United States 

Department of 

Agriculture

Risk 

Management 

Agency

Released 

December 2010

Program Compliance and Integrity

Annual Report to Congress

January - December 2005
The U.S. Department of Agriculture (USDA) prohibits discrimination in all of 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, political beliefs, genetic information, reprisal, or because all or 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 USDA’s TARGET Center at (202) 720-2600 (voice and TDD).

To file a complaint of discrimination, write to USDA, Assistant Secretary for Civil Rights, Office of the Assistant 

Secretary for Civil Rights, 1400 Independence Avenue, S.W., Stop 9410, Washington, DC 20250-9410, or call tollfree at (866) 632-9992 (English) or (800) 877-8339 (TDD) or (866) 377-8642 (English Federal-relay) or (800) 845-

6136 (Spanish Federal-relay). USDA is an equal opportunity provider and employer. 

Issued December 2010
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2005 ii

Program Compliance and Integrity

Annual Report to Congress

January - December 2005

Contents

PREFACE ................................................................................................................................ iii

EXECUTIVE SUMMARY ......................................................................................................... 1

OVERSIGHT ........................................................................................................................... 2

TECHNOLOGY ....................................................................................................................... 3

 Data Mining and Warehousing ..................................................................................................... 3

 Remote Sensing and Imaging ......................................................................................................... 7

COLLABORATION ................................................................................................................. 8

 High-Profile Collaborative Investigations .......................................................................................... 8

 Working with FSA ........................................................................................................................... 12

 Working with Approved Insurance Providers .................................................................................. 13

RESULTS ................................................................................................................................ 15

APPENDIX ............................................................................................................................. 16
iii RISK MANAGEMENT AGENCY
1 RISK MANAGEMENT AGENCY

Executive Summary

The United States Department of Agriculture’s (USDA’s) 

Risk Management Agency (RMA) is dedicated to safeguarding the integrity of America’s agricultural community 

by implementing the best and most innovative methods 

to detect, deter, and prevent fraud, waste, and abuse within 

the Federal crop insurance program. Each year, RMA uses 

targeted methods to strengthen program integrity, make 

cutting-edge technological innovations, and improve collaborative work with its partners in the anti-fraud alliance: 

the Farm Service Agency (FSA) and Federal Crop Insurance Corporation (FCIC)-approved insurance providers. 

This annual report highlights the progress RMA made in 

these areas in 2005.

This fifth annual report has been issued, as required by Section 515(i) of the Federal Crop Insurance Act (the Act) 

(7 United States Code §1515) entitled “Program Compliance and Integrity.” The Act, as amended by the Agricultural Risk Protection Act of 2000 (ARPA), requires RMA 

to report on compliance with the Act by describing the 

methods employed to minimize fraud, waste, and abuse 

within the Federal crop insurance program. This report 

highlights specific cases of fraud, waste, and abuse and the 

specific actions RMA took to address them. This report 

also covers RMA’s key collaborative efforts, specified by 

the Act, with FSA, FCIC-approved insurance providers, 

State insurance commissions, United States Department of 

Justice’s Attorneys’ Offices, the USDA Office of the Inspector 

General, and other agencies within USDA to combat fraud 

and strengthen program integrity. This report includes the 

most recent data available and covers January 1 - December 

31, 2005.

 In 2005 RMA achieved impressive results and savings in cost 

avoidance and recoveries. The results of these accomplishments have been significant, producing about $161 million in 

cost avoidance in 2005, and $52 million in findings and other 

recoveries.

A more detailed description of selected projects RMA focused on in 2005 is provided in this report. 
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2005 2

Oversight

The Federal crop insurance program is a unique, public/private collaboration. It is a one-of-a-kind hybrid of Federal 

administration and private insurance company delivery of 

risk management products and services to American farmers and ranchers. In 2005, there were 16 Federal Crop 

Insurance Corporation (FCIC)-approved insurance providers delivering crop insurance across America. These approved insurance providers share the risk with the Federal 

Government and compete with each other for business. 

They operate within the rules and conditions in the Standard Reinsurance Agreement (SRA) that each company 

signs with FCIC. FCIC is a Government corporation 

managed by the Risk Management Agency (RMA). In 

2004, RMA implemented critically important changes to 

the SRA that greatly reduced the risk of an approved insurance provider being placed under regulatory control by a 

state insurance commission due to its poor financial condition, which reinforced and strengthened program integrity 

by providing stronger controls and greater oversight. 

