Crop Insurer to Pay to Settle Fraud Charges

WASHINGTON — Rain and Hail Insurance Service Inc., the biggest U.S. crop insurer, agreed to pay $10 million to settle charges that the company defrauded the government by inflating claims on a damaged California raisin crop in 1994, the government said.

The payment is the largest settlement in the history of the U.S. Agriculture Department’s crop insurance program, administrator Ken Ackerman said in a statement.

Rain and Hail, based in West Des Moines, Iowa, didn’t admit any wrongdoing. “We are pleased that this dispute has been resolved,” President John Joyce said in a statement.

Steve Harms, executive vice president, said “it was in the best interests of the company to get this behind us.” Settling the case was “a business decision,” he said.

The settlement follows an investigation by the U.S. Agriculture Department and Justice Department that accused the company of falsifying documents showing that a raisin crop in Fresno and neighboring counties was damaged by heavy rains and unfit for human consumption.

In fact, the Justice Department said in a statement, raisins were reconstituted and sold at full market value, resulting in overpayments to farmers. The company “duplicated, falsified and fabricated documents used to support the false insurance claims,” the Justice Department said in a statement.

“The government paid out about $5 million in claims that should not have been paid out,” said E. Robert Wright, assistant U.S. Attorney for the eastern district of California in Fresno.

Harms said that while the company was prepared to go to court, the prospect of the case going on “for a couple years” was taking too much time away from business.

The largest crop insurance fraud case before this one was about $2 million, Wright said.

Farmers in 1999 bought more than 1 million insurance policies covering about $32 billion worth of crops on about 65 percent of all U.S. cropland. Policies are sold by 17 insurance companies.

Rain and Hail is partly owned by Bermuda-based Ace Ltd.