Domestic Fuel

Hundreds of farmers have been showing up at meetings held around the Corn Belt trying to find out what they should do about letters received saying they owe money for grain delivered two years ago to a bankrupt ethanol company.

VeraSun officially filed bankruptcy nearly two years ago. Just a few months prior to filing, the company reported a 500 percent revenue increase over the previous year and they opened their 14th plant just about six weeks before the bankruptcy. But, any farmers who got paid for corn delivery in the 90 days prior to the filing at the end of October 2008 are now being asked nicely to repay that money. If they nicely agree, they can just pay 80 percent by September 30 – if they don’t, they have to pay back the full amount.

The letters went out to an untold number of farmers in South Dakota, Nebraska, Iowa and other states on August 20. The amounts involved vary per farmer, but there are reports of some who were paid as much as $100,000. The initial reaction to the letters was disbelief and shock, but advocacy groups and farm organizations have been working to inform farmers about their rights and what actions they need to take.

According to an explanation by the Iowa State University Center for Agricultural Law and Taxation the letters are based upon a
“preference theory” under federal bankruptcy law. Basically, lawyers for people who were owed money by VeraSun when it declared bankruptcy are going after everyone that VeraSun paid in the 90 days prior to filing because there is a chance they might have gotten “preferential payments” by VeraSun under the theory they may have paid off some people but not others. It is up to the farmers who received payments for grain to prove that they were made “in the ordinary course of business.”

“Our farmers have done no wrong, and yet they must now invest time and treasure fighting off lawyers over a legal transaction made years ago,” says National Corn Growers Association (NCGA) president Darrin Ihnen. “In the end, this is all about taking money from farmers who lost out on previous contracts, making them spend more money and then giving the money to the bankers and others. That is simply not right.”

At meetings this week, farmers have been urged to seek legal counsel and reply to the letters before September 30. Legal counsel for corn grower organizations on the state and national level are collaborating on how best to respond to the letters.