MIL-OSI Security: Two Southeastern Colorado Farmers Sentenced to Federal Prison and Will Pay More Than $6.5 Million for Defrauding Federal Crop Insurance Programs

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Source: Federal Bureau of Investigation (FBI) State Crime Alerts (b)

DENVER—U.S. Attorney Cole Finegan announced today that Patrick Esch and Ed Dean Jagers of Springfield, Colorado, have agreed to pay over $6.5 million to resolve allegations that they defrauded federal crop insurance programs by tampering with and damaging rain gauges. 

One way the United States Department of Agriculture supports farmers and ranchers is by providing federal funding for crop insurance programs that pay indemnities when there is less than the usual amount of precipitation.  Mr. Esch and Mr. Jagers concocted a scheme to defraud these insurance programs by making it appear that there was less precipitation in their area than there actually was.  To carry out that scheme, the members of the conspiracy, including Mr. Esch and Mr. Jagers, tampered with and damaged rain gauges in southeast Colorado between July 2016 and June 2017 to prevent those gauges from accurately measuring rainfall.  Some of the rain gauges that were tampered with belonged to the National Oceanic and Atmospheric Administration and were operated by the National Weather Service.

The conspirators used various means and methods to tamper with the rain gauges. Mr. Esch covered gauges in southeastern Colorado with agricultural equipment and used other means as well, such as filling gauges with silicone to prevent them from collecting moisture, cutting wires on the gauges, or detaching and then tipping over the bucket that collected precipitation. Mr. Jagers typically used an agricultural disc blade to cover up a rain gauge in Lamar, Colorado. This tampering created false records making it appear that less rain had fallen than was the case.

The United States investigated Mr. Esch and Mr. Jagers using civil tools, including the False Claims Act, which imposes civil penalties for certain types of fraud on the federal government, and the Financial Institutions Reform, Recovery, and Enforcement Act, which imposes civil penalties for a variety of misconduct, including knowingly making any false statement or report for the purpose of influencing in any way the action of the Federal Crop Insurance Corporation.  The United States alleges that this conduct violated both statutes.  Mr. Esch and Mr. Jagers have agreed to pay a combined $3.5 million to settle these civil allegations. 

The United States also indicted Mr. Esch and Mr. Jagers criminally for their roles in the conspiracy.  Mr. Esch and Mr. Jagers both pled guilty and were sentenced to pay a combined $3.1 million in restitution.  Mr. Esch was also sentenced to be imprisoned for a term of two months.  Mr. Jagers was sentenced to be imprisoned for a term of six months.  The criminal action is United States v. Esch, 23-cr-00259-CNS (D. Colo.).

“Hardworking farmers and ranchers depend on USDA crop insurance programs, and we will not allow these programs to be abused,” said U.S. Attorney Cole Finegan.  “This case also shows the full measure of justice that can be achieved when our office uses both civil and criminal tools to protect vital government programs.”

“The OIG works steadfastly to uphold the integrity of Federal programs, and we’ll relentlessly investigate those who defraud the American taxpayers and the Federal Government,” said Special Agent-in-Charge Shawn Dionida with the U.S. Department of Agriculture, Office of Inspector General.  “We thank the U.S. Attorney’s Office and our law enforcement partners for pursuing justice until the conspirators were held accountable for tampering with government equipment for the purpose of exploiting the Federal Crop Insurance Program to fraudulently receive funds they were not entitled to receive.”

“The Department of Commerce OIG is dedicated to working with the Department of Justice and our law enforcement partners to curb fraud, waste, and abuse.  We continue to vigorously investigate those individuals who seek to compromise the integrity of National Weather Service equipment and data in an effort to defraud the Federal Government.  We greatly appreciate the cooperation and effort of the United States Attorney’s Office and our law enforcement partners in ensuring justice is served in this matter,” said Jeffrey Lysaght, Special Agent in Charge, U.S. Department of Commerce, Office of Inspector General.”

“These defendants orchestrated a scheme to defraud the federal government.  Holding them accountable would not have been possible without assistance from our partners at the U.S. Attorney’s Office for Colorado and the Offices of the Inspector General at U.S. Department of Agriculture and U.S. Department of Commerce,” said FBI Denver Special Agent in Charge Mark Michalek.  “The FBI will continue to track down opportunists who try to cheat the system for personal benefit.”

The claims resolved in the civil settlements are allegations.  In agreeing to settle, Mr. Esch and Mr. Jagers did not admit liability except to the extent admitted in their guilty pleas. 

The civil settlements also resolve qui tam allegations against Mr. Esch and Mr. Jagers brought in federal court by private party.  The qui tam or whistleblower provisions of the False Claims Act allow a private party known as a “relator” to file an action on behalf of the United States and receive a portion of the recovery.  In this case, the relator has passed away, and the relator’s estate will receive approximately $500,000.  The qui tam action is United States ex rel. Fox v. Esch, 20-cv-03744-MDB (D. Colo.).

The investigations into this crop insurance fraud scheme were a coordinated effort by the U.S. Attorney’s Office for the District of Colorado, the U.S. Department of Agriculture, Office of Inspector General, the U.S. Department of Commerce, Office of Inspector General, and the FBI.  The criminal matter was handled by Assistant United States Attorney Bryan Fields.  The civil matter was handled by Assistant United States Attorney Jasand Mock.

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