Remember last April when Valero bought bankrupt ethanol producer Verasun and then reneged on contracts with local farmers?
It gets worse. Now the New York lawyers tying up Verasun's bankruptcy are telling farmers who did business with Verasun right before it went belly up to pony up. If you did business with Verasun ninety days before their bankruptcy, the lawyers want you to pay that money back.
Verasun filed for bankruptcy on Halloween, 2008. That means the lawyers want farmers to cough up cash they got from Verasun a far back as August 3, 2008. Quick check: how many of you readers still have cash on hand from transactions from summer 2008? How many of you would have $50,000 handy to hand back to a bankrupt entity, as one Minnesota farmer is being asked to do?
The South Dakota Corn Growers Association is understandably torqued at this "bankruptcy preference claim." They are urging farmers to fight back... as am I. You did business with Verasun, you got paid for your product or service, that money's yours.
But it's not entirely that cut and dried. The idea behind "preference claims," says Iowa State University ag law expert Roger McEowen, is fairness. For every farmer or contractor whom Verasun managed to pay in the run-up to bankruptcy, there might be another entity who delivered a good or service to Verasun on, say, October 15, who didn't get a check before Verasun called it quits. Instead of seeing some business partners made whole and others wholly hosed, preference claims seek to spread out the hosing to everyone unlucky enough to deal with Verasun.
Still, possession is nine-tenths of the law. If Verasun paid you and didn't pay someone else, you're still entitled to fight for your cash. Consult SDCGA's resource page, consult your local lawyer, and tell the Verasun vultures to buzz off.
By the way, Verasun's purchaser Valero is profitable again after a rough 2009. Maybe the stiffed creditors and New York lawyers should be turning to the parent company for restitution first.
Update 20:41 CDT: Eager commenter Barry Smith provides a link to Dr. McEowen's really useful brief on bankruptcy law and the defenses farmers and other suppliers can mount against the preference claim. Read carefully, get your receipts, and call your lawyer. Note also that the letters are asking for 80% of the amounts paid back in 2008. As Dr. McEowen notes, that isn't a final number: if you can't wage a successful defense, you may at least be able to dicker.
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