Farmers who sold corn to ethanol producer VeraSun Energy received a letter from a New York law firm last week telling the farmers they have until September 30, 2010 to repay 80% of the money they received from the corn sales.
Iowa Secretary of Agriculture Bill Northey and Iowa State University ag law specialist Roger McEowen are warning farmers not to ignore the letter, but to seek advice from a bankruptcy attorney. "Officials of the State of Iowa are consulting with experts to see what ramifications this letter may have on Iowa farmers," says Northey.
The letter went to farmers who sold corn in the 90-day period before VeraSun's bankruptcy filing on Oct. 31, 2008. It cites a special "look back" provision of federal bankruptcy laws that gives unsecured creditors in bankruptcy filings a second chance at any assets of the bankrupt company.
The farmers who delivered the corn to VeraSun did nothing wrong
McEowen says this provision of the bankruptcy law attempts to level the playing field among creditors by recovering payments received within the 90-day period and then distributing the proceeds to all of the debtor's unsecured creditors. "Unfortunately, the suppliers who did nothing wrong are being asked to provide information to the bankruptcy trustee to establish their defenses to potential preference actions," notes McEowen. He adds that while some suppliers will have strong defenses against preference actions, "some suppliers may not have a defense to the claim of preference by the trustee."
A number of corn growers from across the state have received letters demanding repayment of the money. The Iowa Corn Growers Association is working in partnership with the National Corn Growers Association to help farmers wade through the legal questions regarding the letters. If you received a letter, you are advised to read the information posted on the ICGA website to help answer frequently asked questions from farmers. The site also provides contact information to seek legal counsel. Go to www.ncga.com and look under the topic VeraSun letters. "The Iowa Corn Growers Association can't give you legal advice, but we will be sharing information with corn growers and the public when we have it available," says Mindy Williamson, ICGA director of communications.
Seek an attorney for legal advice, preferably a bankruptcy attorney
Iowa Secretary of Agriculture Bill Northey has released the following statement regarding the VeraSun bankruptcy letter:
"Many Iowa farmers, who sold grain and received payments in the 90 days prior to the VeraSun bankruptcy filing on October 31, 2008, have received a letter from a New York law firm. If you have received the letter from the Silverman Acampora law firm you need to seek out an attorney for legal advice, preferably a bankruptcy attorney. Contact your attorney before you respond to the letter. Don't sign anything until you have contacted your attorney; but, it is important to not ignore the letter. State of Iowa officials are consulting with experts to see what ramifications this letter may have on Iowa farmers. As more information becomes available we will make this known on the Iowa Department of Agriculture and Land Stewardship website at www.IowaAgriculture.gov. Again, this is not legal advice, please consult an attorney for appropriate legal advice."
ISU has information to help you understand what the letters mean
To help keep farmers up to date on issues surrounding the VeraSun bankruptcy preference letters, ISU ag law professor Roger McEowen, director of the Center for Agricultural Law and Taxation or CALT has posted updated information at
McEowen points out that legal counsel for the "reorganized debtors" has sent these letters to farmers as well as grain elevators who supplied corn to VeraSun within 90 days of the bankruptcy filing offering to settle preference claims. "Our CALT website has information to understand what the letters mean," he adds. "We will keep our website updated, as this situation evolves."