Farmers and others in the grain industry say that Turner Grain Merchandising Inc. in Brinkley and related businesses have failed to pay them for crops valued at $15.7 million, according to the latest figure.
The claims are approaching state agricultural officials' estimates of the scope of the problem, which surfaced in mid-August when agents for the U.S. Department of Agriculture shut down a grain storage facility near Brinkley, a sister operation of Turner Grain.
"I think it's going to grow but I don't know to what extent," state Agriculture Secretary Butch Calhoun said of financial damage. Calhoun has said the loss of revenue from grain sales could range from $20 million to $50 million.
Thus far, only civil complaints have been filed.
Fletcher Long, prosecuting attorney for 1st Judicial Circuit of Arkansas, whose counties include two where suits have been filed, said the matter is "at a stage now where it wouldn't be good for anybody to talk about it."
The case would come under U.S. Justice Department scrutiny if laws governing interstate commerce have been violated. Deb Green, spokesman for the Little Rock office of the FBI, had no comment on the case, but said to "check back with me as the days go by."
Two plaintiffs in Louisiana have filed suit in Monroe County for losses they put at more than $3 million. Though no suit has been filed, farmers in the Mississippi Delta and their attorney say that they have not been paid $1.7 million for about 335,000 bushels of corn picked up by an affiliate of Turner Grain, Brinkley Truck Brokerage LLC.
An attorney for six Mississippi farmers said truckloads of corn were picked up by Brinkley Truck starting in late July. That ended Aug. 13, the day before USDA agents shut down the storage facility, owned by Agribusiness Properties LLC, where some of the grain had been sent. The elevators were empty even though certificates at the facility, which has a 241,000-bushel capacity, said the grain was there.
The USDA's Farm Service Agency this week said only that "appropriate actions have been taken" on the facility. The agency had two options -- extend the initial 30-day suspension of the operating license for another month, or revoke the license.
Donald Campbell III, attorney for 21 plaintiffs in a case filed Aug. 22 in Lonoke County Circuit Court, said this week that his clients' losses amount to about $8 million. A case filed Aug. 18 in Lee County Circuit Court by eight farmers amounts to approximately $3 million, attorney David Hodges said this week.
The loss of $20 million in grain sales would translate to a negative effect of $10.5 million on the state economy, said Greg Hamilton, senior research economist for the Institute for Economic Advancement at the University of Arkansas at Little Rock.
But the effects on the east Arkansas communities will be felt by local retailers and banks and investments by local businesses, Hamilton said.
"Most of our sales are [to] farmers. They're not spending a lot. But I can't say it's because of that," said Catherine Clemons, manager of Ridout Lumber.
Bently Manatt, president of the Bank of Brinkley, said the bank has not been hurt yet. "I don't think it's been long enough to tell. Most of the community's No. 1 thing is the harvest," Manatt said. "They're trying to beat the weather and get the crops out of the field."
Once crops are taken in, federal loans are ordinarily due, but proposed legislation introduced Tuesday by Arkansas' U.S. senators and on Thursday by all four of its U.S. House members would give farmers 180 days to pay back the loans after a bankruptcy by a commodities buyer is resolved.
On Sept. 5, Dale Bartlett, a partner in Turner Grain, filed for personal protection under the U.S. Bankruptcy Code's Chapter 12, which is designed to protect family farms and not corporations.
Turner Grain Merchandising is a dealer, not a broker registered with the U.S. Commodity Futures Trading Commission and the National Futures Association.
Bartlett and Jason Coleman until recently were "principals" in Neauman Coleman and Co. That company and Turner Grain are based in the same small building on Main Street in Brinkley. Neauman Coleman is the manager of the firm that bears his name. Neauman Coleman is Jason Coleman's uncle.
Neauman Coleman is an "introducing broker," which means he can recruit investors and can even get a limited power of attorney to direct their investments, said Larry Dyekman, a spokesman for the National Futures Association. In return, such brokers get a commission.
On Aug. 19, Jason Coleman and Bartlett "withdrew" as principals in Neauman Coleman and Co., according to online records of the National Futures Association, which regulates the futures market. Principal status means someone owns a minimum of 10 percent of the company and has no authority to manage investments, Dyekman said.
Gerald Loyd testified in a hearing related to the Lee County lawsuit about a telephone conversation he had with Jason Coleman. During that conversation, Loyd testified, Jason Coleman became emotional and said he had taken "the wrong position" on the grain he bought. Loyd is president of Turner Commodities of Dumas. Jason Coleman and Bartlett are partners with Loyd in Turner Commodities.
"Position" is an industry term used to indicate that a broker anticipates that the price of a commodity, such as grain, will either fall or rise.
Brokers can work on the cash market or the futures market. The latter market allows them to hedge their cash market "bets" by taking what they think is a safe position.
Futures contracts are bought on what is called margin, meaning an investor only has to pay 10 percent of the value of the contracts.
"You're controlling a huge amount of money with a small amount of money, so when the market moves against you ... you're going to have what is called a margin call," Dyekman explained. "The exchange ... asks for more margin if you want to keep those contracts."
A broker who has taken a wrong position might "double down" on a bad bet, adding more to it in hopes that the market will change directions, but risking that he will make the investment even worse, Dyekman said.
Business on 09/20/2014