Issue scramble: Why Ellison, Schultz are talking eggs in attorney general’s race

“On this egg thing…”

That was DFL Attorney General Keith Ellison in a televised debate last week, launching into a defense of his record on a topic that has suddenly, and perhaps unexpectedly, become a point of contention with his Republican opponent Jim Schultz.

At issue is a settlement with Sparboe Farms, a Minnesota-based egg producer, which Ellison last year accused of price gouging during the early days of the COVID-19 pandemic. The company denied the allegations, but it settled with the AG and agreed to donate 1.08 million eggs — that’s 90,000 dozen — to Minnesota nonprofits fighting hunger.

Why are the two candidates worried about eggs in a tightly-fought campaign with fierce debate on issues like crime, abortion, police reform, and courtroom experience? 

Schultz and Ellison have differences over the lawsuit itself. But it’s best understood as an illustration of competing visions for the office of attorney general in the final days before the Nov. 8 election.

The facts of the case

Ellison brought the lawsuit against Sparboe in September of 2021 under powers granted by one of Gov. Tim Walz’s pandemic-era executive orders, this one issued in March of 2020 to ban the sale of essential consumer goods at an “unconscionably excessive price.”

One way the order measured that was by determining whether a product’s price was 20% higher than it was in the 30 days before the peacetime emergency declared by the governor — unless the new costs were outside the seller’s control.

Ellison’s lawsuit accused Sparboe of working to maximize egg production and profit amid huge demand. The AG says the company doubled and tripled prices as COVID-19 arrived, compared to prices from February and early March of 2020. Ellison’s lawsuit says Sparboe even ignored pleas from one of its largest wholesale customers in Minnesota to reduce its prices.

Sparboe never filed a legal response and instead settled with Ellison roughly a month later. In that short eight-page settlement, Sparboe denied it violated any laws, including the executive order. And the company said it only sold eggs to wholesale customers at market prices that, by long-term contract, were determined by a third party company Urner Barry.

As part of the settlement, Sparboe agreed to donate the 1.08 million eggs.

Two views from the AG candidates

At the debate on KSTP last week, Schultz brought up the lawsuit first. He said the AG’s office shouldn’t have been focused on suing egg producers in Minnesota.

In an interview, Schultz said Ellison didn’t understand the economics of the egg business. He argued the company was following contracts and wasn’t increasing prices out of line with what was happening nationally.

Once Ellison’s office learned that information, Schultz said, they settled “tail between legs” and got a “fig leaf” donation. “The case there was extraordinarily weak, and once they realized that they had to enter into a settlement, that was, frankly, embarrassing for the AG’s office,” Schultz said.

Schultz asserted that Sparboe often donates eggs, anyway, so the AG was overselling the impact of his settlement. MinnPost left a message for Sparboe to seek comment about the lawsuit and company practices but the organization didn’t immediately respond.

Ellison, meanwhile, had a very different view of how the lawsuit went. He contends large companies like that don’t settle unless they have legal exposure and said the egg donation was meaningful.

“Not one penny was exchanged but a million eggs went to low-income Minnesotans,” Ellison said at the debate. “I’m over here fighting price gouging and getting food to low-income Minnesotans and food shelves and you are attacking me for it.”

The big picture critiques

Days after the debate, Ellison held a press conference about the egg lawsuit to raise a larger point that intertwines with what has become central to the incumbent’s closing message: that Ellison has and would continue to use the AG’s office to take on large corporations and protect consumers, while Schultz would side with big business.

Ellison has hammered Schultz for previously working at the hedge fund Värde Partners, which Ellison’s campaign says engaged in pandemic profiteering. The Ellison campaign highlights a Nov. 2020 company press release where it touted raising $2.6 billion to “invest in opportunities presented by the historic market dislocations and economic disruption resulting from the COVID-19 pandemic.” 

And this week, the state DFL attacked Värde Partners for in 2018 buying a large stake in OneMain Financial, a prominent subprime lender that has faced allegations of predatory practices, including a federal investigation made public in April of 2022. Schultz was a lawyer for Värde until December of 2021, and a campaign spokeswoman said his work at the large company didn’t involve OneMain.

Schultz, in the interview, also noted the State Board of Investment, which manages state employee pension funds and other accounts, recently invested in a Värde fund. Ellison is one of four statewide elected officials that sits on the state’s investment board.

Ellison has criticized Schultz for saying he would move lawyers from the consumer protection unit at the AG’s office to a criminal division if the Legislature wouldn’t fund a request for more criminal prosecutors. The consumer protection division “is the same division that got hungry Minnesotans a million eggs from a price gouger,” Ellison said at the press conference.

Ellison also condemned $2,500 in donations from Sparboe CEO Beth Schnell to Schultz. The donations are the only ones reported so far this year for Schnell, though she has donated to several Republican politicians in the past. 

Ellison supports legislation targeting price gouging during emergencies. The only reason the AG could bring his case was because of Walz’s temporary executive order. The bill stalled in the Republican-led Senate amid opposition from the Minnesota Grocers Association, which said the price gouging executive order was a burden to smaller stores already struggling with supply chain problems and cost increases. 

Schultz, meanwhile, said Ellison’s lawsuit was “representative of an office more focused on the headlines than doing justice.” If the AG was focused on whether or not the lawsuit had merit, he wouldn’t have brought it, Schultz said.

“We were living through at that time the greatest increase in violent crime in many decades that had already started,” Schultz said. “Here we’ve got an AG’s office suing egg farmers completely baselessly.”

The Republican also said Ellison has a poor record looking after consumers. As evidence, Schultz in part cited Ellison’s support as a congressman in 2015 for increasing the federal gas tax. Schultz also said Ellison “embraced policies that have led to extraordinary violent crime that hits the poor the hardest.”

Schultz has criticized Ellison for supporting the Minneapolis public safety charter amendment that would have replaced the police department with a public safety agency and eliminated a minimum officer requirement.

The Republican said his time in the private sector and in business makes him “much more well equipped” to target wrongdoing by business because he understands regulations and how businesses manipulate and evade those rules.

“Ultimately I’m a kid who grew up in rural Minnesota in a town of 186 people in a middle class family,” Schultz said. “The idea that I won’t hold businesses accountable when they defraud Minnesotans is absurd.”