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Published September 12, 2011, 05:43 AM

Dairy drama: A timeline

Rick Millner, originally from Roseau, Minn., graduated high school in 1983 and was a student at North Dakota State University in Fargo from 1983 to 1987. Who could have predicted the swath he has cut in the region’s dairy industry?

By: Mikkel Pates, Agweek

Rick Millner, originally from Roseau, Minn., graduated high school in 1983 and was a student at North Dakota State University in Fargo from 1983 to 1987.

Who could have predicted the swath he has cut in the region’s dairy industry?

At NDSU, he was involved in student politics, in Little International showmanship. (In 1988, he was convicted of attempted sexual assault in an NDSU fraternity house — Alpha Gamma Rho — in 1986. Since then, has not since been convicted of a similar charge.)

After college, Millner went home to operate as 300-cow dairy farm in the Roseau area. In 1989, he met Jill C. Soli, a former Red River High School student, who he says was working in an orthopaedic clinic in Grand Forks, N.D. On Oct. 21, 1989, Millner, they were married. Millner tried to make his own dairy work, but it didn’t. He cited lack of experience in transitioning to a nontraditional freestall setup.

In about 1996, Al Schneck of Milbank, S.D., hired Millner to work at his dairy. The dairy included a new, 1,800-cow barn built in 1995 and, at the time, was the largest in Minnesota. About the same time, Schneck was convicted for an arson/insurance charge and went to jail for six months. It isn’t clear that there is any connection between Millner’s time there. Schneck declines to say why the two parted ways.

Neither does Millner’s subsequent boss, Jim Ward, chief financial officer of Davisco Foods, Cleveland, Minn., who hired him to work on three other dairies in Minnesota.

In 2000, Millner went to work for dairies that had been developing in Veblen, S.D.

Multi-Community Cooperative Dairy (MCC Dairy) in Veblen had come together in 1997. There were some 40 shareholders, including Ralph Keintz, Eden, S.D., who had been promoting a dairy project under the “Greenline” name. Keintz wanted dairy for the Prairie Coteau Region hills to turn inexpensive “wet feed” and forages into higher-value products.

Others in the project were dairymen Gerald Person and Larry Bosse, Britton, S.D.; Carman Lien, Jim Nickeson, Don Monsen, Tom Satrang, Doug Medhaug, Jorden Hill, Aaron Anderson all of Veblen; and Michael Wyum of Rutland, N.D. The Sisseton-Wahpeton Oyate Indian tribe traded initial trust land for a $40,000 interest. The goal was to milk 1,600 cows, ramped up in stages. There were trips to Fehr family dairies in the Morris, Minn., area, among others.

In 1998, MCC construction began after a $2.3 million equity drive. Cliff Viessman Inc. would do the milk hauling. Wayne Viessman and his brothers each bought a $20,000 share, for a total of $100,000, and later another $50,000 total, collectively $150,000. Wayne Viessman has declined to discuss his philosophy in investing in the region’s production dairying.

At about the same time, Lone Tree Dairy near Cottonwood, Minn., was starting on its own project. Lone Tree was a Dairy Management Services (old Purina feed company) project, made similarly to three other large dairies in the area. All of the dairies were set up for 1,400 cows, including 1,200 milking. There, the investors put in $70,000 for a full share. Trucking executive Wayne Viessman was a substantial shareholder.

Eventually, everything came together, in a collection of dairies, with numerous side deals, cross-connections and director/shareholders making decisions.

2000

- January: Rick Millner is hired as MCC Dairy’s second manager. He’s paid $70,000 the first year. Neither Schneck or Ward would talk with Agweek about Millner or the terms for their departures.

- Summer: Chairman Ralph Keintz in later court documents says Millner approaches him about entering a heifer business with Millner, according to documents. Keintz cautions Millner about conflicts of interest.

- July: Millner travels to Pennsylvania on behalf of both MCC and O’Dakota.

- Aug. 22: Farmland Industries (an initial MCC shareholder, later in its own bankruptcy reorganization) offers to sell 19,950 shares in MCC Dairy equity to Millner, personally. Keintz, who had served as interim board chairman, and actually a chairman, left the board.

- Oct. 1: Rick Millner’s salary increases to $90,000 with bonuses of 5 percent if profits exceed $250,000, as of Jan. 1, 2001.

- Nov. 14: Rick Millner officially becomes an MCC Dairy shareholder. MCC takes a $1.8 million loss for the year.

