Indicted Matanuska Creamery CEO stands behind grant

zhollander@adn.comAugust 26, 2013 

Karen Olson, the 57-year-old former chief executive of the now-defunct Matanuska Creamery, is hoping a federal indictment against her eventually sets the record straight on the company she helped create to save the Valley's last few dairy farmers.

A federal grand jury last Friday handed up a six-count indictment charging that Olson defrauded the state to illegally obtain a $430,000 loan to shore up Valley Dairy Inc., Matanuska Creamery's parent company. The indictment also charged that Olson made false statements to the U.S. Department of Agriculture and lied to protect the dairy's former president and co-owner, Kyle Beus, indicted on similar charges last December.

Prosecutors say Beus falsified paperwork on $643,000 in federal grants and then spent some of that money for personal use.

Four of the six counts against Olson charge felony fraud.

Olson headed the USDA's Alaska Farm Service Agency from 1993 until 2001 as a Clinton appointee.

On Sunday, she declined to discuss the indictment, which she said she hadn't seen. But in an emailed statement, Olson defended the loan applications she put together for Matanuska Creamery back in late 2008.

"The information I provided in those documents and to Rural Development was correct to the best of my knowledge. As far as I am aware of my own knowledge, the information remains correct today," Olson wrote. "I also deny allegations of engaging in any cover-up, then or at any time."

Along with taking the media to task for inaccuracies, the statement goes on to say that "Matanuska Creamery, its customers, employees, member farmers, and investors have been the losers over the past six years. Perhaps these indictments will become the vehicle for setting the record straight."

Dairy operations in Alaska, once numerous, for years have struggled against cheaper supplies from the Lower 48 and rising costs. A state farm project at Point MacKenzie never took hold. The state-run Matanuska Maid dairy that closed in 2007 was buying most of its milk from Washington State.

A board hand-picked by former Gov. Sarah Palin oversaw the end of Mat Maid and the creation of Matanuska Creamery.

The new creamery struggled from the start. The company took on more than $1 million in debt renovating a plant on the Palmer-Wasilla Highway near Trunk Road, Olson said at the time. Old Mat Maid equipment brought to the new creamery proved faulty. The company lost another $166,000 after state officials discovered bacterial contamination on cheese made from raw milk; the cheese was destroyed and the dairy added equipment to pasteurize milk.

Beus, Olson and business partner Rob Wells, a former Mat-Su Borough Assembly member, obtained $630,000 in state grants to rescue the business. Beus at the time said he invested about $200,000 of his family's money. Matanuska Creamery shut down in late December after failing to repay $800,000 in state loans. A smaller dairy operated by the Havemeister family now sells local milk in stores.

Wells, a working farmer reached by phone on his tractor Sunday, said he had no comment.

"I hope the facts get told," he said.

Matanuska Creamery owed Point MacKenzie farmer Wayne Brost nearly $500,000 at the end, Brost said Monday. He's diversifying his farm --and may head to North Dakota to work in the oil and gas fields this winter -- and is largely dissolving his dairy herd. He's bitter about the fate of the Valley's dairy industry, he said, but not angry with Beus and Olson.

"The best way for me to summarize the whole situation ... (everyone) especially Karen Lee was very passionate about keeping the dairy going after Mat Maid shut down," Brost said. "There was a small group of us producers still left. We went ahead and did it. It was too little, too late."

Olson still has a few dairy cows and runs about a dozen beef cattle on a 1,000-acre Talkeetna Mountains lease behind the family homestead near Wasilla. The hardy Scottish Highland variety "aren't afraid of bears," Olson said. "And there's lots of bears up there."

Matanuska Creamery's former location on the Palmer- Wasilla Highway is now a Driven Auto Body store that's just opened for business.

Reach Zaz Hollander at zhollander@adn.com or 257-4317.

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