Michigan Farm Raided by IRS Sues Feds

LINCOLN, Neb. (DTN) -- A Michigan farm under investigation for alleged crop insurance fraud has sued a crop insurance company, the Federal Crop Insurance Corporation and the USDA, alleging breach of contract among other things in connection with unpaid claims filed by the family for the 2019 growing season.

On June 9, 2021, the IRS executed a search warrant at Zeeland, Michigan-based Boersen Farms in connection with an investigation of the troubled farm. Boersen Farms is owned by Dennis Boersen. Two limited liability corporations owned by the farm are operated by Boersen's wife, Stacy, and son, Nicholas. Those LLCs are called New Heights Farm I and New Heights Farm II.

This past summer, Stacy and Nicholas Boersen filed the lawsuit against Great American Insurance Company, the FCIC and USDA, after the entities delayed payment on 2019 crop insurance claims totaling at least $2.3 million, according to a disclosure document filed by the Boersens in the U.S. District Court for the District of Western Michigan last month.

According to a memorandum in support of a motion to dismiss filed by the defendants on Sept. 28, 2023, payment on the claims was withheld because of a pending crop insurance fraud investigation into the two Boersen entities.

"During Great American's adjustment of these claims, FCIC opened a fraud investigation into NHF-I and NHF-II related to their CCIP and claims," the defendants said in the court document.

"In August 2020, Great American notified NHF-I and NHF-II that it was deferring further adjustment of their 2019 loss claims until RMA completed its fraud investigation."

Boersen attorney Ron VanderVeen told DTN the crop insurance fraud investigation is unwarranted.

"The short version is that the FCIC and RMA started an investigation of New Heights Farm I and New Heights Farm II in March 2020," he said.

"We believe it is based on inaccurate information provided to it. New Heights Farm I and New Heights Farm II assert that they have done nothing wrong, have followed the instructions of the Great American Insurance Co.'s agent and the Great American Insurance Co.'s adjusters. After more than three and a half years of investigating the facts from 2019 and early 2020, the FCIC and RMA remain silent, will not discuss the investigation and will not end the investigation. The result is the client has been denied prompt payment of their 2019 crop insurance loss."

2019 GROWING SEASON

According to the Boersens' complaint, Stacy Boersen leased about 9,000 acres for the 2019 crop year.

The lawsuit alleges a claims adjuster for the insurance company "failed to properly measure the corn in the storage bins and submitted falsified storage bin summary records" to the company's office.

"Despite spending more than three years purportedly investigating the background of the claim, GAIC (insurance company), FCIC, USDA and RMA (Risk Management Agency) have failed to find facts upon which they would have a valid basis to deny NHF-I's claim," the complaint said.

The second Boersen farm entity operated by Nicholas Boersen, leased about 8,600 acres for the 2019 crop year, the lawsuit said.

The complaint levels the same allegations against the insurance company as it relates to the second farming entity.

"The adjuster failed to properly measure the corn in the storage bins and submitted falsified storage bin summary records to GAIC's office, over-reporting the volume of corn in storage," according to the lawsuit.

BREACH OF CONTRACT

In leveling breach-of-contract allegations in the lawsuit, the Boersens claim a number of damages.

These include "loss of goodwill" with their creditors and landlords, "loss of ability to lease acreage for farming," "inability to secure favorable financing" and "damage to standing and reputation in the community."

In another count, the lawsuit accuses the defendants of "intentional infliction of emotional distress" to Stacy and Nicholas Boersen.

"Upon information and belief, FCIC, USDA and its RMA intentionally and deliberately misinformed plaintiff's business affiliates that plaintiff engaged in criminal behavior," the complaint said.

They said the defendants "refuse to end the investigation and adjust, determine and pay" the claims "under the guise that they are perpetually investigating" the two farming entities.

Several other motions have been filed in the case, including motions to dismiss the lawsuit. The case is scheduled for trial on Jan. 6, 2025, according to a court order.

OTHER LAWSUITS

Boersen Farms has for years been sued by companies that provided products and services to the farm that once operated about 83,000 acres. Those lawsuits were filed in an attempt to force Boersen Farms to pay money owed to the companies.

CHS Capital Inc. sued Boersen Farms in 2017 for defaulting on a $145.3 million loan.

The CHS lawsuit leveled several allegations against Boersen Farms, including that it "fraudulently and intentionally misrepresented to CHS Capital the quantity of harvested 20l6 grain available for sale, which quantity and resulting expected sale proceeds were included in the budget."

In October 2017, LT Capital LLC agreed to take on the CHS debt and asked for a dismissal of the CHS court action against the farm.

The farm also was sued by equipment companies and others.

In November 2017, the U.S. District Court for the District of Utah issued a $16.2 million judgment in favor of equipment company TFG-Michigan. TFG filed a lawsuit claiming it has not been paid for more than 120 center pivots leased by Boersen Farms.

In U.S. District Court for the District of Kansas, Boersen Farms was sued for breach of contract related to its pursuit of finding someone to acquire the CHS debt.

Read more on DTN:

"IRS Raids Boersen Farms in Michigan," https://www.dtnpf.com/….

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

Follow him on X, formerly known as Twitter, @DTNeeley

(c) Copyright 2023 DTN, LLC. All rights reserved.