2001

- Feb. 28: MCC board holds special board meeting at request of investors over several issues, including: 1) Does Rick Millner have a conflict of interest with ownership in O’Dakota; 2) should a 2000 equity drive have asked each member to put in a pro-rata share instead of a voluntary investment at current share value, 50 percent of original share value; why spoiled silage from last year’s pile is being “given away rather than sold.”

- March 28: MCC co-op board removes directors — Donald Monsen, Gerald Person, Britton, Gerald Heitman and James Schumacher — using a technicality later described as a “Meeting without a Meeting” — in which members are solicited individually for approval. The maneuver normally is used when a board can’t be located in an emergency. The co-op’s lawyer then was Steve Noack of Fargo. They are replaced — still without a meeting — by Mike Wyum, Jorden Hill, Jim Nickeson, Wayne Viessman, Aaron Anderson, Duayne Baldwin and John James.

- April 24: MCC board adopts a policy to forbid any heifer sales from Millner/Nickeson’s O’Dakota Heifers to MCC without prior approval of new MCC board.

- May 29: Members question Rick Millner for Pennsylvania business trip, ostensibly for both MCC Dairy and O’Dakota Heifers. MCC Dairy ends up paying 75 percent of the expenses.

- June 26: MCC board in a Gary, S.D., meeting approves dry cow facility, one-quarter mile west of MCC Dairy on 40 acres. Minutes say “Farm Credit” will build a 300-head facility and lease it to MCC on a 15-year lease. The facility will cost $1.1 million and the cows another $400,000. A group of guarantors were compensated with stock.

- Aug. 14: Rick Millner hires his wife, Jill, for MCC Dairy data entry.

- Nov. 12: Millner and fellow board member James Nickeson formally form R&J (Rick and Jim) as a “heifer partnership” and (similar to O’Dakota Dairy) and become the “primary supplier” of heifers for MCC Dairy.

2002

- April 4: The South Dakota attorney general’s office executes a search warrant with the intent of finding evidence of grand theft.

- April 9: MCC Dairy begins permanent management contract at Lone Tree Dairy for $6,000 per month ($72,000 per year), after temporary management that began in February 2002.

- June 4: Rick Millner summarizes to the MCC board that a South Dakota attorney general investigation has determined no evidence of criminality. The board discusses how to expel certain co-op members who cooperated with the investigation.

- June 17: MCC board terminates heifer-raising contract with Gerald Person, gives the job to R&J/O’Dakota, owned by Nickeson and Millner. The board also terminates voting rights of Ralph and Mary Ellen Keintz and Gerald Person for “willfully obstruct(ing) the lawful purposes or activities of the cooperative.” Initially, there were four or five heifer supply contracts, but eventually, the only one remaining was owned by Nickeson and Millner.

- Dec. 12: Rick Millner transfers 12,698 equity shares in MCC Dairy to his father to be held in the name of Millner Farms in Roseau.

2003

- Jan. 28: Sisseton-Wahpeton Oyate tribe requests information about checks-and-balances to minimize conflicts of interest with the Millner/Nickeson entities.

- June 23: MCC Dairy board gives Michael Wyum unilateral authority to execute and approve all MCC Dairy contracts. John James resigns the board, citing the “workload in his business.”

- Oct. 11: New Horizon Dairy L.L.P., Hoffman, Minn., established. The dairy’s partners include Wayne Viessman and three or four of the Lone Tree board members. The facility operates at 700 cows until expanded to 1,357 mature dairy cows in 2007. Millner states he had the “vision of the first cross-ventilated barn,” which he says is the first of its kind in the industry. It was tested by Kansas State University for air quality.

- Dec. 16: Jim Nickeson is appointed to the board. On paper, MCC Dairy makes $500,000 for the year.

2004

- March 2: Rick Millner discusses potential benefits of calving for MCC Dairy herd to be done at New Horizon, specializing activities.

- March 29: Shortfoot Calf Ranch Inc., Veblen, established. Initial directors: Jorden Hill, Jay Hill and Richard E. Millner. 2011 (Jorden Hill, listed as registered agent in 2011.)

Millner becomes a shareholder in Lone Tree as 400 head of heifers are transferred from other operations he manages. Lone Tree will specialize in cheese — Holstein/Jersey crosses (“HoJos”), for high butterfat content. Millner will source most of these from ShortFoot, O’Dakota or R&J. Meanwhile, Lone Tree establishes its own heifer facilility on the Kesteloot farm, about six miles from the Cottonwood, Minn., dairy, taking heifers from 600 to 700 pounds to breeding at 13 months. Millner decides New Horizon will become a calving center for Lone Tree as well. Eventually, a calving facility (also transition management facility) is moved to Veblen. Most of Lone Tree’s calves are second- and third-generation artificially inseminated Holsteins. Soon, Dairy Herd Improvement Association record-keeping ends.

