SDPUC suspends Minn. seed company license
The South Dakota Public Utilities Commission on Feb. 17 immediately suspended the grain buyer's license for a Mentor, Minn.-based sunflower company, for its processing and handling facility at Redfield, S.D.
If unchallenged, the license for Anderson Seed Co.'s processing and storage facility at Redfield will be revoked in 15 days. The action was taken in the wake of reports that farmers have not been paid for more than $2.6 million in grain deliveries last fall. Officials in North Dakota and Minnesota are also monitoring the situation.
Neither owner Ron Anderson nor his daughter, Stephanie Anderson, who still manages the business, nor their attorney, participated in the telephone conference hearing, which was based in Pierre, S.D. The Andersons and their lawyer told SDPUC staff they would be absent because they didn't object to the petition to suspend.
Meanwhile, the Minnesota and North Dakota assets of Anderson Seed Co. were sold to a Canadian buyer on Feb. 15, as well as the larger St. Hilaire Seed Co. The two deals totaled nearly $19 million.
According to the SDPUC, the Redfield facility was new, established and licensed in September 2010. An open house was held in January 2011. In the hearing, James Mehlhaff of the SDPUC's Grain Warehouse Division, said that when the facility was granted its Class A license, Anderson Seed projected annual purchases of $1.5 million. After seven months of operation it appeared to have unpaid or late amounts totaling more than $2.6 million. The company's bond is for $100,000, held by Auto Owners Insurance of Lansing, Mich.
Informal counts of farmers with unpaid deliveries ranges from 30 to 40, but may change, SDPUC chairman Chris Nelson said in a follow-up interview.
While suspending the license, the commission ordered an immediate audit, which, among other things, will produce a list of current assets.
Mehlhaff couldn't say if financial institutions have security interests in the assets. He said the company had seasonal loans secured by assets and inventory, but as of Sept. 30, had not secured conventional financing and was involved in a "bridge loan" because the company wasn't in compliance with all of the covenants of its financing.
Mehlhaff said it might take a week to complete an audit, assuming cooperation from the Andersons. He explained that people in the company told him there may be "contracts for purchases of grain whereby the producers failed to deliver on those contracts." Mehlhaff said others he'd contacted in the industry "raised questions whether that was actually the case at all."
An audited financial report at the end of the fiscal year, Sept. 30, 2010, showed the company with $243,000 in working capital and net worth at more than $2.5 million -- "well within the licensing requirements," Mehlhaff said.
After reports of slow payment in early January, Mehlhaff investigated. The Andersons promised payments to initial complainants, and those payments initially were made. Mehlhaff looked further when updated balance sheets he requested, current as of Sept. 30, 2011, showed the company's stockholders' audited equity at a negative $11.3 million. An updated, unaudited figure for December 2011 was nearly a negative $11.5 million.
A new, larger round of farmer complaints came in during the first week of February, and Mehlhaff requested a meeting with the Andersons, who then failed to send the promised checks to producers, and stopped communicating with the agency, he said.
The Redfield location processed sunflowers into seed for replanting, for birdseed, or cleaned it and sold bulk seed on a retail basis to specialty purchasers. Mehlhaff noted that as a grain buyer Anderson Seed is not simply a warehouse. "Any grain that has been delivered to that facility, it's assumed it's sold. Title has passed. There is not any ability by the producer to go in and capture any of that grain," he said. Unlike North Dakota, South Dakota has no indemnity fund for losses related to price-later contracts.