Nebraska grain regulators hit South Dakota grain company with $290,000 fine
The Nebraska Public Service Commission on March 15, 2022, imposed a $290,000 civil penalty on Banghart Properties LLC of Gettysburgh, South Dakota, for buying grain in Nebraska without a license.
LINCOLN, Neb. — The Nebraska Public Service Commission on March 15, 2022, unanimously imposed a $290,000 civil penalty against Banghart Properties LLC, of Gettysburg, South Dakota.
The company is owned by Jan Banghart, but associated with Jeremey Frost, a grain marketer from the area. The commission determined Banghart Properties had purchased grain in Nebraska without a license.
The fine was a two-thirds reduction from the $870,000 fine the agency’s grain staff had requested but still one of the largest civil penalties recently imposed, according to the order.
“This company’s flagrant violation of Nebraska law along with its unwillingness to comply led to the conclusion that this civil penalty is warranted,” Commission Chair Dan Watermeier said in a statement after the commission’s unanimous decision.
In writing the commission’s order, Watermeier said no farmers were unpaid in the deals. All of the grain purchased in Nebraska was shipped to South Dakota destinations.
The ruling also listed Frost’s company as “also known as” entities to Banghart Properties. Those include Frost’s Fearless Grain Marketing and Fearless Grain. Banghart has 30 days to pay the penalty or appeal the 21-page order .
Robert T. Konrad, the Pierre, South Dakota, attorney representing Banghart Properties, and also representing Frost in other disputes with South Dakota officials, had argued for a minimum fine.
Konrad said he had been in court on March 15, 2022, and hadn't yet read the order but knew what it said.
"We're disappointed in the ruling and we're contemplating appeal," he said, adding, he thought the decision "arbitrary." He said there may be options for motions to reconsider.
Frost is also involved in legal disputes in federal court with Indigo Ag Inc. over grain marketing disputes.
- Nebraska PSC staff asks for $870K penalty against South Dakota grain trading firm
- Nebraska agency sets January hearing for South Dakota grain trader accused of operating without a license
- Fearless Grain Marketing and Jeremey Frost seek $8.5M in arbitration
- Indigo Ag asks judge to deny arbitration for Fearless Grain Marketing
- South Dakota Public Utilities Commission approves court case versus Fearless Grain Marketing and owner Jeremey Frost
- South Dakota Public Utilities Commission investigates Fearless Grain Marketing
- Indigo Ag sues South Dakota grain adviser in federal court in Memphis
On Oct. 21, 2021 the commission filed a complaint against Banghart and its aliases , after staff alleged Banghart Properties had operated without a grain dealer license and had violated documentation rules, including warnings over rights to recourse against a grain dealer security, as well as failure to issue pre-numbered receipts.
The commission held a hearing on Jan. 5, 2022 , and considered the maximum of $870,000 fine, calculated at $10,000 per day, based on the 29 purchases in the complaint.
In its order, the PSC said the paperwork violations would pertain to “dealers that have actually obtained proper licensing” and giving those warnings would give producers a “false impression that they are protected by financial security that does not actually exist.” The problem is that “such purchases occurred at all,” Watermeier wrote.
Getting around it
Watermeier said Banghart Properties deserved a substantial fine, albeit reduced from the maximum, because the company “engaged for several months in a pattern of activity that ignored and worked to circumvent Nebraska grain dealer licensing requirements and disregarded legal requirements designed to protected Nebraska producers and their communities from a potential grain dealer failure."
The order noted that Banghart Properties started signing farmers to purchasing grain as early as Feb. 25, 2021. The complaint focused on 29 separate grain purchases in Nebraska without a license between Sept. 16, 2021, through Oct. 7, 2021 in which the company “failed to issue a receipt, contract, bill of lading” with required statements of recourse. The company’s business records show another 21 unlicensed grain purchases between Oct. 7, 2021, and Oct. 21, 2021.
The company signed two purchase agreements on Nov. 4, 2021 — two full weeks after the PSC complaint was filed.
“One employee made at least a dozen contacts with a Nebraska producer, before finally convincing the producer to sign a contract on Nov. 4, 2021, well after the filing of the complaint in this docket,” Watermeier wrote.
Jan Banghart on Nov. 15, 2021, suspended the employ for a week for operating outside of his authority but the employee — during the suspension — participated in a company conference call that talked the producer out of his cancellation request.
Two contracts were canceled by Banghart Properties after the producers contacted PSC. In one case, Banghart employees Frost and Wade Hardes “actively discouraged” at least one producer from following through on a written cancellation request.
Jan Banghart may have had the “best of intentions” but employees “evidently ignore her directives,” the order said.
Banghart admitted she did not know about the Nebraska grain dealer licensing requirements until July 19, 2021, and “continued to buy grain and sign new purchase agreements” while “at the same time repeatedly assuring” the grain regulators she was “not doing business in Nebraska.”
The company applied for a license on Sept. 15, 2021, but — without obtaining the license — on Sept. 16, 2021, took delivery of its first purchase of grain from a Nebraska producer.
Watermeier noted that Banghart has “more reason than most to anticipate the need to obtain a license and comply with state law before doing business as a grain dealer,” noting her 25 years in state government social services in the area of regulatory compliance.
In the Sept. 15, 2021, application form, Banghart Properties said the company expected to purchase $300,000 of millet at $10 per bushel over the next 12 months. But as of that date, Banghart Properties had already entered contracts to purchase $587,000 of millet at $15 per bushel to $20 per bushel.
The company “did not even hire an accountant to prepare required financial statements until Oct. 14, 2021,” even though it had already signed more than $1 million in grain purchases with Nebraska producers, taken delivery of $338,000 in grain, and issued checks over $233,000.
“An enterprise that generates this much financial activity in a few months’ time should be able to readily produce a financial statement,” the commissioners said.
As part of proof of solvency, Banghart Properties listed an “open revolving line of credit of $250,000,” but provided to the commission no evidence of how much had been drawn. Banghart testified the company had “positive net worth” and could pay its bills but — as its sole owner — could not say how much capital she had put into the business “or even provide a ballpark estimate of how much business the company has already done.” The company did not provide a statement of net worth or available capital, or discussion of its obligations in other states. The state requires a positive net worth of $10,000 for its grain dealers.
The rules for obtaining a grain dealer’s license are “not onerous,” Watermeier wrote, saying 80 out-of-state companies operate in Nebraska.