Former creamery owner sentenced

ANCHORAGE — Prosecutors only asked for one month in jail, but the judge tasked with sentencing Kyle Beus for the fraud leading up to the collapse of Matanuska Creamery opted for two months.

“The lack of truthfulness, not just of him, but some of the others in this case, is just stunning to me,” U.S. District Court Judge Tim Burgess said in handing down the 60-day sentence. “It’s really quite discouraging.”

Burgess set aside all of Tuesday to hear exactly how Beus had falsified documents when he ran the creamery. He heard from Neal Sanders who, with his wife, owns Nether Industries, which sets up processing facilities to handle milk, juice, beer, wine and other products.

Beus set up the creamery with a couple of grants intended to prop up Alaska’s failing dairy industry. To draw from the grant funds he would need to file invoices with the U.S. Department of Agriculture. The invoices he had Nether prepare were inflated, though, and Nether would send the excess money to Beus.

“Why in the world would you do that?” Burgess asked Sanders.

“Because I was asked to and I had never been involved in a grant before,” Sanders replied.

In his statement at Tuesday’s hearing, Beus described this as, “illegally moving funds from the grant in order to have more discretionary spending.”

His attorney, John Murtagh, pointed out that the creamery, regardless of the challenging financial situation it was in, did produce milk for a few years. He also pointed out that all but $9,000 worth of the money Beus was alleged to have taken was paid back.

“He shouldn’t be handling other peoples’ money,” Murtagh said of his client.

He said when Beus is in over his head he doesn’t realize that and tries to keep going.

“He can’t let it fail. He can’t lose, and he breaks the rules and, in this case, he committed felonies,” he said.

Prosecutors had a different take on it.

“He’s a cheat, he’s a liar, and he’s a thief,” Assistant U.S. Attorney Retta-Rae Randall told Burgess.

She pointed out that Beus seemed to live his life on the financial razor’s edge, moving from a failing dairy in Michigan to a failing dairy farm in Point MacKenzie, then to the creamery, which also failed.

“There has never been any evidence that he has had a 40-hour-a-week job,” Randall said. “He’s always gotten money by lying on grants or loans or by cheating someone.”

Denise Stone, a now-retired special agent with the U.S. Department of Agriculture’s Office of the Inspector General, said that some of the money that was leaving the creamery went to pay a bottle manufacturing company that Beus, unbeknownst to his business partners, was part owner in. In fact, some of the payments went to pay him back his investment in the bottle company.

Stone said that when one of Beus’s partners, Karen Olson, stepped in and looked at the books, she put a stop to that arrangement, demanding that the money come back to the creamery.

Randall said later in the hearing that Olson did the right thing there, but then later made her own mistakes, leading to a similar set of charges on which she is now awaiting trial.

Stone said she was able to track infusions of cash to times when Beus’s restaurant in Wasilla was doing poorly. She said it’s not common to pay a person’s investment interest with a grant, nor is it OK to inflate invoices.

“It’s just not to be given out so anybody can do whatever they want with it,” she said of the grant money.

One of the other witnesses Randall called was Candy Easley, Beus’s state loan officer when he had the dairy farm in Point MacKenzie.

Easley went through a long string of troubles she said led to a $1.89 million write-off when the farm collapsed. She talked about an insurance claim made over a hole in the barn roof. Easley said that she spotted the hole when flying over the farm.

She called Beus’ insurance company and was surprised to find he’d already filed a claim. She told the company to make that payment to the state’s fund.

Then she talked to Beus, asked him if anything was wrong with the farm. He said there wasn’t and she told him what she knew.

“He was surprised to find that I had the photo and was unhappy that the check was coming to (the state’s Agriculture Revolving Loan Fund),” Easley said.

She said at one point during the years she worked with Beus she got frustrated. She said he never paid taxes on the farm, would only insure it to get some grant or loan, then let the insurance lapse. She asked why he kept doing these things.

His answer, she recalled, was a story about a monkey in a tree and a snake and a lion at the base of the tree. The snake convinced the monkey he would not eat him if the monkey came down. Once the monkey was convinced, the snake killed and ate him. The lion asked why.

“No matter what I say or do, I’m still what I am, a snake,” Easley recounted as the punch line to that story.

She said it was clear Beus saw himself as the snake.

Though Burgess went with a two-month sentence instead of the one-month sentence Randall asked for, the judge did do Beus a favor — he allowed him to stay out of jail until after his daughter’s wedding this summer.

Burgess said that it’s important that people who defraud the government face the proper penalties.

“If you do this, then these programs might not be there for others down the road,” Burgess told Beus.

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