BISMARCK, N.D. — Hunter Hanson "totally destroyed me, financially," said Leon Schmaltz, who farms near Harvey in central North Dakota.
Schmaltz was one of four victims who testified Tuesday, Nov. 12, at the sentencing hearing for Hanson, 22, who pleaded guilty in July to wire fraud and money laundering charges after his grain dealing scheme unraveled, leaving farmers and elevators being owed millions of dollars.
U.S. District Court Judge Daniel Hovland sentenced Hanson at the top of a sentencing guideline range, eight years in a federal prison, plus three years of probation. Hanson also has agreed to pay $11.1 million in restitution.
Additionally, the judge ordered $1.27 million in a money judgment, roughly equating that to the amount Hanson had taken from the grain business to invest in his Hanson Motors used auto business at Belcourt.
Hanson said the auto business was designed to make money to repay his grain debts to farmers, but, like his grain dealings, records show he often sold vehicles at a loss.
Hanson’s attorney, Lucas Wynne of Fargo, asked for leniency because of Hanson’s age and the “context” that he started out in a business, thinking he would help farmers, not hurt them. He said Hanson had “panicked” and kept going with his money-losing operation, which was based in Devils Lake, instead of shutting it down.
When Wynne described Hanson’s level of cooperation, Hovland responded that Hanson was “caught with his pants down” and was without options.
Hanson described a business that netted $200,000 in its first fiscal year, which started in April 2017. But he also said he got in trouble, basing durum purchase speculation on a single article he'd read that indicated prices would go up substantially in early 2018. Prices didn't go up.
Investigators said Hanson began operating his company as a Ponzi scheme, although Wynne said Hanson told him he didn’t know what a Ponzi scheme was.
One year later
The sentence came almost a year after Hanson's grain trading scam was shut down. Hanson, dressed in a plaid shirt and khaki pants, sat next to his lawyer in the courtroom.
"I have not for a fleeting moment have lost sight of what you farmers and others have lost," Hovland said. He agreed with the victims that said there is "no real justice" in the case, but tried to assure "some justice."
Prosecutor Jonathan O’Konek, appearing telephonically from Fargo, questioned victims, who gave statements. Hovland said Hanson's was a case of "pure greed and a complete lack of business sense, and financial sense."
Because of the loss, Schmaltz said his farm lost its ability to get operating loans, lost rented land, and insurances, lost a quarter of land and was forced to rent out the rest. "At my age, I will never recover, it's impossible," Leon Schmatz said, adding, "He financially murdered me, is what he did."
Schmaltz said he'd dealt with Dan Stommes, owner of East Central Grain Marketing, a broker from Minnetonka, Minn., with offices in South Dakota. Many of Hanson’s clients had been referred to him by East Central Grain, which received a cut of the grain transactions, but also ended up losing money.
During the hearing, Leon Schmaltz’s son, Zachary, angrily told Hanson his actions had "kicked me off my own family farm" where he'd planned to be the fourth generation. He told Hanson he should be “hung from a post.”
"You have inflicted more financial pain than you can imagine," Zachary Schmaltz told Hanson, who sat without expression. Zachary Schmaltz said Hanson's penalty, divided by the 70 entities, is only a few months each, while "you stole their livelihoods."
He said it appears his parents may no longer be able to support themselves in retirement.
On the other hand, Zachary Schmaltz said, if Hanson is out after eight years, he can start a life again. He also blamed the North Dakota Public Service Commission and the government in general for failing farmers.
Hanson requested to serve his time in federal prison at Duluth, Minn. Hovland said he'll recommend that but the decision is up to the U.S. Bureau of Prisons. Hanson was handcuffed by U.S. Marshal's at the end of the hearing, as a sister wept, sitting with his parents.
Hanson has up to 14 days to appeal the sentence, but already has agreed not to.