Operations Reviews of Approved Insurance

Providers

Operations reviews are used to assess approved insurance 

providers’ compliance with the terms and conditions of the 

2005 SRA and FCIC-approved policies and procedures 

in the delivery of the Federal crop insurance program. In 

2005, RMA completed its first year of a 3-year, cyclical, 

program-payment, error rate protocol in conjunction with 

approved-insurance provider operations reviews. This effort 

makes the best and most efficient use of limited compliance resources. Using this protocol, RMA reviews operations of one-third of the approved insurance providers each 

year. RMA reviews the approved insurance providers’ books 

of business by randomly selecting 750 policies (50 from each 

approved insurance provider) every 3 years. RMA’s data mining contractor, the Center for Agribusiness Excellence (CAE) 

at Tarleton State University, Stephenville, Texas, selects the 

policy samples. CAE has stored all of RMA’s crop insurance 

data since 1996. This protocol provides a larger sample and 

therefore a more accurate error rate estimate than any past, 

random, statistical sample review of approved insurance providers’ operations by RMA or any of the Agency’s oversight 

groups in a 3-year period.

Once an entire 3-year cycle of reviews is completed, RMA 

begins replacing previous error rate data with new data as 

each approved insurance provider’s subsequent review is completed. This protocol provides RMA a rolling error rate 

with one-third of the error rate findings replaced annually. RMA completed the first 3-year cycle with the reviews 

conducted in 2007.

Each Operations Review is conducted in two phases – an 

assessment of the approved insurance provider’s established 

operational systems designed to administer the crop insurance program and an evaluation of the approved insurance provider’s delivery of the program through a review of 

selected policies. 

In 2005, RMA conducted reviews of four insurance providers. 

The program payment error rate on these four insurance providers averaged 2.3 percent. The report issued to the insurance provider as a result of the Operations Review identifies 

the errors and the corrections that were required. 
3 RISK MANAGEMENT AGENCY

Technology

RMA continues to be at the forefront in using state-ofthe-art technology to maximize effective and efficient use 

of precious resources to accomplish its compliance mission. 

RMA strives to improve the methods it employs continually to adapt these technologies to the Agency’s unique 

mission. 

Data Mining and Warehousing

RMA highlighted its data warehousing and data mining 

projects in earlier reports. RMA partnered with CAE to 

incorporate the latest advances in database technology 

to create a single, centralized “data warehouse” of all crop 

insurance-related data collected in RMA databases. Investigators and other RMA staff then use this centralized data 

warehouse to search, or “mine,” all existing data records to 

compare policies and/or detect individual producers whose 

policies demonstrate atypical patterns, which in some cases 

may indicate potential fraudulent activity. Data mining is 

also 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 its efforts on the most problematic areas 

in the crop insurance program so they can be investigated 

and corrected. Prior 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 maintains the data warehouse and conducts data 

mining analysis for RMA. The data warehouse contains 

more than a billion records, including:

RMA’s reinsurance year policyholder data 

beginning in 1991;

30 years of weather data;

Annual USDA National Agricultural 

Statistics Service (NASS) data beginning 

in 1950; 

RMA’s actuarial data; and

RMA’s reinsurance accounting system 

data.

The data warehouse is updated monthly. RMA is currently 

mining the warehouse, and the findings from such activities 

continue to save RMA and American taxpayers millions 

of dollars each year by preventing cases of fraud, waste, 

and abuse before they occur. In 2005 alone, the CAE spot 

check list, created from data mining, saved the insurance 

program $140 million in potential costs. 

Data Mining and the Spot Check List

The RMA spot check list has proven to be the data mining 

method that is the most effective and proactive deterrent 

to fraudulent activity. Each year, RMA develops a list of 

agricultural producers whose operations warrant an onsite 

inspection during the growing season. After RMA’s Compliance field offices review the list, it is sent to FSA staff to 

conduct growing season inspections. 

CAE produced the 2005 spot check list by mining data 

collected in 2004. The evaluation produced a list of 2,696 

producers whose patterns appeared to be atypical compared 

to others in their region. RMA’s Compliance field offices 

then reviewed the list of names and removed some produc-
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2005 4

ers from the list. The field offices then added some producers based on their observations (This list is referred to as the 

Regional Compliance Office Spot Check list.). The combined list was shared with each producer’s local FSA office 

and approved insurance provider. FSA conducted growing 

season inspections and sent letters to the producers identified in the spot check process, informing them they were on 

the list and identified for a growing season inspection.

Statistics show a substantial reduction in indemnities paid 

to producers that were on the 2005 spot check list. For 

instance, in 2004, all the producers who eventually would 

be named on the 2005 spot check list claimed $217 million 

in indemnity payments. However, in 2005, after they had 

been informed that they were on the spot check list, these 

producers only claimed indemnities of $77 million. 

