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Published April 28, 2014, 11:14 AM

Feds amend insurance fraud case against Johnsons

Federal prosecutors have increased allegations against farming brothers from Northwood, N.D., saying they added chemicals to potato seeds to cut production in a crop insurance fraud case, taking $2 million from fraudulent insurance claims since 2002, as well as federal disaster funds.

By: Mikkel Pates, Agweek

FARGO, N.D. — Federal prosecutors have increased allegations against farming brothers from Northwood, N.D., saying they added chemicals to potato seeds to cut production in a crop insurance fraud case, taking $2 million from fraudulent insurance claims since 2002, as well as federal disaster funds.

Aaron Scott Johnson, 50, and Derek Martin Johnson, 47, are pleading not guilty to the allegations, which were originally filed in January but doubled and amended in late April. The case is set to go to court July 15, in Fargo. In court, prosecutor Nick Chase said he thought the case would take seven to 10 days in trial, and declined to comment about the case.

Neil Fulton, of Sioux Falls, S.D., head of the federal public defender’s office for North Dakota and South Dakota, was not immediately available to comment.

In an indictment, federal prosecutors say from 2002 to Jan. 2010, the Johnsons and their Johnson Potato Co. fraudulently obtained crop insurance benefits from an unnamed crop insurance company and the Risk Management Agency and Federal Crop Insurance Corp. Chase acknowledged that the case doesn’t name an insurance company or agent.

The Johnsons received indemnity payments totaling more than $2 million, as well as crop disaster payments. They falsely reported that stored crop damage was from “soft rot.” The disaster payments were $159,000 for the 2006 potato crop.

The Johnsons raised potatoes for the fresh market, including some in the Cooperstown, N.D., area, where they had a storage facility, where some of the alleged activities took place. The government says from 2002 to late 2006 they “conspired to ensure” their Johnson Potato company production “sustained physical damages and losses to their potato crop.” They raised both irrigated potatoes in the Cooperstown, N.D., area, and nonirrigated potatoes elsewhere. They allegedly worked against the crop before, during and after the crop was in storage.

Among other things, prosecutors say the Johnsons “added chemicals to the potato seeds to damage the seeds, so the potato plants would not produce potatoes.” After the potatoes emerged, they damaged plants with cultivators, so they wouldn’t produce potatoes.

After limiting their harvest, the Johnsons “personally, and through the direction of others” made claims against their multi-peril crop insurance policy, claiming the damage was from natural causes.

In addition, they applied chemicals including Rid-X, a chemical designed to dissolve solid materials in a septic system, and also added “spoiled and frozen potatoes to their stored (and otherwise undamaged) potato crop, causing the stored potatoes to deteriorate and rot. ... There is not a legitimate farming purpose for adding these chemicals to stored potatoes,” the indictment states.

Finally, the government alleges the Johnson operation placed heaters in the warehouse in 2006 to increase air temperatures to 80 degrees and accelerate potato damage.

According to records, Aaron Johnson in 1995 was involved in a separate case in which he was convicted of converting Commodity Credit Corp. property and was sentenced to three years probation.

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