1 RISK MANAGEMENT AGENCY

United States 

Department of 

Agriculture

Risk 

Management

Agency

Risk Management Agency

Program Compliance and Integrity

Annual Report to Congress

January - December 2003

RMA

PREVENTING FRAUD. PROTECTING AGRICULTURE.
’

 

 

Note: Use of brand or firm names in this publication does not imply endorsement by the U.S. Department of Agriculture
 

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race,
 

color, national origin, age, disability, and where applicable, sex, marital status, familial status, parental status, religion,
 

sexual orientation, genetic information, political beliefs, reprisal, or because all or a part of an individual’s income is derived 

from any public assistance program. (Not all prohibited bases apply to all programs.) Persons with disabilities who require 

alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDAs 

TARGET Center at (202) 720-2600 (voice and TDD).
 

To file a complaint of discrimination write to:
 

USDA
 

Director, Office of Civil Rights
 

1400 Independence Avenue, S.W.
 

Washington, D.C. 20250-9410 

or call (800) 795-3272 (voice) or (202) 720-6382 (TDD).
 

USDA is an equal opportunity provider and employer.
 

Washington, D.C.
 

Issued January 2006
 
 

United States 

Department of 

Agriculture

Risk 

Management

Agency

Risk Management Agency

Program Compliance and Integrity

Annual Report to Congress

January - December 2003

Contents

Preface...................................................................................4
 

Executive Summary...............................................................5
 

Productivity............................................................................6
 

Speed in Business Programs......................................................................6
­

Compliance Productivity: A 3-Year Analysis.............................................7
­

Innovation ............................................................................10
 

Scoring and Prioritization System ..........................................................10
­

Case Management System......................................................................11
­

Data Mining Warehousing.....................................................................12
­

Remote Sensing and Imaging .................................................................15
­

High-Tech Training................................................................................17
­

Collaboration .......................................................................18
 

High-Profile Collaborative Investigations ...............................................18
­

Collaborative Partnerships......................................................................20
­

Results .................................................................................28
 

Appendix..............................................................................29
 

3 RISK MANAGEMENT AGENCY 
 

 

 

Preface
 

The U.S. Department of Agriculture’s (USDA) Risk 

Management Agency (RMA) administers the services of 

the Federal crop insurance program, the primary source 

of risk protection for America’s farmers and ranchers. In 

2003, 78 percent of the insurable acres of farmland in 

the Nation’s 10 principal crops were protected by Federal 

crop insurance. RMA provided $40.6 billion of coverage 

to American farmers and ranchers. Producer insurance 

premiums for 2003 totaled $3.43 billion, compared to 

indemnity payments of $3.25 billion received for damages 

to their crops by natural causes. To ensure that the cost 

to producers and taxpayers continues to be justified, it is 

essential that there be adequate safeguards in place to avoid 

and correct abuses. 

The Agricultural Risk Protection Act (ARPA) of 2000 

enhanced the incentives for producers to buy higher levels 

of coverage, thus enabling more effective management 

of risk. ARPA also provided the Department with new 

requirements and new tools for monitoring and controlling 

program abuses. It required RMA and the Farm Service 

Agency (FSA) to strengthen local-level oversight by working 

together and sharing information through compatible 

databases of production and yield data. The Act provided 

for the use of data mining as a technologically advanced 

tool for more efficiently targeting compliance reviews 

and investigations. It also increased sanctions that can be 

imposed for program fraud and abuse. 

This third annual report, as required under the Federal 

Crop Insurance Act (7 U.S.C.§1515), documents the 

Department’s progress toward implementing these new 

tools and their effectiveness. It provides information on 

how the program is monitored for compliance and describes 

the steps taken to improve the way compliance detection 

and enforcement activities are conducted. The report 

shows how data mining and other tools are being used in 

identifying areas of potential abuses. It also demonstrates 

that the Department is becoming steadily more successful 

at discovering and preventing fraud, waste, and abuse. 

As indicated in the report, the continued effectiveness 

of compliance-related efforts has raised the level of cost 

avoidance produced, saving the Government $288 million 

in fraudulent or other incorrect payments that might not 

have otherwise been identified until after the fact. A strong 

contributing factor in the growing success of the program 

is the collaboration and partnership among Departmental 

agencies in compliance investigations. This includes the 

highly effective collaboration between FSA and RMA to 

develop ARPA-required procedures for referrals of suspected 

abuse from FSA field offices directly to RMA field offices. 

Another productive source of compliance investigations 

comes from the Office of the Inspector General (OIG) 

Hotline for the reporting of cases of suspected abuse. During 

2003, RMA experienced a 20-percent increase in reviews 

associated OIG Hotline Referrals from the previous year. 

The Department is fully committed to improving upon the 

risk management tools available to America’s agricultural 

producers by preserving the integrity of the Federal Crop 

Insurance Program. I therefore expect to report continued 

progress toward that goal in future reports. 

Mike Johanns 

Secretary of Agriculture 

4 RISK MANAGEMENT AGENCY 
 

 

 

 

Executive Summary

USDA’s Risk Management Agency is 

dedicated to safeguarding the integrity of America’s 

agricultural community by inventing, creating, and 

implementing the best and most innovative methods to 

detect, deter, and prevent fraud within the crop insurance 

program. Each year RMA works toward this important 

mission by creating targeted methods to boost productivity, 

make cutting-edge technological innovations, and improve 

collaborative work with its partners in the anti-fraud alliance, 

Farm Service Agency (FSA) and Federal Crop Insurance 

Corporation (FCIC)-approved insurance providers. This 

annual report will highlight the progress RMA has made in 

these areas in 2003. 

This marks the third year this report has been issued, as 

is required by Section 515 (i) of the Federal Crop Insurance 

Act (7 U.S.C. § 1515) (the Act) entitled “Program 

Compliance and Integrity.” The Act, as amended by the 

Agriculture Risk Protection Act of 2000, mandates that 

RMA report on compliance with the Act by describing 

the methods employed to minimize instances of crop 

insurance fraud, waste, and abuse within the crop insurance 

program. As such, this report highlights specific cases of 

fraud, waste, and abuse and the specific actions RMA is 

taking to address them. Also discussed are key collaborative 

efforts with FSA and insurance providers as well as with 

the Office of Inspector General and other agencies within 

USDA to combat fraud. The report covers January through 

December 2003. 

This year RMA has made a number of significant steps 

forward in its mission to fight fraud, waste, and abuse and 

considerable success has been achieved as a result. Among 

the many accomplishments during 2003 are: 

■	 Developed productivity tools that will allow RMA 

to streamline work processes and improve the 

effectiveness of the Compliance Office efforts;
 

■	 Used innovative new technological approaches
 

to help RMA staff and partners conduct their 

work more efficiently, including new casemanagement and prioritization systems, data 

mining programs, remote imaging project, and 

electronic distance-learning training courses;
 

■	 Strengthened our collaborations with FSA, insurance 

providers, OIG, and a number of other partners 

who help RMA in the fight against fraud; and

■	 Achieved impressive results and savings
 

in cost avoidance and recoveries.
 

The results of these accomplishments have been 

significant, producing about $93 million in cost savings in 

2003, and almost $59 million in findings and recoveries. 

The number of policy reviews conducted by RMA also 

continues to grow, with more than 13,000 policies reviewed 

this year. 

Cost avoidance and findings and recoveries figures also 

continue to increase dramatically over time. In fact, over the 

3-year period since the Act was signed, RMA has achieved 

more than $288 million in cost avoidance and more than 

$127 million in findings and other recoveries. 

These impressive results demonstrate that the new 

tools and approaches RMA is developing to protect the 

livelihood of agricultural producers and the integrity of 

the crop insurance program are having a decidedly positive 

impact. They are allowing RMA to perform its mission 

to fight fraud, waste, and abuse ever more effectively, and 

are bringing substantial savings to the USDA, the U.S. 

Government, and the American taxpayer. 

In the pages that follow, more detailed descriptions of 

some of the projects RMA has focused on over the past year 

are provided. 

5 RISK MANAGEMENT AGENCY 
 

 

 

 

 

 

 

 

 

 

 

Productivity

Productivity
 

The work involved in combating insurance program 

fraud is extremely complex. Each year, the RMA Office of 

Compliance (the Compliance Office) conducts thousands 

of crop insurance policy reviews in order to monitor,

detect, investigate, and prevent fraud. The work involved 

in doing so is multi-faceted and requires a great deal 

of interaction and collaborative effort between a wide 

number of RMA organizational units and personnel in order 

to return optimal results. As such, the Compliance Office 

is continually looking for new ways to upgrade and refine 

work and review processes to increase productivity even 

further. RMA leaders believe that as the Compliance Office 

continues to make these processes more effective, RMA 

will also continue to boost the effectiveness of the crop 

insurance program for America’s agricultural producers.

In 2003 RMA took a significant step forward in building 

productivity and more effective collaboration by using the 

Speed in Business initiative. This section will highlight 

this initiative, as well as demonstrate the positive impact 

it and other tools and innovations implemented over the 

past 3 years are having on the Compliance Office’s work.

Speed in Business Program

Because of the large number of requests for program 

reviews RMA receives each year, the Compliance Office is 

faced with a challenge: how to address an ever-increasing 

workload with a limited amount of staff and resources. 

In 2003 RMA answered this challenge with the Speed in 

Business program. 

The Speed in Business program was designed to help 

RMA fulfill the expectations of both Congress and 

customers, America’s agricultural producers, by allowing 

RMA to work smarter and more efficiently. The program 

was developed by a private contractor called PRT Global, 

which worked closely with RMA to match the principles of 

the program to RMA’s needs. 

Using Speed in Business, RMA offices can systematically 

map out and analyze work processes in order to accomplish 

a number of productivity goals, including: 

■	 Reducing the amount of time it takes to 

perform tasks, or “cycle time”;
 

■	 Increasing the frequency with which tasks are completed 

correctly the first time, or “first pass yields”;

■	 Identifying and eliminating any existing constraints,
 

roadblocks, or non-value-added tasks;
 

■	 Evaluating and assigning priority to tasks through 

a set of established, uniform criteria;
 

■	 Managing the number of tasks initiated 

and pursued at one time;
 

■	 Learning from past errors and adjusting 

processes as a result; and
 

■	 Refining a system of measurement for work processes.

RMA determined that the Speed in Business program 

presented the Compliance Office with an excellent 

opportunity to meet workload challenges. The Compliance 

Office could use the program to develop a better way of 

addressing incoming insurance program complaints, as 

well as build an efficient and effective system to track and 

measure activity and performance. 

The Speed in Business program began in 2003 with 

an initial analysis of Compliance processes and used the 

Speed in Business principles to assess the potential for 

improvements. By doing so, the Compliance Office was 

able to discover how long each work process was taking to 

accomplish, how successful each of those processes were, 

and what potential existed in each case for improvement. 

The Speed in Business program also looked at the 

internal and external constraints that were impeding the 

Compliance Office’s ability to accomplish work at the 

highest level of effectiveness, including items such as high 

workload volume; lack of effective prioritization systems; 

bottlenecks such as excessive formal review and ineffective 

resource allocation; inadequate feedback and internal 

communication; lack or imbalance of staff program skills; 

and lack of a system for setting and measuring goals. 

The Speed in Business program then looked at the 

alternate methods the Compliance Office staff had been 

employing to get around these constraints, and assigned 

costs to these alternate methods of approach. Research 

showed that the alternate methods were adding extra 

6 RISK MANAGEMENT AGENCY 
 

 

 

 

 

-

 

 

 

Productivity

cost and inefficiency and that it would be far more cost 

effective to simply eliminate the constraints themselves 

than to continue working around them. RMA recognized 

that by eliminating these constraints through the Speed 

in Business program it could save the Compliance Office 

staff time and effort, save money, and better accomplish the 

Agency’s mission to serve America’s agricultural producers 

as effectively as possible. 

Based on this information, the Compliance Office 

developed a set of achievable productivity goals to work 

toward, including: 

■	 Improving cycle times and first pass yields; 

■	 Addressing the external factors that are creating 

impediments to task accomplishment;
 

■	 Establishing an effective measurement system; and

■	 Developing a scoring system to assess and prioritize 

the significance of incoming complaints in order 

to improve response time and case completion.

