The former president of Crop Hail Management Inc. in Bigfork, Mont., pleaded guilty wire fraud and money laundering. Myron “Mike” Felt will be sentenced Oct. 19.
Felt admitted defrauding 23 insurance companies and other business and state governments with a scheme to keep farmers’ insurance premiums.
In an offer of proof filed in court by Assistant U.S. Attorney Kurt Alme, the government laid out its case against Felt, who is 77.
According to the court document:
*Felt was president of Crop Hail Management from 1998 through 2003 and had been in the crop-insurance business since 1953.
*Beginning in 2001, Felt had Crop Hail Management issue insurance policies on behalf of other insurance companies for farmers in Montana and other states. When some of the farmers paid premiums to him, he deposited them in his personal accounts rather than paying on the insurance policies.
*Crop Hail Management kept those “out-of-system” policies separate from the policies for which premiums were properly applied to the accounts.
*Some farmers wound up making claims against the out-of-system policies, not knowing that Felt had kept their premium payments and they had no valid coverage. He paid claims from the diverted premiums he had not yet spent. In 2001, Felt kept $141,000 in premiums, not including the amount he paid out in claims.
*In 2002, Felt kept about $486,000 in diverted premiums, not including the claims he paid. If farmers submitted claims on policies that Felt had pocketed the premiums for, he paid the claims from premiums he had not yet spent.
But the scheme caught up to Felt before 2002 was over. By then, he did not have enough diverted premiums to pay all the claims. He began “flipping” the numbers on policies. He would submit to insurance companies a claim on a policy that he had taken the premium payments for, using a policy number assigned to a legitimate, paid-up policy.
Felt submitted claims against flipped policies totaling $863,000 for payment by other insurance companies. The companies paid Crop Hail Management about $656,000.
Felt used the money to pay creditors and for other personal expenses.
Twenty-three insurance companies, two reinsurance brokers and two managing general agencies lost premiums and/or commissions in the scam. Five states lost premium taxes on the diverted premiums.
One company, Heartland Crop Insurance Inc., in Topeka, Kan., received a false report e-mailed from Crop Hail Management. That is the basis for the wire-fraud charge. Another company, Fagan Grain Inc., received a claim check of about $60,000 from Crop Hail Management; Felt knew the money was from premiums he had diverted. That is the basis of the money-laundering charge.
Felt turned himself in to authorities, reportedly before the crimes were discovered.
He entered into a plea agreement with prosecutors. U.S. District Judge Donald Molloy may consider Felt’s admissions at sentencing.
The plea agreement does not guarantee that Felt will spend no time in prison. It does allow him to stay out of prison until he is sentenced.
U.S. Attorney Bill Mercer said Molloy may consider such things as the number of victims in the case and the fact that Felt was in a position of leadership with the company while he was engaged in fraud.
Mercer said prosecutors will ask for Felt to serve some prison time.
The agreement also says that no more charges will be brought against Felt or any employees of the management company.
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