Justice Served in Farm Credit Fraud Case

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Fraud can happen anywhere, and the Farm Credit System (FCS) is no exception. This week, another participant pled guilty to a charge related to a scheme to defraud two Farm Credit institutions, AgSouth Farm Credit and AgGeorgia Farm Credit. The operator behind the scheme, a former Farm Credit loan officer, pled guilty as well.

The former loan officer recruited participants “to pose as loan borrowers with both institutions…[and] fabricated documents to make sure the loan applications were approved. None of the co-defendants were involved in farming nor did they have the collateral needed for the loans.”

This shouldn’t come as a shock to those who have been following Farm Credit’s loans closely. Farm Credit is well known to extend loans that only thinly relate to farming. Growve, which “specializes in acquiring and growing smaller health, wellness and beauty brands” is the recipient of one such loan. And Farm Credit proudly advertises luxury properties which are hard to imagine as modest rural homes, let alone productive farms or ranches. 

But what should come as a shock is that, until only recently, Farm Credit institutions were not required to have an updated standards of conduct and a code of ethics for their officers and employees. When the Farm Credit Administration (FCA), Farm Credit’s regulator, proposed this rule, it was met with more than 150 letters critiquing it. That’s a normal and necessary part of the rulemaking process, but what’s so confounding is that the Farm Credit Council, Farm Credit’s lobbying arm, argued against the updated standards, writing: “we have been unable to identify any other Federal financial regulatory agency that promulgated similar disclosure based standards of conduct regulations for their regulated entities.”

So just because other agencies haven’t formulated these standards, that means Farm Credit shouldn’t adopt its own? Shouldn’t the standard for determining whether Farm Credit’s code of ethics should be refreshed be if there are instances of malfeasance, like fraud? 

The FCA should be commended for following through with the new rule on requiring an updated standards of conduct and code of ethics; this case affecting two Farm Credit institutions shows that it’s clearly warranted. And if the FCA is truly serious about enforcement, it will invoke Sec. 2265a of the Farm Credit Act of 1971 to bar these bad actors from working in any financial institution where they could abuse the public’s trust.

Barring bad actors is a good start. Congress should require that the FCA increase its auditing and enforcement actions so that it can root out bad actors. Taxpayers and the public deserve it.