Two Farmers Indicted in Kentucky Crop Insurance Fraud

Two Kentucky farmers and a relative have been indicted for falsifying crop damage and exaggerating the size of their fields in order to reap crop insurance benefits.

A federal grand jury last week charged Randall Taulbee and James McDonald, of Bourbon and Nicholas counties, near Lexington, with a multi-year scheme to defraud the Federal Crop Insurance Corp. and companies that the FCIC reinsures. ARMTech Insurance Services, now part of Sompo International, paid out on some of the policies

Also indicted was Cherie Lynn Noble, the sister of Taulbee and sister-in-law of McDonald, whom prosecutors said conspired in the fraud and made false statements to a federal investigator.

“It was the purpose of the conspiracy to profit or to avoid oversight through misrepresenting shares on crop insurance policies and underreporting crop production,” reads the indictment in the U.S. District Court for the Eastern District of Kentucky.

Kentucky has seen its share of crop insurance fraud in the last few years. In January of 2022, an independent adjuster who helped tobacco farmers file millions of dollars in fraudulent claims was sentenced to three years in prison. More than three dozen people, including an insurance agent, have been charged in the scheme, and at least 20 have been convicted, according to news reports.

Federal prosecutors have called the fraud “pervasive and severe” in that part of Kentucky. A spokeswoman for the U.S. Attorney’s office said Wednesday that she could not say if the Taulbee and McDonald indictments are related to the other investigations in recent years, or if more arrests are imminent.

The fraud scheme worked like this, according to the indictment: Taulbee and McDonald owned and rented farmland and obtained crop insurance on tobacco and corn, starting in 2009. In 2013, Taulbee certified that he was a new producer, which allowed greater insurance benefits. Over the next two years, he overreported the acreage he had insured, and submitted false records on supplies.

In 2014 to 2016, McDonald overreported the tobacco acreage on his farmland, falsely claimed hail damage, and submitted false records on purchased farm supplies, the indictment reads.

Corn was also sold under James McDonald’ son’s name, but the proceeds were actually split between the two farmers, prosecutors alleged. The production was not reported, resulting in a larger indemnity payout from the crop insurance. The men also split expenses and profits, but on insurance policies each claimed 100% ownership of the crops, the indictment notes.

In 2014, ARMTech Insurance paid McDonald more than $129,000 and paid Taulbee more than $76,000. Sompo International could not be reached for comment Wednesday morning.

In 2015 and 2016, Noble obtained crop insurance on tobacco in Bourbon County and filed a hail-loss claim. But she did not own the crop, and gave the $179,500 in insurance proceeds to Taulbee and McDonald, prosecutors said.

When a U.S. Department of Agriculture inspector questioned Noble, she claimed she was not related to her brother and that she, not the men, farmed the tobacco crop.

Prosecutors are asking that Taulbee repay some $182,000; that McDonald pay more than $207,000; and that Noble return about $3,000. If convicted of the fraud, the three could also face more than 30 years in prison and more than $1 million in fines.