For years, African-American farmers have claimed that they have been discriminated against by the U.S. Department of Agriculture. Correspondent Betty Ann Bowser reports on the settlement of a class action lawsuit between the USDA and African-American farmers.

BETTY ANN BOWSER: Abraham Carpenter and his family once produced more sweet potatoes and turnip greens than anybody in Arkansas. But several years ago, Carpenter says the local office of the Farm Service Agency, run by the U.S. Department of Agriculture, stopped payment on federal disaster loans, claiming Carpenter obtained the money fraudulently. The agency later admitted it had made a mistake, but by then, Carpenter says, his credit was ruined, and his farm business was in trouble.

ABRAHAM CARPENTER: I wasn't able to even get out there and produce the crops that I could go out and sell and make a decent income. You know, by them cutting my funds off-- and they held them for probably about three years -- you cut off three years of income, you know, and take a half a million dollars, basically out of that person's income, you can't produce. So I had to turn down contracts. I lost some contracts.

BETTY ANN BOWSER: Carpenter says his problems are a result of outright discrimination by the local office of the USDA.

ABRAHAM CARPENTER: I guess it would just have to labeled-- there's no other way for it-- discrimination, you know, outright discrimination. You've got people in the state office, you know, saying that "that nigger should have been satisfied with $100,000, instead of trying to get $500,000," or they might say "we're going to cut that nigger's money off and see how he's going to buy businesses and buy land."

BETTY ANN BOWSER: Carpenter isn't the only farmer complaining. Since the 1960's, black farmers have lost 27 million acres of privately owned farmland, and as acreage shrank, so did the number of black farmers. In 1920, there were nearly one million black farm operators in the United States. Today, there are fewer than 17,000. That means black farmers are going out of business at a rate three times that of white farmers. For years, black farmers have maintained they were routinely discriminated against by the USDA in getting loans and disaster relief. They say the problem was made worse after President Reagan disbanded the USDA's Civil Rights Enforcement Unit in 1981. Two years ago, they went to Washington to protest and filed a class-action lawsuit demanding compensation. In January, Agriculture Secretary Dan Glickman agreed the farmers had been badly treated and announced a preliminary settlement.

DAN GLICKMAN, Agriculture Secretary: We are here to announce an historic agreement for both the USDA and, I believe, for our country. It is an agreement that will close a painful chapter in USDA's history and open a more constructive front in our efforts to see this department emerge as the federal civil rights leader in the 21st century.

BETTY ANN BOWSER: Since that announcement, lawyers have gone from state to state to sign up farmers who feel they've been discriminated against by the USDA. So far, they say over 12,000 farmers have applied.

ALEXANDER PIRES: This is the most organized, largest civil rights case in the history of the country.

BETTY ANN BOWSER: Alexander Pires is the lead attorney in the case. Last week he explained who is eligible for compensation to a group of nearly a thousand farmers, who came from all over the state to a meeting in Pine Bluff, Arkansas.

ALEXANDER PIRES: This lawsuit was intended for all black farmers who have farmed at any time, or tried to farm at any time, since 1981, and who had gone to USDA to try to get a loan of any type, to try to participate in the disaster program, try to restructure a loan, get an operating loan, get a farm ownership loan to restructure their loan, and were discriminated against, and filed a complaint complaining about that.

BETTY ANN BOWSER: Then the lawyers helped farmers with the paperwork.

LAWYER: You need to name a white person that received fair treatment versus your father's treatment, okay?

SECOND LAWYER: If you had received your loan at the same time that the white farmers did, do you believe that you would've been able to have that property still today?

FARMER: Yes.

BETTY ANN BOWSER: Under the settlement, farmers have two choices. With Option One, they get a tax- free $50,000 cash payment and forgiveness of all outstanding USDA loans. This was designed for farmers who have a minimum amount of documentation of discrimination. Secretary Glickman estimates Option One will give each farmer about $200,000. But some farmers, like Henry Valentine, a sixth-generation wheat farmer, think that's not enough.

HENRY VALENTINE: $50,000 is nothing compared to the suffering that farmers go through. To tell me $50,000, we're going to settle with you for $50,000, write your debt off, a debt that they caused me to have in the first place by systematically delaying my loans, then that's just a slap in the face to me.

LAWYER: After that, did you make any more applications?

FARMER: No, I didn't make any more applications.

