Federal investigators say they have probable cause to believe that a conspiracy existed to defraud thousands and possibly millions of dollars from the government-backed program that insures crops, according to court records released Monday in Lexington. The alleged conspiracy involved Central Kentucky tobacco farmers, crop insurance agents, crop insurance adjustors, tobacco warehouse owners/employees and others. More than 400 pages of search warrant applications and other documents outlining the alleged conspiracy were released by U.S. District Court. The scheme allegedly involved profiting from false insurance claims for losses of tobacco. The investigation appears similar to a 2011 case in North Carolina where tobacco farmers and insurance agents pleaded guilty to a conspiracy in which farmers fraudulently claimed crop losses and collected insurance money but profited from selling their tobacco harvest. The documents name several individuals but because no charges have been filed and no indictments have been issued, the Herald-Leader is not naming those individuals. Last week, federal investigators searched several sites in Mount Sterling, including several tobacco warehouses and an insurance agency, and seized evidence such as bank records, tobacco crop photos, laptop computers, hard drives and crop insurance documents. Kyle Edelen, spokesman for Kerry B. Harvey, U.S. attorney for the Eastern District of Kentucky, said the investigation is continuing. “What we can say, generally speaking – there are many considerations governing when a court filing is sealed, such as: whether or not it might compromise the ongoing investigation, the safety of informants, or jeopardizing the destruction of evidence,” Edelen wrote in an email. The Central Kentucky investigation appears to have started in 2012 when the Risk Management Agency, an arm of the U.S. Department of Agriculture, received a tip that a Nicholas County farmer had been committing crop insurance fraud with the help of an insurance agent and an insurance adjustor. The allegation was that the farmer received $68,000 on a corn crop that was not even planted. Another complaint alleged that the Nicholas County farmer had 400 acres insured in other farmers’ names. In 2013, another anonymous complaint alleged that a Mount Sterling insurance agent approached a farmer and offered to “give them a good insurance claim.” The agent allegedly offered to do an appraisal for a small amount, and then the farmer could “sell his tobacco for cash or destroy it.” The farmer was to pay the agent 25 percent of the proceeds. The investigation also determined that certain producers consistently under reported their tobacco production in order to cause an insurable loss payment. There was also evidence that certain producers funneled money through different accounts to conceal their source and nature. Satellite imagery indicated the fields in which one Nicholas County farmer reported as being planted in tobacco “were actually forested land or pasture,” wrote Jefferey S. Monnin, a special agent with the U.S. Department of Agriculture’s Office of Inspector General. A personal visit to the land in question showed that the field “was heavily wooded with mature trees and very steep in nature,” and that there was no evidence of any past field preparation or crop growth. With the growth of mature trees on the field, shade would not allow the growth of crops, especially tobacco. Monnin wrote that the land “was incapable of producing any type of agricultural product.” Another producer had received $1 million in crop insurance indemnity payments since 1999, but had applied for food stamp assistance in 2008 “and is still receiving assistance,” Monnin wrote. The federal crop insurance program was created during the Depression in the 1930s as a way to keep farmers from going bankrupt because of a bad growing season. The U.S. Department of Agriculture pays private insurers to sell and manage policies, but taxpayers are on the hook for most of the losses. USDA requires tobacco growers to take out crop insurance ahead of the growing season but payment on those policies is not due until after the harvest. If the crop is damaged by bad weather, the farmer is paid the difference between the value of his diminished harvest and the amount of the policy. The Mount Sterling case isn’t the first in Kentucky involving crop insurance fraud. In April, a Monroe County farmer pleaded guilty in Bowling Green to charges of crop insurance fraud totaling $711,958. According to a plea agreement, that Monroe County farmer, aided and abetted by others, admitted to knowingly making false statements and reports on insurance claims. The Council for Burley Tobacco, based in Lexington, addressed the abuse of crop insurance in a statement in late August. The council noted that in 2013 extreme weather conditions resulted in the loss of crops across the state and the filing of 7,000 bale claims in the Tobacco Administrative Grading Service program that growing season. Yet in 2014, when weather conditions improved and the tobacco fields flourished, there were more than 60,000 bale claims in the TAGS program. More than $56 million was paid out to farmers in indemnity payments in 2014, which accounted for 17.8 percent of the income from the 2014 burley tobacco crop. “This level of abuse, whether intentional or not, has to end,” the burley council said in its statement.