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Published July 16, 2012, 10:50 AM

Judge orders payment to Grabanski partners

A federal judge in Denver has agreed with Tom Grabanski, formerly of Grafton, N.D., who, along with his partners in a farming operation in Colorado, was denied some $8 million in crop insurance indemnities in 2008.

By: Mikkel Pates, Agweek

A federal judge in Denver has agreed with Tom Grabanski, formerly of Grafton, N.D., who, along with his partners in a farming operation in Colorado, was denied some $8 million in crop insurance indemnities in 2008.

Richard P. Matsch, senior district judge, ordered the U.S. Department of Agriculture’s Risk Management Agency to pay indemnities to the partnership, though some issues are still in dispute. Grabanski, who also farmed in North Dakota and Texas, says the government’s refusal to pay the $8 million threw his operations into an economic tizzy that led to numerous bankruptcies and lawsuits, most of which are still underway.

“Like we’ve said, we didn’t do anything wrong with that insurance,” Grabanski told Agweek on July 12, saying he hadn’t heard or read the decision, but knew it was coming. “The government decided not to pay us.”

The case centers on the Group Risk Income Program, which is designed to protect revenue loss. GRIP participants are indemnified if the county average per-acre revenue for the insured crop falls below the insured’s “trigger revenue.”

A former crop insurance agent, Grabanski says the government wrote the policy wrong and “screwed up,” but he hadn’t anticipated a big payday on the insurance. “The government can do whatever they want and there are no repercussions.” He says the case unfairly destroyed his credibility. He adds that other similar cases in Colorado, were resolved earlier, but his partnership was “blackballed” because it is from out of state.

Grabanski wasn’t able to say how much of an indemnity would come to him, but said, “It’ll get a lot of people back some money.”

Stephen D. Taylor, an assistant U.S. attorney for the District of Colorado, who argued the government’s case, did not immediately return phone messages from Agweek.

From the beginning

In 2008, Tom and Mari Grabanski and three other married couples in North Dakota formed Colorado Farms to purchase farmland. In February 2008, four of the Colorado Farms partners — Brian, Ranell, Jeffrey and Amanda Hanson — formed the second partnership called Hanson Colorado Farms to lease the farming of land acquired by Colorado Farms. The Hansons had no experience with farming or farm management and Grabanski, who had experience, connected them with Paul McGeary, an agronomist, who assisted as a shared employee.

In March 2008, Hanson CF applied for GRIP insurance for 30,000 acres of corn in Baca County. In April 2008, the rent finalized to $40 per acre on 11,000 non-irrigated acres and $150 per acre on 1,500 irrigated acres — a total of $885,000, due Dec. 1, 2008.

Colorado Farms paid the expenses, managed by McGeary. On June 23, Farm Credit Services provided a $3.5 million loan to Colorado Farms, and a separate $1 million operating loan to Hanson CF. Both loans were secured by the same property, personally guaranteed by the Hanson CF partners.

In July 2008, Hanson CF reported it had planted 10,840 acres of corn between April 19 and June 2, and certified it had a 100 percent interest in the insured crop. Baca County then had a drought. Grabanski sold some irrigated corn on the acres to apply toward input expenses. On Sept. 5, Hanson CF filed for a loss on the 10,840 acres. The issue was referred to the RMA. In November 2008, the Farm Credit loans were restructured as one loan, with Colorado Farms as the sole borrower.

The RMA denied the claim, saying the partnership did not have an insurable interest in the crop, had failed to provide records, and hadn’t followed good farming practices. In June 2010, Hanson CF lost an appeal with an RMA hearing officer. The company lost another with USDA’s National Appeals Division director in February 2011. Hanson CF filed suit in March 2011, asking courts to overturn both the RMA decision and the director review.

“In sum, there is no legal or factual basis for the director’s conclusion that Hanson CF bore no financial risk for loss of the 2008 corn crop,” Matsch wrote. He said that on June 18, 2012, the plaintiff and defendant agreed to abide by the insurability decision of the court. Match affirmed the withholding of payment on 3,594 acres planted to non-irrigated corn on newly-broken ground, without a fallow period.