Doubling Down on Deception: AEFS's House of Cards Begins to Crumble

This episode continues the saga of American Energy Farming Systems (AEFS) and its audacious attempt to build an agricultural empire on the back of the Jerusalem artichoke. Hosts Andy and Elliot further examine the company's dubious tactics, increasingly desperate attempts to create a market for their miracle crop, and the growing skepticism from experts and authorities.

The Gospel of the Jerusalem Artichoke: AEFS's Sales Pitch and Cultish Tactics

AEFS goes beyond simply promoting the Jerusalem artichoke; it positions the crop as a divinely ordained path to prosperity and even incorporates religious faith into its sales pitch. The episode highlights the company's deep ties to evangelical Christianity, noting that its initial sales list came from the membership of a regional radio show called "Prayer Power", hosted by Pastor Pete. AEFS's first employee is John Peterson, Pastor Pete's son, further blurring the lines between faith and business.

The company integrates religious elements into its daily operations, starting workdays with prayer services and incorporating organ music into its events. AEFS even goes as far as encouraging its employees to pray for the failure of corn crops, hoping that farmers, faced with economic hardship, would turn to the Jerusalem artichoke as a salvation.

AEFS uses various tactics to attract investors, including:

• Promising an escrow account: For every dollar spent on seed, 50 cents would be kept back, creating the illusion of financial security and responsible management.
• Appealing to a sense of shared purpose: The company positions buyers and growers as a "spiritual family" united in a project for God and the nation.
• Utilizing high-pressure sales tactics: AEFS employs the "train is leaving" pitch, creating a sense of urgency and encouraging impulsive decisions.
• Making extravagant claims about industrial uses and imminent demand: Salesmen carry products like spaghetti pellets and jars of alcohol, falsely suggesting they are made from Jerusalem artichokes to bolster the idea of existing demand.
• Exaggerating potential profits: AEFS claims that an acre of Jerusalem artichokes could yield 45 to 65 tons of tubers, a figure exceeding even the highest-producing corn crops, which yield around two tons per acre. This claim, however, ignores the reality that there is no established market or infrastructure for processing and selling such quantities of Jerusalem artichokes.

To further bolster its image and foster a sense of community, AEFS celebrates growers' birthdays and anniversaries, sponsors contests for the tallest plant and best school speeches about the artichoke, solicits recipes from growers' wives, and promotes the exchange of Jerusalem artichoke recipes under the questionable label "breaking loose." These efforts are reminiscent of "love bombing," a manipulation tactic used by cults to foster a sense of belonging and loyalty.

Smoke and Mirrors: Fabricating Success and Hiding the Truth

AEFS uses various methods to create the illusion of legitimacy and future success:

• Partnering with independent news organizations: AEFS collaborates with publicist Willetta Warburg and other individuals to publish questionable articles that promote the Jerusalem artichoke's potential.
• Misrepresenting facilities: Potential investors are flown in to see the large Marshall corn processing plant, falsely presented as belonging to AEFS.
• Exploiting the digestive side effects of Jerusalem artichokes: After signing contracts, prospective growers are treated to a "smorgasbord" of fresh artichoke foods that are deliberately undercooked, causing digestive discomfort. This tactic, while ethically dubious, further reinforces the idea that the Jerusalem artichoke is a potent and significant crop.

Cracks in the Facade: Early Warnings and Growing Skepticism

As early as October 1981, the University of Minnesota Agricultural Extension Service issues a memorandum cautioning that AEFS is overestimating the Jerusalem artichoke's yield and potential. Experts also debunk AEFS's claims about the plant's unique nutritional properties, pointing out that all plants get their nutrition from air, sunshine, and water.

Despite these warnings, many people remain captivated by the idea of the Jerusalem artichoke. Throughout 1982, AEFS continues to aggressively sell seed contracts, capitalizing on the allure of potential riches. However, criticisms and accusations about the company and its practices mount.

• Mark Seton, the Minnesota Commissioner of Agriculture, openly questions AEFS's yield claims and announces his intention to investigate the company for possible pyramid scheme activities.
• The Sioux Falls Argus Leader publishes a critical article questioning the economic viability of Jerusalem artichoke production.
• The Farmer, an influential agricultural paper, labels the Jerusalem artichoke a "highly speculative venture" due to the lack of existing markets. The article quotes experts who suggest that AEFS may even be growing the wrong variety of Jerusalem artichokes for Northern climates.

Legal Troubles Mount: Pyramid Schemes, Monopolies, and Securities Violations

The Minnesota attorney general's office initiates an investigation into AEFS's business practices, focusing on potential pyramid schemes, monopolies, and fraud. The investigation prompts AEFS to make superficial changes:

• Rewriting its literature and contracts
• Abandoning its attempt to define itself as a shared enterprise to avoid securities regulations
• Restricting its sales strategy to avoid being classified as a pyramid scheme

However, the fundamental problem remains: AEFS cannot identify a viable market for its product. The company's entire business model rests on the fictional value of Jerusalem artichoke seed at $1.20 a pound, a price far exceeding the actual market value.

Desperate Measures: AEFS's Futile Attempts to Create a Market

As the legal pressure intensifies, AEFS scrambles to find a market for its product:

• Leasing a small alcohol plant: The plant fails to produce any significant amount of alcohol from Jerusalem artichokes.
• Attempting to convert a failed food processing plant: The fibrous nature of Jerusalem artichokes proves incompatible with the plant's dryers.
• Creating a biomass conversion offshoot company: Biomarkets of America, tasked with converting the Jerusalem artichoke into an energy source, also fails to achieve any success.

These desperate attempts to create a market for Jerusalem artichokes ultimately prove futile. The company's final bid to sell seed to Archer Daniels Midlands for a mere five cents a pound, a 96% drop from its claimed value, underscores the complete collapse of the Jerusalem artichoke bubble.

The Aftermath: Bankruptcy and Denial

Unsurprisingly, AEFS declares bankruptcy. Dwyer, in a stunning display of denial, blames the company's failure on "government interference, bad press, employees, and hyper growth." However, former employees offer a more realistic assessment.

• Mark Hughes, an agronomist, criticizes the company as fundamentally flawed and suggests that AEFS officials were either knowingly deceptive or "stupendously stupid" in their claims about the Jerusalem artichoke.
• Pat Durner, tasked with market development, is revealed to lack the necessary expertise in chemical engineering and processing.

The episode ends by highlighting the lack of foresight and expertise within AEFS. Hughes points out that no one questioned the viability of the project and that the company's practices even had negative ecological impacts, spreading plant diseases like sclerantina.

The Anatomy of a Fiasco: Key Takeaways

The episode paints a picture of a company built on a foundation of deception, fueled by religious fervor and the allure of quick riches. AEFS's failure highlights the dangers of:

• Blind faith and charismatic leadership: Hendrickson's charisma and his followers' unwavering belief in the Jerusalem artichoke allowed AEFS to thrive despite clear warning signs.
• Lack of due diligence and expertise: The company's lack of understanding of agricultural practices, market dynamics, and even basic business principles led to a series of disastrous decisions.
• Exploiting religious beliefs for financial gain: AEFS's reliance on religious messaging to attract investors raises ethical concerns about the manipulation of faith for profit.
• The allure of get-rich-quick schemes: The promise of outsized returns blinded investors to the inherent risks and unsustainable nature of AEFS's business model.

The story of AEFS serves as a cautionary tale about the dangers of unchecked ambition, the importance of critical thinking, and the devastating consequences of prioritizing profit over ethical business practices.

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