The closing of Southeastern Provision, a Grainger County slaughterhouse targeted in a massive federal tax and immigration investigation, created a $20 million economic loss, mucking a multi-state beef-distribution network in a manner that’s a rotten deal for cattlemen and carnivores alike, according to state Sen. Steve Southerland.
Southerland, a Hamblen County Republican, says the profound market disruption prompted near-emergency action at the highest levels of state government in Tennessee and Kentucky but at this point, nothing resembling a fix has emerged.
“We were shocked at the repercussions,” Southerland, who chairs the Senate Energy, Agricultural and Natural Resources Committee, said Friday afternoon. “We had no idea that many were cattle were processed there. We had no idea about its importance to the cattle market.”
With respect to Southeastern Provision, numbers are three times important: the amount of beef supplied; the underlying sewer problem; and the federal prosecution of James Brantley, the former business owner who is scheduled to be sentenced on July 31 in U.S. District in Greeneville.
Southeastern Provision was all about killing cattle quickly and getting the carcasses out the door. The workers involved in the butchery – mostly undocumented Latinos – were very good at their jobs.
They dispatched 63,000 head of cattle every year, which supplied buyers in Tennessee, Kentucky, South Carolina, Georgia and Alabama, according to Southerland. That comes to 242 per work day. Cattle have 4.4 gallons of blood. At full capacity, that’s 277,000 gallons per year – by a familiar horror-movie standard – enough blood to fill 3,462 standard-sized bathtubs.
Southeastern Provision had its own subsurface sewage-disposal system. When it ceased to process the blood, fat and sinew in March 2018, the putrid liquid gurgled to the surface and formed streams that flowed across the landscape, fouling wells along the way and guaranteeing intervention by the Tennessee Department of Environment and Conservation.
“Division personnel performed a complaint investigation and confirmed that the SSDS had failed and wastewater was pooling on the surface and flowing down an established conveyance,” a TDEC director’s order states. “Many drinking water wells were located within close proximity to the site.”
The number of good options to right the wrong was zero. Bean Station does not have a sewer system.
TDEC imposed a $12,000 civil penalty on Southeastern Provision and ordered the company to transport the waste to a permitted plant until a new on-site treatment facility was in place.
On March 26, 2018, TDEC issued a draft permit for a temporary pump-and-haul operation from Southeastern Provision to the wastewater-treatment plant in Greeneville. Seven days later, citing intolerable E. coli bacteria blooms, Greeneville terminated the agreement, leaving Southeastern Provision in the lurch.
Law enforcement officials raided Southeastern Provision on April 5 and detained 97 Latino employees, which slashed production.
The liquid waste was temporarily transported the Morristown wastewater plant, but the pump-and-haul solution was unsustainable, and Southeastern Provision closed its doors.
The tens of thousands of cattle once slaughtered and processed in Grainger County now roll to St. Louis, 500 miles west of Bean Station.
The transportation costs make beef more expensive, but the economic impact is more complicated, according to Southerland.
The distinct possibility cattle could die in transit has lowered the amount processors in St. Louis are willing to pay farmers for cattle coming from this area, the senator said.
At the same time, shuttering Southeastern Provision created an immediate void in beef supply that raised prices. Southerland says Tennessee agricultural officials estimate the shortfall added a quarter to the price of a pound of ground beef.
The market dislocation was serious enough to trigger a June 26 confab that included the commissioners of agriculture from Tennessee and Kentucky, a top U.S. Department of Agriculture official, Southerland and others who have skin the game.
“For them to come together, it has to be a major problem,” Southerland said. “That’s a powerful meeting. They know it’s a problem that has to be solved.”
While no consensus has emerged about possible locations, part of the conversation involves whether to build processing plants in Tennessee and Kentucky or consolidate operations into a plant the size of Southeastern Provision, according to Southerland.
Southerland says building a processing center with its own waste-disposal system like Southeastern Provision will not happen. He says decision-makers will only consider sites that have access to sanitary sewer, ample electricity and lots of water.
Meat-processing plants like these are frequently unpopular for reasons unrelated to blood- and feces-tainted wells. They place an extremely high demand on sewer systems, both in terms of hydraulic demand from the blood and water, and in biological demand, a key determinate in sewer rates
Processing liquid waste that contains fatty solids doesn’t come cheap, a fact people in Morristown know well from experience with Koch Foods, a chicken-processing facility.
Before Koch Foods installed a pretreatment system at the kill plant in central Morristown, the hydraulic and biological loads from that plant alone exceeded the combined loads of every residence and business inside the Morristown city limits, city officials affirmed at the time.
The sewer capacity sufficient to handle a high-volume cattle processing plant could provide sewer service to hundreds of homes and businesses. When given the choice between shiny new neighborhoods and a slaughterhouse, decision-makers in communities with vibrant economies never pick slaughterhouses.
Tax, documents blindness
Brantley, who is in his early 60s, was a serial tax cheat who increased Southeastern Provision’s profits by hiring undocumented Latinos as a means of avoiding federal employment taxes, according to court documents.
He pleaded guilty to tax fraud, wire fraud and hiring undocumented workers, and agreed to pay $1.3 million to the federal government and $127,000 to his former workers compensation insurance carrier. By under-reporting the number of workers at Southeastern Provision, Brantley illegally slashed his workers comp premiums.
The Tennessee Occupational Safety and Health Administration fined Southeastern Provision more than $41,000 for safety violations. The 23 serious infractions included not providing protective equipment for employees assigned to remove cows’ hooves with a torch. He also agreed to forfeit more than $107,000 in cash confiscated during the raid.
The April 2018 enforcement action was widely characterized by an immigration operation, particularly by immigrants-rights groups. That assertion is unsupported by court documents.
Nick Worsham, an IRS criminal investigator, was the lead agent in the case and drafted the 22-page application for a search warrant, which provides a roadmap for the prosecution.
Brantley avoided a potentially incriminating paper trail by paying Southeastern Provision employees in cash, a salary scheme Brantley didn’t try to conceal. Every week, he withdrew about $95,000 in cash from Citizens Bank.
Southeastern Provision twice reported to bank employees the large cash withdrawals “were made for the purpose of paying cash wages to Hispanics,” Worsham wrote in the affidavit. Over the 10-year period that began in 2008, Southeastern Provision withdrew $25 million in cash.
Between 2013 and 2016, the company reported $2.5 million in total wages. The cash withdrawals totaled $10.9 million. The federal taxes on the $8.4 million difference would have been about $2.5 million. All things being equal, the unpaid taxes on the entire $25 million in cash withdrawals would have been approximately $7.5 million, according to tax rates.
Brantley never pretended to care about laws against hiring undocumented workers, a policy law enforcement corroborated.
When the IRS planted a Latino mole inside Southeastern Provision for a for a four-day look-see, the informant reported recognizing workers he knew had been fired by a former employers because they didn’t have papers, according to Worsham.
Two long-time American employees, brothers who had hiring authority, told investigators Southeastern Provision never asked prospective hires if they were in the United States legally, according to their plea agreements.