Check Kiting Allegation Against Hog Farmers

A lawsuit alleges a billion-dollar check kiting scheme that has left 110,000 pigs in “imminent danger,” and could cost lenders millions of dollars. The Iowa Capital Dispatch has followed the case of the lawsuit involving Compeer Financial of Minnesota against Sunterra Farms Iowa Inc., Sunwold Farms, Inc., and Lariagra Farms South, Inc.

The farms have operations in Iowa and South Dakota. Ray, Art, and Glen Price own and manage the farms and their 500,000 hogs. The lawsuit claims that the three companies have misled lenders about their financial situation and put their hogs’ well-being at risk with their alleged check kiting.

Investopedia defines a typical case of check kiting:

“Carried out within the banking system, kiting typically involves passing a series of checks at two or more banking institutions, using accounts that have insufficient funds. Relying on the float time required for a check deposited at one bank to clear at another, the kiter typically writes a check at the first bank against an account at the other.

Before that check clears, they then withdraw the funds from the second bank account and deposit the funds back into the first. The process may then be repeated in the opposite order, sometimes repeatedly. The net result is a series of fraudulent withdrawals that rely on being a step ahead of the fraudulent check on which they are based having cleared.

Reduced times for checks to clear has helped reduce the incidence of check kiting involving banks, as have such practices as banks placing holds on deposited funds and charging for returned checks.”

The lawsuit by Compeer Financial claims that the Prices’ companies issued checks – between $800,00 to $990,000 – among each other, took advantage of processing time, and made it appear that all accounts had sufficient funds when they did not.

Follow the Iowa Capital Dispatch series of reports on the check kiting lawsuit here.