The Compliance Office has already begun moving swiftly 

toward those goals in 2003. It established a performance 

measurement system that will both show how the 

Compliance Office function is performing and help 

the Compliance Office better visualize the performance 

potential that is aimed for. The Compliance Office plans 

to update the measurements monthly to ensure that the 

productivity goals stay on track. 

RMA is also working with Tarleton State University’s 

Center for Agricultural Excellence (CAE) to create 

a scoring system to help assess and prioritize the 

significance of all complaints that the Compliance 

Office receives, which will allow improved response 

time to these complaints, as well as shorten the time 

it takes to complete case reviews. This scoring system 

will be discussed in more detail in the “Innovation” 

section of this report (page 8). 

In the upcoming year, the Compliance Office plans 

to use these tools as it continues to analyze, update, 

and refine processes in order to increase further the 

productivity and efficiency of its work. 

Compliance Productivity: A 3-Year Analysis

The Speed in Business program described above is 

one tool the Compliance Office is currently using 

to build productivity. But this is only one of many 

productivity boosters RMA has developed since 

ARPA to meet the challenges presented by the 

ongoing growth of the crop insurance program (see 

Appendix, figure 8, p. 39). RMA’s goal has always 

been to create increasingly effective Compliance 

Office processes; and as such, every training tool, 

technological advance, and collaborative process 

created and/or updated over time is done with the 

goal of increasing productivity and effectiveness. 

By analyzing the Compliance Office work over the 

past 3 years since ARPA was passed, RMA has clear 

evidence that the Compliance Office is meeting 

Source: USDA/Risk Management Agency 

2001 2002 2003 

Number of Policies Reviewed Figure 1. 2001 2003 

13,200

13,000

12,800

12,600

12,400

12,200

12,000

11,800

11,600

11,400

Source: USDA/Risk Management Agency 

2001 2002 2003 

Amount of Indemnities Figure 2. Uncovered in Final Determinations 

$

2,000,000

$

4,000,000

$

6,000,000

$

8,000,000

$

10,000,000

$

12,000,000

$

14,000,000

$

16,000,000

$

18,000,000

$

0

7 RISK MANAGEMENT AGENCY 
 

 

 -

 

 -

5

0

Productivity

Source: USDA/Risk Management Agency 

2001 

2002 

2003 

Figure 3. Sources of Policy Reviews 2001 2003 Percent 

Complaints/ 

Inquiries 

Program 

reviews 

CDP 

RCO & CAE 

Spotchecks 

OIG Hotline 

OIG 

Investigation 

RCO Datamining 

miscellaneous 

FSA Referrals 

IP Initiated 

30

25

20

15

10

this goal and becoming continually more productive and 

effective at what it does. This section will provide charts and 

analysis that demonstrate the progress made. 

The first graph (figure 1) shows the number of policies 

that the Compliance Office reviewed and processed for each 

of the last 3 years. As can be seen from the chart, the number 

of policy reviews has been steadily rising each year. While 

the crop insurance program has grown significantly over the 

past 3 years, RMA was able to boost efficiency—processing 

a higher amount of work with limited resources. 

The second graph (figure 2) represents the amount of 

improper indemnity payments (compensation for a claimed 

loss) that were uncovered by those Compliance Office reviews 

investigated and closed that year (final determinations). 

As the chart shows, the amount of potentially fraudulent 

indemnities the Compliance Office was able to uncover 

in reviews has risen each year, going from just under $4 

million in 2001 to over $17 million in 2003. This shows that 

RMA is uncovering more policy claims inconsistencies and 

incorrect indemnity payments than ever before. But even 

more importantly, it is clear that the amount of improperly 

paid indemnities being discovered in final determinations 

is increasing at an even faster rate than the number of 

policies being reviewed. This shows that, over time, RMA 

has been able to sharpen its focus and is zeroing in on the 

most significant cases of potential fraud more quickly and 

accurately. For information on the sources of the 2003 final 

determinations, see figure 10. 

Another interesting trend over the past 3 years has been 

the shift in where policy reviews have initiated. As shown 

in figure 3, when ARPA was first enacted in 2000 our main 

source of policy reviews came from comparing claims made 

by the same producers to both the crop insurance program 

nd the FSA Crop Disaster Program (CDP). However, 

in 2002, the Compliance Office’s focus began to shift to 

such areas as complaints and inquiries and FSA referrals, 

while the percentage of errors and irregularities uncovered 

through CDP went down. In 2003 there was another rise 

in reviews in more ARPA-related areas, including non-spotcheck data mining, spot checks, and insurance providerinitiated referrals. This shows that many of the tools and 

innovations that have been created, including the training 

and outreach provided to RMA’s collaborative partners 

(FSA and insurance providers), have had a significant effect 

on uncovering sources of potential fraud, waste, and abuse. 

8 RISK MANAGEMENT AGENCY 
 

 

 

$70,000,000

$60,000,000

$50,000,000

$40,000,000

$30,000,000

$20,000,000

$10,000,000

$0

 

-

 

Productivity

Table 1 – Cost Avoidance by Source, 2001-2003 

Cost Avoidance 2001

Dollars

2002

Dollars

2003

Dollars

RCO Spot Check 620,338 1,021,263

FSA Referrals 2,375,750 3,547,408 1,532,947

FSA Crop Disaster Program 2,370,975

OIG Hotline 4,824,304 2,337,314 2,746,780

OIG Investigation 1,408,375 4,513,633 249,024

Insurance Provider Initiated 345,596 362,078 577,334

Program Reviews 5,169,250 388,191

Other-Complaints/Inquires 5,256,985 2,861,532 4,409,059

RCO Non-spot-check Data Mining 31,829 829

Claims Audit 612,000

Subtotal 21,751,235 14,662,323 11,149,236

CAE Spot Check Data Mining 1 47,942,555 111,353,382 81,674,280 

TOTAL Cost Avoidance 2 69,693,790 126,015,705 92,823,516 

1 CAE Spot Check amended from $72,236,739: 2001 Annual Reports to Congress 2 Total Cost Avoidance Amended from $93,987,974: 2001 Annual Reports to 

Congress. See footnote 1. Source: USDA/Risk Management Agency 

Further proof of increasing productivity and effectiveness 

can be found by looking at the rise in all findings (initial 

findings and final determinations) as well as other important 

recoveries. As can be seen in the chart (figure 4), the dollar 

amount of findings and recoveries—policy payments 

the Compliance Office identified as being in error and/ 

or monies that have been returned to the crop insurance 

program due to discovered policy errors, prosecution, 

appeal processes, or fines—has improved significantly since 

the enactment of ARPA, going from just over $35 million 

in 2001 to almost $59 million in 2003. This means that 

in the past 3 years, efforts have resulted in a total of more 

than $127 million in findings and recoveries. This rise in 

the level of findings and recoveries provides more evidence 

that RMA is becoming steadily more successful at rooting 

out fraud, waste, and abuse. 

Moreover, RMA has had success not only in the discovery 

and recovery of program errors, but also in its efforts to 

prevent fraud and other program errors before they happen. 

This can be seen in the high level of cost avoidance that 

various Compliance Office efforts continue to produce. In 

the past 3 years RMA’s work and initiatives to stop fraud, 

waste, and abuse proactively have paid off, saving the 

USDA, the U.S. Government, and the American taxpayers 

over $288 million in fraudulent or other incorrect payments 

that may otherwise not have been identified until after the 

fact (table 1). 

The internal efforts, external collaborations, and program 

innovations the Compliance Office has made over the past 3 

years have produced a substantial rise in our productivity and 

efficiency, which in turn has brought about significant dollar 

amounts in terms of findings, recoveries, and cost-savings. 

In the remainder of this report, highlights are provided on 

some of the many innovations and collaborations that the 

agency built or refined in 2003 to keep these positive trends 

moving forward. 

Findings Source: USDA/Risk Management Agency 

Other Recoveries 2001 2002 2003 

Findings and Other Recoveries FIGURE 4. 2001 2003 

$20,892,263

$14,297,939

$9,476,594

$24,149,603

$10,058,452

$48,830,277

9 RISK MANAGEMENT AGENCY 
 

 

 

 

Innovation

Innovation
 

The previous section of the report focused on the 

Compliance Office’s work in discovering, developing, and 

utilizing innovative new approaches that build productivity 

and help combat fraud, waste, and abuse with increasing 

effectiveness. This section features some of the cuttingedge technological tools that are being used to do that.

Each of these tools is developed and designed specifically 

to help RMA—along with FSA and insurance providers,

RMA’s collaborative partners—to become more efficient 

and proactive in uncovering and combating patterns of 

fraud, waste, and abuse, as well as eliminating those 

patterns in the future.

Scoring and Prioritization System

After analyzing Compliance Office work processes with 

the Speed in Business program (p. 7), a decision was made 

that one solution for processing the heavy review caseload 

more efficiently would be to establish a scoring method for 

cases. Prior to this, the Compliance Office had no early way 

of sorting out which of the many complaints it received 

were the most critical or the most likely to indicate fraud. 

As such, each had to be given equal investigative time 

and weight, until it could be determined how significant 

the complaint really was. RMA recognized that by 

creating a system to measure and score each case based on 

predetermined criteria, the Compliance Office could then 

assign a priority level to each case. Doing so would allow 

the Compliance Office to adjust the balance of investigative 

efforts to focus staff time more heavily on the cases that 

displayed the most significant indicators of potential fraud. 

To create this scoring system, in 2003 RMA worked with 

CAE, a partnership between Tarleton State University and 

Planning Systems Incorporated. CAE is a data research and 

technology development center that also assists RMA with 

ongoing data warehousing and data mining projects (p. 

16). Using the vast store of information on insurance policy 

histories, past weather conditions, and other data stored in 

a data warehouse, CAE helped RMA design a system that 

can look at the insurance history of any individual producer 

and compare it against the histories of other producers who 

have insured the same crop in the same geographical area. It 

then takes the resulting information and gives the producer 

a score relative to the percentage of atypical policy behavior 

that a producer displays in comparison with his or her 

peers. 

More specifically, the system works this way. First, for 

any producer or policy under review, three independent 

measures are evaluated: 

1. Frequency of loss – The rate at which 

the producer has filed claims
 

2. Severity of loss – The percentage of loss claimed

3. Size of loss – The amount of indemnity paid

Each of these three measures is averaged from the 

producer’s insurance history over the previous 5 years. 

However, the averages are weighted so that more current 

policy activity has a higher value than older activity. Once 

each of these three measures is averaged they are put 

together to form a composite score. Where applicable, this 

score is also automatically adjusted to compensate for years 

with overall low or high loss levels. 

At the same time the system creates an average score for 

all producers growing the same crop in the same county or 

local geographic region as the producer being scored. This 

allows a comparison of the producer to his/her peers growing 

the same crop in the same area, and a determination if the 

producer’s insurance history reflects a discrepancy from the 

norm in that area. The producer is then assigned a score 

of 1 to 50, based on the level of discrepancy discovered. 

The higher the score, the higher the indication that this 

producer’s case should be investigated. 

In 2003, CAE ran an analysis of over 1.9 million 

policyholders to discover what percentage of them fell into 

each score level. The results are displayed in the chart below 

(table 2). 

Table 2 – Percent of Policyholders in Each Score Range 

Range of Scores Number of Producers Percent

0 to 9 1,448,486 73.82

10 to 19 324,883 16.56

20 to 29 138,993 7.08

30 to 39 45,819 2.33

40 to 50 4,130 0.21

Source: USDA/Risk Management Agency

10 RISK MANAGEMENT AGENCY 
 

 

 

Innovation

This scoring system can also be used in the same way to 

evaluate and score the historical behavior of insurance sales 

agents and loss adjusters. 

The CAE score accounts for half of the final prioritization 

score a producer, sales agent, or loss adjuster is assigned 

in the scoring system. In addition to the statistical score 

assigned by CAE, RMA also considers a set of five other 

factors for each producer that can serve as indicators of 

potential fraud: 

■	 Time sensitivity

■	 Prior history of complaints on the producer,

sales agent, or loss adjuster being analyzed

■	 Source of the complaint

■	 Type of alleged violation

■	 Amount of potential risk liability 

associated with the policy 

Each of these factors is assigned a number value and 

then all are added together to produce a score of 1 to 50. 

