Sugar industry, Fanjuls cash in while taxpayers foot bill (Updated)

Update: This post has been updated to reflect clarifications of the roles Flo-Sun and U.S. Sugar have had in influencing (and benefiting from) Everglades restoration projects and other public policy.

Despite being behind every packet of Domino sugar in every diner in the country, the name “Fanjul” is little-known outside of Florida.

Alfy and Pepe Fanjul run Flo-Sun, Inc., the mega-corporation that, alongside U.S. Sugar, dominates the American sugar industry and wields substantial political influence in Washington and around the country. Flo-Sun’s subsidiaries include Domino, Florida Crystals, C&H and Redpath Sugar, but the company’s legacy is its alleged stranglehold on sugar-industry policy in the United States.

The Fanjuls’ sugar empire benefits from environmental efforts that give them a green image — as taxpayers foot the bill — and from federal subsidies that American consumers pay for both at the grocery store and on tax day.

Florida’s Everglades Forever Act of 1994 drives one of the major environmental cleanup efforts in the state.

Everglades Forever implementation so far has cost the state of Florida $1.8 billion. Of that, Florida sugar companies have pledged to contribute $300 million in tax revenue. (The Fanjuls own 40 percent of Florida’s sugar industry, but no hard numbers exist on how much each company has offered to the effort.)

Put another way, the industry that is almost entirely responsible for the historical damage of the Everglades is footing less than 20 percent of the bill to clean up the mess.

Meanwhile, the far larger Comprehensive Everglades Restoration Plan is funded half by the federal government and half by the state government. The Restoration Plan was originally projected to cost $7.8 billion; official Florida state cost estimates have since ballooned to $13.5 billion, though federal projections put it at just under $20 billion (.pdf).

The fact that the Everglades Restoration Plan is designed to clean up the mess in the Everglades without special contributions from the industry that largely created it has led some to speculate that the Fanjuls’ political connections played some part in shaping the program.

Yet the lack of any sort of paper trail has allowed both the Fanjuls and U.S. Sugar (the only sugar corporation that’s on a similar scale to Flo-Sun), as well as the federal and state governments that crafted the plan, to avoid answering any tough questions about how the program was devised. The closest thing to a connection is the fact one of the plan’s principal architects was former U.S. Sen. Bob Graham, D-Fla.; Flo-Sun was a major contributor to Graham’s campaigns.

Graham’s career, however, was characterized by an ostensibly sincere desire to restore the Everglades, so his involvement in the Everglades Restoration Plan is hardly a smoking gun — nor is the fact that he’s gotten Fanjul money, considering Alfy has donated to most major Florida Democrats as far back as there are election records.

Perhaps slightly more damning, though still inconclusive, is the fact that Flo-Sun began sending family scion Jose Fanjul, Jr. to Washington as a lobbyist in the late ’90s, but he stopped lobbying on his family’s behalf in 2000, the same year that the restoration plan went into effect as part of the Water Resources Development Act. Company representatives have since decried (.pdf) Congress for failing to properly fund Everglades Restoration Plan implementation.

The billions that have been spent and the billions that have yet to be spent are meant to reverse the massive ecological changes that came about when nearly 2 million acres of the Everglades were razed, predominately to make room for sugar development.

The money is also used to cut down the concentration of phosphorus that ends up in Florida waterways after being dumped on fields of sugar cane. Phosphorus is a nonrenewable central element in the production of fertilizer and is already in short supply all over the world — it’s also one of the many contributors to record-high food prices.

Meanwhile, Florida Crystals has partnered with both Florida International University and the University of Florida in government-funded, multimillion-dollar ethanol research projects.

As with the corn industry, clean production of ethanol from sugar cane is thought to be the future of the sugar industry. These programs have generated no publicly available academic research, but studies show (.pdf) that the larger University of Florida program has successfully begun generating 2 million gallons of ethanol a year from processed bagasse, a waste byproduct of sugar refining. The taxpayer-funded University of Florida, then, is making progress in seeking new profits for the Fanjuls.

The Fanjul family’s political connections become more open when it comes to Alfy Fanjul’s longstanding ties to the Clinton family. The campaign donation records of Alfy, a Democrat, show he gave extensively to both the Senate and presidential campaigns of Hillary Clinton. He has also given money to the William J. Clinton Foundation, was the co-chair of Bill Clinton’s 1992 Florida campaign and has hosted Clinton fundraisers in the past.

Alfy Fanjul’s Clinton association received outsized attention during the Kenneth Starr investigation of Clinton; Bill Clinton’s breakup speech with Monica Lewinsky was cut short by a phone call from Alfy Fanjul.

While White House records don’t document the content of phone conversations, Alfy’s call, made on President’s Day 1996, could very well have been about an announcement that Vice President Al Gore had made just hours before that he’d be pursuing a tax of a penny per pound on sugar producers. The sugar industry went on to spend $35 million, according to the Army Corps of Engineers (.pdf), in pre-election day advertising once the tax was put on the ballot in Florida. (There is unfortunately no documented breakdown of how much the individual companies spent.) Ultimately, Big Sugar ads claiming the tax would be a job killer won out and Florida voters killed the measure. Bill Clinton quietly shelved it on the federal level against Gore’s wishes.

It’s worth noting that the penny-a-pound tax would be just a dent offsetting the 18 cents-per-pound-of-sugar subsidies (.pdf) that cane growers like the Fanjuls receive from the federal government. The subsidies come in the form of loans; the cost of repaying them, plus interest, is tacked onto the purchase prices of sugar, which explains why the wholesale and retail prices for sugar in the U.S. have hit more than triple the global average several times over the last 20 years, according to USDA figures.

A 2000 Government Accountability Office report concluded that the price markups cost U.S. consumers up to $1.9 billion annually in the 1990s, a figure that doesn’t even account for the fact that the subsidies are paid for with taxpayer money to begin with.

Between 1990 and 2009, U.S. prices for raw sugar averaged out to almost exactly twice the global average: 21.56 cents a pound, compared to 10.85 cents a pound for the rest of the world. In recent months, however, food shortages, crop failures and the economic growth of sugar-producing countries like India and Brazil have driven global prices up to levels close to the artificially inflated U.S. prices.

It’s unclear just how Big Sugar in general will be affected by rising global prices, but the Fanjuls are likely to face a windfall, thanks to their refineries in Canada, England, Mexico and Portugal. They also own thousands of acres of sugar farmland in the Dominican Republic. The Fanjuls, along with other sugar barons, were excoriated in the 2007 documentary The Sugar Babies for alleged slavery-like practices at their Dominican plantations (.pdf). Representatives for Florida Crystals said at the time (.pdf) that the documentary highlighted issues that were no longer company policy.

Still, just as the Fanjuls remain locked in competition with U.S. Sugar over control of the American sugar market, so have they been at odds over government deals with Big Sugar. In 2008, then-Gov. Charlie Crist announced that Florida would be spending $1.75 billion in taxpayer money to buy nearly 180,000 acres of land from U.S. Sugar (the deal has since been scaled back because of budget shortfalls). Flo-Sun representatives balked at the deal, calling it “a gross misuse of public funds” and a unilaterally decided waste of money (.pdf). Some have speculated that the Fanjuls could have emerged from the situation in a position to negotiate sale of their unused lands at an even higher rate. To date, Flo-Sun has not come forward with a deal to do so.