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Published January 03, 2013, 03:07 PM

ND beef company still owes farmers

North Dakota Department of Agriculture commences legal action against major shareholder of North Dakota Natural Beef, which still owes producers more than $324,000.

By: Mikkel Pates, Agweek

JAMESTOWN, N.D. — Gayne Gasal says he’s “more than ticked” that he’s taking a $65,000 loss on the failure of North Dakota Natural Beef LLC, the company once entwined with North American Bison Cooperative of New Rockford, N.D.

Since the collapse of NDNB, in Fargo, N.D., the Gasal family has been taking its natural beef to markets in Omaha, Neb., and Colorado. Gasal had hired a lawyer to look into the issue, but says he may just take a loss on his taxes and forget it.

“This might be a good year to write it off,” Gasal says.

NDNB was a plant built to handle meat processing and packing work for both companies. NABC was a major shareholder in the defunct company.

It is unclear whether state or federal governments can compel the company to make any more payments on the $324,674 it owes to a half-dozen suppliers.

The North Dakota Department of Agriculture is moving forward in Cass County District Court for a $49,000 judgment action against NABC. State Agriculture Commissioner Doug Goehring is making the case that the bison company — despite having a separate board of directors — was essentially doing business as the beef company and had control of its inventory. He wonders why the inventory, which started at $700,000 in October 2011, was somehow depleted and thinks too much of the bison company’s administrative and other expenses may have been charged against it.

“It may have been legal, but it wasn’t ethical to charge that much against the inventory/trust,” Goehring says.

Dieter Pape, president and CEO of both NABC and NDNB, say's nothing was "out of the ordinary" in any expense charges for services rendered against the inventory.

Pape says NABC has filed a counter to the state's assessment that it stopped payment and is responsible for the $49,000. Pape says payments will continue monthly as per an agreement with GIPSA.

The bison (beef) company failed to pay farmers, according to an agreement with the state in December 2011. In that agreement, Goehring’s department fined NDNB $50,000, but waived $49,000 of it on condition that the company would pay off farmers in full from its trust, which included inventory value.

NDNB paid $36,000 in the first installment of the plea and waiver agreement, but failed to complete the repayment, Goehring says. The company pled guilty to violating state laws that require companies to pay farmers in a timely fashion.

The state process stopped, in part, because GIPSA stepped in to audit and verify claims.

Under a separate subsequent agreement, GIPSA paid producers off at the rate of $5,000 per month. But, again, farmers only got a prorated portion of that $5,000 monthly payment in June, and nothing afterward.

Goehring says he regrets that he stepped aside for the federal officials. In the spring of 2012, GIPSA estimated the inventory trust still had $497,000. Goehring says records he’s seen indicate expenses for the whole plant, as well as salaries, utilities, operating — were largely being charged against the beef inventories.

“I went back to GIPSA about that,” Goehring remembers. “I stated I didn’t believe it was appropriate for them to ‘expense’ to that degree. GIPSA has indicated they had no authority to dictate what that expense would be. My response was, ‘Give me that authority.’”

But it was too late, Goehring says.

Disagreement

Gasal and other producers say they’re irritated about recent published statements from Pape.

In a December interview with Agweek, Pape acknowledged that lenders had foreclosed on NDNB’s processing plant in Fargo, and that the company would probably simply fade away, but that producers “for the most part” had been paid — a fact that Gasal and others strongly dispute.

NABC continues on with healthy prospects and new suppliers. Bison meat often enjoys a premium price in the meat market, as does natural beef, which is produced with no hormone supplements and no antibiotic treatments.

Meanwhile, Gasal says the bond amount is a “joke.” Gasal and his family have a feedlot that finishes about 1,500 beef cattle a year. At one time, he’d been selling 300 to 500 of them to the NDNB operation. He says bond levels “might have been okay back in 1930 or something, when you took a truck with 10 head of cattle to the Fargo stockyards and got it sold. It isn’t sufficient for this day and age when you take semi-loads and the prices have increased.”

Myron Ruff, another creditor from Edgeley, N.D., blames Pape and other managers. “Too much money went to management,” Ruff speculates. He says the bison company, the North Dakota Farmers Union and others responsible should pay. “They all should ante up, and get us paid,” Ruff says.

Lloyd Wieland of Dazey, N.D., who is owed more $40,000 in the deal, says protections should be in place to prevent such situations. “There’s no reason they should be able to run off with the money like that,” he says.

Pape blames the failure of the company on poor timing — a delay in construction, disputes with the contractor, the timing of an economic recession and the subsequent loss of key customers.

When the company voluntarily stopped buying beef, it instead processed beef on a toll basis for a Chicago-based customer. The company has since moved its kill and processing functions to the Triple J Family Farms plant in Buffalo Lake, Minn.

NABC was created as a cooperative in 1993, and developed financial problems because of a buildup of unsold inventory at over-market prices. Pape took the company into Chapter 11 bankruptcy reorganization and out again in 2006. In 2010, Pape presided as NABC converted to a limited liability company and became majority shareholder. Pape served as the top manager of both companies. The limited liability meat processing company never made an annual profit.The limited liability meat processing company never made an annual profit.

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