That score is then added to the CAE statistical score, for a 

maximum score of 100. 

A high score does not necessarily indicate fraud. 

However, higher scores do indicate an unusual level of 

atypical or irregular behavior, which indicates a higher 

probability for fraud. As such, this scoring system can be 

used as a preliminary case prioritization tool, allowing 

the Compliance Office to evaluate the relative potential 

for fraud present in each complaint received, and decide 

from that which complaints should be assigned the highest 

priority for investigation, and which should only receive 

warnings or other actions, saving time and money. 

The Compliance Office plans to use this scoring system 

in the future to streamline work, keep overhead down, and 

target fraud, waste, and abuse faster and more effectively. 

Case Management System

The scoring and prioritization system (p. 13) helps the 

Compliance Office decide which cases should be investigated. 

But once such decisions have been made and investigations 

are underway, other challenges arise. Insurance program 

investigations are complex and wide-ranging, and require 

collaboration and continual communication between many 

RMA personnel, often at a distance from each other. This 

can create difficulties in sharing information in a timely and 

efficient manner. 

In fact, prior to 2003, Compliance Office managers 

and staff were having difficulty managing, tracking, and 

determining the status of investigations. This was due to 

a number of issues, all related to the limitations of the 

electronic case management system being used at the time. 

Compliance Office staff felt that the networking system 

was difficult to use, which also deterred many from 

inputting information into it. In a similar vein, Compliance 

Office staff also felt that the system was particularly difficult 

to modify when policy or regulatory requirements changed. 

Additionally, the annual report to Congress RMA is 

mandated to create requires that the Compliance Office 

report on specific results and data, and the above-stated 

issues with this previous system made it very difficult to 

collect this data quickly and efficiently. 

It was clear that RMA needed to update its system 

to something that was easier to use, could be updated 

remotely, and could be modified without difficulty when 

requirements changed. So, in 2003, a contract with 

Paisley Consulting, Inc. was entered into to create a more 

efficient case management networking system using a 

software application developed by Paisley Consulting called 

MAGNUMTM. 

MAGNUM is a case management software that 

automates the investigative process and allows investigators 

and other Compliance Office staff to house, sort, and 

retrieve interrelated information on cases. 

The Compliance Office worked closely with Paisley 

Consulting to tailor-fit the MAGNUM application to 

RMA’s specific needs, and the system was designed and 

put in place in 2003. It answers a number of the previous 

case management issues. With this new system, RMA 

investigators and staff will be able to instantly: 

11 RISK MANAGEMENT AGENCY 
 

 

 

 

 

 

 

Innovation

■	 Store, search for, retrieve, and share electronic evidence 

and other case-related information quickly and easily;

■	 Document and track sources of complaints;

■	 Open electronic case files from any location;

■	 Create electronic complaint, subject, and witness profiles;

■	 Analyze the results of investigations;

■	 Produce reports profiling results of investigations;

■	 Track legal and law enforcement actions 

resulting from investigations;
 

■	 Report dollars lost and recovered by investigations;

■	 Look up the professional certifications of RMA 

investigators when a particular skill or experience 

set is required in an investigation; and/or
 

■	 Store all professional contact information gleaned 

from investigations in an on-line directory
 

Moreover, RMA investigators and other staff will be 

able to perform all of these functions anywhere they are, 

whether in the office or in a remote, off-line location. The 

system is easy to use and modify and it will result in a betterorganized, paperless, centralized electronic case information 

network that all RMA staff can benefit from. 

To ensure the Compliance Office staff would be able 

to utilize and interact with the MAGNUM system right 

away, RMA rolled out an aggressive training schedule. In 

two months (July and August 2003), eight training sessions 

were held for all those employees who would be using the 

new case management system. Training sessions were given 

in each Regional Compliance Office (RCO), and in our 

national District of Columbia office, and were conducted 

by one Paisley Consulting representative and one RMA 

representative. A makeup session was also offered in Kansas 

City for all those who had missed earlier trainings. Once 

this training was completed, RMA was able to release the 

new system to all of the Compliance Offices. 

The MAGNUM system has been up and running since 

September 2003. As of December 2003, the Compliance 

Office has already received and processed 1,598 source 

records into the system, and it is expected this number will 

grow rapidly in the coming year. The Compliance Office 

already has plans to add even more useful features to the 

system, including a way to track investigators’ time and 

expenses for each case, and methods for monitoring and 

evaluating the overall performance of this new system. 

Feedback will be gathered from employees as they use the 

system to help the Compliance Office continue to update 

and improve it, and ensure the continued success and 

efficiency of its work. 

Data Mining and Warehousing

In the two previous annual reports, the new data warehousing 

and data mining projects were highlighted. Working in 

partnership with CAE to incorporate the latest advances in 

database technology, a single, centralized “data warehouse” 

of all the crop insurance-related data that has been collected 

in RMA databases over time was created. Investigators and 

other RMA staff can then use this centralized data warehouse 

to search, or “mine,” all existing data records in order to 

compare policies and/or detect individual producers whose 

policies demonstrate atypical patterns, which in some cases 

can indicate fraudulent activity. Data mining can also be 

used to analyze and uncover larger national patterns that 

may indicate schemes for fraud, waste, and abuse. The results 

of such data mining techniques allow RMA to quickly focus 

efforts on the most problematic areas in the crop insurance 

program so they can be investigated and corrected. Previous 

to the development of these tools it was extremely difficult, 

and sometimes even impossible, for RMA to conduct this 

sort of historical research and data analysis since the various 

types of data records were stored in different databases that 

used conflicting data models. 

CAE continues to maintain the data warehouse and 

conduct data mining analysis for RMA. The data warehouse 

now contains more than a billion records, including: 

■	 All RMA Reinsurance Year policyholder 

data from 1991 to present;
 

■	 30 years of weather data;

■	 Annual National Agricultural Statistics Service 

(NASS) data from 1950 to present; and
 

■	 RMA actuarial data. 

12 RISK MANAGEMENT AGENCY 
 

 

 

 

i i

 

 

$180,000,000

$160,000,000

$140,000,000

$120,000,000

$100,000,000

$80,000,000

$60,000,000

$40,000,000

$20,000,000

$0

 

 

 

 

Innovation

2001 Annual Report to Congress CAE Spot Check Amended from $72,236,739 

Source: USDA/Risk Management Agency Other Cost 

Avoidance Structures 

$80,000,000.00

$60,000,000.00

$40,000,000.00

$20,000,000.00

$0.00

CAE Spot Check 

Datam n ng 2001 2002 2003 

Figure 5. RMA Total Cost Avoidance 

$47,492,555

$21,751,235

$11,353,382

$14,662,323

$81,674,280

$11,149,236

The data warehouse is updated monthly. Data mining 

activities are currently taking place from the warehouse, and 

the findings from such mining activities are saving RMA 

and American taxpayers millions of dollars by preventing 

cases of fraud, abuse, and loss before they occur. In fact, 

in 2003 alone, the CAE spot check list derived from data 

mining saved the insurance program $81.6 million in cost 

avoidance, for a total of more than $288 million in cost 

avoidance over the first 3 years of the project. Further, data 

mining has accounted for a large percentage of RMA’s total 

cost avoidance figures for the past 3 years (figure 5). RMA 

expects such savings to continue and perhaps increase as the 

Agency moves forward with the program. 

One data mining method that has proven to be a 

particularly effective and proactive deterrent to fraudulent 

activity is the RMA spot check list. Each year, RMA 

develops a list of agricultural producers whose operations 

warrant an on-site inspection during the growing season. 

After the RCO’s review the list, it is passed on to FSA so 

its staff can conduct growing-season inspections of the 

producers on the list. 

CAE produced the 2003 spot check list by mining data 

collected the previous year (2002). The evaluation produced 

a list of 2,049 producers whose patterns appeared to be 

atypical compared to others in their region. RMA’s RCOs 

then reviewed the list of names and added an additional 459 

producers based on their field observations. This additional 

list is referred to as the RCO Spot Check list in this report. 

The combined list was shared with the local FSA offices and 

insurance providers related to the producers on the list, and 

growing-season inspections were conducted. RMA also sent 

letters to all producers identified in the spot check process, 

informing them they were on the list and identified for a 

growing-season inspection. 

As a result of this process, statistics show a substantial 

reduction in indemnities paid to producers on the 2003 

spot check list. For instance, in 2002 all the producers who 

would eventually be named on the 2003 spot check list 

claimed $187 million in indemnity payments. But, in 2003, 

after they had been informed they were on the spot check 

list, the indemnities claimed by these producers decreased 

to $106 million (figure 6). 

This pattern has been consistent over the past 3 years 

the spot check list has been in use (figure 7). As a result 

of the 2001 spot check list, indemnity claims for farmers 

on the list dropped from $145 million to $97 million. In 

2002 spot check list producers’ total indemnities dropped 

from $234 million to just over $122 million. And, as stated 

above, indemnities dropped from $187 million to $106 

million in 2003. From these 3-year results ($241 million 

in reduced indemnities), it is evident that producers who 

knew they were on the list chose to file far fewer claims for 

much less indemnity than they ever had before. 

Source: USDA/Risk Management Agency 

$200,000,000

2002 2003 

Spot Check List (Producers Followed 

Over Time) for 2003 (Produced from 

2002 Data) Reduction of CY 2003 Figure 6. Idemnity from $187 Million to $106 Million 

13 RISK MANAGEMENT AGENCY 
 

 

Premium

Spotcheck Year

Year After SPC

 -

 

 

Innovation

Further, when these yearly indemnity reductions are 

compared with the amount of insurance premium the 

producers are buying each year, it becomes clear that the 

amount of insurance this group of producers is purchasing 

has remained fairly constant. However, their claimed 

indemnities have decreased to levels much closer to their 

premiums -- indicating the spot check list is helping to 

create a more sound premium/indemnity balance than had 

existed in the past. Clearly, the spot check results shown in 

figures 6 and 7 demonstrate how financially beneficial the 

data mining and warehousing program is to RMA in the 

prevention of erroneous indemnity payments. Further, the 

program has proven to be cost-effective. The data mining 

project budget was planned for an initial 5-year period with 

a total cost of approximately $18 million. But, as mentioned 

earlier, in only the first 3 years of the project, the CAE spot 

check list alone has saved the crop insurance program more 

than $241 million in cost avoidance through lower claims 

and indemnity payments. This means that for every dollar 

RMA spends on data mining, the Agency saves more than 

$18 in program costs. Projected to the end of the contract, 

the ratio will approach $20 saved for each $1 expended. 

Source: USDA/Risk Management Agency 

Idemnity 

Spot Check List (Producers Followed Over Time) 2001 2003 

Crop Year 2001-2003 

Spotcheck Lists 

Premium & Idemnity 

Figure 7. 

$240,000,000

$220,000,000

$200,000,000

$180,000,000

$160,000,000

$140,000,000

$120,000,000

$100,000,000

$80,000,000

$60,000,000

$40,000,000

$20,000,000

$0

14 RISK MANAGEMENT AGENCY 
 

 

 

 

 

 

 

 

Innovation

In addition to the spot check list, CAE has implemented 

and continues to develop several dozen other data mining 

products that have produced savings that are not yet 

estimable, including: 

■	 Development of a “scoring system” so RCOs 

can prioritize entities for investigation;
 

■	 Identification of individual adjusters who work 

all or almost all of a particular agent’s claims,
 

and comparison of these adjusters’ claims 

and actions against those of their peers; 

■	 Identification of insurance providers with 

overpaid claims and an overall account of the 

overpaid indemnities paid each year;
 

■	 Discovery of “lost producers”—those who were 

previously on the spot check list, but have 

started insuring under some other Social Security 

number or tax identification number; and
 

■	 Development of a simple, user-friendly interface 

that allows executive-level users to access 

and identify necessary information easily.
 

More program cost savings are anticipated as a result of 

these innovative data mining tools, and will be reported in 

the future. 

