Two North Carolina tomato farmers were recently sentenced in a federal court to 76 months and 66 months imprisonment, respectively, for throwing ice cubes at their tomato crops--and for defrauding the Federal Crop Insurance Corporation and several private insurers of more than $9 million.
But it doesn't necessarily represent a U.S. Department of Agriculture Risk Management Agency that's incapable of policing the system, or an FCIC program infested with fraud, say experts. The Warren case is an exception to a relatively honest system.
Between 1997 and 2001, Robert and Viki Warren submitted exaggerated crop information to insurers. They cooked up planting dates, harvesting dates and invoices from their tomato farms in Buncombe and Henderson counties in North Carolina.
According to their grand jury indictment from Oct. 8, 2003, the Warrens and their employees went so far as to maul tomato plants and bombard them with ice cubes. They photographed the resulting damage and used the pictures, along with forged third-party documents, as evidence of weather damage when submitting claims.
Also named in the indictment are George Kiser, an insurance agent, and Thomas Jeffrey Marsh, a claims adjuster, who have both pleaded guilty and await sentencing. Such collusion is not uncommon in crop-fraud cases, says Michael Benishek, director of risk management and insurance at PTG Management Co., one of the nation's largest tomato growers.
But the risk manager has never experienced fraud first-hand.
"The closest that I ever came to crop insurance fraud," he says, "is when I was approached by a crop insurance agent, who made his sales pitch and then stated that I'd get my premium back every year 'because my son is the adjuster.' I just don't do business that way."
According to David Graves, manager of the American Association of Crop Insurers, most farmers and insurance reps don't do business that way either.
"It's not a significant number of people," Graves says. "There is some abuse of the program, but nothing near rampant."
Graves points for proof to the work of Dr. Bert Little, associate vice president of the Center for Agribusiness Excellence at Tarleton State University, in Tarleton Station, Texas.
Supported by the RMA, Little has applied data warehousing and mining to calculate the prevalence of fraud in crop insurance. Little analyzed four significant information sources?crop insurance data from 1991 to 2005, weather data for the past 30 years, soil survey maps and satellite imagery from the public land survey system.
Little unveiled in October the fruit of five years of work--a rate of fraud activity as low as 0.18 percent. That translates roughly to 2,000 suspicious producers--"heavy
hitters," he calls them, with claims over $10,000--out of 1.3 million policies. The professor of computer science and mathematics says these figures disprove that crop insurance is rife with abuse and corruption.
"After very thorough analysis," Little says, "we're convinced it's not rife with that."
Roderick Rejesus, professor of risk management and crop insurance at Texas Tech University, agrees.
"The perception of most producers, most industry experts and academics is that it's only a few bad apples," he says.
The rate is likely to stay this way, or even diminish further, he adds, thanks to data mining and other new surveillance methods.Before, monitoring efforts consisted only of random farm checks and a hotline for one farmer to report another.
"Data mining is more of a tool to narrow down which people are investigated," Rejesus says. The RMA also keeps track of "frequent filers," he adds, insureds who claim indemnity above the average.
December 1, 2005
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