Farmers firstORIENT, S.D. — Ray Martinmaas wants Anderson Seed Co., or at least someone, to pay.
By: Mikkel Pates, Agweek
ORIENT, S.D. — Ray Martinmaas wants Anderson Seed Co., or at least someone, to pay.
If the insolvent sunflower company, based in Mentor, Minn., and with operations in Redfield, S.D., and in North Dakota can’t or won’t pay the nearly $48,000 it owes him for sunflower seeds, Martinmaas wants the companies that bought the seeds to pay him.
He thinks Anderson Seed officials should be criminally or civilly liable for the $2.6 million the South Dakota Public Utilities Commission calculates the company failed to pay South Dakota farmers. If the company doesn’t pay the money owed, he wants the South Dakota PUC to do something — certainly spearhead a change in the law so farmers who aren’t paid for their delivered grain come first.
”They want this job,” Martinmaas says. “They want to sit in Pierre and take responsibility. So take responsibility.”
Looking for fraud
Chris Nelson, PUC chairman, says his agency is on the case, despite what Martinmaas thinks. Nelson says he’s asked South Dakota Attorney General Marty Jackley to look into Anderson Seed and determine whether there may be fraud and, if so, to bring charges. “At this, point we’ve not heard that they’ve been able to put that case together,” Nelson says.
Separately, Martinmaas has asked Vic Fishback, the Spink County state’s attorney in Redfield, S.D., to file criminal complaints. He thinks that may have led to the attorney general’s action. In September, Martinmaas was interviewed by an AG’s investigator in Aberdeen, S.D.
“I don’t have much hope of anything coming of it,” Martinmaas says. He wants the state to charge company officials with theft. “I don’t hold out much hope for that happening, but that’s what I’m doing,” he says.
Beyond urging a criminal investigation, the PUC will ask the state Legislature to narrow the classifications for bond amounts for grain buyers, Nelson says. For the Anderson Seed case, that would have increased the bond from $100,000 to $150,000.
They’ll also ask for contemporary financial information when warehouses come up for license renewal, under penalty of perjury. “A secondary step would be to require any grain buyer, if they go into a negative position, to notify us immediately — also with penalties — instead of trying to ride it out like Anderson did.”
Nelson says the PUC must decide by the first week in January to recommend the bill be sponsored by the House or Senate agriculture committee.
Martinmaas, 63, with a white horseshoe moustache, says his family has overcome obstacles before. They’re not taking this challenge lightly.
His great-grandfather Herman Martinmaas came from Germany and homesteaded four miles from where Ray now lives. His parents, William and Wanelda, established their own farm in 1949, and raised 12 children, Ray being the oldest. “No one ever gave them anything. They never inherited anything, never filed bankruptcy, never had a write-off,” Martinmaas says. “They just worked their whole life.”
All six of William’s sons today remain in the farming/milking corporation. Martinmaas Dairy Inc. includes a 200-cow dairy, as well as an 800-cow Angus beef herd. They farm 12,000 cropped acres. Each brother has his own separate farming or livestock enterprise on the side.
The Martinmaas brothers background-feed cattle and sell stocker cattle. On the farming side, they raise corn, wheat, soybeans, alfalfa and sunflowers.
Ray Martinmaas has kept the books and has handled accounts receivable. He’s never had a problem like the one he’s handling with Anderson Seed.
When Anderson Seed built a plant in Redfield, S.D., it offered a good market for sunflowers, he recalls. His first deal with the company in November 2011 was also his last. Martinmaas Dairy delivered five loads of oil-type seed, totaling $47,973.92, and never got paid.
“It was a straight-away sale, with deferred payment ’til after the first of the year, which is a common practice. Everybody does it,” Ray Martinmaas says. “When we did it at that time, we signed no contracts. The PUC says that I gave them ‘credit’ whether I signed anything or not.”
By January 2012, Martinmaas had heard there might be financial problems with Anderson Seed. When he called the company, officials assured him they were getting “organized.” A week or two later, he heard the company had gone insolvent. It stopped taking his calls.
Anderson Seed officials later explained their troubles started when farmers, lured by increasing commodity prices, broke verbal contracts to sell seeds. Anderson Seed, which had taken positions in the market, then had to buy higher-priced sunflowers on the open market. Martinmaas says he’s talked to farmers who refused to deliver because they were worried the company couldn’t pay.
Attorneys for entities representing Anderson Seed did not immediately respond to requests for comment from Agweek.
Nelson says the Martinmaases are among the $400,000 in unpaid claims that involve “voluntary credit sales” which are ineligible for bond money. PUC staff has determined that where there is intent to defer the amount claimed — say from one calendar year to the next for tax purposes — the bond doesn’t apply.
In March, Jim Mehlhaff, the PUC grain warehouse manager, was quoted in a news article saying he’d recommend the PUC not take over the business in part because there were “no sunflower seeds there.” This angered Martinmaas because he knew the Redfield plant was full of seeds.
Martinmaas complained to Nelson, who told him Mehlhaff’s words were misstated in print. The problem, Nelson says, was that Anderson Seed didn’t technically own the seeds because they’d sold them to Legumex Walker, the new owner. Nelson acknowledges he advised Martinmaas not to try anything rash, because he might be arrested.
