Vista Bid Falls Apart: AgStar Taking Both Veblen Dairies

It looks as if AgStar Financial Services will wrest both of Veblen, South Dakota's bankrupt mega-dairies away from serial polluter Richard Millner and his fellow investors. Vista Family Dairies, a front group formed by Richard Millner and other Veblen West dairy partners to keep the dairies in their hands, has declared it will not follow through on the $21.3 million bid it made in September to buy Veblen East.

Veblen East Dairy

According to a motion filed yesterday (U.S. Bankruptcy Court of South Dakota, Case 10-10146, Document 259) by Chapter 11 bankruptcy trustee Lee Ann Pierce, Whetstone Valley Dairy withdrew its backup bid on October 28. That means the the only bidder left at the table is AgStar's Veblen East Dairy Acquisition LLC, which submitted a credit bid for the minimum $16 million for the facility and $800 per cow.

Pierce's motion gives creditors until December 30 to file objections to the sale to AgStar.

Pierce's motion notes that Vista Family Dairy's attempted acquisition was not hampered by regulators. Marshall County granted Vista its conditional use permit on October 19, and the state Department of Environment and Natural Resources granted the manure permit on December 3. The latter is particularly interesting, given that DENR had said on November 10 that it would grant no permit to Vista as long as Richard Millner had anything to do with permit-compliance decisions.

Taking DENR at its word, I assume that Vista Family Dairy had to tell Millner he was out of the power structure. And as I let my speculation run riot, I can imagine that, without Millner the dealmaker able to keep his hands in the pot, whatever investors he'd cobbled together to float Vista's bid fell apart.

Veblen West Dairy

Millner and his gang already lost Veblen West to AgStar after failing to raise enough money for a viable bid on Veblen West last month. Now AgStar appears on its way to closing on both mega-dairies.

If the DENR, the South Dakota economic development honchos, and area farmers are paying attention, we can hope AgStar's acquisitions will mean Rick Millner is done dirtying the South Dakota dairy industry for good.

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Bonus Evidence: In upholding its denial of a permit for the Dairy Dozen's Excel Dairy in Thief River Falls, Minnesota, the Minnesota Pollution Control Agency reiterates Millner's lengthy record of environmental violations at every dairy he's run. For the record, here's what MPCA says about Millner's Veblen dairies:

102. Veblen East Dairy is an 8,176 head dairy facility that consists of six total confinement barns and eight manure storage basins. Veblen West Dairy, previously known as MCC Dairy, is a 5,500 head dairy facility that consists of five total confinement barns and five manure storage basins. Rick Millner is the managing partner for the entity that owns both facilities. On October 23, 2009, the South Dakota Department of Environment and Natural Resources (South Dakota DENR) issued a Notice of Violation, Order, and Settlement Agreement.

103. On July 10, 2008, the South Dakota DENR inspected both Veblen East and Veblen West Dairies. During the inspection, it was noted that the basins at Veblen West were at their maximum operating level, and the basins at Veblen East were below the maximum operating level. On July 18, 2008, the South Dakota DENR approved the transfer of ten million gallons of manure from Veblen West to Veblen East. This manure was to be land applied in the fall of 2008 prior to soil freeze, and the South Dakota DENR was to be notified when this was complete. A notification was not received.

104. In April 2009, the South Dakota DENR received notification from the facilities that the basins at both Veblen East and Veblen West Dairies were above the maximum operating level and into the freeboard of the basins. This was confirmed during a May 6, 2009, site inspection by the South Dakota DENR. On May 20, 2009, Rick Millner contacted the South Dakota DENR to inform them that high winds were causing manure spray to blow over the berms of the north basins and that a line of straw bales was erected to keep the spray from leaving the basins. Various correspondence and inspections in the months of June, July, and August indicated that the basins at both Veblen East and Veblen West were above the maximum operating levels and into the freeboard.

