SD feedlot's financial collapse leaves investors feeling betrayed

CORSICA, S.D. - The Blom cattle fiasco of 2019 in Douglas County, S.D., will affect farm families for decades and generations to come, victims say.

A bank is foreclosing on feedlot operator Robert Lee "Bob" Blom, who they say overdrew his bank account by $1 million and owes the bank some $6.8 million.

Documents filed in the case show that Blom may have sold the same cattle multiple times, complicating matters for those looking to get paid by Blom.

Left on the hook are "interested party defendants" - 53 individuals in some 14 cattle-related entities in South Dakota, North Dakota and Montana. The meltdown could involve 30,000 head of "missing" or phantom cattle valued at more than $30 million.

Clint Sargent, a lawyer in Sioux Falls, S.D., representing one of the families involved, says the "scope and size of this case is remarkable for anybody in South Dakota."

On the individual level, the results are devastating.

"He ruined 30-plus lives here," says Curt Plamp, 55, a fourth-generation farmer at Stickney, S.D., who says he's personally lost $1 million in the deal. He and his son, Chad, 32, raise corn, soybeans, cattle and hogs. Plamp wonders why Blom isn't in jail. Blom's wife, Becky, is a sister to Plamp's ex-wife, Cindy.

"He's going to get thrown in jail for five years, and be out in two or three," Plamp says. "Meanwhile we suffer for the next 20 years trying to get out of this deal? There's something wrong-something WRONG."

But Blom as of yet faces no criminal charges in South Dakota or at the federal level.

Craig Parkhurst is the Douglas County State's Attorney.

"I can tell you my office is working in partnership with the South Dakota Division of Criminal Investigation, the South Dakota Attorney General's Office, the FBI, the IRS, and the U.S. Attorney's office," Parkhurst said Wednesday, May 22. "Everything is being looked at and under investigation."

Blom is charged with writing a bad check for $135,000 in North Dakota's McIntosh County. The check was to Paul Gader and Gader Livestock LLC, one of the "interested party" cattle brokers in the South Dakota foreclosure. Blom has pleaded not guilty in that case.

It's a washout

Blom, 57, declined to be interviewed by Agweek. He grew up in the New Holland, S.D., area. For the past 15 years, he has operated Blom Feed Yards on his wife's home place.

The Bloms had a 3,000-head yard there and three other feedlots in the area. He would enlist investors - often farmers he'd known for years - to buy cattle that he would care for and market.

Investors would pay "yardage" for feed and operation of the feedlot. Blom would calculate a return based on the futures price. Often, he'd project a profit of $75 to $100 per head. One investor said at times they made return on investment of 10% or more. Some client families did so well that they encouraged extended families to get involved.

It isn't clear what exactly went wrong or when.

Some victims and former friends say Blom told them he'd lost money on some hedged cattle more than two years ago and was trying to recoup.

First Dakota National Bank, based in Yankton, S.D., with a branch in Corsica, became alarmed Jan. 17, when Blom wrote checks overdrawing his accounts by more than $1 million.

Steven K. Huff of Yankton, attorney for the bank, named Blom and his wife, Becky Jo Blom, as well as "B&B Washout LLC," as direct defendants in a foreclosure action.

Harming self, others

Bob Blom was in a vehicle accident Feb. 5 and was arrested for driving under the influence. In court documents, the bank says it was "not an ordinary accident" but an "attempt at self-harm and harm to others." Blom escaped serious injuries from the crash. Friends visited him at the Canton, S.D., Keystone Treatment Center, a detoxification center.

On Feb. 7, the bank determined Blom owed principal of $6.74 million to the bank, with additional interest at more than $1,000 per day. They were in default of their loans and the bank determined "mediation was not appropriate."

The bank, in a document filed with Douglas County District Court, said Don Stange, partner with Marion Rus in Frontier Land and Cattle LLC, (separately partners in Mitchell Livestock Marketing LLC, the sale barn in Mitchell, S.D.) removed as many as 35 trucks of cattle from at least three feedlots - more than 2,000 head. Separately, Dirks reported the cattle removed then were taken to a feedlot location near Wisner, Neb. Both Stange and Rus declined Agweek requests for interviews.