Figure 1. Spot Check List (Producers Followed Over Time) for 

2005 (Produced from 2004 Data) 

Reduction of Crop Year 2005 Indemnity from 

$217 Million to $77 Million

 This pattern had been consistent since the spot check list was 

first used in 2001 (Figure 1). As a result of the 2001 spot 

check list, indemnity claims for producers 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. In 2003, indemnities dropped from 

$187 million to 106 million. In 2004, indemnities dropped 

from $222 million to $151 million. Indemnities dropped 

from $217 million to $77 million in 2005. From these 5-year 

results ($452 million in reduced indemnities), it is evident 

that producers who knew they were on the list chose to file 

fewer claims for less indemnity. 

 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, 

but producers’ 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 in the past. 

The spot check results shown in figures 1 and 2 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 costeffective. The data mining project budget was planned for 5 

years with a total expected cost of approximately $18 million. However, in only the first 5 years of the project, the spot 

check list alone has saved the crop insurance program more 

than $452 million in potential costs through lower claims and 

indemnity payments. 

Source: USDA/Risk Management Agency Risk Premium

Indemnity

$250,000,000

$200,000,000

$150,000,000

$100,000,000

$50,000,000

$0

Crop Year

2004

Crop Year

2005

Spot Check List 2005 FIGURE 1. Producers Followed Over Time

$217,312,561

$107,401,735

$87,078,947

$77,771,616

The data table for Figure 1 is located on page 17 of this report
5 RISK MANAGEMENT AGENCY

In addition to the spot check list, CAE has implemented 

and continues to offer several dozen other data mining 

products that generate savings, including:

A “scoring system” so regional compliance 

offices can prioritize entities for 

investigation;

Identification of individual loss adjusters 

who work all or almost all of a particular 

agent’s claims, and comparison of these 

loss adjusters’ claims and actions against 

those of their peers; 

Identification of approved insurance 

providers with overpaid claims and an 

overall account of indemnities that are 

overpaid 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; 

Development of a simple, user-friendly 

interface that allows executive-level users to 

access and identify necessary information 

easily; and

Development of actuarial tools to help 

evaluate final planting dates.

The results during the first 5 years of this project encouraged 

RMA and CAE to develop more investigative data mining 

scenarios, including:

The data table for Figure 2 is located on page 17 of this report
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2005 6

Developing actuarial tools to help 

evaluate map rates and map areas;

Providing Geographic Information 

System (GIS) and weather information 

as an investigative tool for analyzing 

indemnity claims;

Integrating GIS and weather 

information into data mining scenarios 

to better reflect actual growing 

conditions producers encounter;

Developing simulation technology to 

help evaluate pilot programs; and

Developing an interface to provide 

RMA personnel with the ability to query 

the data warehouse and create custom 

reports for analysis. 

These developments are only a few examples of the 

research and development RMA has planned. Working 

with CAE, the Compliance Office will continue to develop 

more products that help expose patterns of fraud, waste, 

and abuse. RMA is confident that the cost savings will 

continue through the use of the data warehouse and data 

mining programs. 

Disparate Performance 

Agents and Loss Adjusters

Fraud, waste, and abuse in the crop insurance program are 

important problems recognized by RMA and its approved 

insurance providers. The Agricultural Risk Protection Act 

of 2000 (ARPA) mandates that USDA develops and provides 

tools, information, and analysis of “loss claims of insurance 

agents and loss adjusters to identify those agents and loss 

adjusters who have loss claims that are in excess of 150 percent (or an appropriate percentage specified by RMA) of the 

mean for all loss claims associated with other agents and loss 

adjusters operating and adjusting in the same area.”

 

Using data mining technology, RMA analyzes 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 

identifies loss 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 CAE produced an annual report of agents 

and loss 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 loss adjusters who consistently reported lower 

production yield figures than their peers. CAE adjusts and 

refines its methodology for developing this list using experience and knowledge gained in producing previous years’ lists. 

ARPA also mandates that RMA develop procedures to require an annual review of the performance of each agent and 

loss adjuster. The program’s approved insurance providers will 

conduct these annual reviews. 
7 RISK MANAGEMENT AGENCY

RMA included a requirement in the 2005 SRA, Appendix 

IV, Section II. A. (1) that states: “the Approved Insurance 

Providers are responsible for identifying and documenting 

the training needs of the employees, agents, agency employees, loss adjusters and contractors that act on behalf of 

the Company with respect to the applicable procedures and 

requirements associated with selling and servicing eligible 

crop insurance contracts.” RMA expects the approved insurance providers to perform an evaluation of the performance of agents and loss adjusters in order to determine 

such training needs. 

