Criminal probes of Southwest Michigan farm fraud continue

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GreenGavelA Southwest Michigan grain farmer has been sentenced to prison for cheating the federal government of almost $525,000 through fraudulent crop insurance claims and misuse of marketing assistance loans.

U.S. District Judge Paul Maloney ordered Leonard “Lenny” Kolberg Jr., who owned Kolberg Farms in Bangor, Van Buren County, to serve a year and a day behind bars. He had faced a maximum potential sentence of five years in prison and a $10,000 fine.

Maloney also assessed $99,641 in restitution to the government, representing the unpaid loan balance.

Court documents in the Kolberg case – some of them sealed – suggest a broader investigation into farm fraud is underway by the Inspector General’s Office of the U.S. Department of Agriculture.

In another Southwest Michigan case, five defendants have been convicted of bankruptcy fraud-related charges involving two now-defunct farm businesses in Van Buren County. That investigation, involving millions of dollars, is continuing.

Between 1995 and 2011, Kolberg received $642,298 in federal commodity and disaster subsidies, according to data compiled by the Environmental Working Group in Washington, D.C.

The nonprofit research organization reported that he collected subsidies primarily for corn but also for soybeans, wheat, dairy, livestock, barley, sorghum and oats in Mecosta, Cass, Isabella, Montcalm and Van Buren counties.

At the time of the crime he was convicted of, Kolberg farmed about 5,000 acres, including land leased from more than 75 property owners, according to the sentencing memorandum his lawyer submitted to the judge.

At the same time, he owed about $3.5 million in loans to Fifth Third Bank and $2 million in equipment loans, leases and other farm loans, it said.

The indictment accused Kolberg, now 57, of misusing the proceeds from the sale of almost 34,000 bushels of corn that he had pledged to the government as security for 2008 marketing assistance loans.

Marketing assistance loans from the Farm Services Agency such as the ones Kolberg received provide interim help to meet farmers’ cash flow needs during harvest season. That means farmers don’t have to sell their crops when market prices generally are low and assists with “more orderly marketing of commodities during the year,” according to the plea agreement he signed.

He admitted illegally keeping the money instead of repaying the government.

In the sentencing memorandum, his lawyer told federal investigators that Kolberg “knew he was supposed to have applied those sales to the Commodity Credit Corp. loan first. But, out of desperation to keep his struggling farm operation afloat, he admits he did the wrong thing and did not let the CCC know about the sales, nor did he apply the sales proceeds to the CCC crop stabilization loan.”

The memorandum said, “Some years were good, others not so good, but he stuck with it until agricultural and financial setbacks made him unable to sustain his credit to the lending institutions.”

In 2012, he filed for bankruptcy protection, but the bankruptcy wasn’t approved in court and the bank repossessed his farm equipment and land, it said. This summer, he lost his home to foreclosure.

“Kolberg has never lived an extravagant lifestyle,” the sentencing memorandum said. “He is left with a 2-year-old pickup truck with over 200,000 miles on it. All the evidence suggests that, like most hardworking farmers, he had no luxurious habits and did not spend the proceeds he converted on any discretionary goods.”

In announcing the sentence, the U.S. Attorney’s Office in Grand Rapids said, “Kolberg defrauded the Farm Services Agency by lying about the amount of corn he pledged as security and by selling the corn in the private market and keeping the proceeds instead of paying off the loan. Kolberg hid some of his activity by selling the corn in other peoples’ names.”

And U.S. Attorney Patrick Miles said, “Individuals who defraud those programs should know they will be prosecuted.”

Under an agreement with Miles’ office, Kolberg pleaded guilty to one of the five counts in the indictment. The agreement requires Kolberg to cooperate in further investigations.

During the investigation, federal agents asked Kolberg “what if anything he knew about the conduct of other farmers who may have defrauded creditors,” the sentencing memorandum said.

However, details of what he told them remain sealed, according to court files.
His defense lawyer, Thomas Gezon of Grandville, said the names of no other potential targets of the investigation were placed on the record at Kolberg’s sentencing hearing.

In an ongoing Van Buren County case, five defendants have pleaded guilty in the bankruptcy of now-defunct Stamp Farms in Decatur, a business that had borrowed about $65 million from Wells Fargo Bank before it collapsed, court records show.

Convicted so far are Melissa Stamp who owned the farm with her husband, her brother Steven Moser and former farm employees Larry Stambeck and brothers Andrew Trowbridge and Robert Trowbridge Jr.

Melissa Stamp was sentenced to 20 months in prison. Moser and Stambeck also have been sentenced, while the Trowbridges are scheduled for sentencing this month.

Some court documents in those prosecutions also remain sealed.Melissa Stamp’s husband, Michael Stamp, remains a target of the investigation, according to a court document filed before her May sentencing by her defense lawyer, J. Terrance Dillon of Grand Rapids.

“It is expected that Mr. Stamp will be charged with bankruptcy fraud and bank fraud related to the Wells Fargo loans,” Dillon said in the document. According to court documents, federal authorities have not filed any public charges yet against Michael Stamp.

The IRS, Secret Service and USDA Inspector General’s Office are handling that investigation.

Michael Stamp collected $871,665 in disaster and commodity subsidies between 1997 and 2006, the Environmental Working Group database shows. The subsidies were for corn, soybeans, wheat, barley, oats and sorghum in Kalamazoo and Van Buren counties.

And between 2007 and 2011, Stamp Farms received $253,887 in subsidies for grains grown in Kalamazoo, Van Buren, Berrien and Kalamazoo counties, the database shows.

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