UPDATE: Investors Claim They Were Misled But Jury Disagrees

by Mark Friedman  on Monday, Sep. 20, 2004 12:00 am  

"We're disappointed that certain owners felt the need to sue the other owners of the business when they were involved in the operations," Gardner said. "Now that it's in bankruptcy they want to blame the others for the failure of the business."

An attorney for ADFA, James Dowden of Little Rock, said the allegations that ADFA was negligent in making the loan are "meritless. ... We intend to defend it vigorously."

Search Begins

The Catfish Producers began the frantic search for funding for its processing plants in 2001, the lawsuit said.

In March 2001, Farm Fresh Catfish Co. apparently was close to merging with the company that was operating the plant, Farmland Industries. But Farmland backed out of the deal when it learned it was going to have to assume $4.1 million in debt that had not been previously disclosed.

In addition, when Farmland pulled out as operator of Farm Fresh's plants it took several customers with it.

To make matters worse for Farm Fresh, in April 2001 it discovered that nearly 500,000 pounds of fish, with a retail value of $1.5 million, were missing. This still can't be explained today.

But some possible good news was on the horizon in the spring of 2001. Farm Fresh launched merger talks with Country Skillet of Greenville, Miss.

Those talks ended, though, when Country Skillet said "Farm Fresh is not the size originally thought [and] that the book value is less than expected," the minutes said.

It didn't help negotiations when Country Skillet wouldn't commit to keeping the Lake Village plant open. Farm Fresh also had a plant in Hollandale, Miss., at the time.

Just before the merger talks fell apart, though, David Mack with the White Oak Group had been hired as a consultant. Mack's fee was $300 an hour, and his first assignment at Farm Fresh was to look for financing sources.

When he returned with his report on Farm Fresh's operation, it was devastating.



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