Federal prosecutors have charged Kent Duane Anderson, a Spearfish and Rapid City businessman, with fraudulently making $25 million in five years by selling non-organic grains and seeds as organic and spending much of it on high living, such as an $8 million yacht, a $2.4 million home and a Maserati, a Jaguar SUV and $400,000 in jewels.
Anderson, who is 50, pleaded not guilty in a Rapid City federal courtroom on Friday, Feb. 14, to 42 counts from a grand jury’s indictment. It alleges Anderson, aided and abetted “by persons known and unknown to the grand jury,” devised the scheme from about Oct. 1, 2012, through March 14, 2018, in South Dakota and elsewhere.
Prosecutors say Anderson, through employees, bought non-organic grains and seeds from Archers-Daniels-Midland Co., (ADM), and Cargill Inc., and shipped them to his storage and loading facility in Tappen, North Dakota, on Interstate 94 east of Bismarck. Anderson’s employee in Tappen would put the product in bins and receive instructions from an Anderson employee in Florida about which products to load out for customers looking for natural or organic products.
Under Anderson’s company name of Green Leaf Resources, the Tappen employee would prepare shipments to customers, with the bills of lading and invoices identifying them as organic.
The scheme made money because organic products typically garner a premium price over non-organic grains, prosecutors pointed out in the indictment.
A small amount of the non-organic grains and seeds Anderson purchased would be shipped to a processing facility in Rapid City leased by Anderson, prosecutors say.
Anderson “primarily contracted with one trucking company,” identified as U.F. in the indictment, and paid U.F. more than $5 million over the five years, the indictment alleges.
The South Dakota Public Utilities Commission began looking into Anderson’s businesses after getting complaints he wasn’t paying his bills, and questions about his licensing as a grain buyer, according to PUC news releases from last spring.
Federal prosecutors say Anderson began his business after forming the Bar Two Bar Ranch LLC, owned by Anderson and his wife, Aimee Anderson, in 2005 near Belle Fourche. The business was raising calves from 325 Hereford and Angus cows, selling them to feedlots, and selling hay on contracts to ranches in southeast Montana and northeast Wyoming.
In 2006, the company began marketing small grains and oilseed byproducts to ranches, feedlots and feed distributors that were purchasing the Andersons’ hay.
“This business grew substantially during 2006-2008,” according to Anderson’s own business profile, prosecutors said.
“The company was generating more revenue through feed sales than beef sales. At this point the decision was made to create a new set of companies that became Green Leaf Resources, Inc. and its subsidiary companies, to support the feed production and marketing business ...”
Anderson hired his sister-in-law, M.G., and a college friend, J.M., as “figurehead executives” in Green Leaf Resources and “used them to apply for and obtain” USDA certifications as authorized handlers, brokers and traders, of organic grain and seed products. Anderson and his certified employees asserted that the products they handled, brokered and traded were obtained from “organic” suppliers, according to the indictment.
Anderson “used these certifications to falsely market and sell his products as being legitimate ‘organic’ products,” prosecutors allege.
Greenleaf Resources is based in Spearfish and “provides natural and organic bulk flax oil and flax meal, and natural canola oil and canola meal,” according to its website.
Anderson’s USDA “organic” certifications “served as a cover for the true nature of his business operations, that being the large-scale purchases of non-organic agricultural grain and seed products he falsely re-sold as being ‘organic’ products,” according to the indictment.
Anderson used business bank accounts at Dakotah Bank in South Dakota and later at JPMorgan Chase Bank.
During those five years, Anderson paid about $47 million from those bank accounts to buy grain and seed products, 97 percent of it non-organic, and less than 3 percent organic products, prosecutors say.
During the same five years, Anderson’s business generated sales of about $75 million worth of so-called "organic" grain and seed products, with the money deposited in his business bank accounts.
Only about 5 percent of the products he sold were from actual organic grains or seeds, while $71 million of his sales revenues was from “sales of non-organic products falsely represented to be ‘organic,’” according to the indictment.
It was stunningly simple: Anderson made a nice profit of about $25 million just by re-labeling, in a way, non-organic flax and canola products as organic.
The sales proceeds from the fraudulent scheme were put into Anderson’s business accounts, “but periodically transferred from those accounts into personal bank accounts that he and his wife jointly maintained at the same banks,” prosecutors allege. “A substantial portion of those transferred monies were then expended to transact purchases of personal assets.”
Over the five years, Anderson transferred a total of about $11 million of the $71 million in “organic’ sales into his personal bank accounts, prosecutors say.
“A large portion” of that $11 million was used by the Andersons to build and furnish the $2.4 million home in Florida, buy the $8 million Italian-made 86-foot yacht in $1.5 million payments, as well as a 2013 Maserati turismo convertible and a 2017 Jaguar SUV and $400,000 in jewels.
Anderson pleaded not guilty to the 42 counts of wire fraud and using money transactions to accomplish the alleged fraud.
The prosecutors say if Anderson is convicted of any of the 42 counts, he will have to forfeit all of the property he amassed, such as the house, the yacht, the cars and $400,000 in jewels. He also could be ordered to come up with a money judgment of $27,323,023, “representing the amount of proceeds obtained as a result of the offenses.”
Anderson spent Thursday night, Feb. 13, in the Pennington County Jail in Rapid City, according to news reports. He was released after his initial court appearance on Friday, pending his trial or other disposition of his case, according to court documents.
But U.S. Magistrate Judge Daneta Wollmann ordered him to surrender his passport, not to travel outside South Dakota without approval from the court, and not to possess any firearms.
He also was ordered to have no contact, direct or indirect, with anyone who may be a witness or co-defendant in the case.
Wollmann also had a handwritten addition inserted into the court order that Anderson “may have non-case related contact with his wife, but no case-related contact with her.”
There was no indication in court documents available to the public that Aimee Anderson is charged in the case.
According to online sources, Anderson is 50 years old and he has lived in Plaza, North Dakota, and Bradenton, Florida, as well as Belle Fourche and Spearfish.
Anderson is being represented by Rapid City attorney Thomas Diggins, a federal public defender. Assistant U.S. Attorney Benjamin Patterson appeared for the prosecution on Friday.