BISMARCK, N.D. - Hunter Hanson "totally destroyed me, financially," said Leon Schmaltz, who farms near Harvey in central North Dakota.
Schmaltz was one of four victims who testified Tuesday, Nov. 12, at the sentencing hearing for Hanson, 22, who pleaded guilty in July to wire fraud and money laundering charges after his grain dealing scheme unraveled, leaving farmers and elevators being owed millions of dollars.
U.S. District Court Judge Daniel Hovland sentenced Hanson at the top of a sentencing guideline range, eight years in a federal prison, plus three years of probation. Hanson also has agreed to pay $11.1 million in restitution.
Additionally, the judge ordered $1.27 million in a money judgment, roughly equating that to the amount Hanson had taken from the grain business to invest in his Hanson Motors used auto business at Belcourt, N.D.
Hanson said the auto business was designed to make money to repay his grain debts to farmers, but, like his grain dealings, records show he often sold vehicles at a loss.
Hanson’s attorney, Lucas Wynne of Fargo, asked for leniency because of Hanson’s age and the “context” that he started out in a business, thinking he would help farmers, not hurt them. He said Hanson had “panicked” and kept going with his money-losing operation, which was based in Devils Lake, N.D., instead of shutting it down.
When Wynne described Hanson’s level of cooperation, Hovland responded that Hanson was “caught with his pants down” and was without options.
Hanson described a business that netted $200,000 in its first fiscal year, which started in April 2017. But he also said he got in trouble, basing durum purchase speculation on a single article he'd read that indicated prices would go up substantially in early 2018. Prices didn't go up.
Investigators said Hanson began operating his company as a Ponzi scheme, although Wynne said Hanson told him he didn’t know what a Ponzi scheme was.
One year later
The sentence came almost a year after Hanson's grain trading scam was shut down. Hanson, dressed in a plaid shirt and khaki pants, sat next to his lawyer in the courtroom.
"I have not for a fleeting moment have lost sight of what you farmers and others have lost," Hovland said. He agreed with the victims that said there is "no real justice" in the case, but tried to assure "some justice."
Prosecutor Jonathan O’Konek, appearing telephonically from Fargo, questioned victims, who gave statements. Hovland said Hanson's was a case of "pure greed and a complete lack of business sense, and financial sense."
Because of the loss, Schmaltz said his farm lost its ability to get operating loans, lost rented land, and insurances, lost a quarter of land and was forced to rent out the rest. "At my age, I will never recover, it's impossible," Leon Schmatz said, adding, "He financially murdered me, is what he did."
Schmaltz said he'd dealt with Dan Stommes, owner of East Central Grain Marketing, a broker from Minnetonka, Minn., with offices in South Dakota. Many of Hanson’s clients had been referred to him by East Central Grain, which received a cut of the grain transactions, but also ended up losing money.
During the hearing, Leon Schmaltz’s son, Zachary, angrily told Hanson his actions had "kicked me off my own family farm" where he'd planned to be the fourth generation. He told Hanson he should be “hung from a post.”
"You have inflicted more financial pain than you can imagine," Zachary Schmaltz told Hanson, who sat without expression. Zachary said Hanson's penalty, divided by the 70 entities, is only a few months each, while "you stole their livelihoods."
"I now shovel s--- for a day job, and every time I take a scoop I think of you," Zachary said, rhetorically referring to his own grain company job, which requires shoveling out grain equipment. "I work seven days a week, 70 hours a week, solely because of you," Zachary declared. He said it appears his parents may no longer be able to support themselves in retirement, and that will be up to Zachary.
On the other hand, Zachary said, if Hanson is out after eight years, he can start a life again. He blamed the North Dakota Public Service Commission and the government in general for failing farmers.
Hanson requested to serve his time in federal prison at Duluth, Minn. Hovland said he'll recommend that but the decision is up to the U.S. Bureau of Prisons. Hanson was handcuffed by U.S. Marshal's at the end of the hearing, as a sister wept, sitting with his parents.
Hanson has up to 14 days to appeal the sentence, but already has agreed not to.
Brian Larson, general manager of the Co-op Elevator of McClusky, who lost $768,000, said the amount is a "huge amount of money, for any company." "Sleepless nights. There was lots of them," he said. "The reputation of the co-op … you lose. There was jobs put at risk there."
Larson brought Hanson's bookkeeper in to his own elevator to explain the contracts that were owed. "I've never dealt with anyone in the grain business that doesn't know what the hell they're doing," he said.
Larson said the co-op has been able to forge forward. "There's hardly a day that goes by that somebody doesn't bring that up. I have to keep reassuring them that this is still a good place to do business."
Roving grain buyer
Hanson, a 2015 high school graduate from New Rockford (N.D.) High School, said he traded some $23 million in grain, operating Midwest Grain Trading, a roving grain buyer’s business, and then Nodak Grain, a warehouse business.
Hanson’s companies ramped up in 2018 and initially paid farmers and elevators, but by August was more than 60 days overdue for some major accounts. Hanson gave himself 30 to 45 days to pay sellers and was in turn paid immediately from elevators where he’d sell grain. He dealt primarily in yellow peas and durum wheat specialty crops, but also in spring wheat.
Hanson continued to do business, anyway, moving funds among several banks or credit unions, hiring a former law enforcement officer to “run checks” from elevators where he sold grain to the various banks he used.
In August 2018, Hanson purchased a former CHS elevator facility at Rohrville, N.D., northeast of Devils Lake.
But when clients complained of bounced checks just a few months later, the PSC shut down his grain trading operations and investigations into Hanson’s business practices began.
Claimants against Hanson said they lost nearly $8 million in grain payments that never came or bounced checks. Another $3 million were claimed in transactions they said were made but weren't consummated.
The state PSC has said that much of the cash grain deals would be paid 19 cents on the dollar, after the sale of available grain. A smaller number of credit-sale contracts may be paid out 80 cents on the dollar from a state indemnity fund.