As we reported yesterday, some farmers are bilking the nation's crop insurance program out of millions of dollars by filing fraudulent claims for disasters; $160 million worth last year alone. An investigation by the Government Accountability Office indicates that the government-backed program for crops is ripe for fraud and can go soft on crooked farmers. It didn't end up that way by accident. In the second part of our series, Fraud Down On the Farm, NPR's John Burnett reports that powerful political forces are at play.

(Soundbite of unidentified song)

Mr. WOODY GUTHRIE: (Singing) The rain, it quit, and the wind got high and the black old dust storms filled the sky and...

JOHN BURNETT reporting:

Federal crop insurance was created in the Dust Bowl days of the 1930s to help farmers survive the ravages of nature: drought, hail, flood, freeze, insects disease. Because agriculture is so inherently risky, the US Department of Agriculture decided to take on the job of insuring crops. Then in the mid-1990s, Congress privatized the program. The Federal Treasury still guaranteed the risky policies, but the government turned the selling and servicing of those policies over to private insurance companies. The program then exploded in size. The value of insured crops jumped from $10 billion to $40 billion as dozens of new specialty crops became eligible, from blueberries to sunflowers to lemon grass. A congressional mandate and the insurance industry itself helped drive that growth.

Mr. JOHN ZIRSCHY (Associate Administrator, Risk Management Agency): There would not have been an expansion of the program without industry lobbying, in effect, for more legislation, more budget authority, more subsidies for the program.

BURNETT: John Zirschy served as associate administrator of the Risk Management Agency, the USDA agency in charge of crop insurance, from 1998 to 2001.

Mr. ZIRSCHY: The thing that seemed the most egregious was the extent to which the industry ran the program. The industry has a lot of influence and are also major donors to the political process.

BURNETT: According to campaign finance reports, over the past six years political action committees of the crop insurance industry, such as Rain and Hail PAC and the American Association of Crop Insurers PAC, have donated more than $900,000 to national political campaigns. The recipients were men who served on agriculture committees and wielded great power over the program, such as Representative Henry Bonilla, former Representative Charlie Stenholm, Senator Ben Nelson, Representative Jerry Moran. A bigger program meant more profits for insurance companies and insurance agents. Last year, they sold $47 billion worth of crop insurance. According to the USDA records, the Treasury paid farmers $1.4 billion in insurance claims last year, but the insurance companies got even more, $1.6 billion. The industry claims the crop insurance business is expensive to run and, after overhead is paid, their rate of profit is a modest 8 to 10 percent. Yet even as the ag insurance field was growing, John Zirschy says the companies resisted a commensurate compliance program.

Mr. ZIRSCHY: It wasn't like they just wanted to look the other way. They didn't want anybody looking. They actively tried to prevent us from going out to find criminals.


Mr. ZIRSCHY: They don't want somebody else finding out that their agents, for example, may be colluding with the farmer. There are cases where the insurance agents were part of the fraud.

BURNETT: As a result of the spotty oversight, the program became a magnet for farmers looking to scam the system. There's even a name for them--insurance farmers.

Mr. JOHN BROWN(ph) (Agricultural Investigator): They just farm for crop insurance. I want you to know that. That's how they exist. They have no intentions of harvesting a crop and, in many cases, they don't even plant a crop. They don't even plow the soil sometimes, and they get away with it.

BURNETT: John Brown is an agricultural investigator based in Columbia, Missouri, who's testified as an expert witness in 26 civil and criminal cases. One of them was in Nolan County, Texas, where four farmers were convicted in 2001 of an insurance scheme to defraud the USDA out of more than $1 million. Farmer Mike Massey(ph) filed a claim on cotton he never planted. He was convicted of fraud and served a year in the Ft. Worth federal penitentiary.

Mr. MIKE MASSEY (Convicted of Farm Insurance Fraud): Well, we did have our little card games every once in a while and there would be me and probably six other drug dealers sitting across the room. My nickname was `Cotton' in there. They were wondering, `Why in the hell are you in here for cotton?'

BURNETT: Massey sits in his lawyer's office in the town of Sweetwater, just west of Abilene, his black hat and boots still dusty from working cattle that morning.

Mr. MASSEY: At one point you go from trying to make a crop to maximizing the dollars that you make from the insurance. Not to make a crop at all is the best scenario. Either planting substandard seed, plowing too deep, planting too shallow. I mean, if you don't want it to come up, you can pretty well make it where it won't come up.

BURNETT: Chances of getting caught are still slim. The Risk Management Agency has 100 employees to monitor 2 million policies nationwide, so the government depends, as its first line of defense against fraudulent claims, on the 17 companies that sell crop insurance. Some aggressively pursue suspicious farmers, but Dennis Jay says on the whole the industry has little self-interest in policing itself. Jay is director of the Coalition Against Insurance Fraud, a national industry watchdog.

Mr. DENNIS JAY (Director, Coalition Against Insurance Fraud): When somebody files a false insurance claim on your automobile insurance, that money comes directly off the bottom line, off the profit of an insurance company. They have a tremendous amount of incentive to root out fraud. In the crop insurance program it doesn't always work like that because it's the federal government that's paying the claims, for the most part.

Mr. BOB PARKERSON (President, National Crop Insurance Services): There's always going to be people interested in trying to get a quick dollar, and we're working on very diligently trying to find those people.

BURNETT: Bob Parkerson is president of National Crop Insurance Services, a trade group based in Kansas City. First, he points out that the USDA is requiring insurance companies to take on more and more risk, so it's not just taxpayers' money they're paying out. Second, he denies Zirschy's charge that the companies obstructed efforts to crack down on fraud.

Mr. PARKERSON: They're very interested in maintaining the appropriate levels of checks and counterchecks, if I can, within the business because a good deal of their money is on the line. And they're willing to pay a farmer if he does have a legitimate loss and they're willing to also fight that farmer if he has tried to basically commit fraud and tried to take the money away from them.

BURNETT: The Government Accountability Office released the results of an investigation two weeks ago faulting the RMA and the industry for not doing more to root out fraud. It's the third such GAO report in eight years. Senator Susan Collins, the Maine Republican who ordered the GAO investigation, has asked the Agriculture secretary to impose stricter controls. Those changes have already begun. The honor system is out and the Agriculture Department is taking on a new role--farm cops.

John Burnett, NPR News.

MONTAGNE: Tomorrow, how the USDA relies on high technology in its fight against farm crooks.

This is NPR News.

Copyright © 2005 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR’s programming is the audio.



Please keep your community civil. All comments must follow the Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

NPR thanks our sponsors

Become an NPR sponsor

Support comes from