Further, the results during the first 3 years of this project 

have encouraged RMA to develop more investigative data 

mining scenarios. The following are some of the projects 

CAE is currently working on, which RMA plans to deploy 

in the near future: 

• Developing actuarial tools to help evaluate final 

planting dates, map rates, and map areas;
 

• Providing Geographical Information Systems 

(GIS) and weather information as an investigative 

tool for analyzing indemnity claims;
 

• Integrating GIS and weather information into data 

mining scenarios in order to better reflect actual 

growing conditions encountered by producers; and
 

• Developing simulation technology to 

help evaluate pilot programs.
 

These ongoing developments are only a few examples of 

the research and development RMA has planned for 2004 

and beyond. Working with CAE, the Compliance Office 

will continue to develop more insight into schemes that 

help expose patterns of fraud, waste, and abuse. RMA is 

confident that the cost savings experienced so far through 

the use of data warehouse and data mining programs will 

continue as a result of these upcoming developments. 

Remote Sensing and Imaging

In the 2002 annual report to Congress, RMA’s pilot remote 

sensing program was highlighted. This program allows 

agency personnel to quickly capture digital aerial images of 

large areas of farmland, which can then be viewed across 

a variety of light ray spectra in order to reveal valuable 

information about crop conditions. This technology 

provides the ability to detect and document important crop 

insurance-related items such as: 

■	 Whether a producer failed to plant a 

crop in a timely manner, or at all;
 

■	 The type of crop planted;

■	 The overall health of the crop;

■	 Atypical weather and disaster-related crop damage 

such as hail, drought, flood, freeze, etc.;
 

■	 Disease and insect damage to a crop;

■	 Nutrient or water deficiencies;

■	 Chemical pollution and/or overspray of crops; and

■	 Any percentage of reported acreage not planted.

Remote sensing images can also be used not just to reveal 

information about individual farming entities, but also to 

monitor an entire agricultural area to compare the growing 

conditions of one agricultural entity against another in the 

same area. 

This advanced technological approach can produce 

increased efficiency and savings for the crop insurance 

program in a variety of ways. For instance, once remote 

digital images are captured, they can be instantly uploaded 

15 RISK MANAGEMENT AGENCY 
 

Innovation

to a computer and geo-referenced, indexed, superimposed 

with a grid system for identification, and analyzed for 

the kinds of factors stated above in only a few minutes— 

information that beforehand would have taken far more 

time, labor, and expense to gather on the ground, if it 

was possible to gather at all. Further, the digital images 

and information gathered can be copied onto CD-ROM 

or transmitted anywhere over the Internet for the use of 

investigators and staff, making access to information and 

communication between staff easier, and Compliance 

Office investigations more efficient. Finally, and perhaps 

most importantly, these images can capture a vast amount 

of acreage in only a few hours, something that would take 

investigators on the ground much more time to cover. As 

such, RMA is able to save time, money, and labor costs 

and is able to focus more quickly on potential trouble spots 

identified by the remote images. 

In last year’s report, a discussion was provided on how 

this technology was used effectively by RMA’s Western 

Regional Compliance Office (WRCO) to monitor the 

California raisin crop in the fall of 2002. The success of 

this first remote sensing effort has prompted many more 

RCOs to begin using remote satellite imagery to conduct 

investigations. However, until 2003 there was no technology 

in-house to analyze remote images—RMA was dependent 

on contractors to conduct all such analysis. It was decided 

that since remote sensing was beginning to be used much 

more widely within RMA offices it would be faster and 

more cost-effective for the agency to purchase software that 

would allow investigators and other RMA staff to do this 

analysis on their own. 

To answer this need, in 2003 RMA purchased Kodak’s 

Environment for Visualizing Images (ENVI) software. 

ENVI software provides RMA with easy-to-use and 

advanced remote sensing image analysis capabilities. ENVI 

allows RMA staff to read a wide variety of satellite and 

other remote images, and to conduct hyperspectral analysis 

of these images to detect crop conditions not visible to the 

human eye. 

Along with ENVI, RMA has established a USDA 

Satellite Imagery Library by teaming with the USDA 

Foreign Agricultural Service (FAS) Satellite Library. FAS 

will maintain this library for RMA. This library gives RMA 

access to over 10,000 agricultural satellite images dating 

back to 1985. RMA can run these images through the 

ENVI software to gain targeted information on the growing 

history of a particular crop or agricultural region, presently 

or over time. 

These tools will give RMA a multitude of benefits in the 

coming years. First, they will allow the Compliance Office 

to better determine if certain cases are worth pursuing. If 

the images confirm that there is a discrepancy between 

what has been reported in a claim and what is evident 

from the remote image analysis, the Compliance Office 

knows that the case needs to be pursued. Conversely, if no 

inconsistencies are discovered, spending time and resources 

on an unnecessary investigation can be avoided. 

Second, based on successes with remote sensing 

technologies in the past, it is believed that the technologies 

will work as a significant deterrent to those agricultural 

producers who might otherwise have filed fraudulent 

claims. The raisin crop example from 2002 suggested that 

when producers are aware this kind of imaging technology is 

being used there is a marked drop in false claims. Therefore, 

use of these technologies will be publicized throughout our 

various agricultural regions. 

Finally, even if certain producers decide to ignore the 

proactive deterrent approach above and still choose to file 

a fraudulent claim, the technology will provide the ability 

to avoid many lengthy court cases and investigations RMA 

might otherwise have had to conduct. This is because, often, 

when producers have filed a false claim and are shown that 

the Compliance Office has imagery that contradicts their 

claim, they are generally willing to settle quickly without a 

court hearing. 

RMA expects to fully implement the use of these new 

remote sensing analytical tools in 2004. In the spring of 

2004 all RCOs will be visited to load the software onto the 

offices’ computers and to train staff on how to use these 

tools to conduct crop analysis. Plans are also being made to 

continue building more value into the system by integrating 

the ENVI software with both FSA actuarial maps and GIS 

software to provide even more detailed information and 

analysis on various agricultural regions. 

16 RISK MANAGEMENT AGENCY 
 

 

Innovation

High-Tech Training

In 2001, in compliance with the training requirements 

of ARPA, RMA began developing a training program 

to instruct our alliance partners and RMA staff about 

the Compliance Office practices and how to detect and 

prevent fraud. The trainings were intended to give everyone 

involved in the Compliance Office investigative process a 

clear understanding of what our overall goals were, how 

each team member’s work fits into those goals, and how to 

conduct that work in the most effective way possible. 

In 2001 the training process began with a classroombased training module on loss adjustment and a module 

on compliance and oversight. In 2002, two cutting-edge 

distance-learning courses were developed. 

The first of these two trainings, our Anti-Fraud Training, 

entitled The First Line of Defense, was given to all relevant 

RMA staff and alliance partners during 2002. The other 

course, the Crop Monitoring Training, was issued in 2003. 

The Crop Monitoring Training, developed in conjunction 

with mGen Incorporated and Norwich University, is an 

interactive course that can be taken at any location through 

a web-based medium or on CD-ROM. The program is 

intended to help the more than 3,000 FSA county and 

State office employees and district directors across the 

country better familiarize themselves with the information 

and reporting procedures included in the Loss Adjustment 

Manual (the manual which contains the specific procedural 

requirements for adjusting a loss and correctly filing a claim 

for payment). 

Using animation, photos, and interactive quizzes to 

keep trainees engaged, the course walks them through key 

sections of the Loss Adjustment Manual that relate to crop 

monitoring. The following topics are covered: 

■	 FSA’s Role in ARPA

■	 Crop Insurance Policies and Procedures

■	 Overview of Plans of Insurance

■	 Entities & Shares

■	 Unreported Acreage 

■	 Special Farming Practices

■	 Documenting Findings & Unusual Situations

■	 Crop Insurance Definitions & Acronyms

■	 Unit Determination

■	 Verifying Causes of Loss

■	 Acreage Determination

■	 Establishing Production

■	 Adjustment to Production

■	 Farm Stored Production

■	 Crop Monitoring (Performing Growing 

Season & Pre-Harvest Inspections)
 

■	 Prevented Planting & Late Planting

Each section is stand-alone so, depending on scheduling 

and availability, trainees are able to take a few sections of the 

course and then come back at a later time to take the next 

few. After users have taken all sections of the training they 

are given a final examination via computer to verify that 

they have understood all the material, and the score results 

are sent to RMA. 

The Crop Monitoring training course was put on RMA’s 

online management learning system in June 2003. To date, 

81 percent of FSA personnel designated to take the course 

have done so. Of those who have taken the test, the average 

exam score was 91.5 percent. RMA plans to complete 

training for the remaining 19 percent of personnel who 

have not yet taken the course in 2004. 

It is important to note that these interactive trainings 

are groundbreaking for RMA. It is the first time RMA has 

used an electronic medium to deliver quality control/loss 

adjustment-related training, and already the benefits of this 

type of training have become clear. First, the interactive nature 

of the training helps to make the complex information in 

the Loss Adjustment Manual clear and easy to understand. 

Further, unlike trainings in traditional classrooms, the 

training is always accessible and able to be reviewed. Finally, 

training by this method provides significant cost-savings 

over the costs of flying in personnel from across the country 

to traditional classroom trainings in centralized locations. It 

is estimated that the initial training delivered through this 

medium has saved in excess of $400,000 so far. Because 

these training efforts have produced such positive results, 

RMA plans to continue developing effective distance 

learning courses in the future. 

17 RISK MANAGEMENT AGENCY 
 

 

 

 

 

 

 

 

 

Collaboration

Collaboration
 

This section of the report will demonstrate how 

collaborative efforts between RMA, FSA, the insurance 

providers, OIG, and other anti-fraud alliance partners have 

resulted in bringing some high-profile cases of fraud and 

potential fraud to justice. It will also discuss RMA’s many 

other ongoing collaborative partnerships and show some 

specific examples of how these collaborations work.

High-Profile Collaborative Investigations

The Warren Case 

On October 8, 2003, a Federal indictment was returned 

against Robert Warren, Viki Warren, and R&V Warren 

Farms, Inc. (Warren Farms), as well as against a licensed 

insurance agent, a crop insurance claims adjuster, and two 

employees of Warren Farms. The indictment charged that 

those named had been involved in an elaborate scheme to 

defraud RMA and private insurance companies of more than 

$12 million from 1997 onward. The indictment contended 

that the Warrens, who primarily grew tomatoes on farms in 

North Carolina, South Carolina, and Tennessee, conspired 

to defraud the USDA and these private companies through 

a variety of methods, including: 

■ Filing fraudulent applications for crop insurance and 

then filing false loss claims under these policies;

■	 Submitting falsified production records,
 

planting dates, and harvesting dates;
 

■	 Creating thousands of false, altered, and forged 

documents to support these fraudulent insurance claims;

■	 Staging false weather disasters to 

substantiate false crop damage claims;
 

■	 Using false records to file a fraudulent civil 

suit against a neighboring farm; and
 

■	 Attempting to create false farming entities that 

would appear to be run independently of Warren 

Farms, as well as creating false reports and forged 

documents in support of these attempts.
 

The other individuals named in the indictment were also 

charged with assisting in these efforts. 

This important case of potential fraud was brought to 

light through the collaborative work of RMA and fellow 

agencies. Initially, the Compliance Office received a call 

from the North Carolina State Bureau of Investigations in 

2001 concerning information that suggested that Warren 

Farms was improperly receiving crop insurance payments. 

The Compliance Office immediately referred the case to the 

OIG and an investigation was begun. 

OIG requested the assistance of the Compliance 

Office’s Special Investigations Branch (SIB) throughout 

the investigation. They first asked that RMA look at the 

Warrens’ past crop insurance files to determine if it appeared 

that fraud had taken place. To aid in this process, RMA 

notified the crop insurance provider the Warrens were using 

at the time, and asked them to monitor closely Warren 

Farms’ upcoming 2001 crop by conducting growing season 

inspections and an Actual Production History (APH) 

review, in which a production estimate is made for the 

upcoming crop. 

When the SIB reviewed Warren Farms’ records they 

uncovered some major inconsistencies. They found that the 

Warrens were involved in a civil suit against a neighboring 

farm, where they had claimed that herbicide spraying from 

the neighboring farm had caused major damage to their 

tomato crop. In order to demonstrate that this herbicide 

damage had created a significant profit loss for them that 

year, the Warrens had submitted records that showed their 

production yields in previous years had been very large. 