BETTY ANN BOWSER: Under Option Two, farmers who think they deserve more money and have a higher level of documentation can ask to be compensated for all of their losses that resulted from government discrimination. But regardless of which option farmers choose, they must show they complained about discrimination to the USDA. In some cases, proving that may not be easy, because farmers often didn't keep records, so the lawyers have to help them reconstruct history.

LAWYER: We need to show what the effect of that discrimination was in your pocket.

FARMER: I lost a tremendous amount of property.

LAWYER: Yes, it sure was. In other words, we'll take what your income actually was, and then project what it might have been, had you been allowed to get those loans. Obviously, with a foreclosure, you lose the whole ball of wax.

PROTESTERS: You did it! I didn't!

BETTY ANN BOWSER: But protesters who think the settlement doesn't give enough in damages held a demonstration outside a federal court house in Washington, D.C., today. Inside, a hearing on the fairness of the settlement took place, where 17 complaints were considered. A federal judge is expected to rule on it soon. But most farmers say money is only part of what needs to be done.

FARMER: There should be something done about the people who are operating these agencies. There should be a restructuring of the whole system.

BETTY ANN BOWSER: That's precisely what Secretary Glickman says he's trying to do. But it's not a simple system to change. Even though the USDA funds the Loan and Disaster programs, who gets the money is determined by local county committees, made up of farmers who are elected by their peers. Until recently, these powerful committees were usually all white. But Secretary Glickman says that is changing.

SECRETARY DAN GLICKMAN: We are trying to make sure that the committees who run USDA programs at the state level and at the national level represent a better diversity of people in this country. We have changed some systems of accountability to ensure that, in fact, if people don't do it the right way, they're out of here.

BETTY ANN BOWSER: But Abraham Carpenter says not a single member of his local farm board has been replaced.

ABRAHAM CARPENTER: If a person has committed acts of discrimination, I don't understand how they can sit there and remain unpunished and untouched, you know, and keep on committing acts of discrimination. You know, if that person is not removed from office, that tells me that somebody in the higher authority is supporting discrimination.

BETTY ANN BOWSER: And since the boards are elected locally, Secretary Glickman admits that poses problems.

SECRETARY DAN GLICKMAN: We can do a lot based upon the authorities we have, but most of the employees out to work in these counties are technically not federal employees. This is a unique brand of employment, where they get their paychecks from USDA, but they are technically employees of the County Committee. So it is a little harder for the secretary and the Department of Agriculture from Washington to set standards than it might be if they were all straight federal employees, straight federal civil servants. But I'm not using that as an excuse.

SPOKESMAN: I've heard so much about you --

BETTY ANN BOWSER: Mike Dunaway is in charge of making sure black farmers get fair treatment at the local level in Arkansas. He runs the USDA's Farm Service Agency for the state. Last week he spoke at a Black History Month event sponsored by his department.

MIKE DUNAWAY, Arkansas Farm Service: We, as USDA servants, probably are not going to be able to help everyone that comes to us with everything that they're going to want done. But if we're fair in our dealings, and we treat them in a manner that we would want to be treated, a lot of these problems, folks, that we're experiencing now would be on the downhill side.

BETTY ANN BOWSER: Dunaway says things are improving. For the past two years, his office led the nation in the number of loans USDA gives black farmers. And he pledges employees who discriminate will suffer consequences.

MIKE DUNAWAY: If we have an employee or anyone charged with not treating people with dignity and respect, or charged with discrimination, it's going to be fully investigated. And if it can be proven, it will be appropriately dealt with. We still have a lot of work to do. Sensitivity training is something we definitely need to do. But we have got a good start with the civil rights training that we've done, and with the customer service training that we've done.

BETTY ANN BOWSER: Rice farmer Ephron Lewis agrees that relations with the farm agency have gotten better for both him and his son.

EPHRON LEWIS: Things are better for him and things better for me at the local office. With the new guidelines, I guess, that the Department of Agriculture handed down, our office is 100 percent better than it used to be, even though we may have the same people there. But they are a lot different. They look at things -- they look at you as people, instead of looking you as just a subject.

BETTY ANN BOWSER: The USDA says the settlement should secure a bright future for black farmers.

ABRAHAMS CARPENTER: What about tomorrow night?

BETTY ANN BOWSER: But Abraham Carpenter isn't so sure. He's telling his 12-year-old son Carlos to go to college someday and study anything but farming.