South Dakotans accused of millions in fraud against COVID grants and crop insurance
A Pierre father and son are accused of defrauding the government of nearly $3 million, including $1 million from a state COVID-19 relief program.
James Garrett is indicted in federal court on two counts of committing "major fraud against the United States" involving the Coronavirus Relief Fund. He's accused of creating a scheme to obtain the money through "false and fraudulent pretenses, representations, and promises."
James is also charged with four counts of making false statements related to a federal crop insurance program. His son, Levi, faces one false-statement charge.
If convicted, James must return $1 million to the Coronavirus Relief Fund, which was an element of the federal CARES Act and was distributed through a state grant program. He would owe $1,686,372 related to the insurance fraud, which allegedly occurred between 2017 and 2020. Levi would owe $248,361.
"The allegations made against the Garrett family cannot be substantiated and will be vigorously defended," attorney Michael Beardsley said in a statement. "The complaining party at the root of these baseless allegations has a financial motive to tarnish the Garrett family name. The Garretts have successfully ranched their land for 130 years and will continue to do so."
James Garrett is a sole proprietor, according to Colin Keeler, director of financial systems for the state Bureau of Finance and Management. A sole proprietor is the owner of an unincorporated business.
James Garrett is one of 15 South Dakota businesses to receive at least $1 million in small-business COVID relief grants, according to public records. That's the maximum grant amount after Gov. Kristi Noem set the cap at $500,000 for each of two rounds of funding. Garrett received his grants in December 2020 and January 2021, records show.
James signed a grant agreement that says his business is "legally operating in South Dakota" and that he would only receive the money "after a review of Beneficiary’s application, and conditioned upon its determination the business is eligible for assistance."
As a sole proprietor, James would have had to provide his 2019 taxes, a government-issued ID and 2020 revenues and expenses, according to the grant's FAQ page. South Dakota contracted with Guidehouse to manage the grant program, award the grants and make sure the applications were accurate. The state hired Eide Bailly to audit the grants.
The Garrett family appears to work in ranching and farming.
James and Levi received Paycheck Protection Program assistance that went to payroll for their beef-cattle ranching and farming business, according to ProPublica's database. James received $20,832 while Levi received $4,633. South Dakota Secretary of State records show James, his wife Sandra, and Levi formerly operated the Garrett Land and Cattle Company in Pierre.
The Office of Inspector General at the U.S. Department of Agriculture began investigating the Garrett family in June 2019 after receiving complaints about their crop insurance indemnity payments, according to federal court records.
"In one instance, in 2018, the subjects received large insurance indemnity payments after a hail storm reportedly destroyed their crops, however, evidence suggest that the subjects planted no crops," a special agent wrote.
The office served James and Sandra with subpoenas for their financial records in January, court records show. The couple unsuccessfully sued to block the subpoena, arguing that they've passed all crop insurance audits.
James and Levi are on pre-trial release after being indicted Oct. 13.
The Garrett family has faced other allegations and hardships over the past several decades, according to federal and state records. Those include bankruptcy proceedings, a criminal conviction related to mortgaged property, a foreclosure, and other financial litigation.