The next day, the court approved the appointment of Lewis Dirks as an emergency receiver. Dirks counted 4,748 head on three Blom feedlots.

In a Feb. 21 memo to investor-creditors and their lawyers, Dirks said he had discovered that some cattle had been sold to as many as four different individuals. And one load of 197 that was "resold as many as 16 subsequent times."

Although some cattle in the feedlots carried brands to identify ownership, the bank contends that brands or ear tags were not much help when "the cattle were intermingled with others then subsequently resold many times over."

A snail's pace?

Now the remaining cattle are waiting to be sold again.

Plamp and others say they're impatient with the pace of selling the cattle.

In memos to lawyers and farmers, however, Dirks said he'd tried to sell some cattle in February but had to "suspend all action because of the lack of paperwork and objections to the sale." He wanted to stop the $12,000 per day costs the feedlots were racking up.

Various investors had filed various temporary restraining order or preliminary injunctions, resisting the sale of cattle.

On March 5, Dirks noted that the cattle in the feedlot were "fighting to retain weight" and that a warm spell could result in "muddy cattle" that would "markedly decrease their sale value."

When reached at his home office in Sioux Falls, Dirks declined to talk to Agweek about the case. "Are you media? I don't talk to media," Dirks said, while shutting his door.

Out of character

All of this is personal for Plamp, who was a brother-in-law to Blom for 28 years until Plamp divorced four years ago. They had helped each other with certain farming tasks. There were Sunday afternoon visits, suppers, kids' birthdays.

He trusted Blom.

"He would buy cattle, put them in a (feed)lot, show me the projections, and - if it was something I wanted to do - I would buy the cattle from him. He'd feed 'em, charge me yardage, and market 'em." Blom would handle all the paperwork.

Curt made "a little money" but never "a lot of money." A $750,000 investment on a group of cattle might net $20,000 to $30,000. "It helped buy a piece of equipment or helped do something on the farm," he says.

"Everything I have done for the 35 years I have farmed has been for my two boys," Plamp says. "I wanted a better life for my kids, to where I didn't have to see them struggle."

Plamp's banker called him, asking what was going down at the Blom feedlot.

Plamp went to the Bloms and was greeted by Dirks, who said, flatly, "This thing's done." Dirks told Plamp to contact a lawyer. Plamp is being represented by David Jencks from Madison, S.D.

Where's the money?

Plamp said he wonders where all the money went. He estimates he personally lost about $1 million, and his family lost more on top of that.

"I don't know that I'll ever get it recouped," Plamp says. He realizes there are "struggles in life" including just the expense and challenge of keeping up with technology in agriculture. Now his family will be punished.

"How do you get that off of $7 (per bushel) beans and $3 corn?"

He notes that in 2018, he had the best crop of his life and he just broke even financially.

Plamp worries that he's going to "bust my butt out her for another two years," and the bank is going to come knocking on my door and say, 'Well, this ain't going to work. We're going to have to sell you out. Then I'm 57 years old. What's a 57-year-old man do for a living, when all you know is farming."

Plamp said he wonders why Stange thought it would be the right move to take cattle out of the feedlots.

"You just can't come in and start taking cattle you think are yours. You have no idea what pen your cattle are in down there."

Asked specifically about the Stange situation, Parkhurst said he is looking at "all aspects" of the Blom matters. Plamp had felt he was doing his own due diligence in the deals. He'd gone to the Blom feedlot with his own bankers "several times" to look at the operation. When the loan had to go to a larger bank, those bankers went, too.

Plamp says his banker has asked him if he ever saw anything out of line with Blom. "'God, did we do something wrong? Did you SEE anything?'' Plamp says. "If we would have thought he was a crook we wouldn't have been doing business with him.

"When a guy can look you straight in the face-five bankers and three customers-and not show a hint of lying, saying these are your cattle, you've got to believe him don't you? We did. Look where it got us."