Creamery founder faces federal indictment

MAT-SU — One of three owners of Matanuska Creamery could face up to 30 years in prison, a fine of $1 million, or both after he was indicted this week on federal charges of fraud and misuse of federal grants.

Kyle Beus was charged Tuesday with three counts each of wire fraud and making “false statements to influence United States Department of Agriculture Rural Development,” according to the indictment.

The allegations date back to July 2007 — soon after the collapse of the state-owned Matanuska Maid creamery — and surround a $650,000 grant from the federal government to the state of Alaska to “support and expand” the state’s dairy industry by funding small projects.

A year prior in September 2006, Beus had founded Klondike Creamery and Candy LLC. Eventually, he founded Matanuska Creamery with his partners, Rob Wells and Karen Olson.

By December 2007, federal prosecutors allege in the indicctment, Beus had begun his scheme to defraud the federal government.

“The purpose of the scheme was for Beus to obtain money from (the U.S. Department of Agriculture Rural Development) for Beus’ personal and discretionary use unrelated to the construction and management of the dairy processing facility,” according to the indictment.

The federal indictment alleges Beus used Klondike Creamery to charge Valley Dairy — Matanuska Creamery’s parent company — for supplies, materials and services he didn’t provide.

Another of Beus’ companies, BLW Manufacturing LLC, was “formed to produce recyclable containers to carry local milk and water to Alaskans,” the indictment says.

The indictment alleges that invoices circulating between the dairy, the jug manufacturer and the federal government were sometimes inflated and sometimes fraudulent.

“In truth and fact, as Beus well knew, the documents contained false and inflated amounts,” the indictment alleges.

A press release from the Anchorage U.S. Attorney’s Office seems to indicate that the amount of illicit money Beus allegedly received was at least $121,040.

Karen Olson, who took over for Beus as manager of the creamery, said that it was unfortunate the federal charges landed in the public eye in the same week she is fighting to save the creamery from state efforts to liquidate its assets.

“It happened in the context of the state had shut down the only operating creamery and Kyle was the manager and was under a lot of pressure to get going so that farmers didn’t have to continue to dump their milk,” Olson said. “I was not aware of anything until I started working when the company was about to shut down in September of 2008.”

Matanuska Creamery has been in operation since 2007, when it was seen as saving the state’s dairy industry, which was ready to collapse when Mat-Maid shut down.

Since then, the Mat-Su Creamery has been plagued by problems. Cheese supplies were found to be tainted with E. coli and unsellable. Customers complained that creamery milk spoiled too quickly. At times, the creamery has not had enough milk to stock store shelves. In August, it was involved in a dust-up with the Department of Environmental Conservation for dumping milk byproducts near residential areas rather than trucking the byproducts to Point MacKenzie to be sprayed on fields.

But there were bright spots as well for the local venture. The creamery secured a contract providing milk to local schools and its ice cream and cheese curds were popular at farmers markets.

Through it all, numerous commentators in the state have cried foul at state loans the creamery failed to repay.

Former politician and longtime dairy critic Andrew Halcro thrust the unconfirmed allegations of an FBI investigation that had floated through the Valley for months into the public eye in November in a post on his blog, which was later re-printed in the Frontiersman.

The Anchorage U.S. Attorney’s Office writes in a press release that the FBI investigated the case with help from the investigative division of the USDA’s Office of the Inspector General.

Contact reporter Andrew Wellner at andrew.wellner@frontiersman.com or 352-2270.