Non-Spot Check Compliance Office Data Mining

RMA’s regional compliance offices use data mining to 

conduct specific types of reviews where the technology can 

reveal possible errors within a program. For example, one 

regional compliance office might discover, through data 

mining, a crop is over-insured by multiple approved insurance providers. Data mining can identify policies that do 

not adhere to rules limiting the highest levels of insurance. 

Regional compliance office, data mining based reviews account for savings of $22.6 million in potential costs avoided 

in 2005. 

Remote Sensing and Imaging

RMA uses remote sensing data and related technologies 

to support its program compliance efforts and to aid RMA 

personnel and outside customers working on the Agency’s 

mission-critical projects.

Based upon the success of using remote sensing in investigating and combating waste, fraud, and abuse, RMA provided 

remote sensing training to a number of its compliance investigators. Investigators are trained to acquire Landsat 5 and 

Landsat 7 imagery from the USDA Image Archive, managed 

by FSA, and then to make preliminary determinations from 

the imagery to verify a crop insurance claim or forward it on 

to a remote sensing expert for further investigation. Such 

training has increased the number of image requests RMA 

has made to the USDA Image Archive.

.
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2005 8

Collaboration

The mission to detect, eliminate, and proactively prevent 

fraud, waste, and abuse could not be accomplished without 

many parties working together. To meet goals and uphold 

the integrity of the crop insurance program, RMA relies 

not only on the cooperative and dedicated work of its 

own employees, but also on its strong anti-fraud alliance 

partnerships with FSA and the approved insurance providers. RMA also works with many other partners as well, 

including the USDA Office of Inspector General (OIG). 

RMA is dedicated to developing and refining its collaborative efforts with these partner agencies because the Agency 

understands that only through strong partnerships can 

America’s farmers and ranchers be protected from those 

who would take advantage of the crop insurance program. 

Each year RMA improves its collaborations with its partners. The year 2005 continued to build on past successes. 

This section of the report will show how these collaborative 

efforts have resulted in bringing some high-profile cases 

of fraud and potential fraud to justice. It will also present 

RMA’s many other ongoing collaborative partnerships and 

show some specific examples of how these collaborations 

work.

High-Profile Collaborative

Investigations

Special Investigations Branch

The Special Investigations Branch (SIB) is a specialized 

unit within RMA’s Compliance Office. SIB investigates 

significant, high-profile cases of alleged fraud, waste, and 

abuse and collaborates on investigations with OIG, RMA’s 

regional compliance offices, 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. SIB investigators 

provide direct assistance to OIG during criminal investigations, including: executing search warrants, conducting 

interviews, and providing courtroom testimony.

On occasion, SIB also makes referrals to State or local prosecutors regarding insurance fraud. Investigators can also refer 

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

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

(OGC). SIB may also refer cases to the RMA Administrator 

for disqualification of producers, insurance agents, loss adjusters, insurance companies, and others who violate program 

rules.

Collaboration in Action 

Highlighted 2005 Cases

Collaboration in Action: SIB Investigation Uncovers $912,364 in Indemnity Overpayments in Carroll County, Iowa – An investigation into Federal farm 

program and crop insurance fraud in Iowa resulted in Mark 

Hoffman, his wife Sue Hoffman, and their son Justin Hoffman being charged with multiple counts of making false 

statements to a bank to get a farm loan, making false statements to FSA and RMA to obtain Federal farm program 

benefits and crop insurance proceeds, and concealing assets from and making false statements to the United States 

Bankruptcy Trustee. The indictment alleged that in 1997 

the Hoffmans made materially false statements about their 
9 RISK MANAGEMENT AGENCY

true financial status to Mercantile Bank to obtain a $1.6 

million loan. According to the indictment, the Hoffmans 

continued to submit materially false statements about their 

financial condition to keep US Bank (formerly Mercantile 

Bank) from foreclosing on its loan while they sold and 

depleted crops, machinery, and equipment secured by US 

Bank and then transferred proceeds of US Bank’s security 

to their son. The indictment further alleged that beginning sometime in early 1998, the Hoffmans engaged in a 

scheme to obtain Federal farm program benefits and crop 

insurance proceeds and elude creditors by directing their 

son and other individuals to make false certifications on 

documents to FSA and RMA in order to obtain Federal 

farm program benefits and crop insurance proceeds they 

were not otherwise entitled to receive or would have been 

seized by creditors. Charges also included that, between 

1998 and 2003, all three Hoffmans made or caused to 

be made false statements which caused FSA to pay the 

Hoffmans and other individuals on behalf of the Hoffmans 

$746,700 in program benefits and caused RMA to pay the 

Hoffmans and other individuals on behalf of the Hoffmans 

$912,364 in crop insurance proceeds. All three Hoffmans 

pled guilty to the charges in 2005 pursuant to a plea agreement entered into with the Government. Mark Hoffman 

was sentenced to 20 months in prison, 3 years of supervised release, and ordered to pay $2.34 million in restitution. Justin Hoffman was sentenced to 5 years probation 

and was ordered to pay $116,000 in restitution to FCIC. 

