Adams Produce Co. allegedly had been defrauding the government for years — for as much as $15 million to $20 million — before the firm went bankrupt and the Justice Department began filing criminal charges against its principals in 2012.
Five of the former executives have pleaded guilty and negotiated plea agreements related to the fraud. Four of them, including former CEO Scott Grinstead, received prison sentences. Four of them must collectively repay the government $481,000 in restitution. Two others still face criminal charges.
All seven of the federal criminal cases are related to activities from August through November in 2011.
However, a whistleblower who filed a case in 2010 contends the fraud dated back to at least 2006. His case was sealed, as required by federal law, and not made public until it was settled in late 2013.
The whistleblower, Charles Hall, was director of operations at the Adams Produce warehouse in Memphis, Tenn., from June through September in 2009. He claims company officials intentionally and illegally marked up fresh produce it was selling to the government’s Defense Supply Center by 30% to 40%.
“By this scheme over the past five plus years, Adams has knowingly overcharged the government millions of dollars for fresh fruits and vegetables,” Hall said in his case.
Hall’s attorney, Ray Thompson, Mobile, Ala., said June 19 the fraud scheme involved produce for public schools, the military and the Women, Infants and Children nutrition assistance program.
He said false invoices and other information reported by Hall suggested the total of the fraudulent charges was in the range of $15 million to $20 million.
The federal government, Hall and Adams Produce negotiated a settlement in the whistleblower case.
In the settlement, Adams Produce agreed that the government did not have to pay $250,000 of the $293,000 it owed to the company at the point it went bankrupt. The government agreed to pay Hall almost $44,000.
Hall’s attorney said federal law allows so-called whistle blowers to receive between 15% and 25% of the value of what the government recovers in a case.
In an unrelated whistleblower case, Hall made the government aware of overcharges by FreshPoint Inc., a subsidiary of Houston-based Sysco Corp.
The government, FreshPoint and Hall reached a settlement in that case late last year. FreshPoint agreed to pay $4.2 million and Hall received almost $800,000 from the government.