WORLD-HERALD NEWS SERVICE
Published Friday September 3, 2010
VeraSun to farmers: Pay us back
By Robert Pore
WORLD-HERALD NEWS SERVICE
Nebraska farmers who sold corn to the former VeraSun Energy Corp. have been receiving notices from law firms in New York demanding that they pay back any money received from VeraSun 90 days prior to the company filing Chapter 11 bankruptcy Oct. 31, 2008.
The money is to be returned to the bankruptcy-reorganized VeraSun.
VeraSun operated ethanol plants in Ord, Central City and Albion.
An informational meeting is planned for 7 p.m. Wednesday at the Valley County Fairgrounds in Ord.
Farmers and any other corn suppliers or vendors need to respond to the notices in order to avoid losing their rights or defenses by default, said Tom Kruml of Stowell, Kruml & Geweke, a law firm in Ord.
More than $100 million could be at stake.
Prior to VeraSun filing Chapter 11 bankruptcy, the U.S. Department of Agriculture reported that cash corn prices in Nebraska on Sept. 15, 2008, were averaging $5.20 per bushel. If the Ord, Central City and Albion plants were running at full capacity, they would have used 19.6 million bushels of corn during those 90 days prior to VeraSun declaring bankruptcy.
During that period, corn prices were on the rise, eventually hitting more than $7 per bushel on the futures market, causing some ethanol companies to go into bankruptcy or temporarily shutting down plants. In 2008, Nebraska ethanol plants were running at 87.2 percent of capacity, which reflected some of the economic turmoil caused by the skyrocketing corn prices.
Kruml said his law office has received a number of calls from concerned farmers or businesses about the notices.
In most instances, Kruml said, farmers who are receiving the letters are being told that the sale of corn to a VeraSun plant is being called a "preferential transfer" in the VeraSun bankruptcy. He said the letters say all payments received by the farmers for corn need to be refunded to VeraSun. Kruml also said the letters state that VeraSun will accept 80 percent of the amount demanded if the farmer submits the payment to VeraSun by Sept. 30.
Jay Rempke of the Nebraska Farm Bureau said it has sent out letters informing its members about VeraSun demanding repayment.
Rempke said the Bankruptcy Code allows the trustee for the bankruptcy estate to, in some instances, recover payments received by creditors who may have been given preferential treatment over other creditors right before the filing of the bankruptcy. The Bankruptcy Code, he said, calls this a "preference."
Rempke said the Farm Bureau is also telling farmers who received letters that they should respond in writing, after consulting an attorney, because failure to respond could result in litigation and the bankruptcy court potentially authorizing 100 percent repayment to the reorganized VeraSun entity.