Sue Hoffman was sentenced to 3 months home confinement, 6 months probation, and ordered to pay $93,000 in 

restitution to FSA. All three individuals are prohibited 

from participating in Federal farm programs. Mark and 

Sue Hoffman are subject to a lifetime exclusion from any 

USDA, farm-related subsidy or crop insurance program, and 

Justin Hoffman was prohibited from participating in any 

USDA farm program until 2010.

Collaboration in Action: Concerned Citizen Reports 

Elaborate Illegal Scheme in Iowa – A concerned citizen 

alerted RMA to a possible fraudulent scheme to defraud 

USDA of farm program benefits in the northern district of 

Iowa, which also spread to two counties in South Dakota. It 

was alleged that the scheme began in crop year 2000. SIB 

personnel, OIG, FSA county personnel, and OGC investigated the case for 3 years. In 2004, the producer, Don Kluver, 

pled guilty to defrauding USDA of nearly $250,000. In 2005 

Kluver was sentenced to 6 months incarceration. He was also 

ordered to pay $379,000 in restitution to the Commodity 

Credit Corporation, US Bank, and RMA. This case is related 

to the Hoffman case in Carroll County, Iowa.

In 2000, Kluver was farming several thousand acres in Crawford and Sac Counties in Iowa, and 4,500 acres of soybeans 

in Tripp and Mellette Counties in South Dakota. Kluver 

admitted that to avoid program payment limitations, he did 

not disclose the South Dakota farming operation to USDA 

so he could qualify for certain benefits. He also admitted that 

he caused an employee and the employee’s brother to certify 

that they were farming the South Dakota operation so that 

he could claim additional benefits. 

Kluver also admitted that he aided another farmer and his 

wife (the Hoffmans) in evading their bankruptcy creditors. 

At their request, he purchased farm machinery and equipment valued at more than $141,000 and concealed this from 

the couple’s creditors. 
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2005 10

Collaboration in Action: SIB Investigation Uncovers 

$9.2 Million in Indemnity Overpayments in Candler, North Carolina – This investigation was conducted 

jointly by SIB, the Internal Revenue Service, and USDA’s 

OIG. The Federal investigation was assisted by the North 

Carolina State Bureau of Investigation and the Henderson County, Tennessee Sheriff ’s Office. Robert and Viki 

Warren, tomato farmers from Candler, North Carolina, two 

of their employees, an insurance agent, and a loss adjuster 

were indicted and charged with participating in an extensive scheme to defraud FCIC and several private insurance 

companies of more than $9 million between 1997 and 

2001, and attempting to obtain an additional $2.8 million 

between 2001 and 2003. In 2005, Robert Warren was sentenced to 76 months imprisonment, 3 years of supervised 

release, $7.3 million in forfeiture, and $9.15 million in restitution to USDA. Viki Warren was sentenced to 66 months 

imprisonment, 3 years of supervised release, $7.3 million in 

forfeiture, and $9.15 million in restitution to USDA. 

The Warrens schemed to provide false production information to inflate their Average Production History (APH), 

shifted production between insured units, and underreported total production. They also inflated acreage to increase indemnity payments and falsified planting dates. The 

Warrens and their employees also staged a fake hailstorm to 

collect a replant payment. The employees of Warren Farms 

that were involved in the scheme and provided false testimony either pled guilty to perjury charges or were convicted 

in a jury trial of perjury charges. 

The loss adjuster, Thomas Jeffrey Marsh, and the crop insurance agent, George T. Kiser, also pled guilty to charges that 

they assisted the Warrens in defrauding the Federal crop 

insurance program. Marsh cooperated with the investigation 

following his guilty plea. Though he was admonished by the 

judge for breaching his duty as the first line of defense against 

fraud, because of his assistance in the investigation, he was 

sentenced, in 2005, to 14 months imprisonment, 3 years of 

supervised release, and $767,000 restitution to USDA. Kiser 

also cooperated with the investigation following his guilty 

plea. As the Warrens’ insurance agent, Kiser knew that the 

crop yield histories provided by the Warrens each year were 

false, and he advised them on methods to obtain coverage 

at inflated levels and how to receive payments for fictitious 

losses. Insurance agents are also considered part of the first 

line of defense against fraud and for his breach of duty even 

though he assisted with the investigation, Kiser was sentenced, in 2005, to 27 months of imprisonment, 3 years of 

supervised release, and $8.15 million in restitution to USDA.

