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Published February 19, 2013, 10:51 AM

Anderson Seed Insolvency Case Hits One-Year Mark

The Anderson Seed Co. insolvency this week hit its one-year mark, with a total of more than $5 million still owed to farmers in the Dakotas, and perhaps more in Minnesota. Regulators continue to study the case and legislatures are looking for ways to protect farmers from similar cases.

By: Mikkel Pates, Agweek

BISMARCK, N.D. — The Anderson Seed Co. insolvency this week hit its one-year mark, with a total of more than $5 million still owed to farmers in the Dakotas, and perhaps more in Minnesota. Regulators continue to study the case and legislatures are looking for ways to protect farmers from similar cases.

Anderson Seed of Mentor, Minn., with facilities in North Dakota and South Dakota, bought sunflowers from farmers who eventually went unpaid when the company ceased operations in February 2012. Parts of Anderson Seed, a sunflower company, as well as its sister company, St. Hillaire Grain, an edible bean company, were sold to a U.S. affiliate of a Seattle, Wash.-based company whose parent is Legumex Walker Canada Inc. of Winnipeg, Manitoba.

Sue Richter, licensing division director for the North Dakota Public Service Commission, says the agency recently sent an update to North Dakotans embroiled in the case, but acknowledges there is little new to say from the last update, six months ago. Some 47 farmers have claimed $2 million in cash sales, and about $800,000 more in credit sale contracts.

In South Dakota, total claims total $2.6 million, says Chris Nelson, vice chairman of the South Dakota Public Utilities Commission. Of those, $2.2 million are valid cash claims, while the rest have been deemed “voluntary credit sales” contracts, where the farmer voluntarily handed over title of the grain to the company.

In Minnesota, regulators at the Minnesota Department of Agriculture still have not disclosed a number of claims or a dollar amount filed, even though the claims-filing deadline was June 5, 2012. Liz Erickson, a communication coordinator for the department, says department lawyers declined to release more information, concerned that it could compromise an “active investigation.”

Richter, in North Dakota, says the investigation is still in “baby steps” to determine whether $1.6 million in seeds were acquired by Legumex Walker in the “ordinary course of business,” or must be paid back to farmers. The PSC and its special counsel hired for the case, are still waiting on “certain documents from Anderson Seed.” If the agency is successful, “the next thing will be to figure out how we go about obtaining those proceeds,” Richter says.

As of Aug. 22, 2012, Anderson Seed ceased to be registered to do business in the state North Dakota for failing to file an annual report with the North Dakota Secretary of State’s office. Legumex Walker Sunflower LLC registered March 13, 2012, and Legumex Walker Canada Inc., was registered Aug. 22, 2012.

Meanwhile, in South Dakota, the PUC this past week filed a plan for distributing bond proceeds to qualified claimants with District Court in Redfield, S.D. The hearing is March 19, involving a $100,000 bond.

Legislation in SD

Separately, the South Dakota Legislature is dealing with related bills.

The South Dakota House passed HB 1017, by a 65-2 margin. That bill, promoted by thePUC, is yet to be scheduled for a vote in the Senate. Among other things, it would allow the commission to suspend a warehouse operator license if the commission has “knowledge of any act of insolvency, including the filing of a petition in bankruptcy, naming the warehouse as debtor,” or if the warehouse refuses to submit an inspection of its facilities or books and records. The bill requires warehouses to notify the commission immediately if it is experiencing financial problems, or face Class 6 felony penalty for the owner or manager, because of a failure to report. If there is not a farmer loss, it is still a crime not to report, but a Class 1 misdemeanor, Nelson says. The bill also changes bond requirements, in some cases raising bond levels on grain merchants.

The South Dakota House Agriculture and Natural Resources Committee on Feb. 14 passed HB 1228 by a 7-6 margin. That bill would give producers priority in recovering bonds in grain company insolvencies. The bill is sponsored by Rep. Dennis Feickert, D-Aberdeen, a retired farmer and rancher and was backed by the South Dakota Farmers Union and opposed by trucking and cooperative groups. It was scheduled for House floor debate on Feb. 15.

In separate grain insolvency cases in North Dakota:

•FalkirkFarmers Elevator — The PSC at the end of December was appointed trustee and has published notice to file claims in an insolvency from last spring. Claimants have 45 days from the second publication date — roughly in mid-March 2013 — to file claims. The PSC so far has received about three claims. The bond and state’s credit sale indemnity fund have to do only with the grain that wasn’t paid for.

In the separate matter of Falkirk’s pre-paid fertilizer that was interrupted by the insolvency, and for which there are claims, Richter refers questions to Art Perdue, the defunct company’s former interim manager. Perdue, reached in Arizona, declined comment about the status of claims by vendors or farmers. The Falkirk Grain facilities in Falkirk were sold to SRS Commodities of Mayville, N.D.

•Mitchell Feeds — This case has been going on since early 2011. Mitchell Feeds was based in Horace, N.D., buying grain in North Dakota as a roving grain buyer, but had a facility in Hendrum, Minn. PSC staff is still investigating that case before they’ll draft a report and recommendation for the PSC to submit to the court.

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