Former Minnesota elevator manager, who lived lavish lifestyle, sentenced for embezzlement of millions
FERGUS FALLS, Minn. — Jerry Hennessey, who admitted stealing more than $5 million from the co-op elevator he managed, was sentenced Friday to eight years in federal prison.
Hennessey admitted in February that he’d used his position at the Ashby (Minn.) Farmers Cooperative Elevator he’d managed for three decades to bankroll big-game hunting trips around the globe and then built a showroom at his house for his trophies.
The courtroom was full with about 50 people as U.S. District Court Judge John R. Tunheim pronounced an eight-year sentence, plus three years of supervised probation.
As part of a deal to plead guilty in February, Hennessey agreed to up to $5.3 million in restitution for the fraud, as well as $1.2 million repayment to the IRS, for income tax.
Before pronouncing the sentence inside the Devitt Federal Courthouse in Fergus Falls, Tunheim said his own father managed a grain cooperative for 35 years and that he himself had done “almost every job in an elevator.” Tunheim said he considered the co-op business form one of the most important tools farmers have to level the playing field with corporate grain buyers. Still, Tunheim saw “no reason to go above” the guidelines of 96 months in prison.
Hennessey has been free to travel in Minnesota since Feb. 14, when he pleaded guilty.
The judge ordered Hennessey to turn himself to U.S. Marshals Service in Minneapolis or at prison facilities either Duluth or Sandstone on July 29.
A community torn
Darrell Franze, a farmer from Battle Lake, Minn., spoke on behalf of the board of directors for the co-op, which went insolvent last September, shortly after the investigation into Hennessey’s management began.
“Unfortunately, one of the real losses we have suffered is a loss of trust,” Franze said. “Based on our 2018 balance sheet, we had member equity of $3,470,053.98. Our members also had over $2 million in grain sold to the elevator that had not yet been paid for. All that is gone.
“But, it is not just the loss of money. We look at certain individuals, auditors and businesses and we wonder why no one could have raised an issue with any of the unauthorized transactions.
“Neighbors look at neighbors. Friends look at friends,” Franze said. “Jerry Hennessey has caused a giant rip in the social fabric of our rural community. Jerry Hennessey has destroyed the work of past, and future generations of local family farms.”
Looking alert in a sport coat, Hennessey said he was “extremely sorry” for the crime, and indicated it was the result of losing money on bad grain trades. “I never planned or meant to hurt anyone,” Hennessey said, adding, “I don’t know what I was thinking.”
He said he was lucky that his children and grandchildren were “still there behind me.”
Defense attorney Thomas M. Kelly of Minneapolis asked for a sentence at the low end of the range, noting Hennessey had lost everything in the case and would never be free from the sentence.
Samantha Olson, of Ashby, describing herself as both a “victim and a friend,” asked for leniency based on Hennessey’s good family. “Farming is a gamble,” she said, and described Hennessey as “a great man.”
But Assistant U.S. Attorney John Konniken asked for the maximum, noting that Hennessey had written more than 400 fraudulent transfers over more than 15 years and had probably hosted victims in the taxidermy showroom that he had built by stealing from them. Tunheim agreed that the $5.3 million in restitution be due “immediately” and said he preferred payments go first to “equity” rather than “debt” creditors.
After the hearing, David Gaarsland, 77, of Battle Lake, Minn., said he’d lost over $1 million in the insolvency and had considered Hennessey a trusted friend.
“I guess I’ll never recoup it,” he said. “As for what happened, I hate it. It took 50 years of my savings,” and what he would have used to support him if he needed a nursing home. He said the prison term is “kind of a waste” and wouldn’t help anyone get paid.
Franze seemed to disagree with Hennessey’s assertion in court that he never planned to hurt anyone.
“It appears to us that he meticulously planned every move and made provisions for himself if he got caught,” Franze said. “In today’s bleak agricultural economy, this is a devastating blow to the local farm community. His greed put the hard work of generations of families at risk. This crime will impact the community for many generations. None of us will be whole again.”
Franze started by remembering Hennessey’s words to investigators when they caught up with him after he fled from Minnesota last fall: “I stole from my employer,” Franze recalled Hennessey as saying.
“His employer was a co-op made up of farmers, neighbors and friends,” Franze said. “When the board uncovered the crime, it became apparent he had been stealing a huge amount of money for a long period of time. Over $5 million has been documented, and we all are suspicious that the real dollar amount was even higher. This huge amount of money came from a small, approximately 200 member co-op.”
Franze said a co-op is a group of local farmers who get together to create a business that benefits all the members.
“We are generally small or mid-sized farmers who can’t afford to build large bin systems for ourselves, so we get together to create an asset that benefits all of us,” he said. “Each of the members trusts that the co-op will deal with them fairly because they are an owner of the co-op. And, each of the members trusts that the other members and the employees will deal with the co-op fairly so that the co-op can remain in business.”
Erik Ahlgren, a Fergus Falls, Minn., lawyer, is the assignee for the benefit of the creditors of the co-op. Ahlgren had no role in the federal case and repeated to Agweek he no longer represents the board members, who have separate representation because of potential litigation.
Ahlgren said he has the option of suing board members for the past six years for damages resulting in their failure to fulfill their fiduciary roles, including requiring third party financial audits.
Hennessey had used some of the money to improve his rural Dalton, Minn., home including building two elaborate garages. The home is for sale for $795,000. The former co-op is in the process of dispersing a large taxidermy collection that Hennessey amassed using co-op money.
The co-op’s facilities have been leased out and are in the process of being sold.