Summary of a Recent
Judicial Development in
Crop Insurance

Agricultural Partnership, Individual Partners
Found Guilty Under False Claims Act for
Submitting False Insurance Claim

Harrison M. Pittman
Staff Attorney

The United States Court of Appeals for the Eighth Circuit has affirmed, per curiam, a jury verdict entered by the United States District Court for the Eastern District of Arkansas determining that an agricultural partnership, Larry Reed & Sons Enterprises, and its individual partners, violated the False Claims Act ("FCA"), 31 U.S.C. Sec. 3729-3733 (2002)., in 1993 when they submitted a false cotton crop insurance claim for loss of 194.1 acres cotton. United States v. Larry Reed & Sons Partnership, 280 F.3d 1212 (8th Cir. 2002). The jury based its determination largely upon its finding that the 194.1 acres had never been planted in the 1993 crop season. Id. at 1214.

The jury assessed damages against the partnership at $93, 686.50. Id. Pursuant to the FCA, the district court trebled these damages, for a total of $281,059.50 in damages. Id. The individual partners were assessed fines, in addition to being assessed nominal amounts in damages. Id. The district court assessed the partnership the maximum statutory penalty of $10,000.00. Id.

The partnership claimed on appeal that the damages assessed against the partnership were based on insufficient evidence, that allowing a written statement of a government witness was an abuse of discretion by the district court, and that allowing expert testimony pertaining to soil preparation based on computer analysis of satellite images was an abuse of discretion by the district court. Id.

The partnership also argued that the $93,686.50 jury award was based on insufficient evidence because the amount assessed against it ($56,874) at trial to have been fraudulently obtained was higher than the amount alleged in the complaint ($49,720.00). Id. The amount was higher because the government was able to prove at trial the amount of money that the individual partners fraudulently received, and individually deposited into the partnership accounts. Id.

The Eighth Circuit relied on Fed. R. Civ. P. 15(b) to allow evidence of the individual deposits to be treated as though the allegation had been raised in the pleadings. Id. The court stated, "Thus, because we view the complaint as constructively amended to conform to the proof, the United States' failure to include the partners' individual contributions of fraudulent cotton crop insurance proceeds in the original complaint against the partnership does not nullify the jury's damage award against the partnership." Id. at 1215 (citing Charles Schmitt & Co. v. Barrett, 670 F.2d 802, 806 (8th Cir. 1982)).

The court also ruled that the government's introduction of a witness's earlier written statement in which the witness stated that "Reed did not plant cotton" contrary to his testimony at trial that "he did not know if Reed planted cotton" was not an abuse of discretion. Id. Even though the district court failed to properly give a limiting instruction to the jury about the earlier statement, the Eighth Circuit ruled that it was not plain error to do so. Id.

Finally, the court determined that it was not an abuse of error for the district court to allow expert testimony based on the computer analysis of satellite images that involved the amount of soil preparation of the partnership's farmland. Id. The court noted that the expert properly discussed the acceptance of his methodology, the plethora of academic materials dealing with the process of computer analysis of satellite images, its use at numerous universities, and its use of this particular method of analysis at NASA. Id. at 1215-16.

This case summary was prepared June, 2002.