105. The Order, issued October 23, 2009, and amended in March 2010, required both dairies to complete a number of requirements, summarized below, to bring the facilities back into compliance:

1. As soon as possible, remove a sufficient amount of manure to return them to compliance with the freeboard requirements. The Order went on to require the removal of manure from all basins to have no more than one foot of residual material remaining by November 1, 2009. The lowering of the liquid levels in the basins at Veblen West did not happen until December 7, 2009. This lowering of the levels was not sufficient to comply with the October 23, 2009, Order (no more than one foot of manure) but was sufficient to bring the basins back into compliance with the freeboard requirements. Similarly, the lowering of the liquid levels in the basins at Veblen East did not happen until November 23, 2009. This lowering of the levels was not sufficient to comply with the October 23, 2009, Order (no more than one foot of manure) but was sufficient to bring the basins back into compliance with the freeboard requirements.
2. Submit calculations and schedules that demonstrated that the remaining storage capacity within the basins at each facility, after the fall of 2009 pump-down, was sufficient to provide 270 days worth of storage. Sufficient calculations and schedules were never received by the South Dakota DENR. Consequently, the South Dakota DENR concluded that the volume remaining after the fall of 2009 pump-down was not sufficient to provide 270 days of storage.
3. By November 1, 2009, submit an emergency response plan for each of the facilities to identify procedures to be followed in the event of a spill or release. The South Dakota DENR did receive a plan, but it was not sufficient to comply with the specific requirements of the Order. The South Dakota DENR has not yet received sufficient plans.
4. Submit a design report that uses actual water usage and system operation for each facility to assess if the manure management system capacity meets the requirements of the South Dakota General NPDES Permit (270 days of storage). The South Dakota DENR has not received an adequate report to address this issue.

106. On November 17, 2009, the South Dakota DENR performed inspections of Veblen East and Veblen West and also conducted water sampling within the Little Minnesota River (headwaters of the Minnesota River) at areas were there was evidence that discharges had occurred from both dairies. The discharge from Veblen East appeared to reach an unnamed wetland; water sampling confirmed that manure did indeed reach this wetland. Neither of the dairies reported the discharges to the South Dakota DENR as required.

107. Inspections on November 17, 2009, and January 8, 2010, at both facilities revealed that depth markers (designed to clearly identify the maximum operating levels of the ponds) were missing or were broken off.

108. Inspections on July 10, 2008, and January 12, 2010, at Veblen West and December 7, 2009, and January 8, 2010, at Veblen East noted stockpiles of used sand and manure solids in areas not authorized by the permits for the facilities.

109. Inspections on January 8, 2010, and January 12, 2010, at Veblen West and January 8, 2010, at Veblen East indicated that manure application had taken place to fields not identified within the approved manure management plans for the dairies. Also, both dairies had insufficient records of land application dating back to 2008 and including all of 2009.

110. The MPCA has also received complaints about and photos of these facilities, specifically regarding the lack of freeboard, potential for overflow, and pollution resulting from improper land application of manure. The MPCA has received these complaints as the facilities sit at the head of the watershed of Big Stone Lake, located at the border of Minnesota (Big Stone County) and South Dakota.

[Minnesota Pollution Control Agency, In the Matter of the Request for Denial of Contested Case Hearing Requests and Denial of Reissuance of NPDES/SDS Permit No. MN0068594 for The Dairy Dozen – Thief River Falls, LLP (Doing Business As: Excel Dairy) Concentrated Animal Feedlot Facility, Excel Township,Marshall County, Minnesota, Findings of Fact, Conclusions of Law, and Order, 2010.12.14]

Dairy Dozen Converts to Chapter 7; MPCA Nixes Dairy Permit Appeal

The Bernie Madoff of dairy feedlots, serial polluter Rick Millner, is having a very bad week. Millner's Veblen, South Dakota-based dairy management company the Dairy Dozen has been going through Chapter 11 bankruptcy. On Wednesday, U.S. Bankruptcy Court Judge Charles L. Nail, Jr., granted a trustee's motion to convert that bankruptcy from Chapter 11 to Chapter 7.

Chapter 11 is where you get a shot at reorganizing. Chapter 7 is where you throw in the towel and liquidate to pay off your creditors. As I read it, that means the Dairy Dozen is toast.

Then on Thursday, across the border in Minnesota, our friends at the Minnesota Pollution Control Agency officially said no flippin' way (o.k., I'm paraphrasing) to Millner's attempt to reopen his Excel Dairy in Thief River Falls. MPCA shut down that Millner monstrosity in 2009 and denied it a permit in April of this year for hundreds—hundreds—of air quality violations. Millner and fellow Dairy Dozen owners of Excel appealed. MPCA documented Millner's trail of environmental destruction at every dairy he's been involved with, took public comment, and yesterday said no more.

