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Dowson Farms Pays $5.4 Million
To Resolve False Claims Allegations
Related To Farm Subsidy Payment Limits

FOR IMMEDIATE RELEASE
January 29, 2014

Springfield, Ill. – A central Illinois family farm business, known collectively as Dowson Farms, based in Divernon, Ill., has paid $5,364,000 to the United States to resolve allegations that it conspired to avoid statutory caps on federal farm subsidy payments from 2002 through 2008, under terms of an out-of-court settlement announced today by the U.S. Attorney’s Office for the Central District of Illinois. The United States had alleged that Dowson Farms’ principal owners, John J. Dowson, John C. Dowson, Darrel Thoma, Amy D. Thoma, and Melissa D. Vorreyer, violated the False Claims Act by creating multiple entities, falsely claiming that these entities were actively engaged in farming separate and distinct from Dowson Farms. As a result, Dowson Farms’ owners allegedly received farm subsidies to which they were not entitled.

The settlement, reached out-of-court by the Dowsons and before the United States had initiated any action, is neither an admission of liability by the Dowsons nor a concession by the United States that its claims were not well founded.  The settlement avoids the delay, uncertainty, inconvenience, and expense of protracted litigation that likely would have resulted from the United States’ claims.  With the second of two equal payments received this week, the United States has released Dowson Farms’ principal owners from civil and administrative claims related to the operation of limited partnerships and participation by those partnerships and the Dowsons in U.S. Department of Agriculture farm subsidy programs from Jan.1, 2002, through Dec. 31, 2008. 

“We are pleased with this favorable resolution of the government’s claims of misuse of farm subsidy programs,” stated U.S. Attorney Jim Lewis.  “These programs are designed to help farmers withstand market price volatility and the intrinsic risks associated with farming from year to year. Any attempt to exploit the system to take more than one’s fair share is an improper use of government funds that erodes the public confidence in such programs and threatens their continued viability.”

The United States had alleged that the Dowsons evaded annual payment caps established by Congress to limit the amount of payment individuals can receive during a given crop year from farm subsidy programs, known as Direct Payments and Counter-Cyclical Payments. According to Farm Service Agency regulations, the Direct and Counter-Cyclical Payments Program provided payments to eligible producers on farms enrolled for the 2002 to 2007 crop years.  While Direct Payments were tied to acreage bases and yields, Counter-Cyclical Payments provided support to counter the cycle of market prices as part of a safety net in the event of low crop prices.

Throughout this time period, Congress had established an annual limit for each qualified participant in the program.  In particular, Congress permitted an individual to receive payments on up to three entities. Under what is known as the “Three Entity Rule,” no person may receive payments subject to these rules from more than three entities in which the person held substantial beneficial interest. If an individual received payments as an individual, he or she could not also receive payment from more than two entities that receive payment as a separate ‘person.’ Using this provision, along with other regulations, an individual was effectively allowed to receive payments to himself and on behalf of up to two additional entities in which the individual held up to a 50 percent interest.

According to the United States, the Dowsons allegedly created multiple limited partnerships for the apparent purpose of concealing the interests of John Dowson, his son, Chris Dowson, and John’s son-in-law, Darrel Thoma, in the entities’ farming operations.  For the multiple limited partnerships established by the Dowsons, on paper, 98 percent of the purported ownership was held by various employees, including farm hands and other straw men, while the Dowsons retained only a two percent interest. The United States had asserted that the limited partners contributed nothing to establish their ownership interest and none had any authority to conduct business on behalf of their respective partnership. Meanwhile, again according to the United States, the Dowsons wholly controlled the partnerships’ finances and commodity sales.  Farm Service Agency regulations specifically prohibit a person from adopting a scheme or device designed to evade the payment limitations or that has the effect of evading the payment limitations. According to the United States, the creation and use of these limited partnerships, at a minimum, had the effect of evading payment limitations. 

The agreement was negotiated by First Assistant U.S. Attorney Eric I. Long on behalf of the U.S. Attorney’s Office for the Central District of Illinois and the U.S. Department of Agriculture.

 

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