SALEM, Ohio – United Producers and Producers Credit Corporation have filed for Chapter 11 bankruptcy.
The financial reorganization request was made to the U.S. Bankruptcy Court in Columbus April 1.
Producers filed the request to protect its farmer-members from ongoing court battles surrounding a multimillion-dollar cattle fraud.
Dennis Bolling, president and CEO, and other executives were not available for comment.
Fraud. United Producers maintains its position as a victim in what the FBI has called the biggest cattle fraud case in U.S. history.
United Producers and its credit corporation became involved in the scam when they bought into a limited liability corporation with George Young and Kathleen McConnell.
Young and McConnell were convicted of bilking ranchers out of more than $160 million in investments since 1995.
They are currently serving sentences in federal prison.
In September 2004, United issued a statement saying it lost “nearly $10 million from equity, accounts receivable and normal cattle inventory” stemming from the case.
United Producers’ board of directors voted at a special meeting Nov. 1, 2004, to declare bankruptcy, according to the filing.
Lawsuits. Civil legal proceedings against United resulting from the fraud played a role in the decision to seek protection under Chapter 11, according to Amy Boeckmann, spokeswoman for United Producers.
Chapter 11 is the most common form of bankruptcy. Filing frees a company from lawsuits by creditors and allows the company to reorganize finances.
United Producers and Producers Credit Corp. are in appeals litigation with three major lawsuits, Boeckmann said.
What’s owed. The cooperative’s 20 largest unsecured claims total more than $36 million, according to the papers.
United Producers’ creditors’ list include ranchers – the top two claim more than $17 million is owed each – plus veterinary suppliers, utility companies and the U.S. Postal Service.
Boeckmann said the voluntary petition gives the company time to reorganize the structure of the company.
She could not comment on a timeline or possible reorganization options.
As usual. In the meantime, she said all payments will be delivered and processed.
United Producers has reached an agreement with its bank, CoBank, to fund continuing operations.
Court documents show the cooperative owes CoBank $68.5 million.
“They fully understand the position we are in and will continue our line of credit as we move forward,” Boeckmann said.
Additionally, Producers Credit Corporation will continue to conduct business as usual.
Markets reopen. United Producers operates 19 weekly auctions and 23 buying stations in six states.
Those facilities were all closed last week while Producers and federal Grain Inspection, Packers and Stockyards Administration
personnel reviewed records at the corporate headquarters in Columbus.
The facilities opened again April 4.
Boeckmann said USDA’s GIPSA personnel make regular checks of company records and were invited by United Producers to review co-op files “to be sure things were ready to operate” April 4.
Portfolio. In 2004, the cooperative moved more than 3.1 million head of cattle, hogs and sheep through its facilities, according to company facts.
The company figures 40,000-70,000 Midwestern farmers do business with United Producers at least once a year, and the company’s transactions total nearly $1 billion per year.
Net sales totaled more than $932 million in 2004.
Related coverage:
United Producers under federal investigation (3/31/2005)
$166 million cattle fraud tied to Ohio (9/2/2004)
Cattle buyers sentenced to jail time in Missouri ‘phantom cattle scheme’ (6/3/2004)
$160 million phantom cattle scheme involves Midwest victims (10/30/2003)
