subsidies. There's no volume control. There's nothing. Supply and demand.

CHACE: And the future of Marketing Order 989, it is unclear because of Marvin Horne and the court case against him. Marvin Horton was originally convicted. He was ordered to pay half a million dollars. He appealed. His case went all the way to the Supreme Court. The Supreme Court kicked it back down to a lower court. So we're still waiting to see what happens. Justice Kagan, though, has been widely quoted as saying, this just might be most outdated law on the books.

(SOUNDBITE OF SONG, "I HEARD IT THROUGH THE GRAPEVINE")

MARVIN GAYE: (Singing) I bet you're wondering how I knew.

SMITH: And now the big update on the case you've been waiting for. It is June 2015. The case was kicked back up to the Supreme Court, and they ruled in an 8-1 vote. They decided in favor of Marvin Horne, the raisin outlaw. In the decision, Chief Justice Roberts wrote that raisins are private property. I love that he had to write that. Raisins are private property and the fruit of the growers' labor. Raisins are not public things subject to the absolute control of the state. What this decision means is the Raisin Reserve program is no more. Marvin Horne called it an affirmation in our Constitution and the American way of life.

(SOUNDBITE OF SONG, "I HEARD IT THROUGH THE GRAPEVINE")

GAYE: (Singing) Just about, just about, just about to lose my mind. Oh, yes, I am. Oh, yes, I am. Oh, yes, I am.

(SOUNDBITE OF ARCHIVED BROADCAST)

KENNEY: As always, we want to know what you thought of today's show. You can email us - planetmoney@npr.org.

CHACE: You can find us on Facebook and Twitter, on Spotify. And for you, Caitlin Kenney, I have an illegal raisin. I have some contraband.

KENNEY: Ooo (ph). Tastes criminal.

CHACE: Yeah, that's what illegal raisins tastes like.

KENNEY: (Laughter) I'm Caitlin Kenney.

CHACE: I'm Zoe Chace. Thanks for listening.

(SOUNDBITE OF SONG, "I HEARD IT THROUGH THE GRAPEVINE")

GAYE: (Singing) You could have told me yourself that you loved somebody else. Instead, I heard it through the grapevine. Oh, I heard it through the grapevine. Oh, not much longer would you be mind. Oh, I heard it. Yes, I heard it. Heard it through the grapevine.

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