Two men who facilitated millions of dollars worth of fraud in crop insurance in Central Kentucky have been sentenced to federal prison.
Michael McNew, a former insurance adjuster and agent in Mount Sterling, was sentenced to seven years and two months in federal prison.
The sentence also makes McNew liable for $10.5 million in restitution to a division of the U.S. Department of Agriculture and an additional $9 million to ARMTech Insurance Services, a private insurance company defrauded in the conspiracy.
In a related case, U.S. District Judge Karen K. Caldwell sentenced Roger Wilson, former owner of Clay’s Tobacco Warehouse in Mount Sterling, to 12 months in prison. Wilson could be ordered to pay restitution but the amount has not yet been determined.
McNew, 51, and Wilson, 88, were charged in an investigation that has uncovered what a federal prosecutor called a “staggering” level of fraud in an insurance program that is supposed to be a safety net for farmers whose crops are damaged or fall short because of bad weather.
McNew helped file insurance claims for farmers with false information about the size of their tobacco crops or the extent of damage, and paid adjusters to submit false information on damages for his clients, using photos of damage to other producers’ crops to justify claims, according to the court record.
He also sold policies to farmers under other peoples’ names so they could spread out their fake losses to avoid scrutiny and take advantage of higher payouts available to new producers, according to a sentencing memorandum by Assistant U.S. Attorneys Kathryn Anderson and Erin Roth.
The loss amount attributed to McNew was $23.6 million and involved numerous farmers, according to prosecutors.
“If not for Michael McNew, and his network of corruption, this widespread and pervasive fraud scheme might never have been able to occur,” the prosecutors said in the sentencing memo.
Wilson’s warehouse also had a key role in the fraud.
He bought poor-quality tobacco and then let farmers use it when their tobacco was graded in order to justify an insurance claim, and “churned out” fake documentation such as sales receipts and shipping reports to help with fraudulent loss claims, prosecutors said.
Wilson was responsible for more than $9 million in losses to the federal government, according to a news release from acting U.S. Attorney Carlton S. Shier IV.
More than three dozen people have pleaded guilty to criminal charges or resolved fraud accusations through civil agreements as a result of the investigation of crop insurance in Central Kentucky, according to court records.
Caldwell sentenced McNew and Wilson Sept. 10.
Others sentenced recently in the investigation were Ronnie Jolly, 50, of Bourbon County, who received three years in prison, and Bradley Price, 38, of Nicholas County, sentenced to two years and six months.
Price’s brother, Brandon, 30, and father Jimmy, 61, were each sentenced to six months in prison, according to Shier’s office.
Sentencing hearings are pending for other farmers.
The case has been investigated by the U.S. Department of Agriculture, the Internal Revenue Service, the FBI and the Kentucky Department of Insurance.