However, when RMA looked at the Warrens’ insurance 

policy records for the same years, they found a significant 

difference in the production yield reported. For instance, 

the Warrens’ civil suit production records claimed that in 

1999 one of their farms had a yield of 2,215 cartons of 

tomatoes per acre. Whereas, the Warrens’ 1999 insurance 

production yield records for that same farm claimed only 

62.92 cartons per acre. 

Additionally, when the insurance provider returned the 

2001 APH review production estimate RMA had requested, 

RMA compared this estimate against the production the 

18 RISK MANAGEMENT AGENCY 
 

Collaboration

Warrens had actually reported in 2001. Again, there was 

a substantial difference between the two items, with the 

Warrens reporting a lower production amount than had 

been estimated they should produce. 

With the potential for fraud firmly established the 

investigation deepened, with RMA assisting OIG 

throughout by reviewing records and participating in 

interviews. FSA also assisted OIG and RMA in their efforts 

by providing farm histories and aerial photographs to 

establish crop history and acreage for several farms. RMA 

and OIG also worked together to have satellite imagery 

analyzed in order to reveal information such as when and 

if crops were planted, the amount of acreage planted, and 

crop conditions. RMA and OIG also received additional 

investigative assistance from the Internal Revenue Service 

Criminal Investigations branch, the North Carolina State 

Bureau of Investigations, and the Henderson County 

Sheriff’s Office. 

Ultimately, the case uncovered a number of alleged abuses 

of the crop insurance program, and the case was referred 

to the U.S. Attorney’s office. The U.S. Attorney’s office 

presented the case to a federal grand jury. On October 8, 

2003, a Federal indictment was returned by the grand jury. 

Among other items, the indictment alleged that thousands 

of the documents the Warrens and their conspirators had 

created to establish both their pre-coverage production 

history and their current crop yields were false or had been 

entirely forged. The indictment also alleged that since 1997 

the Warrens had been deliberately adjusting yield records 

and reporting false yields for many of their farms in order to 

maximize crop insurance indemnity payments. Further, the 

indictment alleged that the Warrens and their employees 

had attempted to create false photographic evidence of a 

hail storm and resulting crop damage by throwing ice and 

moth balls onto fields and photographing them, as well as 

beating the plants with sticks to make them appear damaged. 

The indictment further alleged that the Warrens had also 

attempted to create and falsely document fraudulent farm 

“fronts” that would appear to be run independently of 

Warren Farms, which, had these “front producers” been 

established, would have allowed the Warrens to receive 

insurance at a lower rate for those farms, and possibly come 

under less scrutiny when loss claims were filed. 

As a result of the indictment, in December 2003 RMA 

suspended the Warrens and George Kiser (an insurance 

agent allegedly involved in the fraud) from participation in 

the crop insurance program. A separate, related indictment 

was made against a crop insurance loss adjuster, crop 

insurance agent, and employee of Warren Farms who were 

also involved in the alleged fraudulent activity. As a result 

RMA has also suspended that adjuster and insurance agent 

from participating in the crop insurance program. The 

Warren Farms employee entered into a plea agreement 

that excluded him from participation in the program for 

5 years. 

Due to the excellent collaborative work between RMA 

and its partners, this case is now due to go to trial in 2004. 

The conspiracy count in the indictment carries a maximum 

penalty of 5 years’ imprisonment; the false statement counts 

each carry a maximum penalty of 30 years; the money 

laundering counts each carry a maximum penalty of 20 

years; the perjury and obstruction of justice counts carry a 

penalty of up to 5 years each; and the continuing financial 

crimes enterprise count carries a mandatory minimum 

sentence of 10 years’ imprisonment, with a maximum of 

life imprisonment. 

The Peterson Case 

On December 1, 2003, the United States Attorney’s 

Office filed a civil complaint alleging a group of producers 

in northwestern Minnesota had defrauded the U.S. 

government of more than $4 million worth of agricultural 

subsidies and over $675,000 in fraudulent crop insurance 

payments. The complaint contended that, from 1996 

to 2002, seven individuals conspired together to receive 

false crop insurance payments and circumvent the limit 

on subsidies that individual producers can receive each 

year. According to the complaint, they did so by filing 

false information with USDA claiming they were running 

three separate farming operations—Peterson Farms (one of 

the largest recipients of farm aid in the Nation), Division 

III Farms, and Keywest Farms—when they were actually 

all operating out of the same base. The complaint also 

contended that some of the individuals who were receiving 

subsidies were not actively involved in farming. 

This high-dollar potential fraud case came to light as a 

result of effective collaborations, which RMA was a part of. 

The case was initially flagged by FSA, which had received 

19 RISK MANAGEMENT AGENCY 
 

 

 

Collaboration

complaints about irregular behavior in the operations 

alleging issues such as lack of planting, late and/or improper 

planting, and other poor farming practices. FSA looked 

into these complaints and felt there might be a need for 

further investigation. 

FSA then referred the case to OIG and RMA, indicating 

there was potential for possible payment limitations fraud 

and crop insurance fraud. Both OIG and RMA’s Special 

Investigation Branch and Northern Regional Compliance 

Office (NRCO) investigated the situation further, with 

OIG checking all three operations to see if they were indeed 

separately owned or not, and RMA checking into the 

operations’ crop insurance records. As these investigations 

continued, both agencies continued to discuss and 

compare findings. Eventually, it was discovered that 

misrepresentations had been made on crop insurance 

applications, acreage reports, and production worksheets. 

Additionally, it was discovered that these three separate 

entities had all been operating out of the same address until 

late in the investigation. At this point, both agencies felt 

the case indicated potential fraud and referred it to the U.S. 

Attorney’s office. 

Due to this extensive collaborative effort between RMA 

and its partners a civil complaint was subsequently filed 

with the District of Minnesota. The criminal division is 

considering this case for criminal prosecution as well. The 

case is expected to come to trial in 2005. 

The Huber Case 

In the 2002 annual report to Congress, RMA demonstrated 

how its collaborative work brought to light a high-dollar 

fraud case perpetrated by Duane Huber, Huber Farms 

General Partnership, and Huber Farms, Inc. Through 

a combined effort between FSA, RMA, and OIG, it was 

discovered that Huber, an agricultural producer and crop 

insurance agent, had set up five sham farm operations and 

had paid others to place the operations under their names 

so that he could acquire excessive crop insurance and 

Federal farm program payments. The case was brought to 

trial by the U.S. Attorney’s office, and in November 2002 

a Federal court criminally convicted Huber of 19 counts of 

fraud, racketeering, and tax and conspiracy charges. Huber 

was ordered to forfeit $5.9 million for money laundering, 

conspiracy to defraud Federal agencies, false statements, 

and filing false tax returns in connection with Federal farm 

and crop insurance programs administered by USDA. 

After the 2002 conviction a sentence was handed down 

on June 4, 2003. Duane Huber, Huber Farms General 

Partnership, and Huber Farms, Inc. were sentenced in 

the Federal District Court of North Dakota. Huber 

was ordered to serve 60 months in prison, followed by 3 

years of supervised release. He was also ordered to forfeit 

$5,876,970, pay a special assessment of $1,800, and pay 

$13,800 towards the cost of prosecution. Huber Farms 

General Partnership was placed on probation for 3 years 

and ordered to pay a special assessment of $4,000. Huber 

Farms, Inc. was also placed on probation for 3 years, and 

was ordered to pay a special assessment of $800. 

As a result of the trial, RMA has suspended Duane Huber, 

Huber Farms General Partnership, and Huber Farms, Inc. 

from future participation in the crop insurance program as 

an insured producer, crop insurance agent, and/or owner of 

an agency selling crop insurance in any capacity. The North 

Dakota Insurance Department has also served a Cease and 

Desist order and filed an administrative complaint against 

Huber to revoke his agent’s license. 

Huber’s defense team has filed an appeal of the verdict 

and sentencing. The U.S. Attorney’s office has also filed an 

appeal of the verdict and sentencing. A hearing is scheduled 

for 2004 with the 8th Circuit U.S. Court of Appeals. 

RMA’s collaboration on this case was integral to its 

successful prosecution. Agency personnel assisted the OIG, 

Internal Revenue Service, and the U.S. Attorney’s Office 

throughout the criminal prosecution and testified at the 

criminal trial. 

Collaborative Partnerships

The high-profile case examples above represent just a few of 

the many ways in which RMA collaborates regularly with 

anti-fraud alliance partners and other agencies to maintain 

the integrity of the crop insurance program. The following 

sections will give details on many other collaborations that 

RMA contributes to, and will give some “Collaboration in 

Action” case examples that show how these collaborations 

work and how they are producing successful results. 

20 RISK MANAGEMENT AGENCY 
 

Collaboration

Working with FSA

FSA is one of the strongest allies in the fight against fraud, 

waste, and abuse. FSA personnel serve as firsthand observers 

in the field and can provide RMA with invaluable, on-theground analysis and feedback about the farming operations 

in their areas. RMA, in turn, works to provide them with 

the help and information they need to monitor agricultural 

producers as effectively as possible. This is done through: 

■ Spot check referrals; 

■ 4-RM Handbook referrals; and

■ Consultation with FSA State committees.

Each of these areas will be discussed below.

SPOT CHECK REFERRALS 

As explained in the section of this report on data mining 

(p. 16), each year RMA uses data mining technology as 

well as analysis and past loss experience to develop a list 

of producers with notable policy irregularities such as 

unusually high loss ratios, high frequency of losses, and 

severe losses. RMA provides this list every April to the 

appropriate FSA county Offices, whose staffs review these 

cases for potential fraud, waste, and/or abuse by performing 

inspections, or “spot checks,” of the farming operations on 

the list. The FSA county Offices then refer their findings 

back to RMA and the Agency then provides these results 

to the appropriate insurance providers for those operations. 

At the same time RMA sends notification by letter to all 

producers who are on the list. 

In previous years the spot check list has served as an 

excellent preemptive risk management and cost-avoidance 

tool, and continues to do so in 2003. As was discussed in 

the section on data mining, statistics show a substantial 

reduction in indemnities paid to producers on the spot 

check list this year. For all producers whose names appeared 

on the 2003 spot check list, indemnities paid out decreased 

from more than $187 million in 2002 to $106 million in 

2003. This means the spot check list and its collaborative 

process allowed RMA to save $81 million in unwarranted 

indemnity payments. These statistics indicate that the list is 

acting as a deterrent to fraudulent claims because producers 

who know they are on the spot check list are choosing to 

file far fewer claims for much less indemnity than they have 

in the past. This pattern has been consistent over the 2 

previous years and continues to be so this year. 

Collaboration in Action: Spot Check Uncovers Fraud in 

Towner County, North Dakota — 

The Towner County, North Dakota producer involved in 

this case was identified and put on the spot check list as a 

result of the data mining process. The data showed that there 

was some irregular policy behavior in the producer’s crop 

insurance history, which could be an indicator of fraudulent 

activity. RMA provided FSA with the information, which 

FSA evaluated. FSA confirmed that the producer should 

be spot checked. The producer’s insurance provider was 

then informed, and was asked to perform a growing season 

inspection on the producer in 2003. That year the producer 

had made a prevented planting claim (stating that he 

was unable to plant his crop due to adverse conditions). 

The insurance company performed an inspection of the 

producer’s records and land and discovered no evidence 

that the producer had even attempted to prepare his land 

for planting, or had in any other way prepared to plant a 

crop. As a result, the producer’s prevented planting claim 

was denied, producing a cost avoidance of $245,111 for 

crop year (CY) 2003. 

4-RM REFERRALS 

Another collaborative effort between RMA and FSA is the 

4-RM referral process. However, in this case, instead of 

RMA providing information to FSA, as in the spot check 

referrals process above, 4-RM referrals originate from the 

observations of FSA county Office personnel in the field 

and are then sent to the RMA RCOs for follow-up. To 

help conduct this referral process as easily and smoothly as 

possible, RMA and FSA developed a procedural guide for 

staff to follow called the 4-RM Handbook, FCIC Program 

Integrity. 

In 2003 FSA county Offices submitted 143 4-RM 

referrals to RMA, representing 224 different crop policies. 

