GUILTY PLEA OVER GRAIN FRAUD
Dozens of farmers ‘victimized’
EDMONTON • He doesn’t often sell to Americans, but when Shawn Madsen struck a deal to sell loads of peas to a buyer in the United States last year, he didn’t see anything out of the ordinary.
Madsen is operations manager at Southland Pulse of Estevan, Sask. A broker arranged the deal in April 2018 and the company sent a few loads down south last fall. The prices seemed fair, no red flags. When a cheque arrived, Madsen sent another load of peas.
A little less than two weeks later, however, the bank phoned: the cheque hadn’t cleared. “And that’s when the s--- hit the fan,” Madsen said. He soon got another call, this time from the FBI.
Southland Pulse was one of roughly 60 grain merchants caught up in a swindle that cost sellers in Canada and the United States some US$11 million in 2018. Last week in a Bismarck, N.D., courtroom, 22-year-old Hunter Hanson, once an apparent agribusiness wiz-kid but now alleged to be the mastermind behind a pulse-based multimillion-dollar Ponzi scheme, agreed to plead guilty to wire fraud and money laundering charges and repay the millions of dollars.
Hanson “victimized dozens of North Dakota and Canadian farmers and businesses,” said Assistant U.S. Attorney Jonathan O’konek in a news release posted to the U.S. Department of Justice website. He is expected to formally plead guilty in court on July 30. Asked for an interview, Hanson’s lawyer, Lucas Wynne, emailed the National Post a link to two statements, which detailed the facts of the plea and noted that Hanson would liquidate assets to pay back the money and co-operate fully with the investigations.
According to the Jamestown Sun, a daily newspaper serving the North Dakota town of a little over 15,000, Hanson had once “seemed to be an entrepreneurial wonder.” He’d graduated high school in 2015, working nights at a grain elevator along the way, and though he had a spotty employment record, fired from one job, making mistakes and failing to show up at another, by 2018 he’d struck out on his own, registering seven different businesses across the state.
In February 2017, he’d pitched the city council of Minnewaukan, N.D., on a biodiesel facility, the Sun reported, but after the city auditor raised questions about the project’s financing, he didn’t show up for meetings in November and December 2017 and the venture went nowhere.
But by then he had bought up a grain elevator and had a fleet of some 30 trucks, making money by offering above-market prices for crops, then storing and moving them to more lucrative markets to turn a profit. He bought a couple properties, took a vacation to Paris and bought into a car dealership, the Sun reported.
And then it all came crumbling down. In November 2018, after a series of bounced cheques and unpaid bills led to “multiple complaints” to North Dakota’s public services commission, which oversees the state’s public utilities, resolves disputes and licences grain elevators to protect farmers, the state issued Hanson a cease-and-desist order.
Hanson’s alleged scheme, according to court documents, involved one of Hanson’s companies, Midwest Grain Trading, agreeing to purchase grain from sellers in Canada and the United States. Via Midwest Grain Trading — based in Devils Lake, N.D., about three hours across the border southeast of Brandon, Man. — Hanson is alleged to have taken delivery of the grain and either not paid for it or paid for it with bad cheques. At the time, Hanson tried to explain the delays in payment as the result of a frozen sump pump that held up grain deliveries.
“I haven’t heard of a company doing this for years and years and years,” said Madsen.
Documents filed in court, and with the North Dakota Public Service Commission, show emails from sellers attempting to get their money back, and Hanson offering various excuses, such as having an incorrect account number for a wire transfer.
The wire fraud charge stems from the emails used to defraud commodities sellers, including explanations of why money had not been received. The money laundering charge is related to movement of money between various bank accounts and businesses, including Hanson’s Nodak Grain warehouse, the car dealership, Hanson Motors and a freight-hauling company.
While U.S. court documents redact the names of specific businesses, the list of companies and individuals that have initiated claims with the North Dakota government includes a handful of Canadian companies in Manitoba, Saskatchewan and Alberta.
Among those that attempted to get money from Hanson was Shafer Commodities, an exporter of grains, protein by-products and feed, with offices in B.C., Alberta, Manitoba and Montana. Documents show emails sent to Hanson and his company over the course of October and November 2018 requesting payment of some $144,000 for yellow peas. “My bank keeps saying it’s the wrong account number,” says an emailed reply from Hanson.
This emailed communication between Shafer’s Morden, Man., office and Hanson is cited in the criminal case court documents as an example of wire fraud. The Post reached out to Shafer Commodities for an interview, but did not hear back.
The alleged swindle has led the North Dakota legislature to look into overhauling the state’s system of regulating the grain sector. Meanwhile, a series of criminal and civil cases filed against Hanson continue to unfold across the state. Hanson has already lost at least one civil suit, according to a report from the Williston Herald. According to the Public Service Commission, another 58 civil claims against Hanson are yet to be resolved.