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North Dakota farmer pleads not guilty to crop insurance fraud; judge releases him on his recognizance

Kent Pfaff, who runs Pfaff Farms, based in the Washburn-Falkirk area in North Dakota, has been released on his own recognizance in a federal crop insurance fraud case. He has pleaded not guilty.

A man stands in the parking lot of a federal courthouse, consulting with his attorney behind a white, Chevy pickup with license plates "FAF1FRM"
Kent Pfaff, a farmer based in theWashburn/Falkirk area of North Dakota, on March 3, 2022, huddles with his lawyer, Gary R. Leistico, of St. Cloud, Minnesota, near his pickup in the parking lot of the federal courthouse in Bismarck, North Dakota, after his arraignment hearing for alleged crop insurance fraud. Pfaff is free until a trial, scheduled, April 19, 2022, although Leistico indicated he will seek a delay. Photo taken March 3, 2022, in Bismarck, North Dakota.
Mikkel Pates / Agweek
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BISMARCK, N.D. — Federal Magistrate Judge Clare R. Hochhalter on March 3, 2022, allowed Kent Pfaff, a North Dakota farmer accused of federal crop insurance fraud , to remain free on his own recognizance until trial.

Pfaff pleaded not guilty to the charges against him. Hochhalter could only accept “not guilty” plea at this juncture. If convicted, Pfaff faces a maximum of 30 years imprisonment, and up to $1 million fine, and five years of supervised release, Hochhalter said.

Hochhalter set a three-day trial date on a case assigned to U.S. District Judge Daniel L. Hovland, starting April 19, 2022. Pfaff’s lawyer said he’d likely ask the trial be delayed because of the amount of paperwork involved.

Pfaff is represented by Gary R. Leistico, of St. Cloud, Minnesota. Prosecutor Jonathan O’Konek, appeared for the U.S. Attorney’s office.

According to the government, Pfaff “shifted production” and gave false information to crop insurance companies and to the U.S. Department of Agriculture’s Risk Management Agency. Pfaff’s fraud occurred over a three-year period from 2017 to 2020. Leistico said he would seek a continuance, or delay, because of the amount of paperwork involved.

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Personal recognizance

Hochhalter released Pfaff on a personal recognizance bond. The judge said he did not order Pfaff’s passport collected, reasoning that Pfaff is not a flight risk. Hochhalter said Pfaff has “substantial assets” and has annual revenues of about $6 million. Pfaff has “all of the things that make you, essentially, a North Dakotan with substantial ties.”

Hochhalter warned Pfaff he must commit no crimes while being released, pending the trial. He must not be in the presence of firearms and — because he has prescribed medications for depression — the judge prohibited him from consuming alcohol until trial. He must comply with any requirements from the U.S. Department of Agriculture's Risk Management Agency, which serves farmers through the Federal Crop Insurance Corp.

Pfaff had been served with a summons about a month ago and was never arrested prior to the trial

Pfaff and his wife, Rhonda, live in the Washburn, North Dakota, area. They farm with sons, Stephen and Zachary, and family friend Chris Stork, according to a 2016 story in the Bismarck Tribune. The farm is known as one of the region’s largest, with tens of thousands of acres.

In the indictment filed Feb. 2, 2022, U.S. Attorney Nick Chase said Pfaff gave false statements to influence the U.S. Department of Agriculture’s Risk Management Agency, which handles crop insurance through the Federal Crop Insurance Corp.

Between Jan. 1, 2017, and June 1, 2022. Pfaff, “falsely represented, and caused another to falsely represent information to RMA/FCIC to shift production from different crop fields to manufacture and inflate crop insurance indemnities to which he was not entitled,” the government alleges.

“Shifting production is a fraud scheme where a person will overreport production from one or more fields and underreport production from one or more different fields to manufacture or inflate claims to which they are not entitled,” Chase wrote in the indictment.

Agencies listed

In an unusual listing of crop insurance agencies involved, Chase said that between Dec. 1, 2019, and June 1, 2020, Pfaff knowingly provided false information to Sheldon Crop Insurance Agency, FMH Ag Risk Insurance Co, and Farmers Mutual Hail Insurance Company of Iowa, and to a Farmers Mutual Hail insurance adjuster.

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Chase listed specific situations in the indictment:

  • In 2019, two witnesses identified only initials — as “B.B. and E.B” — worked for Pfaff as “custom combiners.” They harvested crops on Pfaff’s farmlands. E.B. logged production totals from each field belonging to Pfaff, using grain cart scales and a notepad. On Jan. 2, 2020, E.B. sent Pfaff an email spreadsheet with B.B’s 2019 grain cart harvest data for Pfaff’s operation. On Jan. 3, 2020, Pfaff submitted a Notice of Damage or Loss form with FMH Ag Risk Insurance Company. In the claim, Pfaff said his soybeans were damaged by “Cold Wet Weather,” with a damage date of Oct. 10, 2019. Pfaff didn’t include the harvest records that E.B. had provided.
  • On April 17, 2020, Pfaff  “knowingly listed and affirmed” false information on wheat, corn and soybeans, both in “Production to Count” and “Production Per Acre.” In one example, Pfaff harvested 529 bushels of soybeans from 138.35 acres in one “unit” in McLean County, North Dakota, for “production per acre value of 3.82 bushels.” That understated the yield, which increased the insurance indemnity, Chase wrote. Meanwhile, in the same production summary, Pfaff listed 16.6 acres of “unharvested soybeans” had produced 395.1 bushels, or 23.8 bushels per acre. In another unit, Pfaff said he harvested 408.2 bushels of soybeans from 81.94 acres, yielding an average of 4.98 bushels per acre — an extremely low yield that increased insurance indemnity payments. But in the same production summary, Pfaff reported 11.8 acres of “unharvested soybeans” in the unit had produced 250 bushels, or 21.2 bushels per acre.
  • In another farm unit in McLean County, Pfaff said he’d harvested 1,184.3 bushels of soybeans from 297.6 acres, for an average of 3.98 bushels per acre, and reported this for insurance compensation. In the same report, Pfaff reported that 7.11 acres of “unharvested soybeans” produced a total of 153.8 bushels of soybeans for an average production of 21.6 bushels per acre. On April 17, 2020, Pfaff certified production summaries for two nearby units. On one, in McLean County, he harvested 19,829.8 bushels of corn from a 125 acre parcel, for a yield of 158.4 bushels per acre. A mile away, in Sheridan County, Pfaff reported he’d harvested 4,352 .7 bushels of corn from of 173.7 acres, for a yield of 25 bushels per acre. The summaries were sent to FMH Ag Risk Insurance Company, in the names of Steven Pfaff, a son, and Christopher Stork, an employee. Meanwhile, B.B.’s electronic spreadsheet, mailed to Kent Pfaff on Jan. 2, 2020, and the production statement to the insurance company were described simply as “different.”
Mikkel Pates is an agricultural journalist, creating print, online and television stories for Agweek magazine and Agweek TV.
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