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Alaska ice cream and cheese maker charged in dairy grant fraud scheme

Jill Burke
Stephen Nowers photo

Kyle Beus, co-founder and co-owner of Valley Dairy, which does business as Matanuska Creamery, is facing accusations he steered money meant for the dairy operation into his own hands. A six-count indictment filed Tuesday in U.S. District Court in Anchorage charges Beus with wire fraud and false statements used to obtain grant disbursements from the U.S. Department of Agriculture.

He's accused of pocketing at least $120,000 for his own "personal and discretionary use unrelated to the construction and management of the dairy processing facility," but details enumerated in the indictment suggest the amount may be tens of thousands of dollars higher.

Ice cream and cheese products manufactured by Beus's operation are always a popular draw at farmers markets in Anchorage during the summer.

The government alleges Beus abused his status and relationships with several interrelated companies to facilitate the fraud scheme. Simplified, as a dairy manager with the authority to oversee disbursement of federal grants, prosecutors say Beus used grant-awards and contracted companies as a conduit by which to draw and request cash that was never applied toward the dairy's operations. In some cases, none of the money went toward the dairy's operations. In others, some, but not all of the money drawn was properly used.

In the indictment, Beus is accused of carrying out the scheme by sending false or inflated invoices in support of his funding requests.

According to prosecutors, many of the requests came by Beus on behalf of his first company, Klondike Creamery and Candy, which later folded into the Valley Dairy operation. Under one roof on the Palmer-Wasilla highway in Palmer, the business was to be both a dairy processing plant and a manufacturer of dairy products. Other business relationships were formed to provide equipment for the dairy and recycled jugs by which to package the milk for market.

Alaska DairyGates

It's a new twist in a long saga that began with the demise of the state-subsidized and now defunct Matanuska Maid Creamery. Under the watch of then-Alaska Gov. Sarah Palin, the dairy was dissolved, a highly controversial move, and its assets disposed of. Beus was able to pick up the old equipment at a deep discount to launch his fledgling Klondike Creamery and Candy. By 2008, Valley Dairy was born – a joint effort between Beus, Robert Wells and Karen Olson.

The Rural Development Agency of the U.S. Department of Agriculture was authorized to appropriate $5 million over years 2003-2007 to expand Alaska's dairy industry. Later, an extension was given by Congress to keep $650,000 available until expended.

In summer 2007, Beus received $168,000 of that money for his cheese and ice cream making facility. A month or two later, an unnamed corporation in Alaska received $475,000 to support a milk manufacturing facility. According to the federal indictment, it is from these two grant awards that Beus fraudulently sought and received disbursements meant for the dairy operation.

Prosecutors say the investigation is ongoing.

Contact Jill Burke at jill(at)alaskadispatch.com