Farmers shouldn’t ignore VeraSun bankruptcy letters
CENTRAL CITY, NE (DTN) – Farmers shouldn’t ignore recent letters they received from New York lawyers asking for money as a result of business dealings with now-dissolved ethanol producer VeraSun Energy Corp, local attorneys advised a group of about 70 farmers during a meeting Monday (Sept. 13) in Central City, NE.
“You’re not dealing with VeraSun the company,” said attorney Clifford F. Mesner of Mesner & Mesner in Central City. “They don’t exist anymore. The group you’re dealing with is reorganized creditors.”
The message from the Nebraska attorneys was to the point: Don’t ignore the letters, or it could become costly to defend when it doesn’t have to be.
In recent weeks, the creditors’ attorneys asked farmers and others to pay back up to 80 percent of payments on grain sold to VeraSun plants within 90 days of the company’s Chapter 11 bankruptcy filing in October 2008. Farmers and others have been given until Sept. 30 to respond to the letters.
Mesner said the creditors’ attorneys are trying to get back at least some of an estimated $500 million in payments that farmers and others received.
The reorganized creditors are secured creditors identified by the U.S. Bankruptcy Court in Delaware during court proceedings. Many of them were owed money by VeraSun and were never fully paid.
Attorneys on hand in Central City said most farmers appear to have a good defense to make – that payments received from VeraSun were part of an ongoing business relationship farmers had with the company.
One farmer, Mesner said, received a payment of about $2.6 million from VeraSun. A group of 10 grain elevators that sold corn to VeraSun all received “seven-digit checks” from the company, he said.
“At this point,” Mesner said, “this thing is attorney-driven. There’s this kind of mentality out there that ‘let’s go, maybe we can get 5 percent.'”
Arend R. Baack, an attorney based in Grand Island, NE, said the creditors have the legal right to do what they’re doing.
“This enables the creditors to receive more than they would have received if it had been liquidation Chapter 7,” Baack said.
Most farmers, he said, fall into a similar category where they can simply make the defense that payments were received as part of an ongoing business relationship with VeraSun, and that they did not receive any special preference when they were paid.
Baack said farmers need to first consult their attorneys to sort out the individual details of their cases.
The creditors’ attorneys are attempting to find those cases that they stand the best chances of winning.
Baack said a group of Ord, NE-area farmers in a similar situation are organizing a group defense in reply. This can help expedite the process, he said.
“If you don’t do something with this letter, there are going to be advisory complaints (lawsuits) filed in bankruptcy court in Delaware,” he said. “Then your counsel would have to retain counsel in Delaware.”
Depending on a farmer’s individual situation, Mesner said, it may make more sense just to settle with the creditors’ attorneys.
“Maybe you need to stand back and take a realistic view,” Mesner said, “and there’s a point you want to get rid of this thing. There may be no sense in paying tens of thousands when you can settle for a thousand.
“I think they’re going to come back and ask (farmers to settle). That doesn’t mean you have to say ‘yes.’ For some people in the room, the answer has to be, ‘hell no.’ Others may just need to settle. We just want to get this out of your hair as quickly and as cheaply as we can,” Mesner said.