Managing the Risk of Fraud

34944208 - insurance claim form and assorted money

Farmers buy crop insurance to help manage the multitude of risks involved in crop production. Weather and pests are hard to control, so farmers buy an insurance policy to reduce the risk of damage to approved commodities and the potential revenue loss. An article posted on tells about a North Carolina tobacco farmer who used his crop insurance policy to illegally double his profits.

The story states that the tobacco farmer sold his crop for cash to a tobacco warehouseman, who later resold it to other parties for a profit. (I guess the farmer figured the cash transaction would not be traceable.) At the same time, the farmer submitted a false crop insurance claim. Consequently, the farmer was compensated twice – once through the cash sale to the tobacco warehouseman and again after the fake crop insurance claim was approved.

The 74-year-old farmer was convicted of federal crop insurance fraud and was sentenced to six months in prison to be followed by three years of supervised release. He was ordered to pay $233,559 to the U.S. Department of Agriculture (USDA) Risk Management Agency and $64,856 to the USDA Farm Service Agency. He must also pay an additional $10,000 fine. (Perhaps he should have settled for the cash proceeds in the first place. It would have been a lot less costly.)

Because farmers assume huge risks when they plant their crops, the federal crop insurance program is supposed to serve as a safety net when disaster strikes, not a second source of income. It looks like this man’s scheme to take advantage of other farmers who deserved to be compensated for their failed crops backfired. In the end, the farmer got smoked by the government and will have to pay for his greed.


Source: Today’s ”Fraud of the Day” is based on an article titled, ”Nash Farmer, 74, Imprisoned for Crop Insurance Fraud,” written by Angie Basiouny and posted on on April 9, 2015.

SPRING HOPE, N.C. — A 74-year-old Nash County tobacco farmer will spend six months in prison after being convicted of federal crop insurance fraud, U.S. Attorney Thomas G. Walker announced Thursday.

Clay Taylor Strickland, of Spring Hope, was sentenced Monday and ordered to pay nearly $300,000 in restitution to two federal agencies, along with a $10,000 fine. He will face three years of supervised release following his prison term.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.