Within the next week, Ron, Diane, and Jason Mages are expected to make their first appearance in federal court in Minneapolis.
Bankruptcy
The grand jury alleged that during the course of filing Chapter 11 bankruptcy in May 1994, Ron and Diane Mages hid their ownership of two farming corporations and hid these corporations' assets from the U.S. trustee, the bankruptcy estate, and creditors.
By doing so, the federal indictment alleges, they were able to prevent these assets from being used to pay creditors. This resulted in the reduction of their debt to creditors, including the USDA, from about $1.9 million to $300,000, during the bankruptcy settlement.
According to the indictment, RODI was formed in February 1986 with a neighbor of Ron and Diane Mages named as the president and sole shareholder, even though the neighbor provided no capital to the corporation.
A stock restriction required the neighbor to sell, assign, or transfer his interest in RODI to Ron and Diane Mages at a mutually agreeable time, the indictment states. In December 1991, Ron Mages was named chief executive officer and Diane Mages, secretary in the bylaws.
According to the indictment, Ron and Diane Mages voluntarily filed bankruptcy on May 17, 1994, and failed--in documents and in sworn testimony--to disclose their connection with RODI and Greater Minnesota Inc (GMI). The indictment also charges that they knowingly attempted to persuade their neighbor to withhold testimony from the grand jury.
Converted wetland
According to the indictment, Ron and Diane Mages also hid their interest in GMI and their subsequent farming of a wetland from the Farm Service Agency, which enabled them to receive more than $113,000 in USDA program payments for which they were not eligible.
On or about May 14, 1990, GMI purchased property identified as a converted wetland. A letter was sent to Ron Mages informing him of the converted wetland violation on GMI's property on or about June 29, 1990. Crops were planted on the converted wetland from 1990 through 1999.
According to the indictment, Mages, as a crop producer, submitted wetland conservation certificates to the Farm Service Agencies in Stearns, Kandiyohi, and Meeker counties. In these, Mages failed to disclose his affiliation with GMI and the converted wetland that made him ineligible for payments.
In order to receive certain USDA program payments, the producer must comply with the Wetland Conservation provisions of the Food Security Act of 1985. A producer who converted a wetland between Dec. 23, 1985 and Nov. 28, 1990, is ineligible to receive certain program payments for each year in which a crop is planted on the converted wetland.
The mail fraud and wire fraud charges are the result of the allegedly illegal payments that Ron and Diane Mages received from the USDA by mail and by wire.
Money laundering charges
The indictment alleges that Ron and Diane Mages wired money from RODI to pay their creditors after the bankruptcy settlement. The government charges that this money constituted proceeds from an unlawful activity, bankruptcy fraud and by wiring it to their son, Ron and Diane intended to conceal the true source of the funds.
According to the charges presented to the grand jury, Jason was wired money from RODI, a corporation owned by his parents, Ron and Diane. Then Jason Mages used the funds for payment of creditors in settlement of the bankruptcy.
Forfeiture
If convicted of the charges, Ron and Diane Mages could forfeit to the U.S. government all property, real and personal, involved in their money laundering violation and all property traceable to such property, including the $153,000 wire transferred from RODI to Jason Mages' account on Sept. 25-26, 1995.
According to the indictment, Jason Mages could forfeit all property, real and personal, involved in said money laundering violations and all property traceable to such property, including the $161,000 withdrawn from his account in September 1995.
Penalty
If convicted, Ron and Diane Mages both face a maximum penalty of 30 years in prison and/or a $1 million fine on each of the 29 counts of mail fraud and 12 counts of wire fraud; up to 20 years in prison and/or a $500,000 fine on each of the three counts of money laundering; up to 10 years in prison and/or a $250,000 fine on the one count of witness tampering; and up to five years in prison and/or a $250,000 fine on each count of conspiracy, bankruptcy fraud, and false statement.
Jason Mages faces a maximum potential penalty of 10 years in prison and/or a $250,000 fine for engaging in a monetary transaction involving criminally derived property.
Ron, Diane, and Jason Mages declined to comment on the indictment.
(Linda Stelling and Michael Jacobson contributed to this article.)