Ashby co-op manager pleads guilty to mail fraud, tax evasion: Hennessey was accused of embezzling over $5M
MINNEAPOLIS — The former general manager of the defunct Ashby Farmers Cooperative Elevator Co. pleaded guilty to federal felony charges of mail fraud and income tax evasion in U.S. District Court in Minneapolis on Thursday, Feb. 14.
U.S. Chief Judge Judge John Tunheim said the sentencing will be held June 13 in the federal courthouse in Fergus Falls. Sentencing guidelines call for Jerry Hennessey to serve 6.5 to 8 years in federal prison. A sentence within that range would remove the possibility of either side appealing the sentence. Tunheim explained that all offenses are assigned a base offense level and there are increases and decreases based on particulars, including criminal history.
On top of that, he’d get up to $250,000 in fines and restitution of a total of $6.5 million to victims and the Internal Revenue Service.
As part of the plea, Hennessey agreed to up to $5.3 million in restitution to the court, which would be paid to victims, either to the co-op or members. The plea agreement requests that the court order that restitution be paid prior to a $1.2 million repayment to the IRS for income taxes.
Hennessey, 56, formerly of Dalton, came to the courthouse with lawyer Thomas M. Kelly. In a counterclaim in his separate divorce court filings in Grant County, Hennessey listed his a Minneapolis address.
Hennessey’s attorney said his client would decline interviews.
Until sentencing, the judge agreed with the probation officials who recommended — despite prosecutor objections — to allow Hennessey more freedom to move about the state without a location monitoring program. In part, Kelly said, Hennessey would use the freedom to help sell some of his assets, including his homestead, and to recover some assets which may have have been removed.
Responding to questions from Tunheim, prior to pleading guilty, Hennessy said spent 30 years managing the Ashy co-op.
Hennessey is accused of stealing at least $5 million from the co-op over 15 years, using much of the funds for international big game hunting and improving his farmstead home. Hennessey acknowledged he’d taken “millions of dollars” but wouldn’t agree to a specific figure without reviewing the records.
Assistant U.S. Attorney John Kokkinen also noted that Hennessey reported a $97,000 income for 2013 in a tax filing year when he had another $700,000 in income. Hennessey admitted his income was underreported from 2011 to 2017 by some $3.6 million. The underpayed taxes amount to $1.6 million, including $1.2 million in federal and $400,000 in state taxes, he said.
In one of the most unusual fraud cases in recent times, Hennessey disappeared on Sept. 10, with the help of a former elevator driver who helped him travel to the Des Moines, Iowa, area. It is unclear how long he was there before returning to the Minneapolis area.
Federal charges were filed Dec. 3, and Hennessey turned himself in Dec. 4. He put up bond and was confined to the state. On Dec. 18, federal authorities described the case in an updated “information,” which is an updated version of the charging complaint.
In that document, Kokkinen said Hennessey had taken $7 million to $8 million from a CoBank line of credit and transferred it to the co-op’s bank account. He used some of the funds to cover fraudulent payments for his own benefit, including big game hunting, equipment, taxidermy and buildings. There were “well over 100 checks” for such things, giving the bookkeeper doctored carbon copies that indicated the checks were for grain or feed.
Kokkinen said Hennessey had made “numerous misrepresentations” to CoBank. He zeroed in on Hennessey using $34,166.67 of the company’s money for a piece of hunting land he was buying on a contract-for-deed at Brook Park.