Monday, May 12, 2008

By SCOTT JASON
MERCED SUN-STAR

last updated: May 03, 2008 04:49:50 AM

MERCED -- A Merced County jury awarded $22.2 million to 11 dairymen who were defrauded out of profits by the cooperative that sold their milk.

George Vieira of Escalon, chief executive officer of Central Valley Dairymen, and his wife, Mary, took a portion of the cut when the milk was sold to processors and diverted it into California Milk Market, a separate company they owned, said Martin Reilley, the Santa Rosa-based attorney who represented the dairymen.

Dan Kohls, a Sacramento attorney who represented the Vieiras, declined to comment.

The verdict, handed down at 6:30 p.m. Thursday after two days of deliberations, settles the case, which has been going through Merced County Superior Court since 2004.

While the motions were argued, one client went bankrupt and two others lost their dairies, Reilley said. Many of the dairymen attended every day of the four-week trial with Portuguese interpreters so they could follow what happened.

"It was not just a business deal. It was a very personal thing for them," Reilley said.

In California, the state sets a minimum price for each pound of milk. The co-op can sell it at a higher price to cheese processors and other companies.

That money, usually called a premium, is supposed to be passed along to the dairymen selling their milk as an extra profit.

In this case, a jury decided the Vieiras were keeping it.

From 1995 to 2003, they channeled at least $54 million into the California Milk Market company instead of passing the premium along to the dairymen, Reilley said.

Forensic accountants relied on bank statements to track the money's movement because there weren't any tax returns or financial statements, he said.

Many of his clients were first-generation Portuguese immigrants who could speak little English. They are savvy dairymen, he said, though they concentrated on their cows rather than the business. Also, few dairymen pay attention to the minimum rate for milk, he said.

"The dairymen really do rely on the honesty of the co-op," he said. "They had quite a trusting relationship. He and his wife took advantage of that."

The Vieiras bought the co-op in 1993 for $5,000, when it had gross revenues of $21,000. Over time, more dairymen joined, and its membership peaked at 77.

Reilley's firm began looking into the co-op in 2004 because it could not pay members for milk that was sold. Six dairymen were owed about $1.2 million.

After learning the co-op had no money, the attorneys began an investigation that revealed the scheme.