“‘You’ll be arrested,’” Martinmaas says, ruefully, remembering Nelson’s words. “This is where I made my biggest mistake in this whole deal. I didn’t get arrested. I let them steal my seeds — that’s what I did.”
In May, Fifth Circuit Judge Tony L. Portra in Spink County held a hearing, asking creditors whether he should approve Anderson Seeds’ $100,000 bond to the PUC. “I told the judge that if you give this money to the PUC, we won’t see any of it,” Martinmaas says. “He asked where I should give it? I said, ‘Give it to the Secretary of Agriculture so that it can be distributed evenly.’ But he gave it to the PUC anyway.”
Nelson says he hadn’t heard Martinmaas’ suggestion about the agriculture department. He doesn’t know if it’s even possible, but says Portra’s decision speaks for itself. Further, Nelson says he won’t advocate for special lien protections for farmers that exist in North Dakota, and not in South Dakota, because the protection ends as soon as the buyer transfers ownership to an end market.
In North Dakota, the Public Service Commission estimates farmers may be owed $2.1 million in cash grain payments and another $809,000 in credit-sale contracts to Anderson Seed. There is $280,000 in bond money and more than $6 million in a state indemnity fund that could cover credit-sale contracts.
Jon Jensen of Grand Forks, a special attorney hired by the PSC, on Oct. 23 informed Cass County (N.D.) District Court that he intends to sue Anderson Seed for the value of seed that was sold and left the state, which would include the bond company and Legumex Walker. Legumex Walker contends it purchased sunflower seed in the “ordinary course of business” and that a state lien law protecting farmers isn’t in effect once the grain leaves the state.
Factoring in the election
Nelson, who was appointed to his post at the PUC, acknowledges the Anderson Seed issue may have played a role in the Nov. 6 election. He was elected with a 67 percent majority to fill a four-year term. Kristie Fiegen was elected with a 53 percent majority to a full, six-year term.
Martinmaas describes himself as a conservative Republican, but says he urged friends to vote against Nelson and Fiegen.
“We’re a Republican state, and that’s just the way it is,” Martinmaas says. “It really burns my ass that we elect these people in Pierre and find out they’ve hung us out to dry. It seems like, at every turn, the PUC lets Anderson Seed get away with this. Their reply is that they have to follow the law. There’s always some codified law they’re beating you over the head with.”
Gary Hanson, the third member of the PUC, withdrew from Anderson Seed votes because his son is in the loan department of U.S. Bank in Sioux Falls. U.S. Bank was one of Anderson Seed’s lenders.
Behind ‘the rat guy’
Martinmaas says he’s been blind-sided by the facts about how farmers go unprotected. “I didn’t know that by delay-pricing, we are extending credit,” he says. He testified at state legislative hearings that simply increasing the bond by $50,000 is a joke — “150,000 bond, and you can steal millions, and not go to jail?”
On Oct. 9, Mehlhaff sent him a letter, telling him he isn’t entitled to money in the bond because he’d delivered seeds under a “voluntary credit sale contract.” Like others, Martinmaas says he has mailed paperwork for an appeal for a PUC hearing. The deadline is Nov. 16.
Martinmaas says he’ll appeal on grounds he never had a signed contract with Anderson Seed. He thinks there may be other issues and wonders if the Anderson Seed license was properly approved. He also wonders if the company broke any laws by transporting sunflowers across state lines.
He’s talked to Mike Clemens, a Wimbledon, N.D., farmer who was burned in the Wimbledon Grain Co. debacle in January 2002. In that case, farmers recovered 32 cents on a dollar. It led to the 2003 passage of a self-funded $10 million indemnity fund to protect farmers in price-later contracts in North Dakota. That fund later was capped at $6 million.
Martinmaas isn’t a big proponent of such an indemnity fund, because it’s another cost, like check-off fees that farmers get charged for. Nelson says he heard the same thing on the campaign trail, and will leave that concept between farmers and legislators. Nelson says his opponent in the PUC race may ask for legislation in the next session.
Meanwhile, Martinmaas says the experience has entirely changed his attitude about grain buyers.
North Central Farmers Elevator in Faulkton, S.D., was planning to build a new facility last year and asked Martinmaas if he wanted 100,000-bushel condominium storage in it. Martinmaas initially said yes, but now has changed his mind. He’ll build storage on his own farm if he needs it, where no one can prevent his access to it, he says.
“I’m just not going to risk that kind of a deal again.”
Martinmaas’ one anecdote sums up the experience. In February, his dairy was visited by a vendor who handles rodent protection supplies for a company that also put out rat poison for Anderson Seed. “The guy says, ‘How are you getting along with Anderson Seed, Ray? ‘They owe us money too,’ he said.” The man informed him that his company was ahead of the farmers in the line to get money because of its “machanic’s lien.”
“What do you guys have?” he asked Martinmaas.
“We have nothing,” Martinmaas replied. “I’ve been saying, there’s something wrong when the rat guy’s ahead of the farmers who delivered grain — and I’m not disparaging the rat guy at all.”