Farmers, business owner admit guilt in ‘pervasive and severe’ crop fraud scheme in KY
A business owner has admitted helping facilitate a widespread crop insurance fraud scheme in Central Kentucky.
Roger Wilson, 88, former operator of Clay’s Tobacco Warehouse in Mount Sterling, pleaded guilty Monday in federal court in Lexington to a charge of conspiring to commit insurance fraud.
Five farmers also pleaded guilty in the case in recent days, joining more than a dozen people convicted earlier.
The investigation has shown “pervasive and severe” abuse of the federal crop-insurance program, prosecutors said in one court document.
Tobacco growers have admitted filing false claims for damage to tobacco from poor weather, in some cases on crops they didn’t actually plant, and several insurance agents and adjusters have pleaded guilty to helping in the fraud, which has totaled millions of dollars between all the cases.
Wilson admitted that when he still owned the Clay’s Tobacco Warehouse between September 2013 and May 2018, he arranged for farmers to buy poor-quality tobacco that they could show to tobacco graders as part of filing sham claims for insurance payouts.
Wilson furthered the fraud by providing dozens of tobacco growers with fake sales receipts, putting tobacco sales under false names or in the names of growers’ family members or friends, and helping farmers get false grades on the quality of their tobacco, Assistant U.S. Attorney Kathryn M. Anderson said in one court document.
He also provided a means for tobacco growers to launder money they got from false claims, Anderson said.
Prosecutors have agreed to recommend a two-year sentence for Wilson.
He also agreed to forfeit more than $59,000 from the accounts of two businesses he owns and pay a judgment of $207,030, representing what he got from the fraud, according to his plea agreement.
The others who pleaded guilty in the investigation recently were Morgan Culbertson, Robert L. Livingood, John D. Watkins, R. Chad Price and Jesse Smith.
Culbertson, 33, who grew tobacco in Montgomery, Clark and Bath counties, admitted he used the names of his mother, brother and grandfather to take out insurance policies and file false claims, under-reporting how much tobacco he grew.
For the 2015 crop year, for instance, Culbertson told the insurance company he grew 34,833 pounds of burley tobacco, but sold an additional 131,916 pounds to R.J. Reynolds Tobacco, according to his plea agreement.
Michael McNew, who worked as an adjuster and insurance agent, helped him with the fraud and received kickbacks, Culbertson said.
Culbertson faces up to five years in prison. He also agreed to forfeit more than $950,000 for losses to the government and a private insurance company.
McNew pleaded guilty earlier.
Livingood, 64, who owned and rented farm land in Bourbon, Fleming, Harrison, and Nicholas counties and grew tobacco, corn and hay, pleaded guilty to conspiring to commit crop insurance fraud.
Livingood acknowledged he used false documentation from Clay’s Tobacco Warehouse in an insurance claim, and also that he got insurance in his son’s name.
In at least one year, he also provided muddy, low-quality tobacco for other farmers to use in false claims, according to his plea agreement.
The document said Livingood provided the tobacco to someone identified only by the initials R.W. — presumably Wilson, at Clay’s Tobacco Warehouse.
Livingood’s misrepresentations caused a loss of $313,652 to the U.S. Department of Agriculture, which underwrites crop insurance policies.
Watkins, 49, who farmed in Bath, Fleming and Nicholas counties, pleaded guilty Monday to one charge of conspiring to commit insurance fraud and one count of fraud.
Watkins, who was charged with his brother, Kevin Watkins, admitted not reporting his total tobacco production.
John D. Watkins faces up to 30 years in prison and a fine of up to $1 million.
Smith, 56, pleaded guilty to aiding and abetting crop insurance fraud and faces up to five years in prison.
Smith claimed he was the producer of tobacco in Bath, Bourbon, Fleming, Montgomery and Nicholas counties, though the real owner was Earl Lee Planck Jr., according to Smith’s plea agreement.
Smith helped file false claims on the crops. Prosecutors argue his misrepresentations influenced the government to pay claims totaling $945,970, though Smith argues the amount was lower. That issue will be resolved later.
Price, 39, who was charged with Smith and Planck, pleaded guilty to conspiracy and tax evasion.
Price took out insurance on tobacco and corn crops in another person’s name. That allowed him to spread out claimed losses to avoid scrutiny and to get more favorable terms because the other person was listed as a new producer, the plea agreement said. The agreement did not list the other person’s name.
On the tax-evasion charge, Price acknowledged not reporting $351,004 in income for 2013.
Planck, of Nicholas County, has pleaded not guilty. The federal government has indicated that if he is convicted, it wants to take more than 1,000 acres of land and $575,000 from him.
U.S. District Judge Karen K. Caldwell has scheduled several people convicted in the case to be sentenced in August.
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