Simplot sues insurance company over denial of grass seed fraud claim

Published 2:45 pm Wednesday, September 6, 2023

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The Idaho-based food processor and farm supplier has filed a federal complaint claiming the Great American Insurance Co. wrongly denied its claim related to money swindled by a former employee.

The allegations pertain to Simplot’s Jacklin Seed subsidiary, which in 2020 was sold to Barenbrug USA, an international grass seed company.

Simplot’s lawsuit claims Jacklin Seed’s general manager, Chris Claypool, was suspected of mismanaging his travel budget in 2019, triggering an internal investigation that revealed he’d inflated expenses.

The company fired Claypool and “engaged outside legal counsel and a forensic accountant” to delve into other allegations, but federal prosecutors notified Simplot of their own investigation later that year, according to the complaint.

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Apart from the overstated travel expenses, Claypool’s “largest scheme” involved the payment of fraudulent “commissions” to grass seed brokers and “rebates” to customers that were in reality pocketed by him and his co-conspirators, according to the lawsuit.

Ultimately, federal and internal reviews determined that Claypool and his accomplices inside and outside Jacklin Seed had stolen more than $22 million from Simplot, of which about $9 million was repaid to the company in restitution resulting from criminal convictions, the complaint said.

Simplot claims it filed a claim for the remaining $13 million in losses with Great American Insurance Co., which had sold a crime protection policy that covered “employee dishonesty,” including “any unlawful taking of money.”

Though Simplot provided “timely notice and proof of loss,” Great American “refused to pay any sum” under the policy, which the lawsuit claims was a breach of contract for which the insurance company should be held liable.

The complaint said Simplot’s damages exceeded the crime protection policy’s $10 million limit and that it obtained “multiple extensions” to submit proof of loss while the case was being investigated, but does not explain why the claim was rejected.

A representative of the insurance company did not respond to requests for comment on the lawsuit.

Claypool, Jacklin Seed’s former general manager, was sentenced in 2021 to three years behind bars and three years supervised release after pleading guilty to wire fraud and money laundering. He was released from federal prison in July.

Yao Zhungjun, a former Simplot employee living in China, was indicted for conspiracy to commit money laundering in 2021 for helping Claypool. Federal records indicate the case hasn’t been prosecuted.

In 2021, Proseeds Marketing in Jefferson, Ore., pleaded guilty to concealing a felony for not reporting Claypool’s fraud, for which the company was sentenced to a year of probation, nearly $80,000 in restitution and a $5,000 civil penalty, according to court records.

Earlier this year, Ground Zero Seeds in Yamhill County, Ore., pleaded guilty to concealing a felony for its involvement in a kickback scheme with an accomplice of Claypool. The company was ordered to pay $500,000 in restitution to Simplot and a $40,000 fine, while a federal wire charge against its owner, farmer Greg McCarthy, was dropped as part of the plea deal.

The accomplice in that case, former Jacklin Seed employee Richard Dunham, has pleaded guilty to wire fraud conspiracy and is scheduled for sentencing later this month in federal court in Portland, Ore.

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