Grain Company Owner Sentenced for Mail Fraud
$3 Million Scheme Victimized 100 Farmers

KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced that the owner of a Gallatin, Missouri grain company was sentenced in federal court today for a scheme that stole over $3 million from 100 northwest Missouri farmers.

Daniel F. Froman, 66, of Gallatin, was sentenced by U.S. District Judge Gary A. Fenner to six years in federal prison without parole. The court also ordered Froman to pay $2,851,304.02 in restitution to his victims. Following the pronouncement of the sentence, the United States Marshals Service took Froman into custody to begin immediately serving his sentence.

On October 18, 2011, Froman pleaded guilty to mail fraud. Froman operated Gallatin Grain Company, located at 107 State Highway 6, Gallatin, which stored and bought grain from farmers in northwest Missouri. Froman admitted that he defrauded 100 farmers whose grain was stored at his business by selling their grain in order to pay his debts.

Froman’s wife and co-defendant, Pauline K. Froman, 66, pleaded guilty on November 10, 2011 to conspiracy to commit mail fraud. Pauline Froman was co-owner of Gallatin Grain Company. She is scheduled to be sentenced on April 17, 2012.

On February 6, 2009, Gallatin Grain Company’s attorney called the Missouri Department of Agriculture Grain Regulatory Services to report that the company no longer had any grain, trucks, or assets. Two days later, Froman emptied the storage space at Gallatin Grain, loading 1,200-1,300 bushels of soybeans and corn into four tractor trailers. Froman transported the stolen grain as well as some farm equipment to Falls City, Nebraska, where the grain, farm equipment, and tractor trailers were all sold for $100,000.

The mail fraud charge involves a fraudulent financial statement that Daniel and Pauline Froman mailed to the Missouri Department of Agriculture, Grain Regulatory Services. The financial statement falsely reported a net worth of more than $662,000 in December 2007, when, in reality, Gallatin Grain Company had a negative net worth of $936. The Fromans would have been ineligible to maintain his grain dealer or warehouse licenses with a negative net worth. The false financial statement was used to borrow operating funds from BTC Bank.

The Missouri Department of Agriculture has collected $400,000 in assets from the Fromans, which has been distributed to the victim farmers on a pro-rated basis. The remaining loss, according to the Missouri Grain Regulatory Services, is $2,903,610. Daniel Froman was required to waive any interest he has in the $100,000 bond posted in the case filed by the state of Missouri in Daviess County for 22 counts of stealing grain and three counts of filing false reports. Those funds will be turned over to the state for distribution to the victims.

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