In 2017, Lone Star Ag Credit, a Farm Credit System (FCS) association in Texas, broke horrible news to its customers: Lone Star’s management was unable to issue its normal financial statements due to “appraisal and accounting irregularities affecting a segment of the Association’s lending portfolio.”
No customer wants to hear this, let alone a farmer, rancher or producer who has entrusted Farm Credit with their financial success and credit needs. But now there’s at least an upside to this debacle – the Farm Credit employee who defrauded Lone Star’s customers has been sentenced to prison.
U.S. Attorney Joseph D. Brown announced that Farm Credit employee Michael Shelley has been sentenced to prison for 10 years for his crime. He was also ordered to pay Lone Star nearly $2.2 million in restitution.
Removing Shelley from his position and ordering that he make restitution is only the tip of the iceberg. According to Lone Star, Shelley’s position of authority in the institution meant that Lone Star “had to expend significant resources to unwind and uncover the full breadth and impact of his fraud.” Lone Star will have to do far more work to wrap up this sordid chapter in its history; Lone Star itself notes that “impact of Shelley’s fraud will be felt for years to come.”
How was Shelley able to defraud Lone Star and its customers for so long? Even if he were in a position of sufficient authority, it beggars belief that he would be able to get away with such an expansive and far-reaching crime for so long. As Farm Credit’s regulator, the Farm Credit Administration (FCA) should have discovered Shelley’s fraud far earlier. In fact, the FCA employs a cohort of examiners for precisely this purpose. How could it have let down Lone Star and its customers?
There is, perhaps, some silver lining: last year, Congress passed the 2018 Farm Bill’s industry-wide prohibition on employment of bad actors at Farm Credit like Shelley. He will never again work at any Farm Credit institution, nor at any financial institution.
Congress has fought half the battle, but it could do more to make sure another Farm Credit institutions like Lone Star don’t fail their customers. Congress must hold yearly hearings to make sure the FCA is well-prepared to root out bad actors at Farm Credit. America’s farmers, ranchers and producers deserve an honest accounting.