Authorities uncover tobacco fraud ring

A major tobacco insurance fraud ring involving Rocky Mount farmers has been broken.

Local tobacco farmers and insurance agents have pleaded guilty to being part of a scheme in which the farmers fraudulently claimed crop losses, collected insurance money from a federal program but then profited from selling their tobacco harvest.

Roy Johnson Raynor, 56, the owner of Raynor Warehouse Inc., has been sentenced to one year in federal prison for brokering the deals, buying the tobacco from the farmers and then selling it to Universal Leaf North America and other buyers, according to a press release from the office of the U.S. Attorney Eastern District of North Carolina.

According to the release, Raynor facilitated the sale of $1.4 million in “hidden” tobacco from September 2005 to March 2009.

“The farmers profited from the scheme as they were paid twice for each pound of tobacco, once through the false crop insurance claim and once through the sale of the ‘hidden’ tobacco,’” the release states.

On Jan. 13, Raynor pled guilty to conspiring to make a false statement, to making a material false statement and to committing mail and wire fraud. After his prison term, he will serve two years supervised release, with the first 12 months of supervised release to be under house arrest. U.S. District Judge James C. Dever III also ordered him to pay a fine of $100,000. According to a press release, Raynor received a significant sentence reduction based upon his cooperation with law enforcement.

“Raynor would pay the co-conspiring farmers with checks, concealing the source of money by issuing the check in amounts less than $10,000 so as to evade federal reporting requirements,” the release states.

In an interview Tuesday, Raynor said he had no involvement with filing fraudulent insurance claims.

“I don’t know anything about the insurance part of it,” he said. “I don’t have any knowledge of insurance as far as the process. I have never met with insurance adjusters. All I do is sell tobacco and make a commission. I have never gained financially by anything the farmers did as far as insurance.”

As a tobacco broker, he sells the crop for farmers to buyers and receives a commission. He said he disagrees with the press release statement that he first bought the tobacco from the farmers before selling it.

He said his only mistake was writing out checks after the sale in the fashion that farmers requested, such as in the names of other family members instead of the farmers themselves.

“I always ask: How do you want me to write the check? I didn’t think it was wrong. It was their money,” he said. “But according to the law, that’s called structuring, which I know now. I didn’t gain financially by it.”

Raynor said the farmers didn’t report the sale of the tobacco, but he never tried to conceal anything.

“I had the names (of the people) that I wrote the checks to, and I reported my income based on my commissions of what I sold (for) the farmer and paid the farmer,” he said. “That’s what I paid taxes on.”

So far, none of the farmers are facing prison time, but they have not all been sentenced.

The farmers who authorities said were involved in the fraud were Donald Keith Davis, 53, of Sharpsburg, Robert Sammy Tant, 60, of Rocky Mount and Vernon L. Rhodes of Rocky Mount. The age of Rhodes was not made available.

Davis could not be reached for comment. Rhodes said he was not interested in commenting.

In July, Davis and Tant pleaded guilty to making false statements, committing mail and wire fraud and making false statements in connection with the Federal Crop Insurance Program.

Davis and Tant were facing up to 30 years in prison for the charges they pleaded guilty to, a press release in July stated.

However, Tant has been sentenced to five years probation, a fine of $10,000 and restitution in the amount of $119,739.

Tant said he takes responsibility for his part in the case.

“I can say that my part in it was real small, and I was not even aware of what was going on at the time,” he said. “I just trusted my insurance adjuster. But I accept responsibility for any part I had in it. … I made a mistake dealing with someone else. I’m not a CPA. I’m not an insurance agent. Sometimes, you put faith in the hands of other people and they can drag you into some of their mess.”He said he believes the judge was fair in the case.

“The court system treated me very fairly and they listened to what I had to say,” he said. “That is why the judgement came out like it did. (The judge) was very lenient towards me.”

Davis and Rhodes are scheduled to be sentenced on March 7.

According to the U.S. Attorney office, Tant also conspired with insurance agent, Robert Carl Stokes, who has been sentenced to 30 months of detention, with the first 18 months in home confinement.

Stokes, along with Wilson resident Mark Pridgen, an officer in Tobacco Insurance Agency Inc., have been ordered to pay $16.5 million in restitution.

Nash County Extension Director Charlie Tyson said he knew some of the farmers involved in the fraud ring.

“I’m sad for these guys and disappointed at the same time,” he said.

Tyson said the federal insurance program is critical to help local farmers when their crops don’t pan out.

It’s unclear how much money was fraudulently paid out by the Federal Crop Insurance Corp.

USDA spokeswoman Shirley Pugh said she could not comment on that issue, as it is an ongoing criminal case.

Robin Zier, spokeswoman for the United States Attorney Eastern District of North Carolina office, also would not comment about the insurance losses.

“That’s not public record,” she said.

source: www.rockymounttelegram.com

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