Former supervisor at Albany grass seed company sentenced for his role in fraud scheme

An Idaho man was sentenced to one year in prison for his role in a $1.5-million grass seed fraud scheme while he supervised the company's Albany operations.

Richard Dunham, 66, pleaded guilty to conspiracy to commit wire fraud through seed mislabeling and conspiracy to commit wire fraud through kickbacks. He was sentenced Thursday to 12 months and one day in federal prison and three years of supervised release. Dunham also was ordered to pay $348,065 in restitution to Simplot.

Dunham previously supervised order fulfillment and warehousing operations for Jacklin, a Liberty Lake, Washington, producer and marketer of grass seed and turfgrass.

Dunham and then-Jacklin general manager Christopher Claypool were investigated for their roles in multiple schemes to defraud the J.R. Simplot Company and Jacklin, its former subsidiary.

From 1997 until its sale in 2020, the Idaho-based J.R. Simplot Company, a major privately held supplier of agricultural products, owned and operated Jacklin, including a seed-blending and warehousing facility, out of the Albany area.

Dunham, who supervised Jacklin’s Albany operations, had the authority to purchase grass seed from certain Oregon growers over others.

Oregon is the largest producer of cool-season forage and turf grasses in the U.S., producing nearly 591 million pounds in 2017. Grass seed is the fifth-largest agricultural commodity in Oregon, worth more than $517 million. Most of the 1,300 grass seed growers in the state are in the Willamette Valley, and Linn County is referred to as the grass seed capital of the world.

At some point between 2013 and 2015, Dunham and Claypool realized that growers’ preference for higher-yield grasses was creating substantial shortages of lower-yield varieties that Jacklin had contracted to deliver to its customers.

According to court documents, Dunham and Claypool "recognized that these shortages would either cause Jacklin to fail to deliver on its existing contracts or require Jacklin to pay a premium to growers to acquire necessary inventory, substantially eroding company profits" and expected either result would negatively affect their careers.

From January 2015 and until at least the summer of 2019, Dunham and Claypool directed Jacklin employees at the Albany facility and elsewhere to fulfill customer orders with different varieties of grass seed than the customers had ordered, to conceal such substitutions from the customers, and to invoice the customers as though no substitutions had taken place.

"Together, they referred to this scheme as 'getting creative,'" prosecutors said in a statement.

Dunham and Claypool directed Jacklin employees to package the substitute seed varieties with false and misleading labels.

As a result of this scheme, Simplot refunded or credited more than $1.5 million to defrauded buyers.

"During the same time, Dunham and Claypool also agreed to import mislabeled seeds from Moore Seeds, a Jacklin supplier based in Debolt, Alberta, Canada, to offset the shortage of one of Jacklin’s best-selling grass seed blends," prosecutors said. "In doing so, Dunham conspired with the owner of Cankiwi Ventures, Ltd., Moore’s managing entity, to purchase a less expensive seed blend at above-market rates in exchange for Moore’s falsely labeling the seed as Jacklin’s premier blend and shipping it, under that false pretense, to Jacklin in Oregon."

Dunham also engaged in another scheme while employed with Jacklin.

Dunham conspired to obtain kickback payments from grass seed growers and brokers that regularly did business with Jacklin, including Ground Zero Seeds, International, of Yamhill, Oregon, and ProSeeds Marketing, Inc., of Jefferson, Oregon, prosecutors said.

Between April 2015 and September 2019, Dunham solicited more than $191,789 in kickbacks from Ground Zero and $156,275 from ProSeeds.

In a sentencing memorandum, prosecutors argued that Dunham should serve prison time for the harm he caused.

"Defendant was simply greedy," prosecutors said. "Over the course of four years, he stole nearly $350,000 from a long-time employer who had rewarded him with a position of trust and discretion. He took that money on top of a generous salary, which he collected while faking his performance on the job through bogus sales that cost his employer both money and good will."

On July 7, 2021, Claypool was sentenced to three years in federal prison and three years of supervised release after pleading guilty to conspiracy to commit wired fraud and money laundering.

This case was investigated by IRS-Criminal Investigation and the U.S. Department of Agriculture Office of Inspector General and prosecuted by Assistant U.S. Attorney for the District of Oregon Ryan Bounds.

Additionally, Ground Zero Seeds International and ProSeeds Marketing, Inc., pleaded guilty to knowingly concealing schemes to defraud Jacklin. Both companies were sentenced to one year of probation and ordered to pay criminal fines of $40,000 and $5,000, respectively. Ground Zero was also ordered to pay Simplot $516,000 in restitution, and ProSeeds was ordered to pay Simplot more than $78,000.

CanKiwi Ventures, Ltd., the manager of the Canadian grower Moore Seed, pleaded guilty on March 7 to smuggling mislabeled seed into the United States using false documents and was sentenced to pay a criminal fine of $100,000.

For questions, comments and news tips, email reporter Whitney Woodworth at wmwoodworth@statesmanjournal.com, call 503-910-6616 or follow on Twitter @wmwoodworth.

This article originally appeared on Salem Statesman Journal: Former supervisor at Albany grass seed company sentenced