SD Public Utilities Commission wants up-to-date financials on grain buyers
SIOUX FALLS, S.D. (AP) -- Regulators need better tools to detect a grain buyer's deteriorating financial condition, the chairman of the South Dakota Public Utilities Commission said Wednesday, after farmers in the Dakotas lost $4 million selling sunflowers to Anderson Seed Co.
Chairman Chris Nelson and Vice Chairman Kristie Fiegen are proposing changes to state law that would require grain buyers to provide a current financial statement when they apply for a license, one given under the penalty of perjury. Buyers also would be required to notify the commission if they fall out of compliance with the financial requirements for licensing, Nelson said.
The financial statement that Anderson Seed provided for its license renewal in June-July 2011 was nine months old, he said.
"There are some state laws that can be changed, that can be bolstered to give the Public Utilities Commission some better tools to detect deter financial conditions sooner than what we were able to with Anderson Seed," Nelson said during a teleconference Wednesday.
The proposed bill would also revise the structure of bond amounts that companies must post to receive licenses. The PUC won a judge's approval to use the $100,000 bond posted by Anderson Seed, but that wasn't nearly enough to cover $2.6 million in losses within the state.
The bill would narrow bond amounts into $50,000 increments, but not significantly raise the amounts.
Matt McGovern, a Democratic candidate for the PUC, said the proposals from the two Republican commissioners don't do enough to help South Dakota farmers. He said South Dakota should investigate a voluntary insurance program that protects farmers in case of a bankruptcy.
"As a farmer, I can buy crop insurance, but I can't insure against a crooked grain elevator operator," McGovern said in a statement. "Only the PUC can do that, and these proposals today are too little, too late."
Nelson said the PUC is focusing on prevention of problems rather than collecting after the fact. He also said that more than 99.96 percent of delivered grain was paid for last year, and the commission shouldn't overregulate.
Lowell Bottrell, a Fargo attorney who has represented farmers in elevator cases, said bonds of $100,000 or $200,000 simply aren't large enough to cover losses.
"You can have $4 million of claims in a hurry," he said.
Bottrell said North Dakota has an indemnity fund to cover losses, but it applies only to growers who sell on futures contracts, not cash sellers. Bottrell said he'd like to see states in the region both increase bond amounts and create indemnity funds that are open to cash grain sellers.
The commissioners' proposal Wednesday did not address the sharing of information about grain buying companies between state agencies.
The Governor's Office of Economic Development, which approved a financing package for Anderson Seed in June 2010, later decided that the company didn't meet its requirements for a loan.
Nelson said the PUC wasn't told about the company's financial situation. He said GOED officials later told him they didn't know their determination would have any impact on the company's ability to continue being a licensed grain buyer.
"To me, common sense would have said maybe I'd just give a phone call and find out or let us know," he said.
Nelson said he has talked with the governor's office and the economic development office and asked officials in the future to be share information that may be helpful.
A message left for Mary Lehecka Nelson, spokeswoman for GOED, was not immediately returned.