J. Hadley Hooper

Hot Potatoes!

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.

Indeed, by 1997, the Harrisons and Felmlee were still waiting for payment, despite the fact that, as it was learned later, the Messicks and Riffe were writing each other checks for large sums of money. In June 1997, for instance, the Messicks continued to claim that they didn't have the cash to pay off the two potato growers -- yet somehow they still were able to lend Riffe Potato $130,000. (There is some question as to whether the money ever changed hands; investigators suspect that while the money was never loaned, "repayments" were gladly accepted.) And in August, Riffe Potato sold a parcel of land -- land that was put up as collateral for the SBA loan -- to the Messicks for $10.

A few months later, the Riffe Potato Company was in default on the SBA loan, and in December 1997, Randy Hafford, a bank officer with First Commercial Bank in Dallas, received a phone call from two neighbors of the Monte Vista potato warehouse: David Riffe had skipped town. "The inside of the place was covered with rotten potatoes, filled with insects and everything," he recalls. "It was a mess."

Riffe hasn't been seen since, although court officials believe he is living in Colorado Springs. The elder Messick, meanwhile, has moved to a $400,000 house situated on a golf course in Arizona.

First Commercial quickly foreclosed on the warehouse and equipment and put them up for sale in an effort to recover some of the loan. If the bank cannot recoup the full amount of the loan, the SBA -- using taxpayer money -- will pay off the rest. So far, there have been no takers. The warehouse and the equipment have been listed for sale for two years, but the depressed potato market -- and a persistent case of blight that has hit San Luis Valley potato growers -- has limited the number of potential buyers, Hafford says.

Jim Miller, director of policy for the state agriculture department, explains that produce theft occurs most frequently when farm prices for a commodity are either very high or very low. When they are high, he says, the temptation is for an unscrupulous broker to skim from a crop because he can sell it for so much money. When prices plummet, farmers frequently warehouse their produce in an attempt to wait for a bump in its price. For a broker, all that commodity sitting around sometimes proves too tempting to let lie.

Formulated with such knowledge in mind, state agricultural policies are designed to prevent fraud and theft. For example, when prices are very high or very low, Miller says, state ag officials try to keep a close eye on warehouse operations to make sure that any dip in their bank accounts -- and thus an inability to cover debts -- is noted. Yet the Messicks' business was not seriously audited until it was too late.

"Do I wish we had been in there earlier?" asks Graalman. "Of course I do. By the time we got there, the horse was already out of the barn."

In addition, businesses that buy or sell farm products are required to be licensed and bonded. Yet the Messicks and Riffe's bond was only $10,000 -- a tiny fraction of the money that the farmers lost.

In 1998, the Harrisons and Felmlee sued the Messicks and Riffe. This past September, a Rio Grande County district court judge ordered the potato con men to pay $240,000 to the jilted farmers (the Harrisons had received some payment for their potatoes before Sargent/Riffe potato companies stopped paying altogether). How that will be collected, and when -- if ever -- remains to be seen.

That is not the end of the spud-swipers' problems. Three weeks ago, the state attorney general filed criminal charges against David Riffe and Richard A. Messick related to the disappearance of approximately $400,000 worth of San Luis Valley potatoes.


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