Bankrupt Ethanol Company Demands Farmers Pay Up

Hundreds Of Corn Growers Receive Letter From Company Attorneys

ARCADIA, Neb. -- Millions of dollars and the future of hundreds of Nebraska farmers may be on the line in a unique bankruptcy case. A bankrupt ethanol production company is demanding that farmers return the money the company paid for corn in 2008.

"It's just hard to believe it could be legal," said farmer Dick Bossen of Arcadia.

Bossen and hundreds of other famers received a letter from a New York law firm last month demanding they pay back the bankrupt VeraSun Ethanol Company for corn bought just before the business went under two years ago.

"They said they had written checks to me for $2.6 million, and they would settle for 80 percent of that, which would be $2.1 million," Bossen said.

That amount of money is no small amount for any businessman, even one like Bossen who has 10,000 acres of land and 5,000 head of livestock. His operation is one of the largest around.

VeraSun was running 16 ethanol plants, including one in nearby Ord, when it declared chapter 11 bankruptcy in 2008.

The Ord plant alone bought corn from many growers and grain elevator operators like Bossen's neighbor, Jim Trotter.

"We can't believe this is happening," said Trotter. "We thought everything was over after their bankruptcy."

Trotter owns the elevator in Arcadia. After receiving the letter from VeraSun, he became a local sounding board.

"Our phone has been ringing off the wall since that letter has come out," he said.

So how could a bankrupt company demand farmers pay them back for corn they sold the company years ago? A meeting was called last week in Ord to get some answers. Some 150 farmers showed up for the meeting.

Local attorneys explained what VeraSun was attempting to do.

"They have got a confirmed bankruptcy plan, which means the only that that's left is a bunch of people trying to collect money," said one attorney.

Tom Kruml, a lawyer from Ord, who's helping dozens of farmers with the claims, said VeraSun's actions stem from an obscure part of U.S. bankruptcy law, called preferential transfer.

"In this case, it was corn that was delivered and needed to be paid for, so they made the payment and now, they're claiming that the payment was somehow a preferential payment, and they're asking that it be paid back," said Kruml.

Kruml said VeraSun wants a more equitable distribution of the company's assets and alleges that farmers got too much and the company was left with too little.

But the farmers' concerns go beyond their own property. They said a ripple effect could impact Main Street in towns like Arcadia and Ord.

"It's going to put quite a hardship on these areas where these plants were at. These farmers aren’t going to spend money, local or any place," said Trotter.

Others, like Bossen, worry some corn growers may face bankruptcy themselves by the claims.

"It would be a big hit to the community, to Valley County, to Nebraska," said Bossen.

Attorneys for VeraSun declined to comment on this story.

SOURCE: ketv