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The Long Arm of the Law Reaches Crop Insurance

Every once in a while, you see a story that shows how many different kinds of businesses supported by the United States are vulnerable to fraud.

Would you believe Tabaco Farming is the subject of a fraud investigation?

Well, here we go. A story in the Lexington (KY) Herald Leader has the United States Government getting an indictment against a local farmer. Farming is not really small business anymore and the government is demanding $575,000 in cash and 1,300 acres from a former if convicted in a conspiracy to file false crop insurance claims.

The charges not only include the farmer trying to file false crop insurance claims, but also other claims including a willingness to take kickbacks in exchange for filing similar claims on behalf of others.  This is apparently an ongoing investigation with one defendant already pleading guilty in November. Some of the facts are pretty blatant. For example, a farmer apparently claimed he had produced 20,000 pounds of Tobacco or so in 2015. However, the individual sold 62,000 pounds in the names of his two children. By not reporting such sales, the farmer collected an insurance check.

There appears to be some kind of long-running investigation of farmers conducting such activity in Central Kentucky.  It appears to reach back to 2015, and while the local paper is on this case there is not much on the Justice Department website about it, even after indictments were announced.

As with all government-supported insurance programs, Crop insurance mostly does what it is supposed to do and mostly is not abused by claimants.  The public-private partnership involved in the U.S. supporting such crop insurance means that if somebody rips off these programs they could be subject to civil enforcement under the False Claims Act. Here, however, the government is acting to crack down on the behavior of fraudsters criminally. If you look around you do see a history of prosecuting cases of crop insurance fraud by the department of justice. In 2016, two were prosecuted for 1.1 million in overstating damages.

The cases that have hit the press anyway seem to be in Central Kentucky. This cannot be the only location in the U.S. that involves systematic efforts to rip off the Federal Crop Insurance programs aimed to support farmers. It is good to see the government acting to prosecute such fraud.  Honest farmers, who must rely on such insurance, can’t allow others to cheat the system.

However, maybe its time for whistleblowers to pay attention as well and file cases under the False Claims Act. Commodities traded illegally, of course, may also be subject to the CFTC’s whistleblower program. It doesn’t make sense that this part of the country is the only place where agricultural programs supported by the government are being abused.