Program Compliance and Integrity

Annual Report to Congress

January - December 2006

United States 

Department of 

Agriculture

Risk 

Management 

Agency

Released 

July 2011
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 August 2011
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2006 ii

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

 Working with Approved Insurance Providers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

RESULTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

APPENDIX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Program Compliance and Integrity

Annual Report to Congress

January - December 2006
iii RISK MANAGEMENT AGENCY

Preface

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

Management Agency (RMA) administers the Federal crop insurance program, the primary source of risk protection for America’s 

farmers and ranchers. In 2006, 242 million insurable acres of the 

Nation’s farmland were protected by Federal crop insurance. The 

program provided $49.91 billion of coverage to American farmers 

and ranchers. Insurance premiums for 2006 totaled $4.58 billion. 

Indemnity payments of $3.5 billion were paid to farmers and 

ranchers for damages to crops by natural causes or lost revenue 

from price fluctuations. To ensure that the cost to producers and 

taxpayers continues to be justified, it is essential that there be 

adequate safeguards in place to limit mistakes and control abuse.

The Agricultural Risk Protection Act of 2000 (ARPA) enhanced 

the incentives for producers to buy higher levels of coverage, 

creating a more effective safety net. ARPA also provided USDA 

with new requirements and new tools for monitoring and 

controlling program abuses. It required RMA and the USDA’s 

Farm Service Agency (FSA) to strengthen local level oversight by 

working together and sharing production and yield data information through compatible databases. ARPA 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 sixth annual report, as required under the Federal Crop 

Insurance Act (7 U.S.C. §1515), documents USDA’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 detection and enforcement activities are conducted. The report also 

shows how data mining and other tools are being used to identify 

areas of potential abuses. 

The continued effectiveness of compliance-related efforts saved 

the Government $40.85 million in fraudulent or other incorrect 

payments that might not otherwise have been identified until 

after the fact. A strong contributing factor in success of the program is the collaboration and partnership among USDA agencies 

in compliance investigations. This includes the highly effective 

collaboration between FSA and RMA to refer cases of suspected 

abuse from FSA’s field offices directly to RMA’s field offices. 

USDA is fully committed to preserving the integrity of the 

Federal crop insurance program and expects to report continued 

progress toward this goal in the future.
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 2006.

This sixth 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, 2006.

 In 2006 RMA achieved impressive results and savings in cost 

avoidance and recoveries. The results of these accomplishments have been significant, producing about $40.85 million 

in cost avoidance in 2006, and $15 million in findings and 

other recoveries.

A more detailed description of selected projects RMA focused on in 2006 is provided in this report. 
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2006 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 2006, there were 17 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). 

Operations Reviews of Approved Insurance

Providers

Operations reviews are used to assess approved insurance 

providers’ compliance with the terms and conditions of the 

SRA and FCIC-approved policies and procedures in the 

delivery of the Federal crop insurance program. In 2006, 

RMA completed its second of a 3-year, cyclical, programpayment, 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 2006, RMA conducted reviews of four insurance providers. 

The program payment error rate on these four insurance providers averaged 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 worked 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 

since 1990;

30 years of weather data;

Annual USDA National Agricultural 

Statistics Service (NASS) data since 

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 2006 alone, the CAE spot 

check list, created from data mining, saved the insurance 

program $35 million in potential costs. RMA expects such 

savings to continue and perhaps increase as the Agency 

continues the program.

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 on-site 

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 2006 spot check list by mining data 

collected in 2005. The evaluation produced a list of 1,818 

producers whose patterns appeared to be atypical compared 
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2006 4

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

then reviewed the list of names and removed some producers 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 2006 spot check list. In 2005, 

all the producers who eventually would be named on the 

2006 spot check list claimed $150 million in indemnity 

payments. However, in 2006, after they had been informed 

that they were on the spot check list, these producers only 

claimed indemnities of $124 million. 

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

2006 (Produced from 2005 Data) 

Reduction of Crop Year 2006 Indemnity from 

$150 Million to $124 Million

 This pattern had been consistent since the spot check list 

was first used in 2001 (Figure 1). In 2001, the first year the 

spot check list was used, 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. In 2003, indemnities dropped from $187 million to 106 million. In 2004, 

indemnities dropped from $222 million to $151 million. In 

2005, indemnities dropped from $217 million to $77 million 

in 2005. In 2006, indemnities declined from $150 million to 

$124 million. These 6-year results ($479 million in reduced 

indemnities), show 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 an improved premium/indemnity balance. 

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 cost-effective. The data mining project budget was planned for 5 years 

with a total expected cost of approximately $18 million. In 

only the first 6 years of the project, the spot check list alone 

has saved the crop insurance program more than $479 million 

in potential costs through lower claims and indemnity payThe data table for Figure 1 is located on page 16 of this report

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

2005

Crop Year

2006

Spot Check List 2006 FIGURE 1. Producers Followed Over Time

$150,399,548

$90,953,565 $92,540,851

$123,641,369
5 RISK MANAGEMENT AGENCY

ments. 

