PSC acts in Falkirk Farmers Elevator insolvency case
BISMARCK — The North Dakota Public Service Commission has approved a motion that could lead to the reimbursement of several people with claims against an insolvent grain company.
Whatever the outcome, the case is an important reminder that farmers need to use healthy caution in their financial dealings with grain elevators, Commissioner Randy Christmann tells Agweek.
The PSC voted Dec. 31 to recommend to district court that seven of nine claimants against Falkirk Farmers Elevator receive payment. The seven claims total just under $280,000, according to information released by the PSC.
Under state law, each of these claimants is eligible to receive 80 percent reimbursement from the North Dakota Credit Sales Contract Indemnity Fund. The total amount potentially paid out to the seven claimants is about $223,000, Christmann said.
A hearing on the PSC recommendation is scheduled for March 13 in the Burleigh County Courthouse. A district court must approve the recommendation before money from the indemnity fund can be distributed, according to the PSC.
Christmann is optimistic that the district court will approve the PSC information and that the seven claimants will receive the money relatively quickly.
Falkirk Farmers Elevator was declared insolvent in 2012 and later liquidated. Some customers lost access to large amounts of fertilizer they’d already purchased.
The North Dakota Credit Sales Contract Indemnity Fund was created by the 2003 Legislature after the failure of Wimbledon Grain Co.
The indemnity fund, initially criticized by some farmers, has proven its worth, Christmann said.
The Falkirk grain company case isn’t nearly as prominent as the Wimbledon Grain Co. situation and is unlikely to lead to major changes, Christmann said.
He urges farmers to be cautious when paying in advance at grain elevators and when deferring income from grain sales.
Farmers, for tax purposes, often sell grain in one calendar year and wait to receive the money until the next calendar year.
Pre-paying expenses and deferring income both carry risk, Christmann said.
Dan Wogsland, executive director of the North Dakota Grain Growers Association, wasn’t familiar with details of the PSC recommendation when contacted Dec. 31 by Agweek for comment.
In general, however, “Farmers need to be protected,” he said.
Situations similar to what happened at Falkirk Farmers Elevator have occurred, to lesser degrees, elsewhere in the state, Wogsland said.
His organization, at least for now, doesn’t plan any legislative push to give additional protection to farmers. But the association would be interested in any potential action proposed by someone else, Wogsland said.
The Legislature, which meets every other year, will convene again on Jan. 6, 2015.
$2 million in claims
Claims totaling nearly $2 million were filed against Falkirk Farmers Elevator
Eight of the claims, including the seven that the PSC recommended be paid, are against the North Dakota Credit Sales Contract Indemnity Fund.
One of the eight claims was ruled invalid because the amount is offset by an account payable owed to the elevator, Christmann said.
Another claim, for $1.7 million, is against trust assets and is part of a case in federal court.
In what Christmann called a “new and unique approach,” the $1.7 million claim against trust assets was separated from the eight claims against the indemnity fund.
The $1.7 million claim could take a long time to resolve, and there’s no good reason for that to delay payment to claimants seeking reimbursement from the indemnity fund, Christmann said.
“No one wins in insolvency. But this approach allowed us to resolve a bulk of the claims while work on the unrelated, outstanding legal issues of the remaining claim continues,” Commissioner Julie Fedorchak said in a news release.
In September 2012, SRS Commodities of Mayville bought the Falkirk grain elevator.
SRS Commodities had no involvement in the issues before the PSC, Christmann said.