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ORGANICS PART 2: Fraudulent farmers live lavishly until caught

Farmers who commit organic grain fraud have shown a propensity to spend big money on lavish lifestyles until the authorities catch up with them.

When Belle Fourche, S.D., organic grain broker Kent Duane Anderson turned to fraud, he made millions of dollars and used the ill-gotten gains to establish a new life in Florida, replete with an $8 million yacht, a $2.4 million new home, $400,000 in jewelry, two new Range Rovers and a Maserati.

Over the roughly six years Anderson bought conventionally grown grain and fraudulently sold it as organic at a huge profit, he amassed about $71 million in proceeds from the ripoff that took place from 2012-2018, according to federal court documents.

Such high-profile fraud cases are significant not only for the enormous amount of money stolen, but also because they have damaged the credibility and integrity of the organic food industry, which relies largely on trust and accurate labeling to ensure consumers get what they pay for.

Organic grains can cost double or even triple the price of grains grown conventionally with fertilizers, herbicides and pesticides at wholesale and retail levels. The high price of organics, which look the same as non-organic products at the point of sale or on retail shelves, make fraud hard to detect and difficult to prosecute.

Missouri organic grain broker Randy Constant engaged in an even larger fraud scam, masterminding a $142 million scheme that enabled him to live a second life in Las Vegas, where he made more than 20 visits and spent money on hotels, gambling and escorts.

According to federal authorities, Constant, 61, sold millions of bushels of conventionally grown grain and falsely labeled it as organic. Constant, who had served on his local school board and was active in his church, took his own life after being sentenced to 11 years in prison in 2019.

In the most recent organic grain fraud case to make headlines, 65-year-old James Clayton Wolf of Jeffers, Minn., is accused of buying non-organic grains and falsely selling them as organic, according to a U.S. Attorney’s Office indictment filed in federal court in Minnesota on July 7, 2022. Wolf also grew crops using pesticides and fertilizers and passed those conventional crops off as organic at the time of sale, the indictment states.

Wolf did not hold a legal grain-buyer’s license but still purchased non-organic corn and soybeans and resold them as organic at a large profit, the indictment states. Wolf provided grain buyers a copy of his organic growers certification to convince them his products were organic when in fact he knew they were not, according to the indictment.

As a result of the scheme, Wolf received more than $46 million in payments from grain buyers from 2014 to 2020, prosecutors said.

In its charging documents, the government seeks forfeiture of almost $6.4 million in Wolf’s bank holdings, tracts of land in Minnesota and Arizona, more than a dozen large pieces of farm machinery and numerous vehicles including two pickup trucks, two semis and two Chevy Corvette convertibles.

Wolf has pleaded not guilty to the charges, his lawyer, Paul Engh, told News Watch.

“He’s pleaded not guilty and he’s contesting the entire case,” Engh said.

Kent Duane Anderson of South Dakota used unusual handwriting when signing his guilty plea to wire fraud and money laundering resulting from an organic grain fraud scheme. Photo: Bart Pfankuch, South Dakota News Watch

Documents in the criminal case involving Kent Duane Anderson, reviewed by News Watch, provide an inside view of how a grain fraud scheme was orchestrated. In the file, Anderson signed a letter of factual basis, or a form in which he admits to wrongdoing and spells out the nature of his criminal acts.

According to the court file:

Anderson and his wife, Aimee (who was not charged with a crime) formed Bar Two Bar Ranch in Belle Fourche in 2005 as a cattle-and-hay production business. Later they launched a new set of companies known as Green Leaf Resources that focused more on grain buying and selling.

When Green Leaf was formed, Anderson enlisted his sister-in-law and a college friend as “figurehead executives” to obtain USDA certification as handlers of organic grains. The organic certifications served as “cover” for Anderson’s true actions of buying non-organic grain and selling it as organic. Those two people were not named in the indictment and were not charged as part of the scheme.

Some of the grains Anderson bought were taken to a farm in Tappen, N.D., where an employee of Anderson’s would hold them in storage and await instructions. At some point, Anderson would relabel the gains as “organic” on bills of lading before sending them to other grain buyers.

From October 2012 to December 2017, Anderson’s shell companies bought roughly $46 million in conventional grain and resold it as organic grain for about $71 million. Less than 3% of the overall grain purchases made by Anderson were for true organic grains, the government said.

“As a result of this fraud, the defendant’s business enterprise generated large profits and he accumulated substantial wealth. This enabled him to live an extravagant lifestyle which included the purchase of an $8 million yacht, a $250,000 sports boat, a $2.4 million residence, over $400,000 in jewelry and multiple expensive motor vehicles,” prosecutors said in the indictment.

The court papers do not say specifically how Anderson was caught, but prosecutors included documentation of numerous wire transfers and bank transactions that were later deemed to be connected to fraud.

Anderson faced a 42-count indictment, but he eventually pleaded guilty to one count each of conspiracy to commit wire fraud and one count of money laundering.

Anderson was sentenced in February 2021 to four years in federal prison and two years of probation following his release. According to the Federal Bureau of Prisons website, Anderson began his sentence on March 15, 2021, at the minimum-security Federal Prison Camp in Pensacola, Fla., and is scheduled for release on Oct. 26, 2024.

The court ordered Anderson to pay $150,000 to the government before sentencing and make $15.3 million in restitution to victims of his crimes, which is equivalent to the net profit he made off his organic-grain fraud scheme, court documents indicate. He was also ordered to forfeit many items purchased with money realized from the fraud.

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About Bart Pfankuch

Bart Pfankuch, Rapid City, S.D., is the content director for South Dakota News Watch. A Wisconsin native, he is a former editor of the Rapid City Journal and also worked at newspapers in Florida. Bart has spent more than 30 years as a reporter, editor and writing coach. Contact Bart at bart.pfankuch@sdnewswatch.org.