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 Compliance 

field 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 data table for Figure 2 is located on page 16 of this report

Source: USDA/Risk Management Agency Idemnity

SCL Year

Premium

SCL Year

Idemnity

Next Year

Premium

Next Year

Crop Year 2001-2006 Spot Check Lists FIGURE 2. Premium & Indemnity

2001 2002 2003 2004 2005 2006

$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
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2006 6

The results during the first 5 years of this project encouraged RMA and CAE to develop more investigative data 

mining scenarios, including:

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, Compliance 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. 
7 RISK MANAGEMENT AGENCY

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. 

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 

accounted for savings of $5.7 million in potential costs 

avoided in 2006. 

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 2006 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 other partners, 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 2006 

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 also presents 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 2006 Cases

Collaboration in Action: Affirmative Civil Enforcement (ACE) prosecution results in $900,000 paid to 

the U.S. Treasury from a Civil Settlement in Crowell, 

Texas – This case, involving William and Bobby Moore, is 

related to a case last reported in the 2004 Annual Report to 

Congress involving a Texas farmer and crop insurance agent, 

Wendell Mints. Mints was convicted of operating an elaborate scheme in which he conspired to falsify crop insurance 

loss documents and collected insurance money for thousands 

of acres of cotton, wheat, and sorghum that he did not plant. 
9 RISK MANAGEMENT AGENCY

The case became known because of astute FSA county 

employees who detected inconsistent statements Mints 

made in documents submitted to their office. They physically inspected the fields and found no evidence that Mints 

had planted his crops as he had claimed. This initiated a 

criminal investigation where RMA’s SIB personnel played 

a central role.

An expert in satellite imagery testified that infrared satellite photographs taken of Wilbarger County where Mints 

farmed, indicated that the condition of the fields and crops 

growing on them were inconsistent with Mints’ claims. 

When Mints was asked to provide receipts showing he had 

purchased seed to plant the crops, it was proven he went to 

a seed dealer and had that seed dealer prepare false receipts 

to reflect bogus sales. 

In 2006, William and Bobby Moore, the general partners/

joint venturers of one of Mints’ larger clients, Moore Farms, 

paid $900,000 to settle a civil lawsuit the U.S. Government 

filed in August 2004 alleging that the two men filed false 

insurance claims for the 1998 crop year.

This settlement is the result of joint civil and criminal 

investigations by the U.S. Attorney’s Office, OIG, RMA, 

and FSA in Vernon, Texas. The case was investigated and 

litigated by the Affirmative Civil Enforcement (“ACE”) 

Unit of the U.S. Attorney’s Office. ACE prosecutes civil 

actions to recover damages for fraud and other offenses and 

imposes civil penalties for violations. 

Collaboration in Action: OIG and RMA Joint Investigation Results: $2.128 Million in Damages for 

False Potato Claims in Michigan – A partnership in 

Bay County Michigan was found liable for $2.128 million 

in damages for false crop insurance claims resulting from 

false claims of loss and false certifications of potato production for multiple years. A judge for the Eastern District of 

Michigan found that Richard Bli, on behalf of the partnership Bli Farms, violated the False Claims Act by knowingly 

submitting false claims for crop insurance indemnities on Bli 

Farms’ 1992, 1994, and 1995 potato crops. The court found 

that these claims were false because Bli Farms had substantial unreported sold potato production for these crop years. 

Had all the Bli Farms’ sold potato production been reported 

it would have received little or no indemnity for losses on its 

insured potato crop. 

The court determined that Bli Farms received $704,640 in 

crop insurance indemnities to which it was not entitled due 

to actual sold potato production. Under the False Claims Act, 

these fines can be trebled to $2,113,920. The Court determined that the defendants are liable for penalties totaling 

$15,000. In addition to the monetary judgement, Bli Farms 

and Richard Bli face exclusion from Federal programs. 

Collaboration in Action: North Carolina Crop Insurance Claims Adjuster is Sentenced in Connection with 

Federal Crop Insurance Fraud Schemes in North and 

South Carolina– This investigation was conducted jointly 

with SIB, the Internal Revenue Service, and USDA’s OIG. 

The Federal investigation was assisted by the North Carolina 
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2006 10

State Bureau of Investigation and the Henderson County, 

Tennessee Sheriff ’s Office for the North Carolina case. The 

South Carolina Federal investigation was assisted by the 

FBI and the South Carolina State Law Enforcement Division. 

In 2006, an insurance company claims adjuster, Frank 

Calcutt, was sentenced following his guilty pleas to conspiring to defraud the Federal crop insurance program in North 

and South Carolina. In the North Carolina case, Calcutt 

pled guilty to charges concerning claims filed by Robert 

and Viki Warren, tomato farmers from Candler, North 

Carolina. Calcutt was an adjuster who approved a claim for 

$98,490 filed by the Warrens for losses on a Tennessee farm 

from a “hail storm” that had actually been caused by Warren 

employees throwing ice cubes and beating the plants with 

sticks. 

