Fraud and the family farm

By Mary Baxter, Robert Irwin & Don Stoneman

Better FarmingLast October a reader asked if Better Farming could look into Pigeon King International Inc. (PKI). Based in Waterloo, Ontario, this rapidly-growing company offered 10-year pigeon breeding contracts that included a guaranteed buy-back provision and almost 100 per cent return on investment in just over a year.  The company supported its vision of saving the family farm with hundreds of testimonials from happy contract holders.

As we delved into the company’s activities, we found that about 800 investors in four provinces and 13 states had anted up tens of millions of dollars. Many of the families who signed up were from trusting religious communities like the Amish and Mennonites.

Contracting out production is not new in agriculture — it’s used in everything from pork and poultry production to vegetable growing. In PKI’s case, however, the only market of note for the birds was in new or expanding contract holders. Moreover, the company bills itself as debt free but, over the life of the breeding contracts, it would actually owe investors hundreds of millions of dollars. Investors knew little about PKI or its charismatic owner Arlan Galbraith.

These factors raised the question of whether, in fact, this was a form of Ponzi scheme, a type of fraud, which uses proceeds from newcomers to pay existing investors. So we began digging.
Satisfied contract holders were easy to find, but Galbraith refused all our requests for interviews. So we turned to information in government records, including land titles, motor vehicles and drivers, bankruptcy files.

We accessed a wide range of Internet sources, databases, discussion forums and personal networking sites, such as Facebook.  The research led us to Galbraith’s friends and acquaintances, as well as current and former employees. One source required separate meetings with each of us before finally agreeing to go on the record just before press time. Spreadsheets and chronologies helped us organize the data.

Since the Amish have no telephones, we drove the back roads and knocked on doors. We found communities divided about the morality of the PKI scheme. Few wanted to talk, so we worked with community leaders to build trust.

Better Farming has a circulation of about 40,000 but only three full-time editorial staff. With just three weeks remaining before our December 2007 issue deadline, we worked early mornings, days and nights, including weekends, while juggling the regular work involved in preparing an issue for publication.

Our small offices are hundreds of kilometres apart, so we devised a “poor man’s” wiki to share our information: regular e-mailed updates to a Microsoft Word file that used hyperlinks to reference different subjects.

As expected, given the very large dollars involved and the controversial nature of the subject, there were attempts (still ongoing) to intimidate us. After our December publication and subsequent action against PKI by U.S. authorities, national media such as CanWest, Canadian Press, CBC television and The Globe and Mail, as well as farm and mainstream news outlets south of the border, picked up the story.   PKI has now been barred from four U.S. states. Canadian authorities maintain the company is above board.

When we began the story, Mary Baxter, our London field editor, had only been with Better Farming about a month, but her previous experience on the agricultural beat enabled her to hit the ground running. Don Stoneman and Robert Irwin worked together at Farm & Country for decades as freelancers and staffers before launching Better Farming with Paul Nolan in November 1999. Despite our previous experience, we were all pleasantly surprised at the synergies our editorial threesome generated on this story.

We couldn’t have published it without the valuable insight and editing of Charles Magill, a former editor-in-chief of Reader’s Digest. No story like this can move without expert legal advice and our Toronto libel lawyer, Stuart Robertson, was invaluable.

A Better Farming Special Investigation: Faith in Arlan Galbraith, Ontario’s Pigeon King” won a Canadian Association of Journalists Investigative Journalism Award in the magazine category.

To obtain a full-text version of the article, email Robert Irwin.