The RCOs evaluated these referrals and also continued 

processing and closing referrals made prior to 2003 that 

were still outstanding. Any referrals that ultimately revealed 

21 RISK MANAGEMENT AGENCY 
 

 

 

 

 

Collaboration

improper claims or policy filing were then referred to the 

appropriate insurance providers, who could then deny 

indemnity payments. 

Year-end numbers show that all 4-RM cases that were 

validated and resolved in 2003 resulted in a total of more 

than $1.5 million in cost avoidance. This means that over 

the past 3 years 4-RM referrals have produced more than 

$7.4 million in cost avoidance so far. Some of the 2003 

referrals still remain under review, and it is expected this 

amount will increase as further cases are resolved. 

Collaboration in Action: 4-RM Referral Results in $118,632 

in Savings -- 

The Texas State FSA Office referred the following case of 

suspected fraudulent activity to RMA’s Southern Regional 

Compliance Office (SRCO) in 2003. A producer was alleged 

to be involved in activities that could produce unnecessary 

crop failure, such as poor farming practices, and failing to 

properly maintain his crop. The SRCO evaluated the referral 

and asked the producer’s insurance provider to conduct 

growing season inspections on the producer’s 2003 cotton 

crop. The insurance provider did so, and determined that 

there was loss of production on four units of the crop that 

was due to negligence or mismanagement by the producer 

or his employees. The company also determined that the 

producer failed to follow good farming or irrigation practices 

and there was loss of production due to failure or breakdown 

of irrigation facilities or equipment, an uninsurable cause 

of loss. Further, the company determined that one unit 

was uninsurable because it was planted following a small 

grain crop that had reached the heading stage. As a result, 

the producer’s loss claims for his cotton crop were denied, 

resulting in a total cost avoidance of $118,632 with a 

reduction in the producer’s insurance premium of $2,868. 

CONSULTATION WITH FSA STATE COMMITTEES 

In 2001 RMA and FSA State Committees worked together 

to create procedural guidelines for each agency’s consultation 

responsibilities included in the 4-RM Handbook. Those 

procedures were then put in action, and have continued 

through 2003. 

This year RMA and FSA State Committees continued 

working together to improve program compliance and 

integrity and ensure that procedures remain clear and 

effective. As such, in 2003, RMA Regional Offices (ROs) 

referred 84 issues to the FSA State Committees for review 

and consultation. The FSA State Committees referred seven 

issues to the RMA ROs. 

As a result of discussions between the two agencies, RMA 

made a number of procedural changes (see “Collaboration 

in Action” section below for one such example) and also 

amended RMA’s procedural responsibilities in 2003. These 

amendments will allow RMA to continue to build on the 

efficiency of the consultation process by: 

■	 Adding a procedure for FSA State and County 

offices to follow when providing details and 

information on specific cases to RMA;
 

■	 Providing direction on what steps RMA should 

follow when it identifies producers who are 

suspected or confirmed not to be following the 

crop insurance program regulations properly;
 

■	 Giving procedural guidelines for how RMA should address 

special policy changes (“policyholder alerts”); and

■	 Adding instruction for both RMA and FSA on 

how to proceed when producers have submitted 

questionable program information.
 

In order to monitor and continually refine the consultation 

and referral process, documentation of this process through 

the FSA Consultation electronic log and tracking system 

will continue. This system creates forms, generates reports, 

and documents background information on all requested 

changes to the consultation procedure, including where 

the request for a change originated (FSA or RMA), what 

issues or conditions prompted the change, and what the 

final decision was on whether or not to add the proposed 

change. 

In 2003 RMA ROs also continued to provide annual 

informational updates to the FSA Committees about crop 

insurance issues, provided FSA offices with program fact 

sheets, and conducted review meetings on the consultative 

process. 

22 RISK MANAGEMENT AGENCY 
 

 

 

 

 

 

 

 

Collaboration

Collaboration in Action: RMA and FSA Find Solution to 

Final Planting Date Problems in Washington State --

Washington State’s FSA Committee referred an issue to 

RMA regarding the final planting dates for potatoes and 

cabbage in western Washington State. In the case of the 

potato final planting dates, producers in the area were finding 

that in years with wet weather conditions, the required final 

planting date set by RMA policy (May 31) was too early to 

grow productive early- and mid-season potato varieties. The 

FSA State Committee and Extension Service brought this 

issue to RMA’s attention and suggested that RMA change 

the policy’s final planting date to June 15, which would help 

the farmers grow a better crop without creating a decrease in 

yield or quality. RMA evaluated the suggestion and changed 

the final planting date in Skagit County, Washington for 

early and mid-season potato varieties to June 15, while the 

original May 31 date was maintained for those producers 

growing full-season varieties. 

A similar situation existed regarding final planting dates 

for cabbage producers in the region. Due to the quick 

spoilage rate of cabbage, only a certain amount can be sent 

to markets at a time. This means producers need to time 

their growing and harvesting to accommodate a staggered 

schedule. As such, producers in the Pierce County, 

Washington region were finding the final planting date for 

cabbage required by RMA (July 31) to be too restrictive 

to follow without causing production problems. The FSA 

State Committee and Extension Service referred the issue 

to RMA, recommending that the date for Pierce County 

be extended by 5 days, which they believed would help the 

farmers to produce crops without any reduction in yield. 

After reviewing the recommendation, RMA revised the 

final planting date for Pierce County to August 5. 

Working with Insurance Providers

Along with FSA, insurance providers—those agents, 

adjusters, and other insurance personnel who provide 

and oversee the policies—are valuable allies in the first 

line of defense against fraud, waste, and abuse. Insurance 

providers are directly involved with the policies and 

producers/policyholders at the local level and therefore can 

give RMA and FSA valuable information about suspicious 

claims activity. They can also assist anti-fraud efforts by 

reviewing and investigating claims and managing the claims 

adjustment process. Referrals from insurance providers help 

the Compliance Office maintain a proactive approach to 

combating potential fraud since the majority of these kinds 

of referrals are investigated before the insurance providers 

pay claims to the producers. RMA will continue to work 

closely with insurance providers to detect, prevent, and 

correct fraudulent activity. 

Collaboration in Action: Tip from Insurance Provider Produces 

$97,611 in Cost Avoidance -- 

This case came to light through a tip provided by a local 

insurance provider to RMA’s NRCO. This referral from the 

insurance provider questioned a North Dakota producer’s 

prevented planting claim in CY 2002. The company also 

questioned the amount of wheat production reported by 

the producer. RMA conducted a review of the producer 

and discovered that while he had reported he had been 

unable to plant about 800 acres of his wheat and soybean 

crops due to adverse conditions, he had actually planted the 

crops in this acreage. RMA also found that the producer 

had misreported his 2002 wheat production. In some of 

his production documents, he assigned production to CY 

2001 when in fact it was produced in 2002. As a result of 

these findings, the insurance provider corrected the payable 

indemnities allowed. These corrections resulted in a total 

cost avoidance of $97,611. 

Other Important Collaborations

SPECIAL INVESTIGATIONS BRANCH 

The Special Investigations Branch (SIB) is a division of 

the Compliance Office. As was described in the cases 

highlighted at the opening of this section on collaboration 

(pp. 24 – 27), SIB investigates significant, high-profile cases 

of alleged fraud, waste, and abuse for RMA and collaborates 

on investigations with the OIG, RMA RCOs, and FSA. 

Once a suspected case of fraud is substantiated, SIB 

investigators refer the case to OIG, which is responsible for 

investigating the case further and referring suggested cases 

for prosecution to the U.S. Attorney’s office. RMA’s SIB 

investigators provide direct assistance to the OIG during their 

criminal investigations, including executing search warrants, 

conducting interviews, and providing courtroom testimony. 

23 RISK MANAGEMENT AGENCY 
 

Collaboration

On occasion SIB also makes referrals to State or local 

prosecutors regarding insurance fraud. They can also refer 

cases for Federal civil action to the U.S. Attorney’s office 

through the OIG or the USDA’s Office of General Counsel 

(OGC). Additionally, SIB may refer cases to the RMA 

Administrator for disqualification of producers, insurance 

agents, loss adjusters, insurance providers, and others who 

violate program rules. 

This year SIB investigated 27 major cases in which 878 

crop insurance policies were reviewed. The total indemnity 

involved in these policies was over $46 million. These reviews 

resulted in an operational cost avoidance of $1.3 million 

and final findings of $419,000 in overpaid indemnities. 

Further, the SIB assisted the U.S. Attorney’s Office in 

seven cases involving either civil action, criminal action, or 

both. In the criminal cases the courts ordered approximately 

$5.8 million in asset forfeiture and $116,000 in restitution. 

An additional $20,400 was ordered in special assessments 

and other charges. 

Collaboration in Action: SIB Investigation Uncovers 

$1,176,439 in Indemnity Overpayments -- 

The RMA Midwestern Regional Compliance Office 

(MRCO) participated in a collaborative effort to investigate 

a family of potato producers in Bay City, Michigan who 

appeared to be providing false statements and concealing 

production amounts in order to obtain an FSA loan and 

crop insurance payments. During MRCO’s investigation 

of the producers’ crop insurance and claims records, they 

uncovered evidence that appeared to indicate that the 

producers had combined harvests from two different farms 

in order to claim that the majority of production was only on 

one farm. By doing this the producers could claim a loss on 

the farm that appeared to have low production and receive 

crop insurance indemnity payments. MRCO’s analysis 

found that, at the same time the producers had done this, 

they were already processing and marketing the harvested 

potato production that was actually grown on both farms. 

MRCO also found that the invoices and purchase orders 

provided by the producers as evidence of production losses 

were inadequate and did not accurately reflect the amount 

of production on each unit. Additionally, the OIG searched 

the producer’s residence and place of business and seized 

records that also showed there was substantially more 

potato production sold by them than the producers had in 

fact claimed they produced. These omissions, along with 

the failure to provide all harvested production, caused 

indemnity overpayments of approximately $1.2 million for 

CY 1992-1996. 

This evidence resulted in the U.S. Attorney’s office filing 

both a civil and criminal complaint. As a result of the 

indictment the insureds were suspended from participating 

in the crop insurance program. Though the criminal trial 

found the insureds not guilty, the civil trial is still pending 

and the SIB is currently working with the Assistant United 

States Attorney’s office (AUSA) to prepare the case for civil 

prosecution through the Affirmative Civil Enforcement 

program. At the request of the AUSA, the producers’ 

suspension from the crop insurance program will be 

continued until the civil complaint is settled. 

OFFICE OF THE INSPECTOR GENERAL 

RMA collaborates with OIG and provides significant 

support to OIG during the investigation and prosecution 

of criminal fraud cases. Another vehicle for OIG and RMA 

collaboration is the OIG Hotline. 

The OIG Hotline is a toll-free, confidential phone service 

to which anyone may report conditions they believe reflect 

dishonest agricultural practices. OIG screens the calls and 

refers certain cases to RMA to research, investigate, and 

take corrective action as needed. Once an RCO’s review is 

completed the results are sent to OIG so they can be entered 

in its hotline tracking system. 

During 2003 RMA reviewed over 1,200 policies 

associated with OIG Hotline Referrals, which marks a 20-

percent increase in reviews from the previous year. RMA 

was able to resolve 56 percent of the 280 cases associated 

with these policies. These investigations resulted in more 

than $2.7 million in cost savings and uncovered $630,000 

in overpaid indemnities. 

Collaboration in Action: OIG Referral Uncovers Sham Farm 

Scheme and $1,780,332 in Overpaid Indemnities -- 

OIG sent a hotline referral to RMA regarding five 

policyholders in western South Dakota. NRCO investigated 

these policyholders and found that the individuals had 

24 RISK MANAGEMENT AGENCY 
 

 

 

 

 

 

 

Collaboration

devised a “front producer” scheme in which they set up 

sham farm operations under the name of individuals who 

were not actually farming these operations. Instead, the 

profits and insurance payments for these operations were all 

being channeled to one producer. Further, the investigation 

showed that these front producers were intentionally filing 

false insurance loss claims. For instance, evidence showed 

that some of the individuals filed prevented planting claims 

in CY 1999 when they would have actually been able to 

plant their crops. Additionally, in CY 2000 they reported 

high yields that they were unable to support with records. 

