An alleged $30-to-50 million grain fraud case in north-central Missouri has sparked calls for changes in state law, calls the State Agriculture Director has heard.
Missouri Agriculture Director Jon Hagler says he will work closely with legislators reacting to the Gieseker grain case.
"What I think is important is that we find the right balance," Hagler tells the Missourinet. "When you have a lot of small dealers and a lot of small warehouses, if you raise the cost of business too much, it puts them out of business and then there’s not enough competition in the marketplace and farmers suffer."
Talk now centers on increasing the surety bond requirements for grain elevators and grain brokers. Bonds now are based on the business done, generally 1% of sales. Legislation considered this session would have raised that half a percent, with the maximum bond requirement doubling from the current $300,000 to $600,000. A minimum $50,000 bond would be required as well.
Such increases, though, wouldn’t even come close to compensating farmers for the losses claimed in the Gieseker case. State and federal officials have charged grain broker Cathy Gieseker of Martinsburg with defrauding nearly 200 farmers, mostly in north-central Missouri, out of at least $27 million, perhaps as much as $50 million. The charges were filed five months after the State Agriculture Department moved to seize the assets of T. J. Gieseker Farms and Trucking Company after a routine agriculture audit disclosed discrepancies in Gieseker’s financial records.
There have been no talks about creating an indemnity fund to compensate farmers for losses, a much more expensive solution that some states have implemented. There has been some discussion about creating a misdemeanor crime for a grain dealer to operate outside his or her license, an allegation raised in the Gieseker case.
Hagler says such problems such as the Gieseker case force agencies to take a hard look at their operations. He says the Agriculture Department will consider improvements to its auditing to catch such problems earlier, though he adds it’s difficult to discover fraud when a company might be using two sets of books.
Hagler calls this a tragedy of great proportions.
"This has impacted real lives," Hagler says. "So I think it’s incumbent upon us as a department to sit down with folks and to figure out what will work best for them. Because we don’t want to see this again, but we want to make sure they have an opportunity to do business and I think that’s where these talks will be fruitful."
The Gieseker case has everyone’s attention, but at nearly the same time, a grain elevator in northwest Missouri went bankrupt. In February, Danny Froman voluntarily surrendered his warehouse and grain dealer licenses to the Department of Agriculture after an inspection of the Gallatin Grain Company. More than 100 farmers submitted claims to the department. Grain auditors reviewed them for an administrative hearing held at the end of May.