UPDATE: Missouri auditor reviewing rules for grain deals

Wednesday, September 2, 2009 | 5:16 p.m. CDT; updated 9:22 a.m. CDT, Thursday, October 1, 2009

JEFFERSON CITY — The Missouri auditor's office said Wednesday that it will examine state rules governing grain deals after two alleged grain fraud schemes cost farmers tens of millions of dollars this year.

State Auditor Susan Montee, a Democrat, said the audit is to focus on the Missouri Department of Agriculture's Grain Regulatory Services program and is to include recommendations about how state officials could spot fraud sooner and help farmers recover more of their financial losses. Agriculture Department officials requested the review.

"It was a huge impact, and if there is a way to prevent some of this from happening in the future, we should fix it now," Montee said.

Montee said auditors have already determined that the Agriculture Department has followed its procedures and complied with state laws. She said the review will examine what other states have done. One possibility is to allow the department to hire more grain inspectors, but state budget constraints make that difficult.

The review comes after two high-profile alleged grain fraud schemes on opposite sides of the state. In Gallatin in northwest Missouri, the owner of a Daviess County grain elevator is facing 22 counts of grain theft. More than 100 farmers who lost $3.5 million are expected to get about 12 cents on the dollar.

In Martinsburg in northeast Missouri, the owner of a trucking company and grain elevator was charged in July with 15 state and federal felonies and accused of operating a grain fraud scheme that prosecutors say could cost farmers up to $50 million. Agriculture officials say farmers can expect to receive about 2 percent of their claims.

An attorney representing the grain elevator in Martinsburg has denied there was a fraud scheme.

State Agriculture Director Jon Hagler said Wednesday that he wants the state auditor's office to recommend policy changes.

"This year, Missouri has been faced with the two largest grain failures in state history along with farmers facing economic challenges across all sectors," Hagler said in a written statement. "Our Grain Regulatory staff has done a tremendous job uncovering irregularities and assisting farmers across Missouri with filing claims and answering questions during their times of need. Auditor Montee and her staff have the expertise to thoroughly review and recommend additional tools we may need to protect farm families."

The Department of Agriculture said that for the previous 22 years, the state had 36 grain insolvencies that cost farmers $3.3 million. This year's losses alone are 10 times higher.

The grain problems prompted lawmakers earlier this year to consider legislation to increase the minimum bonding requirements for licensed grain dealers and set criminal penalties for unlicensed dealers. It did not pass. Lawmakers also considered creating an indemnity fund for farmers who lose money in speculative commodity markets — something done in several states.


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