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Mikkel Pates, Forum News Service, Published April 21 2014

Feds broaden insurance fraud case against Northwood potato growers

FARGO – Federal prosecutors have increased allegations against farming brothers from Northwood, accusing them of adding chemicals to potato seeds to cut production in a crop insurance fraud case where they took in $2 million from fraudulent insurance claims since 2002 as well as federal disaster funds.

Aaron Scott Johnson, 50, and Derek Martin Johnson, 47, pleaded not guilty to the allegations, which were originally filed in January but doubled and amended this month.

The case is set to go to trial on July 15 in Fargo. In court, prosecutor Nick Chase has said he thought the case would take seven to 10 days in trial and declined to comment about the case.

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

In an indictment, federal prosecutors say that from 2002 to January 2010, the Johnsons and their Johnson Potato Co. fraudulently obtained crop insurance benefits from an unnamed crop insurance company and the Risk Management Agency/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 area, where they had a storage facility. The government says that from 2002 to late 2006 they “conspired to ensure” that Johnson Potato company production “sustained physical damages and losses to their potato crop.”

They raised irrigated potatoes in the Cooperstown area and non-irrigated potatoes elsewhere. They allegedly worked against the crop before, during and after the crop was in storage.

Spoiled crops

Prosecutors say the Johnsons “added chemicals to the potato seeds to damage the seeds so that 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.

They applied chemicals including Rid-X, a chemical designed to dissolve solid materials in a septic system, and 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 spoilage.

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 of probation.