Grand Forks Herald reporter Kevin Bonham says no one answered his calls to the Dairy Dozen's Veblen office Thursday. Maybe they've already sold the phones.

It's a shame that the Dairy Dozen has done so much economic and environmental harm to so many communities. But perhaps South Dakotans and Minnesotans can breathe a little easier with these two big steps toward putting the dirty Dairy Dozen out of business for good.

Minnesota Seeks Denial of CAFO Permit for Habitual Polluter

The Minnesota Pollution Control Agency has 111 confined animal feeding operation (CAFO) permits pending. Over the next month, after the standard 30-day public comment period, MPCA intends to approve 110 of them. MPCA has announced its intent to deny reissuance of just one of those CAFO permits.

Who gets skunk eye from MPCA? The New Horizon Dairy LLP of Hoffman, Minnesota. MPCA has dealt with this dairy previously, fining New Horizon $17,400 in 2007 for over-application of manure and use of an unpermitted storage basin.

MPCA now looks at the record of New Horizon and the other dairies connected with its ownership and says they won't get fooled again. You see, New Horizon is another dairy managed by serial lawbreaker and polluter Richard Millner of Veblen, South Dakota.

Speculation: One might look at Millner's horrible, no-good, very bad month and conclude that the regulators, courts, and bankers are piling on. Perhaps they are. Millner has shown a willingness to hire lawyers and mount dogged if sometimes absurd

Say, the press loves a good bloodbath. It remains boggling to me that the South Dakota media have said nothing about the spectacular collapse of Millner's extensive dairy fiefdom. defenses to fend off legal challenges to his dirty business practices. Perhaps MPCA, DENR, AgStar, and everyone else to whom Millner has regularly flipped the litigious bird have been waiting for a moment when Millner's legal resources would be stretched to the limit. This year's bankruptcy proceedings appear to be doing that, and the regulators and others with skin in the game are moving in for a long-overdue kill.

Serial lawbreaker and polluter—that's not just blog hyperbole. That's the conclusion that MPCA supports with this summary of the persistent deception and CAFO permit violations committed at every major dairy Rick Millner has been involved with in the tri-state area. Let MPCA explain (with my occasional emphasis):

...In concurrence with its previous action in the Excel Dairy matter and in accordance with Minn. Stat. § 115.076, the MPCA has preliminarily determined that the applicant has a history of non-compliance with Minnesota rules, statues, and permit conditions. The applicant has a history of routinely modifying feedlot facilities without authorization from the MPCA, allowing discharges to waters of the state, violating the state ambient air quality standards, and noncompliance with permit and administrative order requirements. The MPCA is aware of the applicant’s involvement in seven dairy facilities, past and present, all of which have had various non-compliance issues....

New Horizon Dairy, Grant County, Minnesota:

...A subsequent July 28, 2005, site inspection revealed a discharge to a coulee was occurring during the land application of manure. The manure application rate was 20,000 gallons per acre and the same field had received 18,000 gallons per acre three weeks prior, resulting in over-application of manure nutrients.... Also during the inspection, it was observed that manure had been placed in an unpermitted manure storage structure at the facility as a means of storing excess manure....

Excel Dairy, Marshall County, Minnesota

...In January 2010, the Marshall County District Court issued an injunction against Excel Dairy because Excel Dairy had failed to remove the manure from its basin as its permit required. The injunction required Excel Dairy to remove the manure from the basin as soon as field conditions allowed in the spring of 2010. Excel Dairy has failed to comply with that injunction and has been held in contempt of court for that failure to comply with the injunction.

...When Excel Dairy applied for its 2007 permit, Excel Dairy submitted a narrative Air Emission Plan that stated that Excel Dairy would apply straw to the manure basins to establish and maintain a crust on the basins to control air emissions from the basins. When the MPCA called upon Excel Dairy to comply with the Air Emission Plan Excel Dairy had submitted, Excel Dairy indicated that it had submitted the plan “accidentally” and that it had never truly intended to crust its basins despite what the written plan stated.