In the separate South Carolina case (transferred to North 

Carolina) Calcutt pled guilty to charges of making false 

statements concerning false claims in South Carolina. 

Following his guilty plea, Calcutt cooperated in the investigation. As a result, the Government filed a motion asking 

for a reduced sentence to reflect his assistance.

Calcutt was sentenced to 4 months’ imprisonment, 6 

months of home detention, 2 years of supervised release, 

and $312,251 in restitution to USDA. 

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 pages 3-6 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 
11 RISK MANAGEMENT AGENCY

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’s 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. 

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 

over the next several years. CIMS should be completed and 

in full operation by 2012.
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2006 12

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: 

Producers (entities) and shares; 

Farm, field, and unit identifiers; 

Crops and acreage; and 

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 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:
13 RISK MANAGEMENT AGENCY

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 

meet these newly developed 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 2006, both offices continued their lead role in processing 

disqualification actions against those involved in fraudulent 

crop insurance activities. In 2006, 41 sanctions were imposed. 

These sanctions included 20 disqualifications from the program, 9 debarments, 2 suspensions, and 10 civil fines. Sanctions cases pending legal action will be included in future 

reports. Sanctions involve a process that can span more than 

one reporting period.
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2006 14

Results

In 2006, 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:

Conducted 19,307 policy reviews.

Uncovered more than $35 million in 

incorrect indemnity payments.

Recovered approximately $15 million 

using administrative findings.

Saved more than $40 million in potential 

costs; $35 million from the spot check list 

and $5 million from non-spot check list 

data mining.

Employed innovative technologies to 

fight fraud, waste, and abuse (pages 3 - 7).

Investigated and uncovered high-dollar 

fraud cases and assisted in bringing them to 

justice (pages 8 - 10).

Increased collaborative efforts with FSA, 

approved insurance providers, OIG, and 

other partners (pages 10 - 13).

These are only some of the highlights of RMA’s accomplishments in 2006. 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 RMA first issued this report in 

2001, the Agency has seen increasingly substantial results, 

including a total of almost $232 million in findings and 

recoveries, and savings of $593 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. 
15 RISK MANAGEMENT AGENCY

Appendix

 COMPLIANCE FINDINGS and RECOVERIES as of 6/13/2008

2002 2003 2004 2005 2006 TOTAL

Recovered Final Findings $9,849,194 $17,042,246 $9,266,473 $9,092,424 $9,774,408 $55,024,745

Findings Subtotal $9,849,194 $17,042,246 $9,266,473 $9,092,424 $9,774,408 $55,024,745

$ 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

$442,036

$1,431,730

$357,908

$2,986,173

$26,000

$50,154,541

$2,691,800

$11,118,426

$11,270,211

$77,000

Other Recoveries Subtotal $9,476,594 $10,062,952 $7,520,654 $43,007,931 $5,243,847 $75,311,978

Findings and Recoveries Total $19,325,788 $27,105,198 $16,787,127 $52,100,355 $15,018,255 $130,336,723

 COMPLIANCE COST AVOIDANCE

CAE Spotcheck List Cost Avoidance $111,353,382 $81,674,280

Other Datamining Cost Avoidance $14,626,197 $11,149,236

$71,353,529

$7,337,085

$138,301,382

$22,647,285

$35,118,527

$5,729,513

$437,801,100

$61,489,316

Cost Avoidance Total $125,979,579 $92,823,516 $78,690,614 $160,948,667 $40,848,040 $499,290,416

2001-2003 data from RCO Annual Report spreadsheets

2004-2006 findings, criminal, civil data, Other Data Cost Avoidance from Magnum Quick Report 6/13/2008

Sanctions data from C. Simpson 

2004-2006 400.169 data from DCO chron + s drive files

2004-2006 BCA Settlement data from appeal officer case + DAC records

CAE Spotcheck list Cost Avoidance data from S. Hughes SDAAS

*amount includes indemnity repaid to FCIC only
PROGRAM COMPLIANCE AND INTEGRITY ANNUAL REPORT TO CONGRESS JANUARY-DECEMBER 2006 16

Figure 1 Data Table 

Spot Check List 2006

Producers Followed Over Time

Figure 2 Data Table 

Crop Year 2001 - 2006 Spot Check Lists

Premium and Indemnity

Crop Year 2005 Crop Year 2006

Risk Premium $90,953,565 $92,540,851

Indemnity $150,399,548 $123,641,369

2006 2005 2004

indemnity premium indemnity premium indemnity premium

scl yr 150,399,548 90,953,565 217,312,561 107,401,735 222,634,355 107,163,375

next yr 123,641,369 92,540,851 77,771,616 87,078,947 151,670,041 114,737,624

2003 2002 2001

indemnity premium indemnity premium indemnity premium

scl yr 187,846,677 67,048,167 234,265,740 80,249,411 145,440,842 54,746,124

next yr 106,172,397 69,556,318 122,912,358 62,405,417 97,196,674 51,299,181