Some Lone Tree shareholders, totaling about 20 percent of the shares, file a “request of information” action in Yellow Medicine County court, seeking information about the fate of Lone Tree’s calves and culls, and movements, but after more than two years, they drop it.

2005

- May 26: Five Star Dairy, Milnor, N.D., established. (Dairy Dozen- Milnor L.L.P.) Michael Wyum, Rutland, registered agent. Shareholders are Richard Millner; Aaron Anderson, Veblen; David, Randy, Terry and Wayne Viessman, Gary; Doug Viessman, Mankato, Minn.; Dennis Pherson Jr., Dennis Pherson Sr. and Lenny Pherson, Rutland; Jay and Jorden Hill, Veblen; Karen Hornseth, Veblen; Roger Gibbon, Milnor; Michael Wyum, Rutland; Mario Solis, Veblen; Michael Stavick, Veblen; and Richard Millner. The dairy is approved at 1,400 head.

- July 27-28: New Horizon Dairy, Hoffman, penalized for manure storage and application violations. Dairy Dozen-Thief River Falls L.L.C. begins operating Excel Dairy in Thief River Falls in Marshall County. The dairy initially is permitted at 1,544 animal units, with one clay liquid manure storage area.

- November: North Dakota Department of Health cites Five Star Dairy in Milnor, for overstocking.

2006

- May 5: MCC board discusses the Korean investment/visa program (EB-5). At that point, foreigners could obtain a green card if they invest $500,000 in a business that creates four jobs.

- August: Lone Tree Dairy, Cottonwood, is penalized for manure storage violation and modifications of a basin without MPCA approval.

- Sept. 11: Dairy Dozen-Veblen L.L.P., established. Eighteen owner/entities include (Veblen, unless listed): Aaron Anderson; Duayne Baldwin, Lidgerwood, N.D.; Jay and Jorden Hill; Karen Hornseth, Lidgerwood; Jason Medhaug; Richard Millner; Dennis Pherson, Jr., and Lenny Pherson, Rutland; Prairie Ridge Management Co. L.L.C.; Michael Stavick; four Viessmans — David Viessman, Dawson, Minn.; Doug Viessman, Mankato; Randy Viessman, Cottonwood; and Wayne Viessman, Gary; as well as Michael Wyum, Rutland (also registered agent).

- September: Millner travels to South Korea to solicit EB-5 investments. MCC shareholder plaintiffs later said say MCC Dairy paid for consulting services associated with EB-5 investments, but all $13.5 million in investments went to Veblen East — a “competing dairy” located four miles from MCC. Millner explains that EB-5 investments couldn’t go to co-ops and that MCC Dairy would not have been able to afford it. Plaintiffs said MCC Dairy would have qualified for EB-5 or could have established an entity that did.

- Sept. 12: Five Star Dairy in Milnor is cited for discharging manure from storage basins, with monetary penalities and corrective actions, and again in October 2008. (Similar violations were added in October and November in 2009.)

- September: James Nickeson resigns from MCC board.

- Sept. 19: Veblen East Dairy L.L.P. established. General partner is Dairy Dozen-Veblen L.L.P., and managing partner Richard Millner. Veblen East is 51 percent owned by the Korean investors, who have an operating agreement with Rick Millner to manage Veblen East L.P.

- Dec. 14: Matthew Millner, a brother to Richard Millner, becomes MCC Dairy board director, replacing John James.

- Dec. 29: MCC Board discusses that MCC Dairy could be a “satellite dairy” after Veblen East is built and calving could be moved to MCC Dairy.

2007

- April 10: Dairy Dozen Heifers L.L.P. established, to replace M&J, which Nickeson had been involved with. Richard Millner is registered agent. Nine owner/entities initially listed are Aaron Anderson, Duayne Baldwin, Jay and Jorden Hill, Richard Millner, Dennis and Lenny Pherson, Wayne Viessman, Michael Wyum.

- April 11: Prairie Ridge Management Co. L.L.C., Veblen, established. Richard Millner, registered agent. Organizers are Richard Millner and Kurt Meyer of Willmar, Minn. Owner percentages elsewhere noted: Rick Millner, 88; and 4 percent each for Kurt Meyer, Michael Stavick and Karen Hornseth.

