The bankruptcy trustee for Turner Grain Merchandising filed 23 lawsuits Thursday and Friday seeking nearly $100 million paid to creditors and to Turner-related entities shortly before the company filed for bankruptcy in 2014.
Nearly $90 million of that was transferred from Turner Grain Merchandising to three related entities in the year before, the court-appointed trustee in the bankruptcy case said in two of the lawsuits.
The Brinkley grain seller filed for Chapter 11 bankruptcy protection in October 2014 and later converted it to Chapter 7, listing assets of $13.8 million and liabilities of $24.8 million. This week's court filings said claims have since totaled $39.7 million, mostly in grain deals that Turner made with farmers but never paid for.
Turner's public troubles began in August 2014 when federal agriculture inspectors found no grain in Turner's bins that had been certified as being full.
The two largest transfers, according to trustee Randy Rice, were:
• $59,641,295 in 124 transfers from Turner Grain Merchandising to Ivory Rice LLC and Agribusiness Properties LLC between Oct. 23, 2013, and Aug. 1, 2014.
• $29,727,363 in 65 transfers from Turner Grain Merchandising to Turner Commodities Inc. between Oct. 28, 2013, and Aug. 6, 2014.
All those companies are related and operated by the same principals -- Dale Bartlett and Jason Coleman -- according to lawsuits filed in the Helena division of U.S. Bankruptcy Court. Rice said the transfers were made while Turner Grain was insolvent but prior to the bankruptcy filing.
Payments to such "insider" companies within a year of a company's filing for bankruptcy aren't allowed by federal law and can be seized by bankruptcy trustees.
The lawsuits seek the return of that money but gave no indication if Turner Commodities, Ivory Rice or Agribusiness Properties have any assets. If located, the money would be placed in the Turner bankruptcy estate to be parceled out to creditors as determined by the bankruptcy judge.
A third lawsuit seeks the return of $5.8 million Turner Grain Merchandising paid to AgHeritage Farm Credit Services in Little Rock, a major lender to farmers, in the months leading up to the bankruptcy for debts incurred by Jason Coleman. Those debts weren't Turner Grain's and the payments "were made with the intent to hinder, delay or defraud" current or future Turner creditors, according to the lawsuit. It also said neither Turner nor AgHeritage acted in good faith in those dealings.
Turner was having trouble paying its bills as early as December 2013, was overextended in a $1 million line of credit with Rabo Agrifinance Inc. in St. Louis and was often overdrawn at the bank, the AgHeritage lawsuit said.
A Nebraska grain broker, Gavilon, "easily Turner Grain's largest corn and grain broker, engaged in a practice of shorting its payments to Turner Grain, running up Turner Grain's receivables from it into the millions," the lawsuit said. "Even though Gavilon was not current with Turner Grain, Turner Grain was still responsible for paying its freight charges and farmers, often using funds that were earmarked on one contract, to pay the outstanding balance on an earlier contract.
"After operating like this for some time, juggling the farmers, the grain buyers, Gavilon's outstanding receivables, and the other entities in the air, Turner Grain dropped one ball, and the rest came tumbling down too, culminating ... eventually in Turner Grain's bankruptcy filing."
Twenty other lawsuits posted by 5:15 p.m. Friday on the court's website seek the "clawback" return of about $5 million more in payments made to creditors in the 90 days prior to Turner's bankruptcy filing.
Federal law allows a bankruptcy trustee to recover such payments in an effort to treat all creditors equally, Josh Silverstein, a bankruptcy expert and law professor at the University of Arkansas at Little Rock School of Law, said Friday.
It's not illegal to make or receive such payments, unless they're part of an attempt to defraud other creditors, Silverstein said. "When a company is running into trouble and is near bankruptcy, you don't want that company making full payments to some creditors, partial payments to a few, and no payments to others, when all creditors by law are supposed to be treated the same," he said. A debtor also can't make a partial payment to satisfy a larger debt, and it would be unlawful for a creditor to make such an arrangement.
Several Arkansas farmers who had received payments from Turner in the three months prior to the bankruptcy filing have reported receiving letters from the bankruptcy trustee seeking repayment.
