Second conviction in case against former dairy owners

PALMER — A second former owner of the Mat-Su Creamery has been found guilty on federal charges.

A federal court jury convicted Karen Olson, 68, on July 30 of one count of making false statement to influence the U.S. Department of Agriculture’s Rural Development Program and one count of concealing a felony.

“The convictions essentially involve Ms. Olson taking steps to cover up fraud perpetuated by Kyle Beus, the former President of Valley Dairy, Inc., in part by submitting false and fraudulent documents to the USDA,” a press release from the U.S. Attorney’s office states.

Olson took over the dairy when Beus departed. In a separate case, Beus pleaded guilty to three counts of wire fraud and three of making false statements to influence the USDA. He was eventually sentenced to serve two months in prison. The judge who sentenced him described his lack of truthfulness as “stunning” and “discouraging.”

For his part, Beus maintained throughout that nothing he ever did enriched himself but was instead done to keep the business afloat. Evidence presented at a series of hearings showed that he would essentially fake invoices in order to draw money from a federal grant the dairy had access to.

According to the U.S. Attorney, Olson was first made aware of that in 2008.

“In September 2008, Olson discovered that Beus had inflated invoices which had been submitted by Olson and .... to USDA, RD, and Beus had received kickbacks of grant monies. Some of those monies were diverted to assist his financially troubled restaurant, Klondike Creamery/Teeland’s. Olson became aware that because Beus had diverted grant funds to his personal use, funds were not available to pay the milk producers who were owed over $200,000, or to pay over $450,000 owed to construction vendors who had built the Valley Dairy,” reads the U.S. Attorney press release.

The dairy almost shut down mere months after opening. Olson became Chief Financial Officer and Beus wasn’t allowed to sign checks anymore.

“Instead of informing USDA, RD, or law enforcement of Beus’s fraud, Olson sought USDA, RD’s assistance in securing a loan from the State of Alaska to replace the loss of funds. Olson submitted financial documents to USDA, RD, which were inaccurate and covered up the losses caused by Beus,” the U.S. attorney wrote.

Valley Dairy, Inc., ran the Matanuska Creamery, a business formed in the wake of the collapse of the state-run Matanuska Maid dairy. The creamery became local dairy farmers’ only option for a place to sell milk. It produced cheese, ice cream and milk, some of which it supplied to Mat-Su Schools on a school district contract.

The dairy collapsed under a pile of debt to the state in 2013, leaving behind tons of equipment and a trailer filled with spoiled, rotten cheese.

Local milk is still available in area supermarkets, under the Havemeister Dairy brand, named for a family that runs a much smaller milk processing operation on their Bogard Road farm.