Trial about potato contract starts today

Kristin M. Kraemer, Tri-City HeraldApril 14, 2013 

A Kennewick insurance agent and four Mid-Columbia potato growers and packers go to trial todayon charges they defrauded the federal government by conspiring to collect more than $9.6 million in insurance payments.

The case, which deals with alleged false claims of revenue loss, will go before a jury more than two years after it was filed in Eastern Washington's U.S. District Court.

Judge Ed Shea will preside over the trial in the Richland federal courthouse.

The conspirators, as they're referred to in the indictment, are: Lynn J. Olsen II, Blake T. Bennett and Jeffrey J. Gordon, all of Pasco; Mark G. Peterson of Richland; and Fred F. Ackerman.

The indictment also names companies that the farmers either owned or had ties to -- Olsen Ag, Tri-Cities Produce and Poco.

They all have entered innocent pleas to the allegations.

An amended indictment was filed in February after the government changed the way in which it intends to prove the case.

Jury selection could last nearly a week, with the trial expected to go on for at least five weeks.

Federal prosecutors recently filed a witness list with 58 names or businesses. Each defendant also can present their own evidence with witnesses.

According to the court documents, Olsen, Peterson and Gordon grew Norkotah Russet Potatoes -- a variety not normally used for processing -- and entered into contracts to sell the potatoes to Peterson and Bennett for processing.

That means the potatoes are turned into products such as French fries and potato chips.

Peterson acted sometimes as a farmer and sometimes as a buyer, the documents said.

The Norkotah Russets almost exclusively are sold as fresh pack potatoes, which means they ultimately end up in the hands of consumers in their raw, unprocessed form. They're often referred to as baking potatoes, the documents said.

But the contracts required the potatoes to have a starch content unlikely for that variety and to be at least 80 percent bruise-free.

When the potatoes failed to meet the "exceedingly high" requirements, the contracts allegedly required the farmers to sell their potatoes to the buyers at a fraction of the actual market value.

This went on for at least seven years because similar processing contracts were utilized year after year, despite not being economically viable, the court documents state.

The farmers allegedly overvalued their expected potato crop revenue each year knowing that they would get a much lower price for the crop under the contracts. They're also accused of falsely claiming the potatoes had suffered heat damage, so they didn't meet the requirements of the contracts.

It created the appearance of large losses to the farmers, and allowed them to apply to receive insurance indemnity payments since they were forced to sell at bargain-basement prices, documents said.

Ackerman is accused of developing those contracts with Olsen and others, and helping the farmers submit those false claims, documents said.

The victims are named as: the Federal Crop Insurance Corporation, or FCIC, an agency under the U.S. Department of Agriculture; the department's Risk Management Agency; American Growers Insurance; and Farmers Crop Insurance Alliance, which acquired North Central Crop Insurance.

"The United States, through the FCIC, ultimately suffered the full amount of the loss caused by these insurance indemnity payments in an amount not less than $9,570,345," the indictment states.

Federal prosecutors say the conspirators shared the proceeds among themselves, and plan to show evidence of bank transfers where the recipient had no connection to that insurance claim.

Olsen and Peterson both are charged with conspiracy, mail fraud and six counts of false application.

Bennett and Ackerman are charged with conspiracy, mail fraud and nine counts of false application.

Gordon's charges are for one count each of conspiracy and false application.

Olsen Ag is named in one charge of conspiracy and three counts of false application.

Tri-Cities Produce has conspiracy, mail fraud and nine counts of false application.

And Poco is charged with conspiracy, mail fraud and five counts of false application.

The penalties for the five individuals range from up to five years to 30 years in federal prison, along with fines.

The businesses would face a financial penalty, which goes up to $1 million for the false application charge.

-- Kristin M. Kraemer: 582-1531; kkraemer@tricityherald.com; Twitter: @KristinMKraemer

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