...Excel Dairy represented to the MPCA that it would either house 1,104 mature dairy cattle over 1,000 pounds or house a hybrid cow that weighed less than 1,000 pounds so that the facility could stock a total of 1,545 cattle.... [Excel Dairy] instead chose to stock 1,545 cattle over 1,000 pounds at the facility. This would equate to 2,163 animal units, significantly more than allowed in any of the previous permits.

...Excel Dairy has violated Minnesota’s hydrogen sulfide standards hundreds of times since May 2008.... Excel Dairy’s violations have been so severe that the families that live near Excel Dairy have been rendered physically ill by the emissions and have been forced to flee their homes on numerous occasions because of the sickening emissions.

Unnamed Dairy, Roseau County, Minnesota

...Rick Millner operated this facility before abandoning it in 1997. In September 1997, the MPCA staff inspected the abandoned facility and observed manure stockpiles still remaining on site as well as two earthen manure storage structures that still contained manure and were not properly closed.

Lone Tree Dairy, Yellow Medicine County, Minnesota

...In August 2006, the MPCA staff inspected the facility and documented the basin manure level above the basin freeboard limit level and determined that unless immediate basin manure removal and land application occurred, the basin manure level was in danger of breaching the basin’s constructed berm. The MPCA staff also observed that loose soil had been dumped and spread on top of the southeast corner of the basin’s constructed berm in an apparent attempt to prevent basin manure from spilling out the basin’s southeast corner. The MPCA did not approve or issue a permit for this modification of the basin....

Five Star Dairy, Sargent County, North Dakota

In November 2006, the North Dakota Department of Health issued a notice of violation (NOV) to the facility and its managing partner Rick Millner. The NOV stated that Five Star Dairy failed to receive approval from the North Dakota Department of Health prior to constructing a new manure storage pond. Also, Five Star Dairy submitted records that indicated that the facility was stocked with more animals than its permitted capacity of 1,400 head prior to gaining the appropriate approvals....

...Five Star Dairy was once more inspected by the North Dakota Department of Health on October 27, 2009, and, during that inspection, it was observed that the manure storage basins did not have adequate freeboard remaining. Follow-up inspections on November 2 and November 10, 2009, found that the manure storage basins were still above the allowable operating level, and no manure had been removed. A November 19, 2009, site inspection did reveal that some manure had been removed, but the level of manure in the basins remained above the allowable operating level... [Minnesota Pollution Control Agency, Fact Sheet and Public Notice of Intent to Deny the Application for Reissuance of NPDES and SDS Permit for a CAFO Permit to New Horizon Dairy LLP, Hoffman, 2010.11.19]

MPCA also documents Millner's persistent violations of South Dakota environmental regulations and endangerment of the Whetstone Valley/Big Stone Lake watershed with his awful Veblen East and Veblen West dairies, as reported frequently here on the Madville Times.

Seven dairies. Seven dairies. Environmental violations at every one of them.

MPCA counts up the strikes and tells Rick Millner, "You're out!" It's about time. If a state issued a driver's license to a seven-time drunk driver, heads would roll. If a state issued a teaching certificate to a person convicted seven times of child neglect, heads would roll. That a serial offender like Millner has been able to stave off the law this long and pollute his communities for his own profit signals we need tougher enforcement of CAFO rules.

AgStar Wins Veblen West Dairy at Bankruptcy Auction

After extensive legal machinations, Richard Millner appears to be losing his battle to hang onto his dairy fiefdom. Yesterday U.S. Bankruptcy Court Judge Charles Nail granted Trustee Forrest C. Allred's motion to sell the Veblen West Dairy in northeast South Dakota. According to court documents, Financier AgStar, which took the dairy into receivership in March, bought the giant confined animal feeding operation for $8.7 million. AgStar also bought the CAFO's cattle, numbered in the trustee's motion to sell at around 3700, for $2.96 million, $800 a head.

Millner and his business partners had successfully delayed the bankruptcy sale for a couple weeks with a transparently bogus lease plan. In a filed objection, AgStar lambasted the debtors' proposed reorganization plan, saying the document "miserably fails to provide adequate information," "ignored... reality," and falsely claimed compliance with DENR orders after "serial violations by the Debtor of its environmental obligations." Trustee Allred also submitted responses saying the Veblen West owners had been unable to meet a whole slew of payments over the past months and would not be able to carry out their plan. After feebly claiming they would amend their disclosure statement to address these objections, the equity owners yesterday withdrew their plan and watched Veblen West slip from their hands.

