Investigators say Ky. farmers, insurance agents tried to defraud federal crop insurance program

Federal investigators say a conspiracy existed in Kentucky "to defraud thousands and possibly millions of dollars" from the federal crop insurance program, Greg Kocher reports for the Lexington Herald-Leader. "The alleged conspiracy involved Central Kentucky tobacco farmers, crop insurance agents, crop insurance adjustors, tobacco warehouse owners/employees and others" in a scheme to profit from false insurance claims for losses of tobacco.

The investigation began in 2012 when the Risk Management Agency, an arm of the U.S. Department of Agriculture, "received a tip that a Kentucky farmer had been committing crop insurance fraud with the help of an insurance agent and an insurance adjustor," Kocher writes. "The allegation was that the farmer received $68,000 on a corn crop that was not even planted" and that he had 400 acres insured in other farmers’ names.

In 2013, another anonymous complaint alleged that an insurance agent "approached a farmer and offered to 'give them a good insurance claim,'" Kocher writes. "The agent allegedly offered to do an appraisal for a small amount, and then the farmer could 'sell his tobacco for cash or destroy it.' The farmer was to pay the agent 25 percent of the proceeds. The investigation also determined that certain producers consistently under reported their tobacco production in order to cause an insurable loss payment. There was also evidence that certain producers funneled money through different accounts to conceal their source and nature."

USDA "pays private insurers to sell and manage policies, but taxpayers are on the hook for most of the losses," Kocher writes. "USDA requires tobacco growers to take out crop insurance ahead of the growing season, but payment on those policies is not due until after the harvest. If the crop is damaged by bad weather, the farmer is paid the difference between the value of his diminished harvest and the amount of the policy." (Read more)