Weeding out Fraud

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While U.S. tobacco production has drastically decreased over the past 30 years, the controversial crop is still big business for many farmers. (Unfortunately, where there’s a cash crop, fraudsters seem to pop up like weeds.) According to an article in The Fayetteville Observer, a North Carolina tobacco farmer and his wife, who tried to make a profit off of the government by falsifying federal crop insurance claims, netted about $1 million before investigators put a halt to their illegal scheme.

The long-running crop insurance fraud and money-laundering scam involved producing crops and selling them under the names of co-conspirators, who then fraudulently claimed that some of the crops were lost due to natural disasters. This lie qualified them to receive insurance payments from two federal programs—the Federal Crop Insurance Corporation and the Farm Service Agency. By spreading the fraudulent claims amongst multiple schemers, the mastermind farmer was able to temporarily hide the fraud from the government.

The smoking gun in this case was a bogus tobacco sales contract that the farmer used as collateral to secure a $450,000 farm operating loan from a South Carolina lending institution. The purpose of the loan was to help him legitimately produce more crops; however, he used the money to fund additional crop production through his co-conspirators, who continued to file fraudulent insurance claims. (You could say that his illegal crop rotation practices did not yield a health bounty, but a bounty on his head instead. As usual, fraud usually comes full circle.)

After jury selection, the mastermind farmer entered a guilty plea stating that he illegally received money from the government by hiding and underreporting crop production and by lying about the amount of acreage declared on federal crop insurance documents. The 48-year-old was sentenced to 11 years in federal prison, followed by three years of supervised release. He is required to forfeit the proceeds of his crimes and must pay more than $2.5 million to multiple federal programs and the lending institution through which he obtained the loan based on false pretenses.

His wife previously pleaded guilty to making false statements to federal investigators. She is awaiting sentencing for her part in the crime and could serve up to five years in prison and incur a fine of up to $250,000.

Crop insurance is intended to help provide farmers with protection against the loss of their crops due to natural disasters or the decline in the prices of agricultural commodities, not provide an additional source of income for shysters. While this farmer will be paying for reaping an illegal harvest by serving time in prison, he will also have plenty of time to reflect upon improving his own personal growth practices.

Source: Today’s ”Fraud of the Day” is based on the article, ”Tabor City farmer given 11-year prison sentence for insurance fraud, money laundering,” published by The Fayetteville Observer, on January 27, 2016.

RALEIGH – A Tabor City-area farmer who orchestrated a long-running crop insurance fraud and money-laundering scheme has been sentenced to serve 11years in federal prison, the U.S. Attorney’s Office for the Eastern District of North Carolina said Wednesday.

Milton Russ Barnhill, 48, was sentenced in U.S. District Court in Raleigh. He was ordered to serve three years of supervised release after serving his prison time, and ordered to make restitution of more than $2.5 million to various federal programs and Horry County State Bank, a lending institution based in Loris, South Carolina.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.