Grain Company Owners Indicted for $3 Million Scheme to Defraud More Than 100 Farmers

KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced that the owners of a Gallatin, Missouri grain company were indicted by a federal grand jury today for a scheme that defrauded more than 100 northwest Missouri farmers of more than $3 million.

Daniel F. Froman, 66, and his wife, Pauline K. Froman, 65, both of Gallatin, were charged in a five-count indictment returned by a federal grand jury in Kansas City, Mo.

According to the indictment, the Fromans operated Gallatin Grain Company, 107 State Highway 6, Gallatin, which stored and bought grain from farmers in northwest Missouri. The indictment alleges that, from Jan. 23, 2008, to Feb. 12, 2009, the Fromans participated in a conspiracy to defraud the farmers whose grain was stored at their business. According to the indictment, the fraud conspiracy resulted in a total estimated loss of $3,113,023 to 110 farmers.

Today’s indictment alleges that grain (primarily corn and soybeans), which was owned by various farmers who contracted with Gallatin Grain, was sold by the Fromans without the farmers’ permission and the proceeds of the sales were wrongfully withheld by the Fromans. The indictment specifically cites 10 farmers who were victims of the scheme when the Fromans allegedly sold approximately 140,000 bushels of grain.

In February 2009, Daniel Froman allegedly emptied the storage space at Gallatin Grain, loading 1,200 - 1,300 bushels of soybeans and corn into four tractor trailers. Daniel Froman allegedly transported the stolen grain as well as some farm equipment to Falls City, Neb., where the grain, farm equipment, and tractor trailers were all sold for $100,000.

Today’s indictment also alleges that the Fromans submitted a false and fraudulent financial statement to the Missouri Department of Agriculture, Grain Regulatory Services which overstated their accounts receivable and understated their accounts payable. The financial statement submitted by the Fromans falsely reported a net worth of more than $662,000 in December 2007, the indictment says, when in reality they had a negative net worth of $936. The Fromans would have been ineligible to maintain their grain dealer or warehouse licenses with a negative net worth.

The false financial statement was allegedly used to obtain $500,000 in loans through a line of credit at BTC Bank.

In addition to the conspiracy, the Fromans are charged together with one count of mail fraud and one count of bank fraud. Daniel Froman is also charged with one count of wire fraud and one count of interstate transportation of stolen property.

Today’s indictment also contains a forfeiture allegation, which would require the Fromans to forfeit to the government $3,113,023, which represents the amount received from the fraud scheme.

Phillips cautioned that the charges contained in this indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.

This case is being prosecuted by Assistant U.S. Attorney Jane Pansing Brown. It was investigated by the Federal Bureau of Investigation, the Missouri State Highway Patrol, the Missouri Department of Agriculture Grain Regulatory Services, the Missouri Attorney General’s Office, the Daviess County, Mo., Prosecutor’s Office, and the Daviess County, Mo., Sheriff’s Department.