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$100 Million Crop Insurance Fraud Ring Busted

$100 Million Crop Insurance Fraud Ring Busted

A scheme between dozens of insurance agents, claims adjusters, brokers, and farmers in North Carolina were busted by federal agents for attempting to scheme $100 million from the government-backed program that insures crops.   Forty one defendants have pleaded guilty or reached a plea agreement.  The false insurance claims were filed on tobacco, soybeans, wheat, and corn for crops that were never damaged.  The farmers sold the crops under assumed names then claimed the crops were damaged.

 A confidential informant was used to trap a key participant of this group.  This person then agreed to implicate others.  Assistant US Attorney Banumathi Rangarajan said, “These defendants make it harder on the honest farmer.  The more they lie and steal the more premiums and costs go up for the farmers who play by the rules. 

The federal government created the crop insurance program in 1930 to keep farmers from going bankrupt as a result of a bad growing season.  Fifteen private insurers are paid by the US Department of Agriculture to sell and manage the policies.  However, taxpayers pay for most of the losses.  In 2012, payouts reached $15.6 billion and this figure continues to grow with each new claim filed.  Description: http://ads.wellspublishing.com/www/delivery/lg.php?bannerid=3453&campaignid=2014&zoneid=79&loc=1&referer=http://www.insurancejournal.com/news/southeast/2013/03/13/284534.htm&cb=c08385396a

According to Bruce Babcock, an agricultural economist at Iowa State University, a small percentage of that total is due to fraudulent claims.  He said, “There’s always fraud in the crop insurance system, but I’ve seen nothing to suggest it is pervasive.  Eighty percent of the program costs are supported by the federal government.  Some people see defrauding taxpayers like cheating on their income taxes.”

According to prosecutors, this group claimed millions for years without being detected.  Then in 2005 USDA auditors started using computer software to track insurance claims data across the country.  One of the names identified was a Wilson crop insurance agent whose clients consistently had bad luck, Robert Carl Stokes. 

Authorities were led to dozens of others involved in similar frauds throughout eastern North Carolina when prosecuting Stokes and his co-conspirators.  This included tobacco brokers and adjusters who were working with multiple insurance agents and their farmer clients.  According to the USDA’s Office of Inspector General, this is the largest crop insurance fraud scheme compared to similar investigations across the US. 

Karen Citizen-Wilcox, special agent in charge of the Southeast Region said, “Our agents have been involved in a remarkable number of successful crop insurance investigations in this district, with substantial monetary penalties and restitution ordered by the court.”

Farmers are required to take out crop insurance ahead of the growing season.  However, they aren’t required to pay the premiums until after the harvest.  The farmer is paid the difference between the value of his diminished harvest and the premium due on the policy, if the crop is damaged by bad weather or leaf-eating insects. 

Source: www.insurancejournal.com

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