Agent is first sentenced for ‘pervasive and severe’ $6 million crop insurance fraud

Some of the tobacco baled and ready for sale on the opening day of the 2008 burley tobacco market held at Clay’s Tobacco Warehouse in Mount Sterling.
Some of the tobacco baled and ready for sale on the opening day of the 2008 burley tobacco market held at Clay’s Tobacco Warehouse in Mount Sterling. Lexington Herald-Leader

A crop insurance agent whose actions defrauded taxpayers of nearly $6 million was sentenced Tuesday to five years in federal prison.

Debra Muse, 63, of Wallingford in Fleming County was the first defendant to be sentenced as part an investigation into crop insurance fraud. She pleaded guilty in April to one count of conspiracy to defraud the United States and one count of making a false statement and report.

The initial indictment said the loss amounted to $169,000 but court documents filed in advance of the sentencing said Muse “churned out” fake documents and reports to cause the government to pay out $5,917,515 in crop insurance indemnity payments “to producers who did not deserve that money” over the course of 2013 and 2014.

During sentencing, a federal judge considers not only the specific acts for which a defendant is convicted but also considers the scope of behavior involved.

“This investigation has revealed that the abuse of the crop insurance program is pervasive and severe,” a government sentencing memorandum said. “Like any government benefit program, people find a way to abuse and unjustly benefit from the system designed to help those that need it.”

Muse, who must report to prison on Oct. 1, was ordered to pay $1.6 million in restitution. She had no comment after the sentencing.

In addition to working as a crop insurance agent, Muse was employed as a seasonal worker at Clay’s Tobacco Warehouse in Mount Sterling.

For the warehouse, Muse entered information into a software program that tracked the purchases, sales and shipments of tobacco. The government says Muse created false sales bills, shipping reports and tobacco grade reports used in filing fraudulent claims.

As a crop insurance agent, Muse obtained policies for her client farmers. Those farmers, with help from Muse, filed false claims that defrauded the government of $1,656,276. But the government said Muse also helped farmers on insurance claims sold by other agents in the crop years 2013 and 2014. Those claims totaled $4,261,239, the government says.

Co-conspiring farmers profited under the scheme because they were paid twice for each pound of tobacco: once through the false crop insurance claim and also through the sale of unreported, hidden tobacco.

Muse profited by collecting the original insurance commission, by retaining and expanding the business of her crop insurance clients, and by securing business for the tobacco warehouse. Her commissions rose from more than $40,000 in 2013 to $56,879 in 2014, according to testimony during a two-day sentencing hearing.

Six Central Kentucky farmers have been indicted in three other fraud cases pending in federal court in Lexington. Other farmers who have not been indicted are in negotiations to reach a settlement in which they agree to pay damages to the government. One farmer who has already reached a civil settlement with the government is Brandon Overley, Muse’s son-in-law, according to a court record.

The investigation into Clay’s Tobacco Warehouse became public in December 2015 when federal agents raided the Mount Sterling business. Nevertheless, Muse created one false document in January 2016, after the warehouse had already been searched.

“She continued to break the law,” said Assistant U.S. Attorney Kathryn Anderson.

Investigators said some of the warehouse records were obviously falsified to the point of being comical. For example, one customer’s name was listed as “Go Cats.”

But U.S. District Judge Joseph M. Hood interrupted to say from the bench, “I guarantee you, somewhere in Eastern Kentucky there’s somebody named Go Cats.”

Defense attorney John Helmuth had objected to the calculations for the loss amount. Helmuth argued that others had access to a computer at the warehouse and others could have falsified records.

Hood didn’t buy that argument. “She (Muse) used her skills to run this deal. She used her computer skills to do this,” Hood said.

Charges were filed in connection with a $1 billion Medicare care fraud scheme, announced the U.S. Attorney’s Office during a press conference in Miami, Florida on July 22. Federal prosecutors said it was the biggest Medicare fraud scheme in the na