Sioux Center, Iowa — A former high-level manager of a Sioux Center grain cooperative who directed subordinate employees to blend oats into soybeans was sentenced Tuesday to three months in federal prison.
According to federal prosecutors, 60-year-old Calvin Diehl, of Aberdeen, South Dakota, received the prison term after a June 9, 2020 guilty plea to one count of conspiracy to defraud the United States.
In a plea agreement, and at guilty plea and sentencing hearings, Diehl admitted he was the Assistant General Manager at a large, federally licensed grain warehouse that is headquartered in Sioux Center but has satellite locations in the Northern District of Iowa and elsewhere.
Authorities say in July 2015, Diehl agreed with others to defraud the United States by blending lower value oats into soybeans and then selling the mixture as soybeans. During the fraud, the individuals involved also made false statements and executed false certificates to USDA inspectors, layered soybeans on top of oats in both storage bins and trucks to deceive USDA inspectors and customers about the quality and quantity of the grain, and made false entries and adjustments in reports provided to the grain warehouse’s bank.
In March 2017, one of Diehl’s subordinates instructed a warehouse manager in Worthing, South Dakota, to blend more oats with soybeans. As a result,
approximately 30 truckloads of what were supposed to be soybeans were “spiked”
with oats. After the customer happened to discover the badly “slugged” or “spiked”
loads, one of the customer’s managers called Diehl and told him to stop blending
oats into soybeans. The manager warned Diehl that “someone can go to jail for
this.” Diehl feigned surprise, apologized, and falsely promised that the practice
would not happen in the future. However, prosecutors say he continued to blend oats into soybeans and sell them to the same unwitting customer. Diehl reportedly also instructed the Boyden location manager to dump other rejected loads in a bin and send the remainder to another customer who did not monitor its soybean receiving location.
In late March 2017, shortly after the “slugged” loads incident, the USDA conducted a pre-planned inspection of the cooperative. During the inspection, the cooperative’s Sanborn location manager called Diehl and stated that he had oats visible because he was mixing oats with soybeans in open view. Diehl reportedly instructed the Sanborn location manager to cover up the oats by putting soybeans on top of them in order to hide the oats from the USDA inspectors.
After learning of the conspiracy, the USDA conducted a search of grain bins
at the cooperative’s various locations in Iowa and South Dakota. Of the estimated
87,996 bushels of grain in the bins at these locations, prosecutors say the bins actually contained only 34,354 bushels of soybeans even though all of these bins had been certified as soybeans.
Diehl was sentenced to three months’ imprisonment and fined $7,500. He must also serve a one-year term of supervised release after the prison term. There is no parole in the federal system.
