Missouri grain dealers will face more stringent financial requirements under legislation signed Monday by Gov. Jay Nixon in response to the most costly grain fraud scheme in state history.
The new Missouri law, effective Aug. 28, will require grain dealers to set aside more money as a safeguard against insolvency, though it will come too late for the roughly 180 farmers who lost about $27 million to a northeast Missouri grain dealer now in federal prison on fraud charges.
Cathy Gieseker, of Martinsburg, received a nine-year federal sentence on mail-fraud charges and a concurrent 10-year state sentence for felony charges of theft and filing false statements with state officials. Gieseker and her husband, Timothy, ran T.J. Gieseker Farms and Trucking in Martinsburg. She continued the business after he died of cancer in 2007.
Prosecutors say Gieseker defrauded farmers by telling them she had contracts with Archer Daniels Midland Co. that would provide returns of 50-100 percent above market. But she had no such deal. Instead, Gieseker sold the grain at spot prices. To keep the scheme going, she would occasionally pay inflated returns to some farmers as false evidence that she really had a contract, prosecutors said.
Some farmers started to worry as Gieseker kept putting off their payments, and eventually turned to regulators with the state Agriculture Department. An audit revealed financial irregularities in her firm that prosecutors claim date back to 2002.
Nixon held a bill signing ceremony Monday at a feed store in the northeast Missouri city of Mexico. Agriculture officials have said Gieseker served as broker between grain farmers and buyers in Mexico, Mo.; Louisiana, Mo.; St. Louis; and Quincy, Ill.
The new Missouri law will require grain dealers to maintain assets at least equal to their liabilities. Missouri had been one of the few states that did not have an asset-to-liability ratio, said Richard Wahl, president of the Association of Grain Regulatory officials and chief of the Grain Warehouse Bureau for the Iowa Department of Agriculture and Land Stewardship.
The Missouri law also will require grain dealers to maintain a net worth of at least 5 percent of their annual grain purchases. For larger grain dealers, Missouri law previously capped that amount at $20,000 or 1 percent of annual grain purchases, whichever was greater. The law also increases the net worth requirements for grain warehouses, often referred to as elevators, from the current 15 cents to 25 cents per bushel based on their storage capacity. The new requirement for grain elevators brings Missouri more in line with national standards.
Under the new Missouri law, the surety bond required for grain dealers also will rise to a minimum of $50,000 and a maximum of $600,000 instead of a range of $20,000 to $300,000.
"Overall it's a move to modernize Missouri's grain dealer statute, and it should enhance the protections that the (state agriculture) department provides to the farmers through its regulatory program." Wahl said.
The legislation also contains several provisions unrelated to grain regulation. It creates a program allowing retiring farmers to donate their land to the state to be leased to young farmers. It also creates a new check-off option on state income tax returns, allowing people and corporations to donate $1 or $2 toward the state's efforts to regulate dog breeders.