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Hot Potatoes!

Some farmers in the San Luis Valley were just waiting to be picked.

ere are some terms commonly associated with the word "potato": French-fried, mashed, Mister, scalloped, baked, Dan Quayle.

Here is one that is not: embezzled.

Colorado ranks sixth of all states in the nation in potato production. Seventy-five trucks a day rumble out of the San Luis Valley alone during harvest season. Last year, the state's crop was worth more than $125 million. In short, some potatoes were bound to be swiped sooner or later.

"There's a problem in the farming community, which is that people in these small communities are just too trusting yet," says Gary Graalman, Farm Products Section chief for the state Department of Agriculture. "That makes them perfect victims. They're just ripe for the flimflam man."

On one level, the story of the pilfered potatoes offers a concise lesson in how simple it can be to construct and operate a series of businesses using other people's money. Yet it also demonstrates how, if you are a con man, it's not necessary to concentrate your efforts on securities and cash and stocks. Despite the rural location and unremarkable product, huge amounts of money can be gained and lost -- and stolen -- when it comes to farm produce.

But who knew tuber theft could get so complicated? What was to become a complex shell game for potato money all started in 1995 with three local men -- the father-son team of Richard L. and Richard A. Messick, and David Riffe -- and a California doctor. According to Graalman, the Messicks and Riffe had already owned one failed potato business, the Sargent Potato Company, which had filed for bankruptcy protection early in 1995. Later that year, though, the San Luis men struck a deal with a physician investor from California: He loaned them $100,000, then leased back to them the potato cleaning, grading and bagging facility in Monte Vista.

That loan was the start of what was to become a long line of broken promises and missing money. Most of the loan, it would later be revealed, went directly to the Messicks and Riffe. Richard L. Messick, for instance, not only paid himself a salary as an officer of the revived Sargent Potato, LLC, but also granted himself a $10,500 "consulting fee." The rest was never paid back.

In the meantime, in May and June 1996, the Messicks and Riffe went about making deals with local potato farmers to buy their produce, with the intention of then selling it to retailers. The men offered a good price -- potato markets have been depressed in recent years -- and on June 4, an Alamosa farmer named Jack Felmlee delivered $62,328 worth of spuds to Sargent Potato, on a contract to be paid later. On June 30, Galen, Ellis and Brian Harrison, representing a family potato-farming operation near Homelake, in Rio Grande County, delivered $433,000 worth of tubers to Sargent's Monte Vista warehouse.

What these farmers couldn't have known is that, at the time, Sargent Potato had virtually no money to its name. In fact, later investigations would reveal that the company's only bank account was overdrawn by nearly $6,000.

But after cutting deals with Felmlee, the Harrisons and others -- a half-dozen local farmers in all -- the Messicks and Riffe did have plenty of potatoes, and between July and September 1996 they unloaded them to retail produce buyers in and out of Colorado. The sales of the by-then hot potatoes netted the company more than $350,000 -- more than enough to pay back Felmlee and the Harrisons, the biggest producers to do business with Sargent. Instead, court records show the three men used the majority of the proceeds to pay themselves.

In the summer of 1996, despite their looming financial problems, growing list of creditors and depleted bank account, the Messicks and Riffe were nevertheless thinking big. They decided they wanted to buy out the California physician. For reasons that remain unclear, the U.S. Small Business Association agreed to guarantee an $800,000 loan to the three men with the checkered financial past, to be used to buy the Monte Vista warehouse and to pay off Sargent Potatoes' debts. (A spokesman for the SBA explains that the credit checks were performed by the lending institution, First Commercial Bank of Dallas.)

According to the deal, the three men promised to contribute another $500,000. Most of the deal turned out to be fiction, however. None of the debts from Sargent Potato were ever paid off. The $500,000 promised by the Messicks and Riffe never materialized.

Instead, using the taxpayer-guaranteed money, the three men decided to start another potato company. They called their third spud venture Riffe Potato Company. That fall, the SBA and First Commercial agreed to make out the $800,000 check to Riffe and, in a closing ceremony on October 18, 1996, Riffe Potato accepted the money and bought the warehouse.

Despite the cash infusion, the Harrisons and Felmlee (all of whom declined comment for this story) found themselves stiffed again. Worse, according to subsequent court filings, "Apparently not content with evading [the farmers'] demands for payment, [the] Messicks set out to draw more money from the potato venture." It appears, for example, that in a deal that permitted them to bail out of Riffe Potato Company and skim some money at the same time, the Messicks sold their interest in the ailing company to Riffe for $300,000.

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