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Former Valley Dairy exec found guilty in fraud coverup

  • Author: Richard Mauer
  • Updated: September 28, 2016
  • Published July 31, 2014

A former federal agriculture official in Alaska was found guilty this week of making false statements to the U.S. Department of Agriculture to cover up the fraud of a business partner in Valley Dairy Inc.

Karen Olson, 68, of Wasilla, was found guilty by an Anchorage jury of two felonies, both involving federally backed state loans for the dairy, the U.S. Attorney's Office said Thursday. Federal prosecutors obtained the convictions Wednesday in U.S. District Court in Anchorage.

According to the U.S. Attorney's Office, Olson submitted false statements to the U.S. Department of Agriculture's Rural Development Program and failed to alert the government that she knew her business partner, Kyle Beus, was diverting federal grant money from the dairy to a failing restaurant.

Beus pleaded guilty in 2013 to six federal charges associated with his misuse of federal grants. The grants were designed to save Alaska's dairy industry.

Beus was the manager in charge of day-to-day operations of Valley Dairy, on the Palmer-Wasilla Highway in Palmer. But when he bled the operation of its federal grants in 2008, he put others at financial risk -- the milk producers who were owed $200,000 and construction contractors due more than $450,000, the U.S. Attorney's Office said.

Olson stepped in to run the operation, and while she removed Beus from authority over bank accounts, she kept him as president of the dairy and failed to alert the USDA or prosecutors of his fraud. Instead, she successfully induced the USDA to support a state loan for the dairy, though the information she provided about the business was false, prosecutors said. The state loan kept the operation afloat for a while, but it finally collapsed in 2012.

Olson remains free on bail until her sentencing Oct. 24. She faces years in prison and thousands of dollars in fines.

Olson, one of the Valley's most prominent farm advocates, was the state executive director of the USDA's Farm Service Agency from 1993 to 2001.

But she had crossed ethical lines before in defense of her own troubled farming operations. In 1983, she and her then-husband, John Lee, concocted a plan to give special allowances to employees of their dairy and construction company so the employees could make $1,000 contributions to the leading legislator on agricultural issues at the time, Sen. Jay Kerttula, a Palmer Democrat.

In 1983, the maximum contribution a person could make to a candidate was $1,000, so by using their employees, the couple was able to pour $22,000 into Kerttula's campaign fund, 10 percent of what at the time was the most expensive state Senate race in Alaska history. They agreed to pay a $4,340 fine to the Alaska Public Offices Commission to close an investigation into illegal contributions without admitting wrongdoing.

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