STATE: SCHOOL MILK $7.6 MILLION TOO HIGH

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, January 9, 1992                   TAG: 9201090552
SECTION: VIRGINIA                    PAGE: B6   EDITION: NEW RIVER VALLEY 
SOURCE: Associated Press
DATELINE: NORFOLK                                LENGTH: Medium
STATE: SCHOOL MILK $7.6 MILLION TOO HIGH
Students in 35 Virginia school districts from the Richmond area to Hampton Roads were overcharged $7.6 million for half-pint cartons of milk from 1984 through 1990, the attorney general's office said Wednesday.
The figure was derived by a consultant who has worked with prosecutors on a multistate investigation of alleged price-fixing by dairies on school milk contracts.
The total was contained in a report submitted by Attorney General Mary Sue Terry to support a lawsuit filed in U.S. District Court in Norfolk this past summer against five dairies accused of rigging bids on school milk business in eastern Virginia.
The defendants are Embassy Dairy of Waldorf, Md.; Maola Milk and Ice Cream Co. Inc. of New Bern, N.C.; Southland Corp. of Dallas; Marva Maid Dairy of Reston; and Land-O-Sun Dairies Inc. of Johnson City, Tenn.
According to the consultant's report, the estimated overcharge amounted to 2.4 cents per half-pint of milk bought by the school districts during the period. The overcharge was 17.4 percent of the districts' total milk expenditures of $44 million for 317 million half-pints, the report said.
"Of course, the size of the overcharge varies by district, year and type of milk," the report said. The purchases involved whole, low-fat and chocolate milk.
The civil suit is set for trial in July, Terry said. A hearing on preliminary motions is set for Friday.
Hunter Sims, a Norfolk attorney for Marva Maid, challenged the consultant's estimate as "a computer that spit out answers." Sims said the estimate apparently did not take into account that State Milk Commission regulations prohibit dairies from selling milk below an established average cost.
Anthony Troy, a Richmond attorney representing Land-O-Sun, said the state cannot proceed against his client because of a pending Chapter 11 bankruptcy case in Florida, although Land-O-Sun is still listed in the suit.
Attorneys for the other dairies could not be reached.
In August, Pet Inc. of St. Louis pleaded guilty to rigging school milk bids and agreed to pay $3.5 million in fines. Pet also agreed to settle claims for civil damages made by Virginia and nine other states.
In September, Marva Maid Dairy was convicted in a federal criminal trial of conspiring to rig bids on school milk contracts. U.S. District Judge John A. MacKenzie fined Marva Maid $1.1 million.
Attorneys for Marva Maid contended at the trial that providing schools with milk was more of a public service than a profit-making venture and that school milk sales were a small part of the company's overall milk business.

by Archana Subramaniam by CNB