BISMARCK, N.D. - The Mountrail County State's Attorney has filed a felony criminal complaint against Hunter Hanson of Leeds, N.D., for issuing a $94,000 bounced check for grain transactions.
In a separate civil case, a Mountrail County farmer has filed suit in Eddy County to recover $111,000 for a separate bounced check from one of Hanson's companies.
Meanwhile, a North Dakota Public Service Commission official on Tuesday, Dec. 11, said the agency is "days" away from filing insolvency actions grain businesses Hanson runs.
Konrad Crockford, PSC director of compliance, said Hanson did not respond by a Dec. 5 deadline to request a hearing on a cease and desist order, which the PSC had imposed Nov. 21.
Crockford said a separate but related insolvency action for Midwest Grain Trading, a roving grain buying company, will be filed in Burleigh County in Bismarck. Another separate insolvency action against Nodak Grain, with two warehouses in rural Devils Lake and Rugby, will be filed in Ramsey County at Devils Lake, where the companies have an office.
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"We're working on finalizing that paperwork now," Crockford said. The three-member PSC would likely have to schedule another special meeting to trigger the court action.
The PSC became alerted on Nov. 8 when several patrons complained that the company had failed to pay for grain on time or had bounced checks. Randy Christmann, a PSC commissioner with the grain regulation portfolio wasn't immediately available to comment on the pace or status of the agency action.
Roger Harstad, a farmer from Palermo, N.D., in Mountrail County, on Nov. 27 filed a civil suit in Eddy County, alleging Midwest Grain Trading failed to pay $111.888.25 for bushels of hard red spring wheat.
In the complaint, Harstad said he shipped grain to ADM-Benson Quinn at Hensler, N.D., in Oliver County, between Aug. 7 and Sept. 15. Hanson paid with a check dated Sept. 24. The check was returned for insufficient funds on Nov. 9. Harstad is represented by Derrick Braaten of Bismarck.
On Monday, Dec. 10, Mountrail County State's Attorney Wade Enget filed a citation against Hanson for issuing a non-sufficient fund check of $94,480.41 written to United Quality Cooperative on Oct. 26. The co-op is based in New Town, N.D., with facilities in Parshall and Ross.
The charge is a Class C felony, Enget said. If convicted, the maximum penalty would be five years in the state penitentiary, with no mandatory minimum. The maximum fine is $10,000 plus restitution. Enget acknowledged he could have waited for the North Dakota Attorney General's office to act if issues had crossed jurisdictions.
"That would only delay it," Enget said. "My thought is, you get after it. No. 1, it is a crime. No. 2, it happened in Mountrail County."
$23M in business
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Hanson, 21, told Agweek his companies have traded some $23 million. His roving grain buyer license was established by the PSC in May 2017, after complaints the previous months that he was operating without a license, which requires a bond.
In an earlier interview, Hanson said he has paid a lot of farmers substantial amounts for more than a year.
Crockford and Christmann said the PSC said they'd received calls totaling more than $5 million in troubled transactions, some including bounced checks. Hanson has told Agweek that bounced checks might only involve $700,000 and that they were part of a mixup in his offices.
On Dec. 11, Hanson declined comment for a follow-up story and noted he wanted any future contact to be through his lawyer.
The company remains in control of its books and accounts, Crockford said. The PSC's authority is only over the grain assets and accounts receivable for grain.
The PSC has measured the amount of grain held in the Rugby (Tunbridge) and Devils Lake (Rohrville) elevator sites.
Hanson had blamed some of his difficulties on a sump pump failure that put water into some of his Rohrville grain bins and ruined grain, but Crockford said the agency hasn't made any assessment of any water damage.
Deliver? Don't?
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Lowell Bottrell, a partner in the Anderson, Bottrell, Sanden & Thompson Law Firm in Fargo, says his firm has been contacted by farmers about claims that could be made against Hanson's businesses.
One potential client for Bottrell's firm is concerned about whether they had to deliver grain for which they'd made contracts with the companies.
"You have to monitor what the PSC is doing with their claim," Bottrell said. The case has been handled "administratively" with the cease and desist order, he said.
If the case gets to district court and the court makes the PSC a trustee, a fund would be established that would include accounts receivable, possibly grain in the facility, and a bond claim.
If the courts approve the PSC as a trustee, any farmer involved should file a claim, he said.
For people who have made cash sales, a $400,000 bond is available for the roving grain buyer's license and a separate $150,000 bond for the warehouse business, if needed.
Both company names registered with the secretary of state appear to be simply "trade names," Bottrell said, with Hanson operating them as an individual, which would be unusual for a business of this nature. "Anybody who thinks they had dealt with a corporation, they're mistaken."
Any farmers who might lose money in an insolvent company could qualify for an 80-percent
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compensation under a special Credit Sale Contract Indemnity Fund established by the North Dakota Legislature in 2003 in the wake of the Wimbledon (N.D.) Grain Co. insolvency in January 2002. The 2005 Legislature cut the fund to $6 million. Assessments to the fund resume when the fund falls to $3 million. No new assessments have been made since 2008.
No 'sexy' crime
Bottrell says he's seen numerous grain company insolvencies where bonds don't provide farmers with substantial protection. He said even a $400,000 bond in the Midwest Grain Trading case would offer little protection when compared to the price of commodities and the volumes involved.
"Twenty years ago, we thought bond coverage was insufficient," said Bottrell, who was involved when the Woods Farmers Cooperative Elevator Co. of Leonard, N.D., filed Chapter 7 bankruptcy liquidation in 1989.
Bottrell didn't specify an amount his client has not been paid for but said any amount these days is significant, especially with the tight economic straits farmers face with low commodity prices. Stuart Letcher, executive vice president of the North Dakota Grain Dealers Association, said farmers should check with the state about any complaints. "Or, stick with companies that historically have done well," he said.
He said one caution is if someone pays "way over market" on grain, farmers should be "a little cautious" when approaching the deal.
Bottrell is soon is retiring from active legal practice. He said he has never seen anyone prosecuted criminally for fraud relating to grain trading. "It's usually not a sexy crime," he said. "It looks more like a business transaction."
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