This misrepresentation and false reporting resulted in 

subsidy and indemnity overpayments totaling $1,780,332. 

The case was then passed to the U.S. Attorney’s Office, who 

is preparing the case for indictment, expected to occur in 

2004. 

MANUAL 14 

Manual 14, entitled Guidelines and Expectations for the 

Delivery of the Federal Crop Insurance Program, is a document 

that sets the minimum requirements for training, qualitycontrol review procedures, and performance standards for 

insurance providers issuing FCIC policies. The purpose of 

Manual 14 is to establish oversight and quality control of 

insurance providers’ performance. 

Manual 14 requires insurance providers to follow certain 

regulations in order to administer FCIC policies. To ensure 

that insurance providers are following these policies, 

Manual 14 also requires that RMA conduct regular reviews 

of insurance providers’ compliance with FCIC procedures. 

One such review is the Compliance Crop Insurance 

Contract Review. Under this review, the insurance provider 

must conduct compliance reviews of a certain number of 

statistically selected indemnity claims from the previous 

crop year based on the number of active contracts they have 

(with a minimum requirement of 50 reviews conducted 

for any provider). Insurance providers must verify that 

each of these examined claims was accurately reported 

to RMA, and that all documented information provided 

by the policyholder, sales agent, and loss adjuster is true 

and accurate. FSA State Offices also assist in this review 

process by providing producer information, maps, and 

other program information and documents to insurance 

providers by request. The FSA State Offices are integral to 

this process because they provide third-party verification of 

producer information that helps both insurance providers 

and RMA confirm that crop insurance indemnities were 

properly paid. 

During 2003 all FCIC-approved insurance providers, 

with the assistance of FSA, completed 1,680 Compliance 

Crop Insurance Contract Reviews of CY 2002 indemnity 

claims, representing 43 crops in 40 States. Of these 1,680 

reviews, the insurance providers uncovered 86 improper 

policy errors. 

RMA is also currently developing a system of conducting 

operational reviews of insurance providers to assess their 

overall compliance with the terms and standards of Manual 

14. Part of this new review process will allow RMA to 

estimate a rate-of-error percentage for individual insurance 

providers. The first operational review of an insurance 

provider is expected in 2004. 

SANCTIONS 

RMA has the authority to impose administrative sanctions 

on producers who abuse the crop insurance program. RMA 

is able to disqualify and impose civil fines against producers, 

agents, loss adjusters, and insurance providers involved in 

fraudulent activities. Further, RMA has the authority to 

disqualify these individuals from both the crop insurance 

program and most other farm programs. RMA can also 

impose a civil fine for each violation up to the total dollar 

amount the individual obtained as a result of the false or 

inaccurate information provided, or $10,000, whichever 

is greater. Referrals for sanctions are processed by RMA’s 

Sanctions Office and the Appeals, Litigation, and Liaison 

staff (A&L). 

Sanctions Office and A&L responsibilities include: 

■	 Reviewing all incoming sanction recommendations 

for adequate evidence and completeness;
 

■	 Preparing complaints;

■	 Working with OGC to secure legal sufficiency;

■	 Briefing the RMA Administrator on all cases 

and securing required signatures;
 

■	 Filing documents with the Administrative Law Judge;

■	 Participating in all aspects of the appeals 

process when invoked, including providing 

litigation support and attending hearings;
 

■	 Ensuring all interested parties are notified 

when sanctions are imposed;
 

■	 Collaborating with OGC to develop evidence and 

documentation standards for sanctionable activities; and

■	 Working with RMA RCOs to ensure that their sanctions 

referrals meet these newly developed standards.

25 RISK MANAGEMENT AGENCY 
 

Collaboration

Table 4 – Witness Request Activity - January 1 through 

December 31, 2003
 

Number of Requests 19

Requests Approved 14

Requests Denied 0

Requests Withdrawn 5

Requests Pending 5

Source: USDA/Risk Management Agency

A&L also processes referrals and appeals for suspension and 

debarment under 7 Code of Federal Regulations (C.F.R.) § 

3017, and performs similar functions to those listed above 

for that process. 

This year both offices continued their lead role in 

processing disqualification actions against those involved in 

fraudulent crop insurance activities. From January through 

December 2003, 56 sanctions referrals were received. 

Of these, 19 sanctions were imposed in the form of 

disqualification from the program, debarment, suspension, 

and/or civil fines (table 3). Another 60 sanctions cases are 

pending legal action. 

A&L is also responsible for responding to requests, both 

for RMA employees to appear as witnesses in cases in which 

RMA is not a party to the lawsuit and for subpoenas for 

the production of documents. The appearance of an RMA 

employee at a judicial proceeding provides significant 

support to an insurance provider in its efforts to uphold 

the integrity of the crop insurance program. As such, these 

witness requests have increased significantly during the 

past few years. In the last 3 calendar years alone (2001 

to 2003) RMA has received 82 witness requests; whereas 

only 28 such requests were received over the entire period 

of 1992 to 2000. This increase in witness requests, both 

those made and those subsequently approved by RMA 

(table 4), demonstrates our willingness to provide support 

to RMA insurance providers when policies are challenged 

in arbitration or other legal proceedings. 

Collaboration in Action: Sanctions Referral Results in 

Disqualification, Civil Fines -- 

In 2003 sanctions and civil fines were imposed against a 

North Dakota producer and a loss adjuster for willfully and 

intentionally providing false and inaccurate information 

to FCIC and the producer’s insurance provider. This case 

was uncovered through a collaborative effort between FSA, 

RMA NRCO, and the Sanctions and A&L offices. 

Initially, the North Dakota FSA found a discrepancy in 

a local producer’s production records. The producer had 

reported to the crop insurance program that his entire wheat 

acreage was not harvested. Later, the producer filed for crop 

disaster assistance and indicated that some of his acreage had 

been harvested. The North Dakota FSA notified NRCO of 

this discrepancy and NRCO investigated further. 

NRCO discovered that, in February 1999, the producer 

and the loss adjuster on the claim had backdated production 

and appraisal worksheets stating that inspections had 

Table 3 – Sanctions Processed - January 1 through December 31, 2003

CURRENT STATUS OF REFERRALS

Sanction Type: Disqualification Debarment Suspension Civil Fines

Referred (open) 22 12 19 3

Completed (sanction imposed) 3 2 10 4

Declined (lacked legal sufficiency) 10 2 0 10

Appealed or Withdrawn 1 0 0 0

Pending (w/A&L, OGC, ALJ, or DOJ) 33 12 11 4

Source: USDA/Risk Management Agency

26 RISK MANAGEMENT AGENCY 
 

Collaboration

taken place in July 1998 as well as February 1999. In fact, 

NRCO found that no inspection had occurred in July at 

all. However, despite failing to make an on-site inspection 

to account for the harvested production on the producer’s 

claim forms the adjuster recommended the claim be paid, 

resulting in a $3,112 overpayment. 

NRCO then referred this case for possible sanctions. 

After a review by the A&L staff a settlement was reached 

with both parties. The producer was disqualified from the 

crop insurance program for 1 year beginning October 15, 

2003, and received a civil fine of $1,500. The loss adjuster 

received a civil fine of $2,000. 

DETECTION OF DISPARATE PERFORMANCE 

Using data mining technology RMA can analyze statistical 

information on insurance agents whose policies have paid 

out loss claims that were 150 percent or more above the 

average for other agents in their local area—a disparity that 

can indicate fraudulent activity. Similarly, the data mining 

process can identify insurance adjusters who consistently 

reported significantly lower production yields (both 

harvested and unharvested) than their peers, which resulted 

in indemnity payments that were 150 percent or greater 

than the average for that area—another condition that may 

indicate suspicious activity. 

Beginning in 2001, the CAE produced an annual report 

of agents and adjusters whose records reflected disparate 

behavior. This list identified the top 5 percent of agents 

who had the greatest disparities in loss claims relative to 

their local agricultural production area. It also identified the 

most egregious cases of adjusters who consistently reported 

lower production yield figures than their peers. 

Copies of the 2003 list produced by CAE have been 

distributed to the insurance providers. RMA is planning to 

have a session with the insurance providers in 2004 to go 

over the results of this year’s list and provide follow-up data 

information on the agents and adjusters identified on the 

list. At that time RMA will also provide insurance providers 

with a new 2004 list. 

DATA RECONCILIATION 

RMA and FSA began development of a Common 

Information System (CIS) in 2003, which included a 

preliminary meeting of agency and crop insurance industry 

personnel and completion of the Office of Management 

and Budget and USDA’s Office of the Chief Information 

Officer’s required documents. This project is designed 

to identify common and unique producer information 

reported to both agencies and to reduce the reporting 

burdens of producers, FSA, and insurance providers. The 

CIS project will improve the efficiencies of data exchange 

and reconciliation between RMA, FSA, and insurance 

providers. CIS will also bring a reduction of duplicate acreage 

information required to be reported to both programs, 

reduce misreporting and program abuse, and satisfy the 

ARPA requirement for reconciliation of producer-reported 

information to FSA and RMA. 

CIS is being developed to address the requirement in 

Section 10706(b) of the 2002 Farm Bill, which states: “The 

Secretary shall ensure that all current information of the Federal 

Crop Insurance Corporation and the Farm Service Agency is 

combined, reconciled, redefined, and reformatted in such a 

manner so that the agencies can use the common information 

management system developed under this subsection.” CIS is 

also an important part of the President’s E-Government 

initiative. 

The scope of the project includes four components of 

core information: (1) producers (entities) and shares; (2) 

farm, field, and unit identifiers; (3) crops and acreage; and 

(4) production information required by both agencies. It 

is recognized that some program differences exist between 

FSA and RMA programs. To the extent that such program 

rules differ, allowances will be maintained to account for the 

differences. In areas where the rules are similar, efficiencies 

should be possible. CIS will interface with approved RMA, 

FSA, USDA, and insurance provider applications collecting 

and reporting common information. CIS will allow RMA, 

FSA, other USDA branches, and insurance providers 

access to use the shared, common information reported by 

producers. 

Collaboration in Action: Data Reconciliation Uncovers 

$258,789 in Overpaid Indemnities -- 

In 2003, the Eastern Regional Compliance Office (ERCO) 

closed a case of fraud perpetrated by an Indiana popcorn 

and soybean producer. A referral on this producer originally 

came in from FSA’s Crop Disaster Program. After RMA and 

FSA shared data to uncover discrepancies and investigated 

further it was discovered that the producer was farming 

three farms and shifting the harvested crops between the 

three farms in order to adjust the production records in 

a way that would improve his ability to claim losses and 

receive higher indemnity payments. The producer also failed 

to keep separate production records for each farm. These 

actions resulted in overpaid indemnities totaling $258,789. 

The producer’s insurance provider is attempting to recover 

the overpaid indemnity amounts and the case is currently 

being reviewed for possible administrative sanctions. 

27 RISK MANAGEMENT AGENCY 
 

 

 

 

 

 

 

 

 

Results

Results
 In 2003 RMA’s Compliance Office continued to work 

towards an ever-increasing level of productivity,

innovation, and collaboration in an effort to fight fraud,

waste, and abuse in the crop insurance program. This 

work has produced a number of successful results.

Among other achievements described in this report, in 

2003 RMA’s Compliance Office has:

■	 Conducted 13,088 policy reviews (p. 9; Appendix, p. 40)

■	 Uncovered more than $17 million in incorrect 

indemnity payments (p. 9; Appendix, p. 41) 

■	 Recovered approximately $59 million in findings 

and recoveries (p. 11; Appendix, p. 42) 

■	 Produced more than $92 million 

in cost avoidance (p. 12)
 

■	 Initiated the Speed in Business program 

to boost productivity (pp. 7-9) 

■	 Developed ways to manage and prioritize 

caseload more effectively (pp. 15-16) 

■	 Employed innovative technologies to proactively 

fight fraud, waste, and abuse (pp. 16-22)
 

■	 Created cutting-edge training tools (pp. 22-23)

■	 Investigated and uncovered high-dollar fraud cases 

and assisted in bringing them to justice (pp. 24-27)

■	 Heightened collaborative efforts with FSA, insurance 

providers, OIG, and other partners (pp. 27-36)

These are only some of the highlights of what has been 

accomplished this year. Such work adds to the efforts that 

have been made over the past 3 years to fulfill RMA’s ongoing 

mission to protect the integrity of the crop insurance 

program for America’s agricultural producers. Since the 

first issuance of this annual report in 2001, increasingly 

substantial results have been achieved, including a total of 

more than $127 million in findings and other recoveries, 

and more than $288 million in cost avoidance. 

