LINCOLN, Neb. (DTN) -- A lawsuit alleging ag reality television star and farmer Steve A. McBee fraudulently transferred assets to two of his sons to avoid surrendering them as part of a still-outstanding $4 million judgment on crop insurance fraud will continue after the U.S. District Court for the District of Western Missouri denied the family's motion to dismiss.

The star of the reality television series "The McBee Dynasty: Real American Cowboys" pleaded guilty to crop insurance fraud and is serving a two-year prison sentence in South Dakota.

U.S. attorneys contend the Gallatin, Missouri, farmer transferred assets to the trusts for his sons, Cole and Jesse, to avoid surrendering the assets. The family has argued in court filings the trusts were created more than a decade before a transfer of assets was made in 2014 and were an established practice of the trusts.

"Plaintiff has alleged that McBee became aware of an investigation against him in June 2023, and that his lawyers met with the U.S. attorney's office in December 2023 to consider his 'criminal culpability,'" the court said in its order.

"Plaintiff then alleges about a month later, on Jan. 7, 2024, McBee transferred his interests in defendant companies to the defendant trusts. Plaintiff then alleges that McBee received no consideration for these ownership transfers. A plausible inference from these facts, which the court must assume are true at this stage, is that McBee made these transfers anticipating a criminal conviction that would result in a significant restitution judgment and that he made these transfers to shield his assets from collection."

The court concluded that at the early stages of the new lawsuit, the plaintiff has met its burden for the case to continue.

"Plaintiff alleges that in the summer of 2023, McBee became aware that he was the subject of a criminal investigation and that, in December 2023, his attorneys met with the U.S. attorney's office to discuss his potential criminal liability," the court said.

"Plaintiff further alleges that approximately one month after that meeting, McBee transferred his ownership interests in the defendant companies to the defendant trusts and did so without receiving anything of value in exchange. At the pleading stage, these allegations suffice. Given the alleged timing of the transfers -- shortly after discussions with the U.S. attorney's office regarding potential criminal liability -- and the existence of a restitution obligation exceeding $4 million, the court may reasonably infer that McBee believed he would incur debts beyond his ability to pay as they came due."

McBee transferred his ownership interests in three companies to his sons Jesse and Cole.

That includes 39% interest in McBee Properties L.C.; 99% interest in Rock Bluff Development LLC; and 99% interest in S&K Enterprises LLC. According to the lawsuit, Steve McBee split those interests evenly between Jesse and Cole.

The federal government alleges the transfers occurred while McBee was under federal investigation, and he received no payment in exchange.

The federal government's lawsuit includes six claims for fraudulent conveyance under both federal and Missouri state law. The U.S. argues the transfers were made with actual intent to defraud the federal government, and the transfers were made without equivalent value when McBee knew he would face debts he couldn't pay.

In addition, the government asked the court to file an injunction preventing anyone from selling, mortgaging or disposing of the business assets.

The U.S. is also seeking money judgements against Jesse McBee and Cole McBee, for the value of the transferred interests.

As part of Steve McBee's plea agreement, the U.S. government agreed not to charge anyone in his family with crop insurance fraud.

Read more on DTN:

"Feds: McBee Trust Committed Fraud," https://www.dtnpf.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

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