Making a bad month for Millner worse, he stands to lose another 4476 heifers in Montana. The following public notice appears in the Sidney (MT) Herald:

NOTICE
SHERIFF’S NOTICE TO OWNER OF SALE OF OWNER’S PROPERTY AT
PUBLIC AUCTION

To: Vantage Cattle Company LLP, 104 S. Greenman Street, Veblen, SD 57270
YOU ARE HEREBY GIVEN NOTICE IN ACCORDANCE WITH 71-3-1203 (4) THAT:

1. On Wednesday, November 24, 2010 at 10:00 AM, or as soon thereafter as the cattle are assembled, sorted and prepared for sale, at the Yellowstone Livestock Sale Barn located in Sidney, Montana, replacement dairy heifers owned by Vantage Cattle Company LLP will be sold at public auction to enforce an Agisters Lien held by Steven Lunderby and Shanna Lunderby d/b/a Lunderby Livestock.
2. The amount of the claim against the livestock to be sold at the public auction is Five Hundred Ninety Five Thousand Eight Hundred Seventy Five and 31/100 Dollars ($595,875.31).
3. The property to be sold is approximately 4,476 dairy replacement heifers, or so many thereof as will satisfy said lien.
4. The name of the owner, and who contracted for the services to be performed, is Vantage Cattle Company LLP.
5. The name of the lien claimant is Steven Lunderby and Shanna Lunderby individually and d/b/a Lunderby Livestock.
   

DATED this 10th day of November, 2010.
Brad Baisch
Richland County Sheriff

Vantage Cattle Company: Notice that Veblen, SD address? Vantage is another of Millner's shell companies. According to documents from the South Dakota Secretary of State's office, Millner is the official agent of the company. The partners listed in 2009 were Aaron Anderson, Duayne Baldwin, Jay Hill, Jorden Hill, Dennis Pherson, Lenny Pherson*, Wayne Viessman, and Michael Wyum... mostly the same guys who make up the (former!) Veblen West Dairy major equity holders and the Vista Family Dairy company Millner formed to try leasing Veblen West back to himself.

Distantly related: Sidney stockyard owner Steve Sunderby was also tangled up in a $7.8 million cattle fraud scheme that sent Todd Kenneth Horob to prison for eleven years.

Now I don't know much about cattle, but I have to wonder why Millner and his pals were trucking cattle all the way out to Sidney, on the Montana–North Dakota border. Veblen to Sidney is an eight-hour drive, says Google Maps. It would seem that even if I was getting a really good deal on feedlot or pasture rent, I'd still save money and stress by keeping my heifers a little closer to my main operations. But I welcome the comments and corrections of my cattleman-readers on that point.

So Millner is out one big dairy and about 8000 cattle. He still faces $453,000 in liens for back taxes owed to us South Dakota taxpayers, as well as DENR's apparent willingness to deny Millner an environmental permit to run any South Dakota feedlot. 2010 is not ending well for Richard Millner.
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*Update 09:51 CST: Lenny Pherson died last summer at his home in Rutland, ND. He was still listed as a partner in Vantage on the last annual report filed March, 2010.

DENR to Vista: No Veblen Dairy Permits with Millner in Charge

The South Dakota Department of Environment and Natural Resources may be about to put one man out of business... permanently.

Richard Millner has managed the giant Veblen West and Veblen East feedlots in northeastern South Dakota for the last couple years. He has also managed dairy operations in North Dakota and Minnesota. His operations have spent most of this year in bankruptcy. His permit to operate Excel Dairy, his confined animal feeding operation near Thief River Falls, Minnesota, was revoked by the Minnesota Pollution Control Agency due to air quality violations so serious that the state advised neighbors of the dairy to evacuate their homes. Last April, the MPCA denied Millner a permit to resume operations at Excel Dairy.

Millner has been battling mightily to cobble together some creative financial plan to reorganize his two Veblen dairies. But operating a dairy with thousands of cows discharging tons of waste each day requires more than capital. It requires a permit from the Department of Environment and Natural Resources. Millner violated the conditions of his permits for both Veblen West and Veblen East in 2009. I checked with DENR and learned that Veblen East met the October 15 deadline for complying with DENR's cleanup order, but that Veblen West did not.

