RALEIGH – Their jail time was only 24 hours each, but two eastern North Carolina farmers will pay dearly in another form of punishment.

United States Attorney George E.B. Holding announced in federal court on March 18 that United States District Judge James C. Dever III sentenced the two men for their part in a multi-million dollar crop insurance fraud scheme.

Vernon L. Rhodes, 54, of Rocky Mount received one day of custody followed by five years’ supervised release. He was also ordered to pay restitution in the amount of $85,472.20.

Donald Keith Davis of Sharpsburg received one day custody followed by five years’ supervised release. Davis also received restitution in the amount of $209,270.55.

On June 18, 2010, Criminal Informations were filed by the

United States Attorney Office charging each defendant. On July 20, 2010, each defendant pled guilty to one count of conspiring to make false statements, to making material false statement, to committing mail and wire fraud and to structure transactions, and to one count of making false statement in connection with crop insurance.

According to the Information, from August, 2005, to December, 2009, Rhodes, also an elected member of the Edgecombe County United States Department of Agriculture – Farm Service Agency Committee, obtained federal crop insurance policies for his tobacco crops. Rhodes then filed false crops insurance claims, hiding some or all of the tobacco production by selling it in nominee names or for cash to a co-conspiring tobacco warehouseman. This scheme allowed Rhodes to be paid twice for each pound of tobacco, once through the false crop insurance claims and again through the sale of the “hidden” tobacco.

In October, 2005, Rhodes sold approximately 13,440 pounds of tobacco to the co-conspiring warehouseman. That same day, the warehouseman issued two checks for the tobacco in the amounts of $7,500 and $7,284, respectively. Later that month, Rhodes cashed both checks.

In November, 2005, Rhodes filed crop insurance claims, failing to report that the tobacco had been sold. Later in November, Rhodes received another check for $11,898 from the Farm Bureau for crop losses he had not suffered.

For the following years until 2009, Rhodes proceeded to use this same scheme, defrauding the federal government out of over $85,000.

In the same manner, from October, 2005, to March, 2008, Davis, the owner and operator of Davis Farms, received checks for crop losses he declared but did not suffer, defrauded the federal government out of more than $309,000. Both Davis and Rhodes had the co-conspiring warehouseman structure the payments in amounts less than $40,000 to evade federal reporting requirements.

Investigation of this case was conducted by the United States Department of Agriculture, Office of the Inspector General, Risk Management Agency, Special Investigations Branch, and the Internal Revenue Service, Criminal Investigation Division. Assistant United States Attorney Banumathi Rangarajan represented the government.