False Claims, Finance, and Food: USDA Fraud
Did you realize that some False Claims Act (FCA) cases encompass many levels of our food supply chain? The United States Department of Agriculture (USDA) serves as an umbrella over a surprisingly wide number of food-related areas. FCA cases concerning the USDA range from providing the credit needed to grow crops to insuring the crops to the selling of tainted food to government programs. As you might imagine, USDA fraud can, and often does, involve many millions of dollars.
Credit Fraud and Crop Insurance Fraud
Credit fraud and our country’s crops can reach beyond our shores. In a 2014 judgment, the Department of Justice recovered $80 million from BNP Paribas, a Paris-based financial institution. The government alleged that BNP Paribas violated the USDA’s Supplier Credit Guarantee Program, which guarantees the credit needed by foreign importers.
Importers use the USDA-backed credit to purchase agricultural commodities like wheat and corn, and thereby open up additional markets to U.S. commodity sellers, generally a positive situation for all. But in this case, the claim is that BNP Paribas deliberately engaged in fraud by allying themselves with disqualified importers and exporters, resulting in financial transactions that included no shipment or sale of actual agricultural commodities.
In another 2014 case, this time centered in the U.S., over $175 million in counterfeit USDA-backed loans were sold to investing entities such as retirement funds and financial institutions. Allegedly an Orlando, Florida, husband and wife team came up with the loan fraud, using inside information to control the USDA system illegally through a lending company called First Farmers Financial. Numerous credit unions were victimized by the scam. No settlement has been reached.
A case settled in 2015 concerned crop insurance fraud.
Farmers insure their crops against losses due to unpredictable events like natural disasters. In this suit, $44 million was the amount that Fireman’s Fund Insurance Company agreed to pay. The government alleged that the company both falsified documents and intentionally issued ineligible policies as defined by the regulations of the USDA’s crop insurance program.
All of these cases, although they did not originate with whistleblowers, demonstrate the many ways in which our federal agricultural department can be defrauded. They are cases that likely could have been brought by whistleblowers, if any had stepped forward.
Suppliers of Tainted Food
The USDA’s National School Lunch Program was sold adulterated meat, and a judgment resulted in the case because of a qui tam whistleblower case that triggered the investigation. In the lunch program, the meat sold to the USDA is allocated to state agencies, which then distribute it to local school districts. The meat ends up being eaten by schoolchildren, so you can understand why it is important that only meat from healthy animals ends up on their plates. But in this case, and as has been suspected in certain other situations, the meat was not processed in line with government regulations.
Additionally, the suspect meat was alleged to have come from cattle that were, in addition to being sick, inhumanely mistreated at the point of slaughter.
Several settlements in the case amounted to over $158 million, originating with a 2008 qui tam suit brought by the Humane Society of the United States (HSUS) against a meat-packing plant in California. The suit alleged that some of the meat came from “downer cows”—cows that are often too sick to stand—which is illegal under the Federal Meat Inspection Act. Selling meat considered unfit for humans to the government’s federal school lunch program violates the provisions of the False Claims Act and also puts children at risk.
Two good things arose from the case. One is that it set a needed precedent that might help bring success to future qui tam whistleblower cases involving either the unethical treatment of animals or frauds against the USDA with regard to our food supply chain. The second is that the USDA has ordered more Food Safety Inspection Service inspections to certify that the provisions of the Federal Meat Inspection Act are followed by our country’s meat processors and packers.
It’s a SNAP
The USDA is also the federal agency that deals with Supplemental Nutrition Assistance Program (SNAP) fraud, sometimes called “food stamp” fraud. The trafficking in food stamps (illegally selling SNAP benefits for cash or trading them for other items) continues to create problems for our nation. High on the list of the USDA’s priorities is eliminating this criminal activity and the network of crooks that help it continue.
The USDA wants to know about any of the following kinds of activities when they relate to SNAP fraud:
- Criminal behaviors such as bribery, theft, or smuggling, or behaviors that create dangers to public health and safety
- Conflicts of interest
- The wasting or mismanagement of public funds
- Employee violence or other wrongdoing that is connected to frauds.
If you believe you have actionable information about any USDA-related fraud, you may wish to speak with an attorney who can assist you in navigating the complex rules of bringing a qui tam case.