Livestock, poultry claims against Agriprocessors hits $6 million
By Jean Caspers-Simmet
Agri News staff writer
POSTVILLE, Iowa -- Livestock sellers and poultry growers have more than $6 million in claims pending against Agriprocessors under the Packers and Stockyards Act, according to documents filed in U.S. Bankruptcy Court.
Agriprocessors filed for Chapter 11 bankruptcy protection on Nov. 4.
A letter from Eric Paul, an attorney with the Office of General Counsel, USDA, identified $6.08 million in livestock and poultry grower trust and bond claims against the Postville packer. The letter was filed by attorneys for First Bank Business Capital as an exhibit in support of a motion to change the venue of the bankruptcy case from New York to Iowa.
Paul's Dec. 4 letter, sent to Joseph Sarachek, bankruptcy trustee, and David Eskew, assistant U.S. attorney, said the packer trust and bond claims filed by livestock sellers should be released shortly by the deputy administrator of the Packers and Stockyards Program. He said USDA analysis of the poultry can't be completed until auditors gain access to poultry records at the Postville plant.
Forty-thre claims by 25 livestock producers and businesses are filed against the packer bond and 41 claims by 24 producers and businesses filed against the packer trust. The claims were filed by producers and businesses in Iowa, Illinois, Minnesota, South Dakota and Wisconsin.
The largest amount in livestock claims, $582,915, was filed by Kalona Sales Barn, Kalona. The second highest was $521,598 filed by Central Livestock Association, Inc., of South St. Paul, Minn. That was followed by $345,371 in claims filed by Leon Farrow/J & L Farms, Ledyard. Waverly Sales Company of Waverly, filed $194,006 in claims and Equity Cooperative Livestock Sales Association of Baraboo, Wis., filed claims of $186,913.
There are 17 poultry grower claims. The highest trust claim was $2.02 million filed by John Burger/Burger Turkey Farms, Jasper, Ind. Lyle Opheim/Four County Ag of Postville filed a claim for $660,614. Dietrick Enterprises of Cedar Falls, filed a claim for $384,802. The fourth-largest claim was filed by Dan Byl of Maurice for $64,241. The fifth-largest claim was from Ross Enterprises/Brad Helberg of Winona, Minn., for $54,357.
Paul said that in 1976 after a lot of livestock producers ended up with nothing in the bankruptcy of a packing plant, Congress amended the Packers and Stockyards Act so that the inventory, receivables and proceeds derived from purchased livestock are assets that belong to unpaid sellers. The packer trust assets aren't even the property of the debtors' estate. The livestock producers come before secured lenders if they file a valid claim. A poultry trust was established in 1987 to protect poultry growers.
The procedure for paying claims is determined by the bankruptcy court judge, Paul said.
In an application to extend the order authorizing financing from First Bank Business Capital, Sarachek said he has worked closely with the USDA to quantify and reconcile valid trust claims asserted under the Packers and Stockyard Act. The $6 million in claims is considerably higher than Agriprocessors had previously reported, Sarachek said, and he hopes to eliminate ineligible claims after further discussion with USDA.
I'm not sure about this but, if GIPSA pays the growers, the USDA then becomes a secured creditor, so to speak, of Agriprocessors and has first rights to any money recovered in a sale – perhaps even ahead of the bank.
This should make any potential legitimate sale harder.
[Hat Tip: Archie.]