Federal judge sentences former ag supplier to three years in prison

CEDAR RAPIDS - A former Waterloo agricultural supplier, who evaded Iowa authorities for four years after being indicted, was sentenced Monday to three years in federal prison for bank fraud, and he must also pay more than $1 million in restitution.

U.S. District Judge Leonard Strand during sentencing said Kelly Freese carried out a 'well thought out” scheme over a number of years, moved to Brazil to escape the Cedar Falls bank from collecting the debt and sold the pledged collateral through a 'dummy” company.

Strand said a 'huge” aggravating factor is that Freese got his parents involved in the scheme when he had them set up Ag-Zone - the dummy company. Strand granted a four-level increase in guideline sentencing to increase his prison time for being a 'leader” of the scheme in which he involved his wife and parents.

Freese, 52, former owner of Christy Corp. in Waterloo, pleaded guilty in July to one count of bank fraud. The three other bank fraud and making false statements charges were dismissed at sentencing.

During the plea hearing he admitted to selling assets and inflating the company's accounts receivable that were used as collateral to get a $1,035,687 loan from Lincoln Savings Bank in Cedar Falls in 1998.

Freese declined to make a statement before being sentenced but submitted a written statement to the court.

Freese's primary business operations were in the agricultural industry, spreading lime and chemicals on farm fields. But the company also handled snow removal, trucking and sales of used farming equipment, documents show. Christy Corp. also did business as Freese Ag Services and Ag-Zone.

The plea agreement shows Freese inflated the value of accounts receivable and also sold equipment pledged as collateral, according to the plea. For example, he sold equipment to Ag-Zone, a company formed by his wife and his parents, who in turn sold the equipment at auctions and gave the proceeds to Freese. Christy Corp. failed to repay the money it had borrowed, causing a loss to the bank of $541,911, records show.

The equipment, including conveyors, tractors, dump trucks, pickup trucks, road graders and forklifts, were valued at more than $1.1 million. The equipment had been transferred to Ag-Zone, and some was sold to third parties, records show.

Strand also ordered Freese to pay $1,060,022 in restitution to the employee owned bank, which includes attorney fees and interest. Strand also ordered him to serve four years on supervised release following his prison term.

Freese, indicted in November 2012, was living with his family in Brazil and was arrested earlier this year but fought extradition to Iowa, prosecutors said.

He was returned June 18 to Cedar Rapids.

l Comments: (319) 398-8318; trish.mehaffey@thegazette.com