US Wants Crops Fraud Case Expedited

US Attorneys Allege Michigan Farmer Continues So-Called Straw-Farms Scheme

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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U.S. attorneys asked a federal judge to expedite an ongoing crop insurance and benefits fraud case in Michigan. (Photo by Tim-Evanson-cc-by-sa-2.0)

LINCOLN, Neb. (DTN) -- U.S. attorneys asked a federal court in Michigan to expedite the case of a farmer accused of committing federal crop insurance and farm benefits fraud, alleging the producer is attempting to sell assets to his grandson to avoid paying more than $19 million in debts owed to the federal government.

In December 2021, the U.S. filed a complaint alleging Gaylord 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. Lincoln farms in four south-central Michigan counties.

The lawsuit alleges Lincoln financed a network of so-called "straw lessees" to help circumvent USDA benefits limits set on farms from 2010 to 2019.

U.S. attorneys alleged in a court brief filed this month that Lincoln is on track to sell assets to his grandson, 20-year-old Carter Gibbs, by November, although the government contends Lincoln owes it more than $19 million as a result of alleged fraud.

"Once that land is sold, defendants will no longer have a non-exempt interest in the land, and the United States' application for prejudgment remedies against that land will be moot," the U.S. said in a court brief filed in the U.S. District Court for the District of Western Michigan.

"Defendants have created another straw farming operation -- this one purportedly owned by Lincoln's grandson, Carter Gibbs -- to which they are assigning and disposing assets. While they attempt to characterize these dispositions as loans from a grandfather helping his grandson take over the family farm, in reality, Lincoln controls the young grandson's farming operation, and his actions threaten the United States' ability to collect on its claims in this action."

The government said Gibbs has "no experience managing a farm or any other business, and now purportedly operates a substantial farming operation of approximately 8,000 acres."

U.S. attorneys filed a motion to expedite the case and requested the court to grant what are called writs of attachment to a number of Lincoln's properties, to prevent their sale.

FARMER OBJECTIONS

Lincoln's attorneys filed an objection to the motion to expedite, arguing it would interfere with ongoing settlement negotiations. A new settlement conference is scheduled for Sept. 20.

"Defendants have not concealed any proposed sales from plaintiff," the objection said.

"In an effort to amicably resolve the dispute between these parties, defendant has disclosed to plaintiff a copy of the buy/sell agreement referred to in plaintiff's application. Defendant is not hiding anything from plaintiff. In other words, defendants have never attempted to hinder, delay, or defraud the United States."

As part of the objection, Lincoln's attorneys contend the $19.2 million said to be owed to the federal government was an "exorbitant amount" and put the number at around $6.4 million.

Gibbs created a new farming entity called C. Gibbs Farms LLC, that according to the U.S. government, was created to allow him to lease land, equipment and machinery from Lincoln.

"During his deposition, Gibbs had difficulty recalling the names of less than a dozen employees he has supposedly hired," the government said in a court brief.

"Defendants are now selling much of their land, which appears inconsistent with setting up Gibbs to take over the family farm."

The government alleged in the original complaint that Lincoln used so-called straw operators who leased various parts of the farm. They each would claim to be producers enrolling in various crop insurance and other farm 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 crop insurance premiums funded by the federal government and other payments through farm programs "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 contract ceilings, according to the original complaint.

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.

In March 2022, Warsaw, Indiana-based crop insurance company Silveus Insurance Group Inc. CEO James Silveus agreed to a voluntary exclusion from federal programs through March 1, 2023.

The company 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 Lincoln.

Silveus Insurance Group Inc. also agreed to a one-year monitoring period with USDA's Risk Management Agency.

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

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Todd Neeley