SIOUX CENTER, IOWA, US — A former high-level manager of a Sioux Center, Iowa, US, grain cooperative who directed subordinate employees to blend oats into soybeans was sentenced on Feb. 2 to three months in federal prison, according to the Department of Justice (DOJ).

Calvin Diehl, 60, from Aberdeen, South Dakota, US, 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.  In July 2015, Diehl agreed with others to defraud the United States. The DOJ said the fraud involved 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, according to the DOJ.

The DOJ said that in March 2017, one of Diehl’s subordinates instructed a warehouse manager in Worthing, South Dakota, US, 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 DOJ said 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, according to the DOJ. However, Diehl continued to blend oats into soybeans (even directing subordinates to remix one of the “slugged” loads) and sell them to the same unwitting customer. Diehl also instructed the Boyden, Iowa, US, 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, according to the DOJ.

The DOJ noted that 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, Iowa, US, location manager called Diehl and stated that he had oats visible because he was mixing oats with soybeans in open view. Diehl instructed the Sanborn location manager to cover up the oats by putting soybeans on top of the oats 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, the bins actually contained only 34,354 bushels of soybeans even though all of these bins had been certified as soybeans.

Diehl was sentenced in Sioux City by United States District Court Chief Judge Leonard T. Strand. 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.

Diehl was released on the bond previously set and is to surrender to the Bureau of Prisons on a date yet to be set.