Hunter Hanson PSC claims climb to $11.5 million
BISMARCK, N.D.—Claims against the failed grain businesses of Hunter Hanson have increased by more than $3 million over previous reported levels and now are at nearly $11.5 million.
The new figure includes $8.6 million for grain that sellers say was actually picked up by Hanson's businesses but checks to pay for the grain bounced or never arrived. The rest of the amount is the reduced value from grain deals that were made but the grain wasn't picked up and had to be marketed separately at a lesser price.
The North Dakota Public Service Commission last fall shut down Hanson's businesses were shut down after multiple reports of bounced checks.
The case has rocked the grain regulation system in North Dakota, spawning competing bills in the state Legislature that would study a complete revamping, including moving the regulation from the PSC to the state Agriculture Department.
Hanson, 21, who is originally from Sheyenne, N.D., and later lived in Leeds, N.D., and West Fargo, N.D., remains in the McLean County Jail in Washburn on a felony theft charge related to his grain dealing. Separately, Hanson has been hit with civil claims of more than $4 million in district courts around the state.
Konrad Crockford, PSC director of compliance, says 60 farmers and other entities — including some sizeable elevator systems — had made claims as of the April 8 deadline for filing claims against Hanson,and his two unincorporated businesses — a roving dealer entity known as Midwest Grain Trading and NoDak Grain, operating under a separate warehouse license. Both of the businesses were sole proprietorships — essentially "doing-business-as" entities of Hanson.
East Central Grain
One of the claims is from East Central Grain Marketing of Minnetonka, Minn., which played a role as an "introducing broker" who several victims said first introduced them to Hanson. East Central was present in most of the claims reviewed by Agweek, showing 2 to 10 cent per bushel commissions in deals. East Central has reportedly paid some farmers and entities a refund on its commission fees, but now has filed a claim for $595,674 in the case.
Courts named the PSC as trustee for both of the entities after the agency declared the company insolvent in November 2018. The case initially was sited in District Court in Burleigh County for Midwest Grain Trading, because it is not tied to a specific location. The PSC initially expected the NoDak Grain case would be held in Devils Lake, in Ramsey County, where Hanson established an office.
Now, Crockford says the PSC has requested that both cases be heard at Rugby, N.D., in Pierce County. That is the county where Hanson bought his first elevator facility for NoDak Grain at a defunct cooperative in the former town of Tunbridge. He also operated a second elevator site at Rohrville, N.D., in Ramsey County.
If the cases are co-located it could make it more convenient for claimants to attend hearings, he said.
Crockford says the PSC is in the process of validating claims, which will sort them into two types — cash sales, for which payment is required, or credit sales, which means the seller hands over title to the grain but takes a "priced later" or agrees to the price but takes a "deferred payment" option. The PSC earlier said it appeared most of the sales were cash sales.
The distinction is important as farmers would like to be covered by a special state indemnity fund that covers only credit sale contracts. The fund stands at about $4.3 million but can only be used for credit sales contracts because those are the contracts that were taxed for the purpose of creating the fund.
Peas over durum
As trustee, the PSC has sold some of the grain in the Tunbridge location, west of Rugby. There was no grain in the site's aged wooden structure, but the agency has sold $183,890.90 in yellow peas that he'd kept in several exterior hopper bins.
There also is about 4,700 bushels of durum wheat at the facility. Crockford says that the durum is left over from a bin that NoDak Grain apparently filled partway with durum and had piled yellow peas on top of it. "That's definitely not a common practice," Crockford says, adding, "Nobody wants to buy a mixed commodity."
The PSC has inventoried grain at Rohrville, N.D., a former facility of CHS that Hanson purchased for $100,000. That site includes 59,000 bushels of yellow peas, 4,600 bushels of durum wheat, 3,400 bushels of barley and 1,100 hundredweight of canola.
"We are in the process of soliciting bids on those," Crockford said. At this point, that elevator remains "inoperable" because of water that must be removed from the "boot," a below-ground part of the elevation system that takes grain through the "leg" to the storage bins above.
Hanson had explained that his company's payment troubles had in part been due to the sump system failing at Rohrville, moving water through the leg up into stored grain. Crockford says the PSC has sampled the grain in the bins and they "don't look terrible."
Crockford says the PSC also is looking to companies that may still owe money to the Hanson entities. He said the company received a check for $9,700 from Hanson from what he said was left in one of the accounts for NoDak Grain. "That check was deposited in the trust account," he said, noting that it had $124,773.17 in it as of March 31.
The PSC has not yet called upon bonds that the company was required to have in order to get licenses. There may be $715,000 in them to cover a small portion of the claims.
Sorting out bonds
Midwest Grain Trading has a bond of $400,000. Hanson initially got a $50,000 bond with Hartford Fire Insurance Co. in March 2017 when it was first licensed, after complaints he was operating as a roving grain buyer without a license.
Crockford said Hanson replaced that with a $200,000 bond with State Farm Fire and Casualty Co. on Aug. 30, 2017. He then increased that to $400,000 on Aug. 6, 2018, with the same company. That would have been the proper bond for expected purchases of 1.25 million bushels.
Crockford says it appears Hanson almost immediately exceeded that amount in the months of September and October 2018 alone. A roving grain buyer is required to report activity levels 30 days after the end of a month's activities, so the PSC would have learned about the excesses through the reporting.
Separately, NoDak Grain had two bonds covering its two warehouses at Tunbridge and Rohrville.
On April 6, 2018, NoDak Grain acquired a $165,000 bond from Philadelphia Indemnity Insurance Co. On Aug. 27, 2018, that bond was replaced by a $150,000 bond from CorePointe Insurance Co., of Birmingham, Mich. The original bond exceeded the total required for the two facilities, Crockford said. But he said the PSC is arguing that the Philadelphia Indemnity Insurance bond is still in effect because the company failed to send a required cancellation notice to the PSC, and that the policy can be canceled only 90 days after the PSC receives that notice.