A Miracle Crop with a Fatal Flaw
The Jerusalem artichoke, or sunchoke, is a versatile tuber native to North America. Unlike potatoes, which store energy as starch, sunchokes store energy as inulin, a type of soluble fiber. While this makes it a beneficial prebiotic and a lower-glycemic option for diabetics, it also has a notorious side effect: it causes significant flatulence and digestive discomfort for many people. The inulin content was a well-known peculiarity, but in the early 1980s, two charismatic promoters turned it into a weapon of agricultural fraud.
The Birth of a Bizarre Scam
The American Energy Farming Systems (AEFS) was founded in 1981 by Fred Hendrickson, a charismatic alternative energy enthusiast, and James Dwire, a businessman struggling financially. They were aided by Reverend L.D. Kramer, a former televangelist, who added a layer of religious fervor to the sales pitch. Targeting farmers in crisis, AEFS sold the Jerusalem artichoke as a "miracle crop" that would be the key to American energy independence through ethanol production.
AEFS's sales pitch included extravagant claims of profits, vastly exceeding what was possible with traditional crops like corn and soybeans. The company guaranteed that it would be the exclusive buyer of the harvested tubers at exorbitant prices, but these promises were built on pure fantasy. The core of the scheme was a classic Ponzi model: new farmer investments were used to pay off the first, smaller wave of growers, creating the illusion of a profitable market.
The Mechanics of the Fraud
- Exploitation of Desperation: The farm crisis of the 1980s, marked by high inflation and crippling interest rates, left many farmers desperate for a solution. AEFS preyed on this desperation, selling them hope disguised as a new crop.
- The Pyramid Structure: The company's business model was pyramid-like. Farmers were sold seed tubers at a premium price, with the understanding that they would sell their harvest back to AEFS to be processed into biofuel. In reality, AEFS's only significant revenue was from selling these overpriced seeds to an ever-expanding group of new farmers.
- Religious Justification: The involvement of Reverend Kramer and the use of religious rhetoric, framing the enterprise as a divinely guided mission to save the family farm, helped attract a segment of the farming community. AEFS even held massive, revival-style conventions to galvanize its followers.
- No Market Reality: Despite the promises, no commercial-scale processing plants for Jerusalem artichoke biofuel existed, nor was there any real consumer market for the food product. AEFS was the only buyer because there was no one else.
The Inevitable Collapse and Aftermath
By early 1983, the pyramid could no longer sustain itself. As more farmers entered the scheme, the amount of seed on the market surged, but the promised market for the harvest never materialized. The company, unable to pay its growers, filed for Chapter 7 bankruptcy in May 1983, with $19 million in unpaid debt. Over 2,500 farmers in multiple states lost their investments, and many saw their financial situations worsen dramatically. The subsequent criminal investigation, led by a persistent McLeod County prosecutor named Peter Kasal, resulted in convictions for theft by swindle against Hendrickson, Dwire, and Kramer in 1987.
Comparing the Jerusalem Artichoke Scam to Modern Cons
| Feature | Jerusalem Artichoke Scam (1980s) | Modern Cryptocurrency/NFT Scams |
|---|---|---|
| Product | A real, but unmarketable, agricultural crop (sunchokes) | Digital assets like cryptocurrencies or NFTs, often without inherent value |
| Promise | High profits from biofuel and food markets that did not exist | Rapid, exponential growth in value based on hype and speculation |
| Target Audience | Financially desperate Midwestern farmers | Novice investors seeking quick, high returns |
| Tactic | Ponzi scheme structure reliant on recruiting new investors | Multilevel marketing, pump-and-dump schemes, and social media hype |
| Core Deception | The illusion of a created market where the promoters are the only buyers | The illusion of a high-demand market, often fueled by paid influencers |
| Use of Faith | Religious messaging and revival-style meetings | Creating a cult-like community around the project, with leaders framed as visionaries |
Conclusion: A Cautionary Tale for All Ages
The Jerusalem artichoke scandal is a textbook case of a Ponzi scheme exploiting a vulnerable population. Its legacy is a cautionary tale about the dangers of investing based on hype and false promises, especially when faced with financial hardship. The fact that a humble, flatulence-inducing tuber could become the centerpiece of a $25-million fraud highlights how easily a seemingly legitimate product can be used as a vehicle for a purely fictional market. The scheme not only ruined thousands of lives but also sullied the reputation of a nutritious (if gassy) vegetable for decades to come. Today, while the vegetable has regained some culinary respect, the 'Jerusalem artichoke' remains a powerful reminder of how greed, desperation, and charisma can collide with devastating consequences.
For additional reading on the history of this bizarre affair, the book The Great Jerusalem Artichoke Circus: The Buying and Selling of the Rural American Dream by Joseph A. Amato is considered the definitive account.