Going forward into 2004 and beyond, RMA will 

continue its efforts to support the country’s agricultural 

producers by striving to boost productivity, increase 

innovation, strengthen collaborations, and eliminate fraud, 

waste, and abuse. 

28 RISK MANAGEMENT AGENCY 
 

 

$41,000,000

$40,000,000

$39,000,000

$38,000,000

$37,000,000

$36,000,000

$35,000,000

$34,000,000

 -

ources of Policy Reviews January - 

otal number of policies reviewed: 13,088

 

 

Appendix

Appendix
 

Source: USDA/Risk Management Agency 

LIABILITY (in thousands) 

2001 2002 2003 

Figure 8. Program Growth 2001 2003 

$36,732,900

$37,311,355

$40,647,509

S December 2003 Figure 9. T

Source: USDA/Risk Management Agency 

Complaints & Inquiries (2,572) 

Program Reviews (2,374) 

NS. Provider Initiated (613) 

2003 RCO Spot Check (238) 

2003 CAE Spot Check (1,445) 

2002 Spot Check (427) 

2001 Spot Check (143) 

2003 Data Mining (787) 

2002 Data Mining (273) 

2001 Data Mining (65) 

Data Reconciliation (160) 

2003 FSA 4-RM Referral (224) 

2002 FSA 4-RM Referral (231) 

2001 FSA 4-RM Referral (378) 

FSA CDP 2001/2002(676) 

FSA CDP 2000 (400) 

FSA CDP 1999 (2) 

OIG Hotline (1,255) OIG Audit (49) 

OIG Investigations (732) 

29 RISK MANAGEMENT AGENCY 
 

Findings and Other Recoveries 2003

 . Total: $58,879,729

Source: USDA/Risk Management Agency

 

 

 

Appendix

Figure 11 

Findings ($48,830,277) 

Criminal Cases ($7,427,645) 

Civil Penalty ($14,500) 

400.169 Amount Adjusted ($1,690,587) 

BCA Decision ($367,488) 

BCA Settlement ($558,232) 

2003 Idemnities Identified in Final Determinations Figure 10. Total Idemnities: $17,042,246 

Source: USDA/Risk Management Agency 

RCO Spotcheck 2002 ($149,431) 

RCO Spotcheck 2001 ($31,710) 

Datamining 2003 ($80,438) 

Datamining 20002 ($26,211) 

FSA Referrals 2002 ($560,895) 

CDP 2001/2002 ($49,750) 

CDP 2000 ($1,961,638) 

Claims Audit/M14 ($222,451) 

OIG Hotline ($630,322) 

OIG Audit ($2,878,400) 

Complaints & Inquiries ($7,414,654) FSA Referrals 2001 ($185,596)

Program Reviews ($156,314) 

IP Initiated ($825,218) 

IP Initiated ($825,218) 

30 RISK MANAGEMENT AGENCY 
 

- 

Appendix

TOTAL

 OVERVIEW BY CASE SOURCE (Reporting Period: January 1 - December 31,2003)

A B C D E F G H I J K L

2003 RCO 

SPOT CHECK 

AD-2027

2003 CAE 

SPOT CHECK 

AD-2027

2002 SPOT 

CHECK 

AD-2027

2001 SPOT 

CHECK

AD-2027

2003 DATA 

MINING

2002 DATA 

MINING

2001 DATA 

MINING

DISPARATE 

PERFOR

MANCE

DATA 

RECONCILIATION

2003 FSA 

4-RM

AD-2007

2002 FSA 

4-RM 

AD-2007

2001 FSA 

4-RM 

AD-2007

S

C

O

P

E

1 TOTAL CASES 36 58 61 50 35 26 15 3 1 145 110 94

2 TOTAL POLICIES 238 1,445 427 143 787 273 65 0 160 224 231 378

3 TOTAL PREMIUM $2,933,602 $16,290,199 $4,278,574 $2,693,581 $10,808,846 $4,261,491 $4,224,037 $0 $794,983 $3,142,108 $2,133,291 $2,742,203

4 TOTAL LIABILITY $28,475,549 $117,807,758 $28,712,056 $20,624,042 $73,785,100 $32,573,012 $36,016,584 $0 $6,184,456 $16,537,620 XXXXXXXX $18,635,646

5 TOTAL IDEMNITY $2,150,154 $18,625,658 $8,838,111 $7,800,440 $24,100,342 $6,241,135 $10,457,321 $0 $2,223,451 $2,210,239 $3,987,330 $6,518,770

6 CLOSED CASES 6 0 53 42 4 16 12 1 1 38 66 86

7 CLOSED POLICIES 213 0 411 134 348 133 49 0 160 70 177 212

8 CLOSED PREMIUM $2,694,068 $0 $3,983,849 $2,483,235 $6,110,614 $1,587,603 $865,300 $0 $794,983 $970,301 $2,723,461 $3,037,976

9 CLOSED LIABILITY $26,749,707 $0 $27,155,681 $18,693,715 $43,764,960 $11,669,895 $8,292,746 $0 $6,184,456 $4,215,790 $11,933,603 $15,163,555

10 CLOSED IDEMNITY $1,726,436 $0 $9,136,501 $7,191,048 $24,100,342 $4,101,999 $1,837,184 $0 $2,223,451 $812,141 $3,063,320 $6,678,059

R

E

S

U

L

T

S

11 # INITIAL FINDINGS 0 0 0 1 0 1 0 0 0 3 10 18

12 INITIAL PREMIUM

DISCREPANCY $0 $0 $0 $0 $0 $305 $0 $0 $0 $15,561 $48,646 $77,432

13 INITIAL IDEMNITY

DISCREPANCY $0 $0 $0 $4,596 $0 $3,698 $0 $0 $0 $4,278 $1,037,039 $326,105

14 # FINAL FINDINGS 0 2 21 4 2 3 0 0 0 3 19 23

15 FINAL PREMIUM

DISCREPANCY $0 $66,977 $45,131 $4,327 $192 $234 $0 $0 $0 $4,552 $82,196 $11,734

16 FINAL IDEMNITY

DISCREPANCY $0 $0 $149,431 $31,710 $80,438 $26,211 $0 $0 $0 $0 $560,895 $185,596

17 # CASES OIG

INVESTIGATION 0 0 0 1 0 0 0 0 0 0 0 4

18 # OPERATION

RECOMMENDATIONS 0 1 5 1 0 0 0 0 0 2 2 0

19 OPERATION COST 

AVOIDANCE $0 $245,111 $644,107 $132,045 $0 $829 $0 $0 $0 $221,864 $942,604 $368,479

20 OPERATION 

QUESTIONED COSTS $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $110,000

21 # PROGRAM 

FINDINGS 0 0 0 0 0 0 0 0 0 0 0 0

22 # PROGRAM

RECOMMENDATIONS 0 0 0 0 0 0 0 0 0 0 0 0

23 PROGRAM COST

AVOIDANCE $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

24 PROGRAM 

QUESTIONED COSTS $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

25 # CLOSED CRIMINAL 

CASES 0 0 0 0 0 0 0 0 0 0 0 0

26 $ CLOSED CRIMINAL

CASES $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

27 # CLOSED CIVIL

CASES 0 0 0 0 0 0 0 0 0 0 0 0

28 $ CLOSED CIVIL

CASES $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

A

c

t

i

o

n

s

29 # SANCTIONS 0 0 0 0 0 0 0 0 0 0 0 0

30 CIVIL MONETARY 

PENALTY $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

31 # 400.169

DETERMINATIONS 0 0 0 0 0 0 0 0 0 0 0 0

32 # 400.169 $ AMOUNT

ADJUSTED $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

33 # BCA DECISIONS/

SETTLEMENTS 0 0 0 0 0 0 0 0 0 0 0 0

34 $ BCA DECISION $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

35 $ BCA SETTLEMENT $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

31 RISK MANAGEMENT AGENCY 
32 RISK MANAGEMENT AGENCY 

-

 

X Y

Appendix

M N O P Q R S T U V W

FSA

CDP

2001/2002

FSA

CDP

2000

FSA

CDP

1999

CLAIMS

AUDIT/

MANUAL 14

OIG 

HOTLINE OIG AUDIT OIG INVESTIGATIONS

INS.

PROVIDER

INITIATED

PROGRAM 

REVIEWS

COMPLAINTS

and 

INQUIRIES

Total

464 181 3 47 280 14 63 102 54 629 2,471

676 400 2 44 1,255 49 732 613 2,374 2,572 13,088

$2,935,967 $4,331,408 $198,409 $1,461,899 $13,518,221 $4,836,784 $20,255,995 $6,656,015 $5,109,095 $40,994,822 $154,601,530

$24,652,653 $29,119,806 $1,069,279 $20,646,917 $113,277,502 $34,064,408 $137,417,500 $60,781,658 $44,139,961 $421,928,602 $1,280,856,359

$5,484,272 $5,753,670 $735,765 $4,720,162 $24,757,876 $29,330,431 $48,715,856 $12,265,758 $12,816,116 $80,389,562 $318,122,419

188 128 1 44 158 7 16 44 40 407 1,364

300 306 2 44 505 30 166 423 1,714 1,280 7,738

$889,923 $3,056,861 $198,409 $1,630,341 $8,916,250 $4,368,180 $5,193,100 $9,477,113 $2,916,567 $24,623,031 $97,469,624

$7,461,157 $21,785,258 $1,069,279 $22,406,749 $67,895,456 $30,925,908 $33,002,051 $75,567,008 $23,147,678 $244,405,428 $780,634,205

$3,463,274 $8,036,437 $735,765 $4,980,643 $32,712,909 $27,457,373 $14,865,045 $39,998,111 $7,624,128 $74,192,296 $286,354,297

17 22 2 0 21 0 21 4 42 69 231

$2,371 $54,130 $19,855 $0 $549,886 $0 $42,328 $376,337 $63,510 $1,594,983 $2,845,344

$453,980 $531,207 $689,722 $0 $2,274,406 $295,312 $13,860,445 $1,784,251 $540,307 $3,611,941 $25,417,287

19 187 0 1 17 20 15 17 60 126 539

$2,771 $363,436 $0 $3,534 $221,777 $741,257 $1,198,301 $82,851 $72,816 $623,314 $3,525,400

$49,750 $1,961,638 $0 $222,451 $630,322 $2,878,400 $1,869,218 $825,218 $156,314 $7,414,654 $17,042,246

0 2 0 0 0 0 1 1 1 19 29

0 0 0 0 6 0 0 4 0 10 31

$0 $0 $0 $612,000 $2,746,780 $0$ $249,024 $577,334 $0 $4,409,059 $11,149,236

$0 $0 $0 $0 $1,305,961 $0 $2,172,163 $0 $0 $0 $3,588,574

0 0 0 0 0 0 0 0 0 3 3

0 0 0 0 0 0 0 0 2 3 5

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

0 0 0 0 0 0 2 0 0 7 9

$0 $0 $0 $0 $0 $0 $6,683,120 $0 $0 $744,525 $7,427,645

0 0 0 0 0 0 0 0 0 0 0

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

0 0 0 0 0 0 0 0 0 0 19

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $14,500

0 0 0 0 0 0 0 0 0 0 22

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $1,690,587

0 0 0 0 0 0 0 0 0 0 2

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $367,488

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $558,232

Z AA

2002 Spot 2001 Spot 

Check Check

45 80

3,283 1,900

$21,352,407 $10,810,175

$157,872,061 $93,518,611

$26,187,031 $10,578,057

$175,093 $42,000

2003 RCO 

Spot Check

35

571

$5,924,218

$59,920,163

$4,494,978

$0

2003 CAE 

Spot Check

26

2,730

$19,994,526

$149,515,565

$27,271,338

$0

PROGRAM COMPLIANCE AND INTEGRITY • ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2003 32
Table 5 – Overview by Case Source for 2003

Source: USDA/Risk Management Agency