A Humboldt County district court judge has ruled against the Iowa attorney general in a case that was designed to keep pork processor Smithfield Foods. from gaining control of Murphy Family Farms’ Iowa pork operations.

Iowa law prohibits meatpackers from owning livestock, and Attorney General Tom Miller sued Smithfield in January 2000, saying the company had used a "sham" to get around the Iowa law and after it purchased Murphy's operations nationwide. Murphy's had contracts with 220 Iowa farmers to finish hogs.

District Court Judge Ronald H. Schechtman ruled there was no sham in the transaction in which Smithfield made it possible for Randall Stoecker, the manager of Murphy's Iowa operations, to acquire the Iowa business.Stoecker created a company called Stoecker Farms with $10,000 of his own money, the court ruling states.

Stoecker Farms acquired Murphy's Iowa assets from Murphy's at a price of $79.3 million, with that sale closing before Smithfield's $460 million acquisition of Murphy's nationwide operations was completed. Stoecker Farms paid for Murphy's Iowa operations with a promissory note. The attorney general called the transaction a sham because William Prestage, a Smithfield director, owned 51 percent of Stoecker's stock.

In a 29-page ruling issued Wednesday, Judge Schechtman dismissed the lawsuit and says the state had not shown that a sham existed or that Stoecker's acquisition of Murphy's Iowa operations violated Iowa law. The judge ordered the state to repay expenses advanced by the court and says Smithfield would have to pay any additional costs.

A Smithfield official referred questions Friday to a spokesman who was not available for comment late in the afternoon. Eric Tabor, the Iowa attorney general's chief of staff, says he and Miller are studying the decision and have not decided whether to appeal.

Tabor says the claim that the sale was a sham was difficult to prove because it wasn't a clear statutory interpretation kind of case. “It was a good argument. It was a legitimate argument, but it was a difficult case," says Tabor. The decision goes to the heart of an issue - meatpacker ownership of livestock feeding operations - that has been hotly debated across the country for years. Congress is currently considering legislation that would block packer ownership of livestock nationwide.

Des Moines Register