Last week, The Journal Inquirer of Connecticut reported that a “run-of-the-mill” probate case has been settled. The facts of the case are appalling to anyone with the even the slightest scruples: a former state legislator enriched himself – bought a Rhode Island vacation home and paid his children’s private school tuition – using a shell corporation to obtain federal funds, all on the advice of Farm Credit East, a Farm Credit System (FCS) association.
And last year, a judge issued a ruling on this case, calling for a federal investigation of Farm Credit East.
The judge had declared that “Farm Credit walked Steven through a process to set up a new LLC in order to get additional funds from the federal government that were not available to the business while the estate was being settled…there is serious question as to whether this was appropriate or even legal since it was nothing more than a shell corporation to funnel federal money [emphasis added].”
The Journal Inquirer reported that the underlying probate case has been settled.
But what about Farm Credit East’s possible crimes?
The presiding judge found, as a matter of established fact, that Farm Credit East created a shell corporation in order to obtain federal money that its client would normally not have had access to. Though it is ultimately up to a judge to determine whether that is indeed a crime, it seems like a textbook case of conspiracy to commit fraud.
There’s already a system in place to prevent this sort of thing from happening – it’s called the Farm Credit Administration (FCA). The FCA was created to administer the FCS, and that means making sure it doesn’t do anything legally questionable or outside of its mission to help young, beginning and small farmers. If the FCA isn’t fulfilling that purpose, then what is it doing?
The FCS can’t continue to slip away from the consequences of its actions. And lending to a publicly-traded REIT, abandoning midsize farms, and leaving investors in the lurch – that’s just the beginning. There’s a definite pattern of negligence and possibly illegal activity happening under the FCA’s nose. Congress needs to make sure that the FCA is doing its job to keep the FCS on track.
For now, it looks like Farm Credit East has temporarily evaded justice, and the FCS and the FCA have escaped blame for their negligence.
But they’ll soon reap what they’ve sewn.