Peter Townsley, 49, of British Columbia, Canada, former president of a California Liquid Fertilizer, Gonzales, Calif., has been arrested and charged with fraud and other crimes involving the sale of organic fertilizers.

A federal grand jury in San Francisco indicted Townsley with eight counts of mail fraud, two counts of making false statements, and one count of conspiring to commit mail fraud, according to U.S. Attorney Melinda Haag in San Francisco.

The grand jury returned the indictment on June 1, 2010. The indictment was unsealed last week after Townsley was arrested.

The indictment charges Townsley with engaging in a scheme to defraud purchasers of organic fertilizers, and the agency that approves fertilizers as organic, by falsely representing his company's fertilizer to be an organic product when he knew that the product contained prohibited synthetic materials.

According to the indictment, Townsley was the president of California Liquid Fertilizer (CLF), a business formerly located in the Salinas Valley in Gonzales, Calif. CLF sold what it represented as organic fertilizers to organic farms in California. Beginning in approximately April 2000 and continuing until December 2006, Townsley allegedly engaged in a scheme to defraud with a CLF product called Biolizer XN.

The indictment charges that in 1998, Townsley signed and submitted applications to the Organic Materials Review Institute (OMRI), an agency that approves fertilizers and other products as organic, to have OMRI certify the Biolizer XN product as organic. Townsley's final application on behalf of CLF stated that Biolizer XN was a liquid organic fertilizer composed of ocean-going fish and fish byproducts, feathermeal, and water. OMRI approved Biolizer XN to be listed as an organic fertilizer. CLF then began marketing Biolizer XN as an organic fertilizer that was OMRI-listed.

The indictment alleges that in approximately May 2000, Townsley knowingly changed the chemical ingredients in Biolizer XN so that it no longer contained fish or feathermeal; instead, it allegedly contained synthetic ingredients, including ammonium chloride and subsequently ammonium sulfate.

Despite knowing that the new formulations did not contain fish and feathermeal, had not been approved by OMRI, and contained synthetic ingredients, Townsley allegedly continued to sell Biolizer XN as an organic product until December 2006. CLF only stopped selling the Biolizer XN as an organic product when the California Department of Food and Agriculture launched an investigation of the product. The indictment states that Townsley, via CLF, marketed and sold approximately $6 million worth of Biolizer XN between May 2000 and December 2006.

In addition to labeling Biolizer XN as organic and OMRI-approved, the indictment alleges that Townsley submitted annual renewal applications to OMRI stating that Biolizer XN continued to contain organic inputs when he knew that it did not. As a result, OMRI continued to list Biolizer XN as a certified organic fertilizer and Townsley continued to label and market Biolizer XN as an organic product.

Townsley made an initial appearance on Oct. 12 in federal court in Los Angeles before U.S. Magistrate Judge Paul Abrams and was released on a $150,000 bond. The matter has been assigned to U.S. District Judge Charles Breyer in San Francisco.

The maximum statutory penalty for each count of mail fraud is 20 years in prison, a fine of $250,000, plus restitution.

The maximum statutory penalty for each count of making false statements is five years in prison and a fine of $250,000.