Harold Dean Cole, an employee of the Warrens, was convicted in 2004 by a Federal jury for preparing false agricultural 

spraying records that purported to show that the Warrens 

had raised tomatoes on their Tennessee acreage from 1991 

to 2000. These false records helped to establish the false 

high-production history on this farm, thereby tripling the 

guaranteed yield the Warrens should have had and increasing 

the indemnity they received by $2 million in 1 year. In 2005, 

Cole was sentenced to 46 months imprisonment, 3 years of 

supervised release, and $2.18 million in restitution to USDA. 
11 RISK MANAGEMENT AGENCY

Collaboration in Action: OIG Investigation Uncovers More Than $2 Million in Indemnity Overpayments in Au Gres, Michigan – In March 2005 a Federal 

jury convicted Alan Kuehnemund, a potato producer from 

Au Gres, Michigan, of 16 felony charges stemming from 

Kuehnemund’s scheme to fraudulently obtain crop insurance between 1998 and 2003. Kuehnemund repeatedly 

supplied false information and falsified records to multiple 

insurance companies. He misrepresented his potato production, acreage, and yields on his APH and fraudulently 

collected over $2 million in crop insurance indemnities. 

Kuehnemund was sentenced, in 2005, to 87 months imprisonment and $2.29 million in restitution to USDA. Investigators from the Compliance field office and SIB worked 

with OIG and the Assistant United States Attorney’s 

Office in this investigation.

Collaboration in Action: SIB Investigation Confirms Insurance Agent Falsified Documents Leading 

to Invalid Premium Payment in Franklin County, 

Florida – A complaint registered with RMA’s Valdosta 

Regional Office and forwarded to the Eastern Regional 

Compliance Office alleged that a crop insurance agent, 

Waldo Rushy Scott, had created falsified documents and 

used these documents to solicit an insurance premium for 

clam crops in counties where it was ineligible to be sold. 

Clam insurance is a pilot program and is only available in 

limited counties. Agents receive commission on premiums 

in their book of business. Because of the collaborative 

investigation between the RMA field offices, SIB, and OIG, 

Scott and his company were sanctioned by RMA by being 

debarred from participating in the Federal crop insurance 

program. 

Collaboration in Action: OIG and RMA Investigation 

Uncovers $1.35 Million in Farm Program Benefit 

and Indemnity Overpayments in Rapid City, South 

Dakota – Two producers, David and Connie Finneman of 

Rapid City, South Dakota, were indicted in 2004 in connection with a scheme they devised to fraudulently obtain farm 

program benefits and commit crop insurance fraud. The 

Finnemans owned and managed their farming operation. 

They provided the capital, labor, and equipment. Laborers are not entitled to farm program benefits. When the 

Finnemans reached the upper annual limit of their benefits, 

they set up “sham” or phony farming operations using two 

of their relatives and their son. The Finnemans convinced 

the local FSA office that these three men were also full-time 

farmers entitled to Federal benefits. In reality the two relatives were occasional workers on the farm. The son worked 

on the farm, but did not provide any management, capital, or 

equipment and was not entitled to benefits. The payments 

made to the relatives and to the Finnemans’ son were transferred by Connie Finneman into the Finnemans’ bank account. In 2005 the Finnemans were sentenced to 37 months 

imprisonment, 3 years of supervised release, and $1 million in 

restitution to USDA. The investigation was a collaboration 

between OIG and RMA Compliance investigators. 
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2005 12

Working with FSA

FSA is one of RMA’s strongest allies in the fight against 

fraud, waste, and abuse. FSA personnel serve as the eyes 

and ears in the field and provide investigators with invaluable, on-the-ground analysis and feedback about the 

farming operations in their areas. RMA works to provide 

them with the help and information they need to monitor 

agricultural producers as effectively as possible. RMA does 

this through:

Spot check referrals; 

4-RM referrals; and

Consultation with FSA State committees.

Each of these areas will be presented below.

Spot Check Referrals

Each year RMA uses data mining technology, 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 (for a 

detailed description, see page 3 on data mining technology). RMA provides this list every April to the appropriate 

FSA County Offices, whose staffs help review these cases 

for potential fraud, waste, and abuse by performing inspections, or “spot checks,” of the farming operations on the list. 

The FSA County Offices then refer their findings to RMA. 

Then RMA forwards these results to the appropriate approved insurance providers for those operations. At the 

same time, FSA sends notification by letter to all producers 

who are on the list.

4-RM Referrals

Another collaborative effort between RMA and FSA is the 

4-RM referral process. 4-RM referrals originate from the 

observations of FSA County Office personnel in the field, 

which are sent to the RMA Compliance field offices 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: the 4-RM Handbook, FCIC 

Program Integrity.

