Kentucky farmer pleads guilty in crop fraud, must pay government $9.9 million

A Kentucky farmer agreed to pay at least $9.9 million to the federal government over fraudulent crop insurance claims.

Larry Walden pleaded guilty to one charge of conspiracy to commit money laundering. The restitution agreement is part of his plea.

Walden also faces up to 20 years in prison under the charge, though his sentence will likely be less under sentencing guidelines used in the federal court system.

According to court documents, Walden, of Barren County, owned and rented farm land in the county and grew crops that included burley tobacco.

Walden admitted he wrote checks to Farmers Tobacco Warehouse in Danville to show he had bought tobacco from the warehouse, even though he hadn’t.

That was part of a scam to make it appear he hadn’t raised enough tobacco to fulfill the amount he had contracted to provide to tobacco companies, according to the court record.

In reality, the warehouse paid Walden back for the checks, minus a fee, and Walden used the checks to support insurance claims that his tobacco crops had been short, his plea agreement said.

That happened in crop years 2014 through 2019, according to his plea.

Thomas Kirkpatrick, former manager of the Danville warehouse, has also been indicted on charges of conspiracy to commit money laundering and conspiracy to commit fraud. He pleaded not guilty.

For the 2020 crop year, Walden used the same process at Greensburg Tobacco Warehouse to get false documentation for crop-insurance claims, and then did the same thing in crop years 2021 and 2022 at Fair Deal Tobacco, according to his plea.

Walden admitted he also wrote checks to other farmers to make it appear he’d had to buy burley to fill his contract.

The other farmers gave the money back to Walden, but he gave his insurance adjuster copies of the checks to justify claims for payments.

Walden also sold tobacco in other people’s names to hide production, he acknowledged in his plea.

Walden agreed to pay “not less than” $9,960,817 to the U.S. Department of Agriculture, which backs crop-insurance policies sold by private companies.

He also agreed to forfeit 120 acres of land on Happy Valley Road in Barren County to the government, as well as 5.7 acres of land and a house on Pace Quarry Road to help satisfy the amount he owes.

Walden pleaded guilty May 15 before U.S. Magistrate Judge Edward B. Atkins in federal court in Lexington.

Atkins recommended that U.S. District Judge Karen K. Caldwell accept the plea deal.

Walden is scheduled to be sentenced in August.

His guilty plea was the latest in a federal investigation of crop-insurance fraud in Kentucky that has been going on for years.

More than 30 people have been charged or convicted, including farmers, crop insurance agents and people associated with tobacco warehouses.

They included Michael McNew, who worked in Mount Sterling as an insurance agent and adjuster. Federal authorities said he caused a loss of more than $23 million through fraud.

“This investigation has revealed that the abuse of the crop insurance program is pervasive and severe,” prosecutors wrote in one court document. “Like any other government benefit program, people find a way to abuse and unjustly benefit from the system designed to help those who need it.”

A judge sentenced McNew to seven years and two months in federal prison in 2021. The sentence included $19.5 million in restitution to the government and an insurance company.

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