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New tobacco threat: fraud

More than 200 tobacco farmers and tobacco industry representatives met at a meeting called by the Risk Management Agency on March 16 in Wilson, N.C., to discuss the growing problem of crop insurance fraud in tobacco. To make certain farmers felt able to speak freely, reporters were asked to leave at the beginning of the meeting.

In a Field Notes brief on the Farm Bureau website, North Carolina Farm Bureau Federation President Larry Wooten noted that more than 30 people have been prosecuted in eastern North Carolina for this offense since 2005. Some have received prison terms, and some farmers have been banned from the RMA crop insurance program.

At the meeting, RMA officials pointed out the crop insurance program for tobacco could be threatened if the abuse continues. In fact, the future availability of crop insurance — or the potential loss of it — was a main theme.

“They were very specific in saying that the future availability of crop insurance would depend on the ability to rein in this misuse,” noted Jay Boyette, NCFB commodity director, in a follow-up telephone interview.

Key Points

Crop insurance fraud is growing in North Carolina tobacco.

Tobacco growers could lose crop insurance in future as result.

USDA wants growers to help control the bad behavior.

“The OIG [Office of Inspector General that works through USDA] and U.S. Attorney [for the Eastern District of N.C.] have spent considerable resources investigating crop insurance conspiracies and building criminal cases against offenders,” noted Wooten in his Field Notes. “USDA has been able to monitor farms, build cases, prosecute farmers and have them sentenced for the felony offense of filing false claims, a charge that has a 10-year statute of limitations.”

Speakers at the meeting included Michael Hand, USDA’s Risk Management deputy administrator for compliance; James Hipple, an RMA imaging specialist; and Miles Davis, a special agent with OIG. Southern Bank CEO Greg Morgan and Michael Creech of First Citizens Bank were invited to give a lender’s point of view. Brent Leggett, a Nash County tobacco farmer who is also president of the Tobacco Growers Association of North Carolina, made closing remarks.

Hipple, who works with RMA’s satellite monitoring program, helped make it clear to farmers that if they misuse the system, the government could very well be aware of it. A big part of the program was to explain RMA’s extensive abilities to monitor field activities and make sure normal farming operations are being conducted. “So when a claim is filed by a farmer, they know if it is a legitimate claim,” Boyette said. “They know if there was a loss that is covered by the policy that the farmer is asking to be indemnified.”

Speakers gave a demonstration showing how the government can easily spy on field operations using powerful camera lenses and other technology, sometimes even with satellites. Boyette noted investigators can even recognize faces or read truck license numbers with the technology. They can compare weather claims to recorded weather satellite data.

“They also showed some weather radar equipment that indicated where hailstorms had hit,” Boyette said. “They can look back and see those kinds of events — so you can’t really say your tobacco was hit by hailstorms if it wasn’t.”

Investigators use color analysis and other technology to determine exactly what is planted in a field. One speaker showed satellite photos of marijuana that growers thought had been hidden in the middle of a legitimate crop.

Crop insurance is critical to all tobacco growers who try to qualify for farming loans. The bankers testified to that.

They were out front at the meeting saying that if tobacco farmers weren’t able to manage their risk with crop insurance, they wouldn’t qualify for many of the operating loans the bankers give out. The crop insurance is an important tool. Boyette noted that if crop insurance becomes unavailable in the future, it is going to change the landscape of who is able to farm tobacco.

“We have a tendency to look on this bad behavior as a victimless crime,” Boyette said. “I think going forward, we have to look at the fact that the growers who responsibly use the product [crop insurance] are going to become the victims if we don’t change the behavior that is going on.”

This article published in the May, 2012 edition of CAROLINA-VIRGINIA FARMER.

All rights reserved. Copyright Farm Progress Cos. 2012.