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ND potato farming Johnson brothers sentenced to prison for crop insurance fraud

March 11, 2015 by  
Filed under Blog

FARGO – Potato farming brothers Aaron Johnson of Northwood and Derek Johnson of Vancouver, B.C., will spend time in federal prison in the Federal Prison Camp in Duluth, Minn., and are jointly responsible for restitution of nearly $1 million because of crop insurance fraud.

In a rare crop insurance fraud conviction, the Johnsons were found guilty on Dec. 11 and were sentenced on March 9.

Aaron, 50, was sentenced to four years in prison and five years of supervised release and will report to prison on April 13. Derek, in his late 40s, will serve 18 months in prison and five years of supervised probation, perhaps in a halfway house, and will submit to U.S. Marshals on March 10.

The two have 14 days to appeal the sentence.

The conviction was based on crop insurance fraud from 2002 to 2007, but U.S. District Judge Ralph R. Erickson based the money losses sentence solely on the 2006 crop season. That’s a year in which investigators from the U.S. Department of Agriculture’s Office of Inspector General intensified their case and found the Johnsons had applied heat, frozen potatoes and Rid-X, a sewage system enzyme treatment, to their potatoes to make them rot and ensure crop insurance payments.

Jointly liable

Erickson confirmed that federal officials can start to sell any farm machinery or farmland owned by Aaron or Derek Johnson to satisfy the restitution. The judge specifically said neither of the brothers is less liable for the restitution.

New details emerged in Monday’s sentencing hearing.

Mark Price, a USDA Risk Management Agency investigator, said Aaron planted only a third of the minimum certified potato seed recommended for irrigated Yukon Gold potatoes, for which he received crop insurance benefits. Derek purchased and planted half the minimum recommended red potato seed on acres for which he received crop insurance payments.

Price said there have only been six crop insurance convictions nationally since 2012, and only one in 2014.

Erickson said the Johnsons’ actions harmed taxpayers, but also other farmers because their poor results would count in county averages for crop insurance. He said their family responsibilities, which both cited as reasons for leniency, could not be counted.

Both defendants made statements in their sentencing.

Aaron said he worried about his family.

Erickson said Aaron has a smart wife and two strong sons, and that the law doesn’t allow for simple sympathy. Erickson noted that the Johnsons were guilty of a “white collar” crime, concocted solely for greed.

He said the fraud is “economic,” and was “cold, calculating in the light of day.”

In his statement, Derek became emotional, and said he’d “lost everything” because he could not return to Canada, where his wife and her children live, and where he started a construction business in the past seven years.

Bulk to the RMA

The bulk of the $977,776 in restitution between the two brothers goes to the Risk Management Agency and $159,400 goes to the Farm Service Agency. The RMA restitution includes all indemnity payments, the amount of government subsidy for premiums, and the amount paid in administrative and operating costs to crop insurance companies.

Prosecutor Nick Chase acknowledged that Aaron was the “leader” in the scam, but maintained Derek was fully culpable because he directed activities of Leo Borgen, a farm laborer who blew the whistle on the fraud and was a star witness despite being in jail for an unrelated sexual assault conviction.

Some 20 community members wrote letters to the court, asking for leniency for Aaron, based on his community service after a 2007 tornado in Northwood and other charitable work. Derek had 17 letters on file for character reference.

Chase noted that none of the character letters of support came from potato farmers.

“They’re at home, waiting for justice,” Chase said.

Derek’s lawyer, Ben Thomas, said in 26 years in law he never had “as much doubt about the guilt of a client.”

In his statement before Erickson, Derek noted he’d “lost everything,” because of the conviction alone, because he can’t go back to Canada to live and because his wife of seven years has five years before acquiring state pension benefits.

Paul Feeney, a press agent for USDA’s OIG in Washington, D.C., wasn’t immediately available for comment.

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