RMA Consultation with

FSA State Committees

RMA and FSA State Committees continued to work together in 2005 to improve program compliance and integrity. 

In 2005, RMA regional offices referred 128 issues to FSA 

State Committees for review and consultation. The FSA 

State Committee referred two issues to the RMA regional 

offices for their consideration.

RMA regional offices continued to provide annual information updates to the FSA State Committees about crop insurance issues, provided FSA offices with program fact sheets, 

and conducted review meetings on the consultation process.

Data Reconciliation

ARPA requires that RMA and FSA develop and implement a coordinated plan for the two agencies to reconcile all 

relevant information received from producers who have crop 

insurance. RMA and FSA initiated reconciliation efforts on 

the 2001 crop year data. However, these efforts were effectively negated by the hundreds of thousands of disparate 

records identified between the two agencies and lack of available resources necessary to reconcile and resolve each one. 
13 RISK MANAGEMENT AGENCY

Differences in definitions of basic terms, such as “producer” vs. 

“insured” and “farm” vs. “unit” hampered the data reconciliation effort as well as data sharing. 

Since enactment of ARPA, Section 10706 of the Farm Security and Rural Investment Act of 2002 directed the Secretary 

of Agriculture to develop a Comprehensive Information 

Management System (CIMS) for implementing programs 

administered by RMA and FSA. Under Section 10706, 

all current RMA and FSA information is to be combined, 

reconciled, redefined, and reformatted in such a manner that 

the agencies can use the information management system. 

Under the direction of the Office of the Under Secretary for 

Farm and Foreign Agricultural Services, the Administrators 

for RMA and FSA established a working group to develop 

and implement the CIMS Project. RMA plans to meet its 

data reconciliation requirements specified in Section 515(c) of 

the Act, and address the Section 10706 requirements through 

implementation of the CIMS. RMA expects implementation 

of and benefits from CIMS to occur in phases beginning in 

2005 with CIMS should be completed and in full operation 

by 2012. 

RMA and FSA announced CIMS in May 2005. The CIMS 

project will improve the efficiencies of data exchange and 

reconciliation of common and unique producer information 

between RMA, FSA, and insurance providers. In the future 

CIMS will reduce the amount of duplicate acreage information that is now 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.

 

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 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. CIMS 

will interface with approved RMA, FSA, USDA, and insurance provider applications collecting and reporting common 

information. CIMS will allow RMA, FSA, other USDA 

branches, and insurance providers to use the shared, common 

information reported by producers. 

The CIMS project complied with President George W. 

Bush’s E-Government initiative, the Office of Management 

and Budget’s requirements, and USDA’s Office of the Chief 

Information Officer’s requirements. 

Working with the Approved

Insurance Providers

Approved insurance providers, agents, loss 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. Approved insurance providers are directly 

involved with the policies and producers at the local level, and 

therefore can give RMA and FSA valuable information about 

suspicious claims activities. They can also assist by reviewing 

and investigating claims and managing the claims adjustment 

process. Referrals from approved insurance providers help 

maintain a proactive approach to combating potential fraud, 

since the majority of these kinds of referrals are investigated 
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2005 14

before the approved insurance providers pay claims to 

producers. RMA will continue to work closely with the 

program’s approved insurance providers to detect, prevent, 

and correct fraudulent activity.

Sanctions

RMA has the authority to impose administrative sanctions 

on producers who abuse the Federal crop insurance program. RMA is able to disqualify and impose civil fines on 

producers, agents, loss adjusters, and insurance companies 

involved in fraudulent activities. RMA can impose a civil 

fine for each violation up to the total dollar amount the 

individual received because of false or inaccurate information provided, or $10,000, whichever is greater. RMA also 

has the authority to disqualify these individuals from both 

the Federal crop insurance program and most other farm 

programs.

Referrals for sanctions are processed by RMA’s Sanctions Office and the Appeals, Litigation, and Liaison staff 

(A&L). The Sanctions Office and A&L’s 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 USDA’s 

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;

Working with OGC to develop evidence 

and documentation standards for 

sanctionable activities; and

Working with RMA’s regional compliance 

offices to ensure that their sanctions 

referrals met these standards. 

A&L also processes referrals and appeals for suspension and 

debarment under 7 Code of Federal Regulations, Section 

3017, and performs similar functions to those listed above for 

that process. 

In 2005, both offices continued their lead role in processing 

disqualification actions against those involved in fraudulent 

crop insurance activities. In 2005, 32 sanctions referrals were 

received and 24 sanctions were imposed, in the form of disqualification from the program, debarment, suspension, and/

or civil fines. The same year 57 sanctions cases were pending 

legal action, a process that can span more than one reporting 

period.
15 RISK MANAGEMENT AGENCY

Results

In 2005, the RMA Compliance Office continued to work 

towards an ever-increasing level of productivity, innovation, and collaboration in its efforts to fight fraud, waste, 

and abuse in the FCIC program. This work has produced 

a number of successful results. Among other achievements 

described in this report, RMA Compliance has:

Conducted 10,941 policy reviews.

