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Nebraska PSC staff asks for $870K penalty against South Dakota grain trading firm

Jan Banghart of Banghart Properties LLC of Gettysburg, South Dakota, on Jan. 5 admitted to Nebraska’s Public Service Commission that her company traded Nebraska grain without a license in 2021, but her lawyers balked at the staff’s recommended fine of $870,000.

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LINCOLN, Neb. — The Nebraska Public Service Commission on Jan. 5 heard their staff recommend a whopping total of $870,000 in fines against a company owned by Jan Banghart of Gettysburg, South Dakota , for operating as a grain buyer without a license in that state.

The five-person PSC heard four hours of testimony in Lincoln. The Commission will take the information and will issue an order as an agenda item at an unspecified future regular meeting. Terri Fritz, the PSC’s grain division manager, said the fine is based on the number of transactions and months of illegal trading.

Banghart’s attorney Robert Konrad of Pierre, South Dakota, asked for leniency and noted that the fine is triple the company’s net worth.

“That would bankrupt her,” he said.

PSC lawyers said that assessment was based on financial statements that hadn't been verified.

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Nothing hurt?

PSC legal counsel Dillon Keiffer-Johnson said Banghart operated without a license in “disregard of our rules and regulations on a continuous basis for several months.” Payments were made after Banghart knew the company had made deals improperly.

Banghart, who appeared in person, admitted the company had operated without a license, without documentations with required warnings to sellers, pre-numbered and sequential paperwork. She said she’d temporarily suspended one employee without pay for making sales in Nebraska without a license and has implemented new internal controls.

Konrad said his client has admitted to wrongdoing and is applying for the license.

“There has been no harm to the farm, although we can speculate on potential risk,” he said. Protecting producers should be weighed with “wanting to be pro-business and helping the economy grow,” he said.

The PSC in October 2021 filed the complaints against companies associated Banghart, whose son, Jeremey Frost, has other grain-related companies, including Fearless Grain Marketing Storage and Arbitrages, Fearless Grain Marketing, and Fearless Grain, as well as grain-related legal issues. Frost did not appear.

The PSC accuses the entities of “taking possession of grain without issuing written communication compliant with Commission rules."

‘A few mistakes’

Banghart, 61, speaking confidently, admitted she made “quite a few mistakes” and was sorry for failing to know the Nebraska licensing requirements and said she expected it to be as easy as it was in South Dakota, Colorado and North Dakota.

PSC Chairman Tim Schramm asked Banghart why company checks indicated the company was involved in “storage and arbitrage,” and was associated with Fearless Grain Marketing. Banghart said she wasn’t clear on FGM’s company status but said the companies have never had a warehouse, and that the check blanks were from old stocks and are being replaced.

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Crystal Rhoades, one of the PSC commissioners, noted that Banghart talked to Fritz about the licensure requirements in July, but her staff purchased grain in Nebraska anyway. The company started to apply for the license on Sept. 15, 2021, and one of its employees made new deals into November.

Commissioners asked why Banghart Properties advertised to buy grain in a Nebraska newspaper, listing the Fearless Grain Marketing name in the ad. Banghart explained that the company had bought an advertising package through a Martin, South Dakota, company, near the Nebraska border, but the advertising was supposed to only go into South Dakota newspapers.

The company was willing to cancel contracts when farmers asked for them but didn’t notify the farmers they’d made the deals without a license, bond, and with contracts that didn’t have the proper warnings to sellers.

‘Weird position’

When she realized the company had made deals without a license, Banghart allowed Banghart Properties to continue to pay farmers for deals made without a license because she didn’t want to put them in a “weird position.”

“At the end of the day, the responsibility is yours,” Rhoades said.

Banghart acknowledged her education was in criminal justice and human services, and her business experience had been in real estate management. She worked four years in the grain business for her son before they switched roles and she became the boss. Frost is in the midst of lawsuits and arbitration struggles with Indigo Ag Inc., over whether Frost overstepped his authority in dealing with grain sellers, and whether Indigo Ag had lived up to its agreements with Frost in stock payments.

Banghart Properties, LLC, was established as a company with the South Dakota Secretary of State on June 22, 2018, but first worked in real estate management and for a time went dorman.

Banghart Properties confirmed that Banghart Properties LLC had achieved a grain dealer’s in South Dakota in June 2021, with the required $50,000 bond. The North Dakota Department of Agriculture, on Nov. 8, 2021, issued a roving grain buyer license to Banghart Properties. The permit is good through July 31, 2022, when all annual permits expire.

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In a separate but related matter, Frost since May 2021 has been involved in an arbitration action with the National Grain and Feed Association against Indigo Ag Inc , claiming over $100 million in damages, including potential stock valuations. The parties in that case were due to complete document replies as of Dec. 22, 2021, but those were not yet available as of Jan. 5, 2022.

Indigo Ag, meanwhile, sued Frost for $8.5 million in federal court for exceeding authority in committing farmers to deliver grain, among other issues. U.S. District Judge Thomas L. Parker, in Memphis, presides over the case.

Frost also has had issues with licensing in South Dakota .

Mikkel Pates is an agricultural journalist, creating print, online and television stories for Agweek magazine and Agweek TV.
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