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Turner Grain Collapse Prompts Legislation

5 min read

With Turner Grain Merchandising Inc. of Brinkley filing for Chapter 11 bankruptcy protection, the Arkansas Agriculture Department is working on legislation to prevent any other company from suffering a similar collapse that could cost farmers millions of dollars.

“You could be out here and be a grain dealer and all you needed was a telephone, a computer and a pickup,” Arkansas Secretary of Agriculture Butch Calhoun told Arkansas Business this week. “And you could be out here buying millions of dollars worth of grain and reselling them. And nobody’s checking your books and nobody’s doing anything.”

Calhoun said he hopes to have a draft of legislation to present to legislators within the next month. But lawmakers couldn’t take action until the legislative session that starts in January, he said.

In the meantime, Turner Grain has filed Chapter 11 bankruptcy, listing $24.8 million in debts and $13.8 million in assets. The Thursday filing, made by Turner’s receiver, attorney Kevin Keech of North Little Rock, followed an Oct. 14 draft. Nearly all Turner’s debts, $23.8 million, are to unsecured creditors. Turner also is facing seven lawsuits over allegations of breach of contract and other alleged misconduct.

U.S. District Judge James M. Moody Jr. appointed Keech as the receiver last month.

Keech told Arkansas Business earlier this week that he was waiting on Moody’s approval before he filed for bankruptcy. He said Turner Grain is winding down and isn’t in active operation.

The filing shows that some of the larger unsecured claims include Southern Rice & Cotton LLC of Harrisburg, $3.228 million; Zero Grade Farms of Blytheville, $2.293 million; and Kennedy Rice Dryers LLC of Mer Rouge, Louisiana, $2.285 million.

Turner’s assets include about $310,000 in a checking account at Helena National Bank and $3 million that Turner said it is owed for miscellaneous billing errors over the past two years, including overpayments to producers and missed freight charges.

“My first priority is figuring out how to gather as many assets as we can get so that, hopefully, we can pay the creditors as much of a return as we can get for them,” Keech said. “Who knows? We might be able to get a home run and get everybody paid off.”

Problems Develop

Keech won’t say what triggered the collapse of Turner Grain.

“There’s going to be a lot of creditors who are going to want to know that,” he said. “We’re in the middle of trying to sort through those issues. … At the appropriate time, we’ll be giving out information.”

Incorporated in 2002, Turner Grain acted as a middleman between farmers and grain buyers. Turner would buy the farmer’s supply and hold it until a customer wanted to purchase it.

Turner Grain wasn’t a broker whose role was limited to taking a commission for matching sellers with buyers. Instead, Turner was referred to in the industry as a “principal” or “jobber,” actually contracting to buy and taking possession of the farmer’s grain and delivering it to the ultimate buyer.

It appeared revenue had been climbing in recent years. In the bankruptcy, Turner claimed 2013 revenue of $277.9 million, up 24 percent from 2012. And Turner reported revenue of $235.3 million so far this year.

The first sign of trouble may have come in February, when Turner Grain President Dale Bartlett of Marvell said he sold all his stock in the company to Vice President Jason Coleman of Brinkley, according to Bartlett’s Chapter 12 bankruptcy filing from September. Apparently, Bartlett was supposed to receive $5,000 and the transfer of farm equipment. Bartlett said in the filing that he received the money but not the farm equipment.

Bartlett’s attorney, Frederick Wetzel III of Little Rock, didn’t return a call for comment.

The stock sale is being disputed, though, in Turner Grain’s bankruptcy filing. Bartlett and Coleman are listed as 50 percent owners of Turner, and Bartlett’s ownership interest is listed as disputed, according to the Turner filing.

Coleman’s attorney, Lisa Ballard of North Little Rock, didn’t return a call for comment.

By July, cracks in the company began showing.

Southern Rice & Cotton LLC began selling rice to Turner in the fall of 2013, according to its lawsuit filed in Poinsett County Circuit Court last month.

On July 22, Coleman and Bartlett allegedly signed a check to Southern Rice worth more than $1 million on a Turner Grain account that had insufficient funds. Eventually, Turner paid $750,000 on the bounced check, but the balance of the debt was still outstanding as of last month.

By August, Turner’s problems came into sharp focus. By the middle of the month, several sources had told Arkansas Business that the company was heading toward bankruptcy.

Arkansas House Speaker Davy Carter, R-Cabot, on Aug. 15 sent a letter to state Rep. Matthew Shepherd, R-El Dorado, who is chairman of the House Agriculture, Forestry & Economic Development Committee, seeking help for state farmers who might be left holding breached commodities contracts.

Three days after Carter sent the letter, a group of farmers sued Turner Grain for fraud, alleging they weren’t paid for grain they sold to Turner.

The eight farmers, who have fields in Monroe, Phillips and Lee counties, said in a lawsuit filed in Lee County Circuit Court that they had commodities contracts to sell grain to Turner.

The farmers said Turner either hadn’t paid them for their products or that checks they received from the company didn’t clear. Meanwhile, Turner had sold the grain to a third party, the lawsuit said.

When Turner files for bankruptcy protection, the lawsuits pending against it will be put on hold.

‘A Little More Cautiously’

Steve Eddington, vice president of public relations for the Arkansas Farm Bureau, told Arkansas Business this week that the lasting effect of the Turner Gain collapse will be that farmers will be more cautious in their dealings with companies such Turner Grain.

“Everybody is going to look at things probably a little more cautiously,” Eddington said. “I think they’ll find ways to move that crop.”

But who a farmer does business with and how the business is conducted “most certainly will be done through a cautious lens in the future,” Eddington said.

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