Sunday, September 28, 1997

Cotton scheme also illustrates why taxpayers are mad

By J. T. Smith / Abilene Reporter-News

All this past week, the national news headlines lamented horror stories from congressional hearings regarding questionable behavior by the Internal Revenue Service in gathering tax money from citizens.

But the waste of taxpayer money in federal programs is just as troubling.

On Sept. 18, two Texas cotton companies pled guilty to lying, cheating and stealing more than $1 million from taxpayers.

W.G. Ripley Inc., and Suncot Inc., both of Lubbock, entered corporate pleas of guilt in Memphis, Tenn., before U.S. District Judge Jerome Turner. Together, the Texas companies pled guilty to 38 criminal counts, including fraud, conspiracy, wire fraud, and money laundering.

The almost two-year federal investigation became public in November 1995 when federal authorities issued search warrants for records and documents of two large Memphis cotton merchants. Contract files involving Ripley and Suncot were taken by federal agents.

Records involving deals with the late Mississippi cotton broker Perry Galloway of Yazoo City also were seized later. Since the time that the investigation began, Galloway died in an auto accident.

After the 1995 raids, a federal task force was opened in Memphis, headed by USDA's Office of Inspector General.

How the scheme worked

Sadly, this was flagrant abuse of what had been touted as a model program to help move U.S. ag products into the world marketplace.

USDA's export subsidy program pays cotton shippers certain amounts of subsidy in relation to the world price of cotton at various times. This is aimed at keeping U.S. cotton from being priced out of the world market. The subsidy helps bridge the gap between the world price and the U.S. domestic price so cotton can move into export channels.

Ideally, cotton shippers are happy. Cotton farmers are happy, too, as it help moves their cotton globally.

Trouble is -- according to federal records -- Ripley and Suncot created false and fraudulent documents and sent those documents to USDA's Commodity Credit Corporation to qualify for subsidy payments and hide the true nature of the transactions.

Later, this "subsidy money" paid to Ripley and Suncot was split with co-conspirators. (The co-conspirators were not named in the Sept. 18 documents).

The illegal proceeds were laundered through various bank accounts. The criminal investigation showed that much of the money from USDA to Riley and Suncot was deposited in accounts opened with a Memphis bank during 1995. Checks drawn on the accounts distributed proceeds in 1995 and 1996.

W.G. Ripley and his wife, Ruth Elkins Ripley, are corporate officers of both W.G. Ripley Inc. and Suncot Inc. Both appeared in Turner's courtroom Sept. 18 and were allowed to plead guilty to the criminal violations rather than being indicted.

The criminal investigation records filed that day showed that W.G. Ripley admitted to 11 criminal counts that included making false statements, filing false claims, wire fraud, money laundering, and conspiracy in a scheme in which $242,079 was obtained illegally through USDA's CCC.

Meanwhile, Suncot pleaded guilty to 27 criminal counts that included false claims, mail fraud, wire fraud, money laundering and conspiracy -- illegal acts through which it collected $825,496.32 from USDA.

Just these two firms, which are not even big names in cotton circles, admitted to stealing more than $1 million from taxpayers.

Now you see why American taxpayers have had it.

It's not just the rudeness, harassment and other tactics of the IRS in taking money from citizens. There's also the matter of what happens to their hard-earned dollars once that money goes into federal programs.

This was one of those "good intentions" programs. Sounded noble. And it actually has worked to move ag products into the world market.

But such abuse leaves a dark cloud over the program.

Many irate taxpayers already objected to subsidizing certain commodities long before this escapade.

You can imagine how they feel now.