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COMPANY OVERSIGHT INCREASES
United States Attorney
District of Minnesota
Contact: Thomas B. Heffelfinger, United States Attorney (612) 664-5600
Karen Bailey, Media Coordinator (612) 664-5610
Greg Brooker, Assistant United States Attorney (612) 664-5600
MINNEAPOLIS, Oct 11, 2001 - Great American Insurance Company (Great American), one of the nation's largest issuers of federally reinsured crop insurance, agreed on October 10, 2001, to settle all claims of the United States arising from Great American's payment of false claims submitted in connection with federally reinsured multi-peril crop insurance.
In 1998, the United States Department of Agriculture (USDA) discovered evidence that violations of the False Claims Act occurred in connection with crop insurance claims for crop years 1994 and 1995. The fraudulent claims were filed by a Great American loss adjuster who submitted the claims on his family's policy for his own farming operation in Minnesota. The claims were processed and approved by claims managers in the Fargo, North Dakota, regional office of Great American in a manner which violated crop insurance rules. Great American approved and paid the claims, and then requested that USDA reimburse Great American for the claims under the terms of its reinsurance agreement with USDA. Although managers of Great American became aware of allegations the claims were fraudulent, they did not report the suspected fraud to USDA's Risk Management Agency (RMA).
USDA's Office of Inspector General, assisted by RMA's Northern Regional Compliance Office, and the Special Investigation Branch, later discovered that the claims were based on fraudulent and false statements and were processed by Great American in knowing violation of federal crop insurance rules. Great American also failed to promptly notify USDA of the suspected violations and fraudulent activity, as required under federal crop insurance program regulations.
The Settlement Agreement entered into by Great American calls for the payment to the United States of treble damages and six civil penalties under the False Claims Act totaling $323,616. The Settlement Agreement also includes a Corporate Compliance Plan, which requires Great American to:
(1) establish a special investigation unit (SIU) within the corporation that is independent of Great American's crop insurance division and that must investigate all cases where farmers or Great American employees are suspected of committing unlawful conduct in the multi-peril crop insurance program
(2) regularly provide to USDA data on crop insurance claims that appear to be based on misrepresentation or other unlawful conduct;
(3) develop and implement annual fraud-prevention training for all Great American loss adjusters and SIU investigators; and
(4) promptly take all appropriate corrective action when notified by USDA of any violation of crop insurance program requirements.
In the Federal Crop Insurance Act, Congress authorized USDA to utilize private insurance companies to provide crop insurance to the nation's farmers. Proper internal investigations by crop insurance companies are crucial to root out fraud and abuse in the federal crop insurance program. Prompt notification by crop insurance companies to USDA of all suspected cases of fraud is also critical in uncovering fraud in the system. The Settlement Agreement in this case seeks to ensure the independence of internal investigators at Great American and better control potential internal conflicts of interest.
Assistant United States Attorney Greg Brooker negotiated the agreement on behalf of the United States.