A Kentucky farmer and his sister-in-law have pleaded guilty to a multi-year scheme to defraud the Federal Crop Insurance Corp. and companies the FCIC reinsures. ARMTech Insurance Services, now part of AgriSompo North America, paid out on some of the policies.
James McDonald and Cheryl Lynn Noble entered pleas in May and will face sentencing Sept. 7. The two may have agreed to testify against Noble’s brother, Randall Taulbee, also a farmer in Kentucky. Taulbee has pleaded not guilty to the $700,000 fraud scheme and his trial in federal court in Lexington is set to begin June 26, according to court documents.
From 2013 to 2017, McDonald “worked with Taulbee, and at times an insurance agent, to falsify crop insurance policies in his and Taulbee’s names …” reads McDonald’s plea agreement.
The insurance agent was not named in court papers.
The fraud, part of a widespread tobacco-crop scheme in central Kentucky in recent years, worked like this, according to prosecutors and the indictment: Taulbee and McDonald owned and rented farmland and obtained crop insurance on tobacco and corn, starting in 2009. In 2013, Taulbee certified that he was a new producer, which allowed greater insurance benefits. Over the next two years, he overreported the acreage he had insured, and submitted false records on supplies.
In 2014 to 2016, McDonald overreported the tobacco acreage on his farmland, falsely claimed hail damage, and submitted false records on purchased farm supplies, the indictment reads.
Corn was also sold under James McDonald’ son’s name, but the proceeds were actually split between the two farmers, prosecutors alleged. The production was not reported, resulting in a larger indemnity payout from the crop insurance. The men also split expenses and profits, but on insurance policies each claimed 100% ownership of the crops, the indictment notes.
In 2014, ARMTech Insurance paid McDonald more than $129,000 and paid Taulbee more than $76,000. In 2015 and 2016, Noble obtained crop insurance on tobacco in Bourbon County and filed a hail-loss claim. But she did not own the crop, and gave the $179,500 in insurance proceeds to Taulbee and McDonald, prosecutors said.
When a U.S. Department of Agriculture inspector questioned Noble, she claimed she was not related to her brother and that she, not the men, farmed the tobacco crop.
McDonald and Noble could face more than five years in prison. McDonald could also be required to pay $458,000 in restitution to the U.S. Department of Agriculture and $260,700 to AgriSompo North America, his plea agreement notes. Noble argues in her agreement that she earned just over $3,000 from the scheme and should not have to repay more than that, although prosecutors have said the figure should be more than $260,000.
McDonald also has agreed to refrain from participating in any crop insurance or benefits programs for at least five years.
The guilty pleas are the latest development in several prosecutions of what authorities have said was extensive crop insurance fraud in central parts of Kentucky, according to local news reports. Some two dozen farmers and others associated with a tobacco operation have been convicted or pleaded guilty.
An independent adjuster was sentenced in late 2021 to three years in prison. A Fleming County insurance agent pleaded guilty in 2019 to crop insurance fraud.
Topics Fraud Agribusiness Kentucky
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