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Justice News

Department of Justice
U.S. Attorney’s Office
District of Alaska

Thursday, July 31, 2014

Jury Convicts Former Owner of Valley Dairy, Inc. of False Statements to the USDA, Rural Development

Anchorage, Alaska - U.S. Attorney Karen L. Loeffler announced today that on July 30, 2014, an Anchorage jury convicted a Wasilla woman, Karen Olson, 68, of one count of false statements to influence the United States Department of Agriculture, Rural Development Program, and one count of misprision of a felony.  The convictions essentially involve Ms. Olson taking steps to cover up fraud perpetuated by Kyle Beus, the former President of Valley Dairy, Inc., in part by submitting false and fraudulent documents to the USDA.  In May 2014, Beus was convicted of wire fraud and false statements to influence USDA, Rural Development (RD).

According to Assistant U.S. Attorney Retta Randall who prosecuted the case, trial evidence demonstrated that in 2007, through an appropriation, a one-time grant offering of $650,000 was made available by USDA, RD, to fund one or more small dairy projects in an effort to support and expand the dairy industry in Alaska.

Through that appropriation, Kyle Beus received a grant in the amount of $168,000 to support an ice cream and cheese making facility, and Rob Wells & Co., LLC, received $475,000 to support a milk manufacturing facility.  Karen Olson wrote the grant application for Rob Wells, and unbeknownst to the USDA, she was a 50/50 partner in the Wells grant.  Karen Olson was the former Alaska State Executive Director of the USDA, Farm Service Agency, from April 1993 through February 2001.

In November 2007, Olson, Wells, and Beus decided to join their projects and locate them in one dairy processing facility which became known as Valley Dairy, Inc., located at 7805 Palmer Wasilla Highway in Palmer, Alaska.  They agreed that Beus would be the manager in charge of the day-to-day operations of the Valley Dairy, and he would manage the disbursement of USDA, RD, grant funds.

In September 2008, Olson discovered that Beus had inflated invoices which had been submitted by Olson and Wells to USDA, RD, and Beus had received kickbacks of grant monies.  Some of those monies were diverted to assist his financially troubled restaurant, Klondike Creamery/Teeland’s.  Olson became aware that because Beus had diverted grant funds to his personal use, funds were not available to pay the milk producers who were owed over $200,000, or to pay over $450,000 owed to construction vendors who had built the Valley Dairy.

Hence, within months after the Valley Dairy became operational, and due in part to fraud by Beus, the Valley Dairy was in jeopardy of being shut down.  Subsequently, Karen Olson was named CFO for the Valley Dairy and Beus’ signature authority was removed from the bank accounts; however, he remained President of Valley Dairy, Inc.

Instead of informing USDA, RD, or law enforcement of Beus’s fraud, Olson sought USDA, RD’s assistance in securing a loan from the State of Alaska to replace the loss of funds.  Olson submitted financial documents to USDA, RD, which were inaccurate and covered up the losses caused by Beus.  The documents influenced USDA, RD, to allow the State to hold a first lien position on equipment in the Valley Dairy which had been purchased or obtained with federal grant funds.  The State of Alaska then authorized loans to the Valley Dairy, some of which were used to pay vendors who should have been paid with the federal grant funds diverted by Beus.  Within three months the Valley Dairy was once again in a poor financial state, and the dairy closed in 2012.

The jury acquitted Olson on a third count in the indictment charging her with mail fraud.  Olson remains out on bail and her sentencing is scheduled for October 24, 2014.

As a result of her conviction for submitting false documents to the USDA to influence it to give up its first lien position, Olson faces a maximum sentence of 30 years of imprisonment, to be followed by five years of supervised release.  She also may be fined up to $1 million.  For taking actions to cover up Beus’ fraud – the misprision of felony count – Olson faces a maximum sentence of three years of imprisonment, to be followed by one year of supervised release and a potential maximum fine of $250,000.

Ms. Loeffler commends the U.S. Department of Agriculture, Rural Development, and the Federal Bureau of Investigation for the investigation of this case.

Updated February 9, 2015