Settlement in Crop Insurance Fraud Case

This article was originally posted at 3:12 p.m. CST on Thursday, March 10. It was updated at 8:41 a.m. CDT on Monday, March 14, to correct information regarding Silveus Insurance Group Inc.'s settlement.

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LINCOLN, Neb. (DTN) -- A Warsaw, Indiana-based crop insurance company has reached a settlement with the U.S. attorney's office in western Michigan, agreeing to pay $500,000 to resolve allegations the company violated federal law by submitting fraudulent crop insurance claims for a Michigan farmer now facing charges.

Silveus Insurance Group Inc. agreed to a one-year monitoring period with USDA's Risk Management Agency in connection with a crop insurance fraud case filed against Gaylord Lincoln. Lincoln farms in four south-central Michigan counties.

James Silveus, the company's CEO, agreed to a voluntary exclusion from federal programs through March 1, 2023, according to a news release from the U.S. attorney's office.

Currently, the case against Lincoln is pending in the U.S. District Court for the District of Western Michigan, where the U.S. attorney's office filed a complaint.

The U.S. contends Silveus, through Silveus Insurance Group, served as the crop insurance agent for Lincoln, who farmed crops in Calhoun, Eaton, Ingham and Jackson counties in Michigan.

In December 2021, the U.S. filed a complaint alleging Lincoln violated the False Claims Act by maintaining a "scheme to fraudulently obtain more federal farm benefit program payments than he was entitled to receive," according to the U.S. attorney's office.

The U.S. attorney alleged Silveus and Silveus Insurance Group, acting at the direction of Lincoln, "obtained federal crop insurance policies for these straw farming operators, and that Mr. Silveus and Silveus Insurance Group caused the submission of false claims for the straw farming operators who had no insurable interest in the insured crops under their names.

"As a result of these false claims, the federal government, through the Federal Crop Insurance Corporation, paid subsidy premiums and indemnities on these false policies, as well as administrative costs that were paid to Mr. Silveus and Silveus Insurance Group," the news release said.

THE LAWSUIT

The U.S. attorney's office alleges in the lawsuit that Lincoln financed a network of so-called "straw lessees" to help circumvent USDA benefits limits set on farms from 2010 to 2019.

Each of the lessees, according to the complaint, would claim to be a producer enrolling in various crop benefits programs.

"To do so, Lincoln parsed his substantial farmland holdings to a group of straw operators who, at Lincoln's direction, knowingly submitted false and fraudulent documents to enroll in USDA programs," the lawsuit alleges.

"By falsely claiming Lincoln's crops as their own, these straw lessees fraudulently obtained USDA benefit payments that they funneled to Lincoln for his personal benefit. Lincoln also directed his network of straw farming operators to falsify documents and fraudulently obtain crop insurance policies that were partially subsidized by the federal government."

The complaint said Lincoln's alleged scheme allowed him to obtain insurance premiums funded by the federal government and crop insurance indemnity payments "to which he was not entitled."

"Defendant Gaylord Lincoln took advantage of the FSA's benefit programs, including the DCP, ARC, and PLC programs, as the producer on these farms," the complaint said. "But because his farming operation was so large, defendant Gaylord Lincoln hit the $40,000 maximum of FSA's DCP program benefit payments as early as 2010."

Lincoln allegedly created a way to get around crop insurance contract ceilings.

"He placed certain farmland under the names of his family members and employees," the complaint alleges. "That allowed these family members and employees to fraudulently enroll with FSA in the DCP, ARC, and PLC programs as producers to receive payments."

The alleged straw operators took out land leases on farmland, including some new and previously leased or owned by Lincoln. The complaint said Lincoln provided money for the leases.

"Then, at the direction of defendant Gaylord Lincoln, the straw farming operators submitted farm operation plans to FSA for the straw farming operations by completing and signing forms," the government alleges.

"In these forms, the straw farming operators fraudulently certified to FSA that they were 'producers' (i.e., that they were entitled to share in any crop produced and shared in the risk of producing that crop). This was not true. In most instances, the crops were planted, cultivated and harvested by defendants who alone profited from the crop production and bore all the risk of producing these crops.

"The straw farming operators then returned their ill-gotten gains to defendants. Sometimes the money was paid directly into 'joint' bank accounts to which defendant Gaylord Lincoln was a signatory with the straw farming operator and which defendants ultimately controlled."

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Correction: DTN erroneously reported that Silveus Insurance Group Inc. agreed to a voluntary exclusion from federal programs through March 1, 2023. Only the company's CEO, James Silveus, has agreed to the voluntary exclusion. We apologize for the error.

Todd Neeley can be reached at todd.neeley@dtn.com

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