Uncovered more than $25 million in 

incorrect indemnity payments.

Recovered approximately $62 million in 

findings and recoveries.

Saved more than $162 million in 

potential costs; $140 million from the 

spot check list and $22 million from 

regional compliance office non-spot 

check list data mining.

Employed innovative technologies to 

proactively fight fraud, waste, and abuse 

(pages 3 - 7).

Investigated and uncovered high-dollar 

fraud cases and assisted in bringing them 

to justice (pages 8 - 11).

Increased collaborative efforts with FSA, 

approved insurance providers, OIG, and 

other partners (pages 8 - 14).

These are only some of the highlights of RMA’s accomplishments in 2005. This work has added to the efforts that have 

been made since 2002 to fulfill RMA’s ongoing mission to 

protect the integrity of the FCIC program for America’s 

farmers and ranchers. Since this annual report was first issued 

in 2001, RMA has seen increasingly substantial results, including a total of almost $62 million in findings and recoveries, and savings of almost $162 million in potential costs.

RMA continues its efforts to support the country’s farmers 

and ranchers in the important work they do by striving to 

boost productivity, increase innovation, strengthen collaborations, and eliminate fraud, waste, and abuse. 
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2005 16

Appendix

 COMPLIANCE FINDINGS and RECOVERIES 

Recovered Final Findings

2002

$9,849,194

2003

$17,042,246

2004

$9,266,473

2005

$9,092,424

as of 6/13/2008

TOTAL

$45,250,337

Findings Subtotal $9,849,194 $17,042,246 $9,266,473 $9,092,424 $45,250,337

$ Closed Criminal Cases

$ Closed Civil Cases

400.169 $ Amount Adjusted*

$ BCA Settlement

$ Sanctions Penalty

$6,359,526

$1,093,070

$1,047,642

$976,356

$0

$7,427,645

$14,500

$1,690,587

$925,720

$4,500

$3,183,724

$152,500

$3,930,029

$224,401

$30,000

$32,741,610

$0

$4,092,260

$6,157,561

$16,500

$49,712,505

$1,260,070

$10,760,518

$8,284,038

$51,000

Other Recoveries Subtotal $9,476,594 $10,062,952 $7,520,654 $43,007,931 $70,068,131

Findings and Recoveries Total $19,325,788

 COMPLIANCE COST AVOIDANCE

$27,105,198 $16,787,127 $52,100,355 $115,318,468

CAE Spotcheck List Cost Avoidance

Other Datamining Cost Avoidance

$111,353,382

$14,626,197

$81,674,280

$11,149,236

$71,353,529

$7,337,085

$139,540,945

$22,647,285

$403,922,136

$55,759,803

Cost Avoidance Total $125,979,579 $92,823,516 $78,690,614 $162,188,230 $459,681,939

2001-2003 data from RCO Annual Report spreadsheets

2004-2005 findings, criminal, civil data, Other Data Cost Avoidance from Magnum Quick Report 6/13/2008

Sanctions data from C. Simpson 

2004-2005 400.169 data from DCO chron + s drive files

2004-2005 BCA Settlement data from appeal officer case + DAC records

CAE Spotcheck list Cost Avoidance data from S. Hughes SDAAS updated for 2005 from Micheal Schucking, CAE on 9/30/2009

*amount includes indemnity repaid to FCIC only
17 RISK MANAGEMENT AGENCY

Figure 1 Data Table. 

Spot Check List 2005

Producers Followed Over Time

Crop Year 2004 Crop Year 2005

Risk Premium $107,401,735 $87,078,947

Indemnity $217,312,561 $77,771,616

Figure 2 Data Table. 

Crop Year 2001 - 2007 Spot Check Lists

Premium and Indemnity

2007 2006 2005

indemnity premium indemnity premium indemnity premium

scl yr 178,526,078 70,512,903 150,399,548 90,953,565 217,312,561 107,401,735

next yr 93,745,253 89,413,570 123,641,369 92,540,851 77,771,616 87,078,947

2004 2003 2002

indemnity premium indemnity premium indemnity premium

scl yr 222,634,355 107,163,375 187,846,677 67,048,167 234,265,740 80,249,411

next yr 151,670,041 114,737,624 106,172,397 69,556,318 122,912,358 62,405,417

2001

indemnity premium

scl yr 145,440,842 54,746,124

next yr 97,196,674 51,299,181