GREENWOOD — Winter is the slow season for most farmers.
The lull between harvest and next year’s planting is a time for them to catch up on their sleep, spend some time in the woods and travel.
One Leflore County farmer, though, is using his downtime to launch a personal crusade to expose the fraud he says is rampant in the taxpayer-subsidized crop insurance program.
The farmer asked me not to disclose his identity, as he says some of his neighbors are abusing the program. But he has written U.S. Rep. Bennie Thompson about it and was planning to contact other members of Mississippi’s congressional delegation, too.
As with lots of government programs, Washington’s involvement in crop insurance had a sensible rationale when it began almost 80 years ago. Rather than pay out massive amounts of unbudgeted aid when flooding, drought or other natural disasters kept farmers from planting or harvesting their crops, Congress decided to steer farmers instead toward buying insurance to cover themselves against potential weather-related losses.
Participation in the crop insurance program was low for several decades, though, so Congress in 1980 added several sweeteners to get farmers and private insurance companies on board. It agreed to subsidize farmers’ premiums, initially at 30 percent but more than doubling since. It also agreed to reimburse insurers for their administrative costs and cover some of their losses when claims exceeded premiums collected.
In 2015, the federal government spent $8.2 billion on crop insurance. Almost three-fourths of the cost was in premium subsidies.
To try to deter fraud, the U.S Department of Agriculture has a division, the Risk Management Agency, that oversees the crop insurance program. On its website, RMA lists dozens of cases of crop insurance fraud that have been successfully prosecuted since 2000.
To hear the Leflore County farmer tell it, those convictions are just the tip of the iceberg.
He says there is widespread collusion between dishonest insurance agents, adjusters and farmers to collect insurance money on acres that the farmers had no intention of planting. He says it’s become so common that he is ridiculed for not going along, too.
One outrageous case of fraud he cites is of a young Delta farmer who went bankrupt one year. The next, he rented several hundred acres, even though he had no equipment to work the farm and couldn’t get credit to finance a crop. But the broke farmer applied for crop insurance and collected more than $200,000 because an unscrupulous agent sold him the policy and a compliant adjuster agreed that it had been too wet to plant in time.
Since one of the screwball provisions of crop insurance is that farmers don’t have to pay their premiums until they settle up at the end of the year, the farmer was able to use the insurance payout to cover his premium, pay his rent and have a tidy sum to pocket himself, all without putting a single seed in the ground.
“It boils down to the fact that the agent will lie to keep the farmer happy so he keeps the business,” says the disgusted planter. “The adjuster will lie by filling out a false report to keep the agent happy. The farmer is lying about not being able to plant the crop because he knows he will make more money by not planting the crop. The scenario keeps everyone happy except the poor taxpayer. Every year crooked agents, adjusters and farmers use this formula to defraud taxpayers out of billions of dollars.”
The scenario he describes is similar to one uncovered a couple of years ago in North Carolina, where a federal investigation snagged more than 40 tobacco farmers, insurance agents and claims adjusters who defrauded taxpayers of almost $100 million. At the center of that ring were an insurance agent who aggressively signed up farmers on the promise that they could count on cashing a crop insurance check every year and a claims adjuster who took payoffs to falsify or inflate damage claims.
My farmer source says the corn program is especially prone to abuse because of its early cutoff date for planting of April 20. In Mississippi this past year, more than 7 percent of corn acreage was deemed unplantable because of the wet spring. In some counties, it was as much as 20 percent.
“Honest farmers always find a window of opportunity to plant their corn, but dishonest farmers cry that it is too wet,” the farmer says. In almost four decades of farming, the weather has never stopped him from planting a crop.
He recommends two changes to cut down on the abuse: move the cutoff date for corn to May 1 and only allow claims for preventive planting in areas declared a disaster by the federal government.
I’ll add one more: Make farmers pay their crop insurance premiums when they purchase the policy. Letting them defer that cost only invites abuse.
Kalich is editor and publisher of The Greenwood Commonwealth.
