UPDATE: Investors Claim They Were Misled But Jury Disagrees

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

At a December 2001 board meeting, with none of the new investors present, a Farm Fresh owner, Tom Pugh, said "we are a dying company."

Still, various debts of the company, which were guaranteed by the defendants, were being paid — including a loan from Simmons First Bank of South Arkansas for $3.5 million, the lawsuit said.

"More precise allegations of how fiduciary responsibilities were violated during this time, and thereafter, will be provided following discovery," the lawsuit said.

In February 2002, United Farms Inc., which is one of the plaintiffs, was induced to loan Farm Fresh another $800,000 in order to bring the payments for processed fish current.

Also in February 2002, after an examination, ADFA approved a funding package for Farm Fresh of $8.5 million.

This funding package would have created the strong company which the defendants represented existed in August 2001, the plaintiffs argue. But the defendants only took $3 million, "which was necessary to extinguish an equal debt already guaranteed by these defendants and overdue," the lawsuit said.

In 2002, Farm Fresh lost more than $2 million, resulting in ADFA taking control of the operation.

Under ADFA's representative Charlie Lynch, "the company had been turned around and was then showing profitability," the lawsuit said.

The plaintiffs then agreed to guarantee a loan from ADFA for $3.5 million in July 2003, the lawsuit said.

Mac Dodson, president of ADFA, said the agency got involved because the catfish industry "is a very important aspect of the economy in that part of the state."

In 2003, about 250 people worked at the processing plant.




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