Separately, Millner is listed as owning 15.2 percent of Veblen West; 19.1 percent Veblen East; 18.2 percent Dairy Dozen Thief River Falls (Excel Dairy), as well as interest in Lone Tree. Millner also serves as general contractor for the Veblen East project.

- April 27: MCC Dairy board decides that Prairie Ridge Management L.L.C. is the management company for the dairies. Rather than working for MCC, Millner and all of the key office staff now work for Prairie Ridges. Wayne Viessman moves, board approves to grant Prairie Ridge banking authority.

- May: New Horizon, Hoffman, expands to 1,357 cows, with three clay-lined manure basins, with manure flushed to a sand separator.

- Summer: Millner is a guest speaker in Ukraine at Three Rivers Milk Conference and at the Western Dairy Conference in Reno, Nev. Back home, he’d been working on budgets for a Ukrainian project and MCC Co-op had been paying the bills. There were discussions about management fees to be charged for “taking care of the labor and administrative activities for the (Ukrainian) operation.” The deal never materializes. Later, Millner focused more on the Korean investment.

- Sept. 1: MCC Dairy leases its dry cow facility and feed center to Veblen East Dairy L.P. through Dec. 31, 2008.

- Sept. 18: MCC board discusses need to raise $500,000 to improve a barn at Veblen East and raise $400,000 to $1.5 million to “shore up MCC Dairy’s financial position to meet loan requirement, a year after Millner had obtained $6.5 million investment in Veblen East.

- Oct. 27: Millner attends the MCC Dairy board meeting, representing Prairie Ride Management, while also still MCC Dairy manager.

- Nov. 20: Nine shareholders file a complaint, concerned whether MCC managers and directors may have taken money from MCC’s minority investors and used for other dairies or to enrich themselves. Plaintiffs include the Sisseton-Wahpeton Oyate Indian tribe; Gerry Person, a nonvoting member, $186,000 investment; Carmen Lien, $40,000 investment. Also on the list are former MCC Chairman Ralph Keintz and former board member Gerald Heitman, both of Eden, who seek information on improper comingling of feed, employee time and other assets between MCC and “outside dairies” managed by the “umbrella” Prairie Ridge Management. Of special focus are O’Dakota, Lone Tree, New Horizon and concerns that manager selling cattle to himself.

Among other things, they allege MCC Dairy had paid for heating, cooling and plumbing for housing, including housing owned by Rick Millner. They said MCC was billed for consulting work associated with Lone Tree, New Horizon and “risks associated with Ukraine project.”

- November: New Horizon/Hoffman expands feed storage without a required MPCA permit. Inspections show manure violations and damage to the clay liner.

- November: Excel Dairy, Thief River Falls, doubles the concrete feedpad without required MPCA permit. MPCA requires Excel to install a clay liner on a borrow pit to serve as a runoff pond.

- Nov. 17: MCC board recommends dissolution of MCC Dairy, because of a lawsuit and requested capital.

- Nov. 26: Matthew Millner, brother of Richard Millner, failed to attend a single MCC board meeting during the year and was not involved in decision-making. He’d been seated on the board Dec. 13, 2006.

- Dec. 13-14: Plaintiffs fail to appear at Dec. 13 to 14 depositions, originally scheduled by MCC defendants, at the Bull Pen Bar.

2008

- Jan. 16: Genex/Central Livestock sues Millner and Jim Nickeson, who had fed cattle owned by Genex/Central Livestock. Genex alleges some sale proceeds that should have gone back to Genex/Central instead were used to buy more cattle. Millner say the $3 million debt had been reduced to $1.6 million because the MCC Dairy had paid off $1.4 million.

- Jan. 28: Nickeson Farms and James L. Nickeson sue MCC Dairy, requesting court supervision of dissolution sale of MCC Dairy.

- Feb. 19: Veblen West Dairy L.L.P. established from old MCC Dairy. Some MCC shareholders challenge this in court, but to no avail.

- Spring: Alpha Foods and Union Dairy, under ownership including Jim Ridgeway, purchases financially troubled Lone Tree Dairy.

- May: MPCA determines that Excel Dairy, Thief River Falls, improperly uses an “experimental” aeration and biological treatment program for manure basins. The treatment, MPCA says, “had never been permitted by the MPCA.” Excel violates air quality standards for hydrogen sulfide “hundreds of times.”

- September: Excel Dairy illegally allows manure-contaminated runoff into Minnesota waters.

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