Crop Insurance Update: North Carolina Farmer Sentenced to 11 Years for Charges Including Attempt to Defraud Crop Insurance

Written by M. Sean High – Staff Attorney

On January 27, 2016, the United States Department of Justice United States Attorney’s Office for the Eastern District of North Carolina (USAO-EDNC) issued a press release announcing that North Carolina farmer Milton Russ Barnhill had been sentenced to 11 years in a federal prison on charges for: 1) “Conspiracy to Make False Statement in Connection with Federal Crop Insurance;” 2) “Making False Statements in Connection with Federal Crop Insurance;” and 3) “Mail Fraud and Money Laundering.”

According to USAO-EDNC, Barnhill was charged with conspiring to defraud the Federal Crop Insurance Corporation (and the Farm Service Agency) by “produc[ing] crops which he sold in the names of others.” USAO-EDNC stated that Barnhill and his coconspirators “then reported on insurance claims that the crops were lost due to natural disasters.” Additionally, USAO-EDNC asserted that Barnhill “also placed crops and insurance policies into the names of conspirators to boost the amount of money he could collect on the insurance claims.”

USAO-EDNC stated that Barnhill was charged with making (and assisting others to make) false federal crop insurance claims.  According to USAO-EDNC, Barnhill had “received more than $1 Million into his bank account that was derived from hidden crop production, underreported crop production, and overstated crop acreages.”

Additionally, the USAO-EDNC press release stated that: 1) Barnhill was charged with mail fraud after using a fictitious tobacco sales contract as collateral to secure a farm operating loan; and 2) Barnhill was charged with money laundering after a) proceeds from his fraudulent actions were placed in his bank account, and b) those funds were then used to file false crop insurance claims. 

Importantly, the USAO-EDNC press release noted that “Barnhill previously went to trial on these charges on August 4, 2015, but pled guilty following jury selection.”

Seafood Processor Sentenced for Fraud

Written by Tyler R. Etter

On August 11, 2015, Alphin Brothers Inc., a North Carolina seafood processor, was sentenced in federal court for falsely labeling imported shrimp. The sentencing follows a plea agreement made on February 10, 2015, where Alphin Brothers plead guilty to one count of making or submitting false records, a violation of the Lacey Act.

According to court documents, the company directed employees and another processing facility to label approximately 25,000 pounds of farm-raised, imported shrimp as a wild-caught “product of the United States.” The mislabeling is against the Country of Origin Labeling (COOL) regulations of the United States. The Lacey Act makes it illegal to “make or submit any false record, account, or label for...any fish or wildlife...intended to be imported, transported, purchased or received from any foreign country, or transported in interstate or foreign commerce.”

The company will have to pay a criminal fine of $100,000, as well as forfeit 21,450 pounds of shrimp. Further, the company will serve three years of probation, and be required to implement a training program to educate employees on federal labeling requirements.

Lisa Weddig, Secretary of the Better Seafood Bureau (BSB), commented on the case, stating “This case is an example of coordinated law enforcement, both state and federal, working together with the tools they already have to crack down on fish fraud.” Weddig emphasized the use of the pre-existing Lacey Act and coordination to show that enforcement and punishing these crimes do not require new laws or regulations.