|COMPANY OVERSIGHT INCREASES
United States Attorney
District of Minnesota
B. Heffelfinger, United States Attorney (612) 664-5600
Karen Bailey, Media Coordinator (612) 664-5610
Greg Brooker, Assistant United States Attorney (612) 664-5600
MINNEAPOLIS, Oct 11, 2001
- Great American Insurance Company (Great American), one of the nation's
largest issuers of federally reinsured crop insurance, agreed on October
10, 2001, to settle all claims of the United States arising from Great American's
payment of false claims submitted in connection with federally reinsured
multi-peril crop insurance.
In 1998, the United States Department of Agriculture (USDA)
discovered evidence that violations of the False Claims Act occurred in
connection with crop insurance claims for crop years 1994 and 1995. The
fraudulent claims were filed by a Great American loss adjuster who submitted
the claims on his family's policy for his own farming operation in Minnesota.
The claims were processed and approved by claims managers in the Fargo,
North Dakota, regional office of Great American in a manner which violated
crop insurance rules. Great American approved and paid the claims, and then
requested that USDA reimburse Great American for the claims under the terms
of its reinsurance agreement with USDA. Although managers of Great American
became aware of allegations the claims were fraudulent, they did not report
the suspected fraud to USDA's Risk Management Agency (RMA).
USDA's Office of Inspector General, assisted by RMA's Northern
Regional Compliance Office, and the Special Investigation Branch, later
discovered that the claims were based on fraudulent and false statements
and were processed by Great American in knowing violation of federal crop
insurance rules. Great American also failed to promptly notify USDA of the
suspected violations and fraudulent activity, as required under federal
crop insurance program regulations.
The Settlement Agreement entered into by Great American
calls for the payment to the United States of treble damages and six civil
penalties under the False Claims Act totaling $323,616. The Settlement Agreement
also includes a Corporate Compliance Plan, which requires Great American
(1) establish a special investigation unit (SIU) within
the corporation that is independent of Great American's crop insurance division
and that must investigate all cases where farmers or Great American employees
are suspected of committing unlawful conduct in the multi-peril crop insurance
(2) regularly provide to USDA data on crop insurance claims
that appear to be based on misrepresentation or other unlawful conduct;
(3) develop and implement annual fraud-prevention training
for all Great American loss adjusters and SIU investigators; and
(4) promptly take all appropriate corrective action when
notified by USDA of any violation of crop insurance program requirements.
In the Federal Crop Insurance Act, Congress authorized
USDA to utilize private insurance companies to provide crop insurance to
the nation's farmers. Proper internal investigations by crop insurance companies
are crucial to root out fraud and abuse in the federal crop insurance program.
Prompt notification by crop insurance companies to USDA of all suspected
cases of fraud is also critical in uncovering fraud in the system. The Settlement
Agreement in this case seeks to ensure the independence of internal investigators
at Great American and better control potential internal conflicts of interest.
Assistant United States Attorney Greg Brooker negotiated
the agreement on behalf of the United States.