All the "clawback" lawsuits are typical for large bankruptcies and more are likely to follow, Silverstein said. "A trustee's responsibility is to collect as many assets back into the debtor's estate as he can for the benefit of all creditors and then let the judge work out a distribution schedule. That trustee can be very aggressive in his duties," he said.
The lawsuits seeking collection on payments made inside the 90-day bankruptcy filing are:
• $1 million to Southern Rice and Cotton of Harrisburg, which has its own lawsuit against Turner Grain pending in Poinsett County Circuit Court.
• $950,000 to AgriMarketing Inc., which owns a grain elevator in Hoxie (Lawrence County).
• $462,843 to Razorback Rice and Seed Company in Newport.
• $405,274 to Hill and Hill Farms Partnership in Dumas.
• $300,000 to K and K Farm Services, a licensed grain warehouser in Carlisle.
• $266,736 to James Farms in Walnut Ridge and in Dumas.
• $223,460 to Leslie T. Brown Farms Partnership in Monroe County.
• $170,175 to Crystal Ainsworth, a farmer in Frenchmans Bayou (Mississippi County).
• $175,857 to Fogleman Farms in Crittenden County.
• $168,187 to Walter Shepherd Farms in Desha County. (Another check from Turner to Shepherd for $123,567 at about the same time was returned by the bank for insufficient funds.)
• $162,046 to 384 Farms Inc. in Newport.
• $117,754 to Angie James, also of Frenchmans Bayou.
• $95,183 to Big Creek Rice, in St. Francis County.
Seven other lawsuits were filed Friday seeking repayments ranging from $14,000 to $28,000.
Several of those parties are owed money from Turner beyond what is being sought by the trustee.
While the FBI has declined comment on any investigation of Turner Grain and didn't respond Friday to a request for comment, a filing in September for payment of salary and expenses by the attorney for the Turner trustee alludes to such an investigation. Bankruptcy law allows a trustee to be represented by counsel, and also for the trustee and lawyer to be high on the priority list for payment by the estate, Silverstein said.
The Crossett law firm of Streetman, Meeks & GibsonPLLC in September asked for $71,910 in payment and $5,212 for expenses.
In that filing, the attorney, Thomas Streetman, noted that on Feb. 25 he'd had a telephone call with Jeff Rosenzweig, a Little Rock criminal defense lawyer who represents B̶a̶r̶t̶l̶e̶t̶t̶,̶ ̶a̶ ̶f̶o̶u̶n̶d̶e̶r̶ ̶a̶n̶d̶ ̶p̶r̶e̶s̶i̶d̶e̶n̶t̶ ̶o̶f̶ ̶T̶u̶r̶n̶e̶r̶ ̶G̶r̶a̶i̶n Coleman*. The call, Streetman wrote, was "to discuss court appearance next week with U.S. Attorney to try to negotiate limited immunity from prosecution to assist Trustee to recover assets for the estate."
Rosenzweig declined comment Friday. "We are aware the U.S. attorney is looking at the case, but beyond that, it's not appropriate for me to comment," he said.
A notation on March 22 refers to a coming meeting with the FBI, Coleman and his attorney Lisa Ballard of North Little Rock. Ballard didn't respond to a telephone message left at her office.
An April 8 note from Streetman refers to Richard Cox, the first court-appointed trustee who worked on the case for a year before resigning in May, receiving a telephone call from an FBI agent, Mike Wood. "He is calling me once a week for a report on Jason's cooperation," Cox wrote in an email to Streetman.
Streetman, on Feb. 2, noted another email from Cox. "I know we have all speculated about this case and have heard the speculation of others as to where the money went," Cox wrote, later recommending that lawyers take a look at Turner Commodities, according to Streetman's notes.
Lawyers also met with the FBI and Coleman on March 23, according to Streetman's list of work performed.
Business on 10/08/2016
*CORRECTION: Jeff Rosenzweig, a Little Rock lawyer, represents Jason Coleman in the collapse of Turner Grain Merchandising. A story in Saturday’s editions incorrectly identified the client.
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