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Are Federal Farm Subsidies Wrought with Fraud?

Farm subsidy fraud

Federal farm subsidies are programs through which the government provides funds to eligible farming businesses in order to sustain America’s food supply and to help keep America’s farmers in business. For instance, Direct Payment subsidies provide eligible farmers with up to $40,000 each year depending on acreage and yields, and Counter-Cyclical Payment subsidies provide funds necessary to counter balance fluctuating market prices and provide a safety net in the event of low crop prices.

Pursuant to Farm Service Agency regulations, the amount of funds that an individual can receive through Direct Payment and Counter-Cyclical Payment farm subsidies is limited by an annual cap. Not only is the program subject to monetary caps, but each qualified participant in the Direct Payment and Counter-Cyclical Payment subsidy programs is limited to receiving payments for only three entities – a regulation commonly known as the “Three Entity Rule.”

Unfortunately, funds available through federal farm subsidies are often obtained through illegal means and fraud. For instance, a central Illinois family farm business, known collectively as Dowson Farms, recently paid $5,364,000 to resolve allegations that it conspired to avoid statutory caps on federal farm subsidy payments from 2002 through 2008. Specifically, the government contended that Dowson Farms’ principal owners violated the False Claims Act by creating sham entities, falsely claiming that these entities were actively engaged in farming separate and distinct from Dowson Farms, and thus violated the “Three Entity Rule.” As a result, Dowson Farms’ owners allegedly received farm subsidies through Direct Payments and Counter-Cyclical Payments to which they were not entitled.

“We are pleased with this favorable resolution of the government’s claims of misuse of farm subsidy programs,” U.S. Attorney Jim Lewis said.  “These programs are designed to help farmers withstand market price volatility and the intrinsic risks associated with farming from year to year. Any attempt to exploit the system to take more than one’s fair share is an improper use of government funds that erodes the public confidence in such programs and threatens their continued viability.”

Federal farm subsidies have come under significant scrutiny lately, particularly given the high risk of fraud involved with the programs and the high percentage of subsidies that are going to America’s wealthiest individuals and corporations, and not to the family farmer as was originally intended by the subsidies. For instance, as this Bloomberg article discusses, federal crop insurance which is designed to encourage farmers to plant marginal crops has been “marred by fraud.” In fact, Bloomberg states that, in North Carolina, a network of insurance agents, claims adjusters, and farmers cheated the government out of close to $100 million over more than a decade.

Dowson Farms was accused by the government of violating the False Claims Act in its farm subsidy scheme. The False Claims Act prohibits cheating the government out of funds in any way – whether by overcharging for a product, failing to perform a service, underpaying money owed to the government, providing inferior products, failing to comply with program restrictions, charging for one thing but delivering another, or violating a governmental regulation. Under the False Claims Act, whistleblowers who file lawsuits on behalf of the government are able to share in the ultimate recovery obtained by the government.

The whistleblower attorneys at Goldberg Kohn are committed to fighting fraud against the government and protecting the rights of whistleblowers. If you would like more information about farm subsidy fraud or any other potential fraud on the government, please contact us at (312) 863-7222 to schedule a free, confidential appointment with one of our nationally-recognized whistleblower attorneys.

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