Catch of the Week – Sour Grapes: Fruit-Broker Squashed for Role in Defrauding Federal Crop Insurance
The manager of a California fruit broker learned the hard way that it doesn’t pay to assist in defrauding the Federal Crop Insurance Program. The manager, at the behest of a grape farmer who sold crops through the broker, altered the farmer’s records to reflect lower-than-actual sales. The falsified records assisted the farmer to claim crop-losses falsely and receive insurance-reimbursements funded by the government-owned Federal Crop Insurance Corporation (FCIC). The years-long scheme withered on the vine when a USDA audit unearthed it. The fruit-broker manager was criminally charged by the Department of Justice for aiding and abetting the farmer’s crop-insurance fraud. To address the government’s wrath, the manager pleaded guilty to his role in the fraud and agreed to pay $1.25 million in criminal restitution and to resolve civil False Claims Act and FIRREA claims. The charges against the farmer have not yet ripened to resolution.
This is not the first time that farmers and others have been caught defrauding the taxpayer-funded Federal Crop Insurance Program. In October 2020, seventeen tobacco farmers and co-conspirators admitted to falsely claiming their crops were damaged, receiving nearly $900,000 in federally backed crop-insurance payments. The widespread fraud included farmers who didn’t even own the tobacco crops, but who falsely claimed ownership to get a cut of insurance payments from the farmers who did. There, the fraudsters included insurance agents and adjusters who helped to inflate loss amounts and falsify documents. The scheme went up in smoke when, among other things, it was discovered that the “lost” tobacco was sold for cash under fictitious labels at Clay’s Tobacco Warehouse. Some tobacco defendants had to sell farmland and vehicles as part of the settlement with the government.
The Federal Crop Insurance Program
The USDA’s Risk Management Agency administers the Federal Crop Insurance Program through FCIC. FCIC underwrites crop-insurance policies, which private-insurance companies service and sell. The FCIC, using taxpayer dollars, generously funds the Federal Crop Insurance Program: it pays the private insurers’ related administrative and operating costs, and reimburses the insurers for claims payments made for covered crop-losses due to natural events like drought, heat waves, and flooding. The FCIC also subsidizes farmers’ premiums for crop insurance.
Whistleblowers May Be Rewarded for Reporting Crop Insurance Fraud
Wrongfully claiming crop-losses under the Federal Crop Insurance Program, or causing such claims by assisting others to make them, violates the Federal False Claims Act. Fraud on the FCIC also runs afoul of The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA). Both the False Claims Act and FIRREA have whistleblower provisions that encourage people with knowledge of violations to come forward with their information. Under these laws, successful whistleblowers may receive a portion of the recovery from the wrongdoer. Whistleblowers might also receive awards for exposing other types of insurance fraud.
If you have knowledge of crop insurance fraud, through the grapevine or otherwise, please Contact Us.
- Blowing the whistle on crop insurance fraud
- Insurance fraud whistleblowing
- Fraud on the federal Flood Insurance Program
- Fraud on private insurers in California and Illinois
- I think I have a whistleblower case