DENR appears to have had enough. In a November 10, 2010, letter, DENR tells Jorden Hill, agent for the "new" company formed by Millner and his partners, that if Millner is involved in any way with management of the reorganized Veblen dairies, they will get no manure permit:

According to legal documentation received from the Minnesota Pollution Control Agency, an NPDES permit issued to Rick Millner for Excel Dairy was revoked by the State of Minnesota because of environmental violations. South Dakota Codified Law 1-40-27 states that an applicant or any officer, director, partner, or resident general manager of a facility for which application has been made is unsuited or unqualified to perform the obligations of a permit holder if the applicant has had any permit revoked under the environmental law of any state or the United States. Therefore, Rick Millner at no point in form or substance can be an applicant, an officer, a director, or resident general manager of Vista Family Dairies and Veblen East Dairy. Rick Millner cannot be the decision maker responsible for compliance with the general permit. The organization chart and the duties and responsibilities of all officers, directors, and managers must reflect this [Jeanne Goodman, Administrator, Surface Water Quality Program, South Dakota Department of Environment and Natural Resources, letter to Jorden Hill, agent, Vista Family Dairies, 2010.11.10; as reproduced in Case 10-10071, Document 474, In re: Veblen West Dairy LLP, U.S. Bankruptcy Court, District of South Dakota, filed 2010.11.12].

The emphasis is in the original. When bureaucrats put things in bold, they mean it.

Millner had a permit revoked in Minnesota. SDCL 1-40-27, a nice little "bad actor" statute, makes the revocation grounds for DENR to deny Millner any environmental permit. As long as DENR believes Millner is the driving force behind the investors trying to retake control of the bankrupt Veblen dairies (and since he signed the disclosure/reorganization plan, that seems logical), DENR can withhold that permit.

Wow. Between DENR and the Department of Revenue, Millner may finally have met his match in South Dakota.
----------------------------------
Read an amended version of the court motion containing the DENR letter cited above.

Two Scoops of Socialism: SDSU Ice Cream Downtown!

Don't tell me the State can't do anything right!

South Dakota State University, my alma mater, makes some of the best ice cream in the state. The SDSU dairy program also makes some smart business moves. Ryan Woodard reports in the Brookings Register that SDSU has opened the Campanile Connection, a shop selling SDSU ice cream and cheese in downtown Brookings.

The new shop is getting up and running right next door to Sioux River Cyclery (a long bike ride always makes me hungry for ice cream!). SDSU instructor and dairy plant manager Howard Bonneman also looks eagerly to the gymnastics center next door and the spectacular new Children's Museum just a couple blocks away as sources of hungry little coneheads.

This new state-owned business (SDSU's second downtown venture this year, following a new branch of the campus bookstore to Main Street) isn't putting too much of a squeeze on other businesses. With Zesto's now moved out to the University Mall, there's no ice cream vendor within reasonable walking distance of downtown. There's no grocer downtown, either—hmm... maybe the Campanile Connection can snag some SDSU beef as well!

This kind of town-and-gown connection is good for everyone. The dairy products students make in their dairy-micro classes gets put to good use instead of getting thrown out. Students and residents get to make connections through commerce and chocolate revel. And everyone has one more reason to spend the day in the wonderful destination into which downtown Brookings is making itself.

Maybe DSU here in Madison can do something like this. Maybe our Tech Fellows could open a branch office downtown to provide cheap tech support for the community. Maybe our programming classes could open up a shop, Widgets While u Wait, whipping up quick Facebook event pages, blog polls, and other Web gizmos in under an hour.

SDSU ice cream: totally socialist, and totally good for downtown. Two scoops, please!

Veblen West Dairy Auction Delayed Two More Weeks

In another sign that the bad guys are winning in South Dakota, the bankruptcy auction of the Veblen West Dairy in northeastern South Dakota has been delayed again. Last week Friday, bankruptcy trustee Forrest C. Allred moved and Judge Charles C. Nail agreed to postpone the auction until November 18. Allred moved on behalf of the contending parties, the Veblen West equity owners and financier AgStar, which apparently "have requested and agreed to further time to discuss possible settlement of the matters in question, and consent to this motion" (says Document 461 in the Veblen West bankruptcy case, Allred's motion filed 2010.10.29).

So the main force behind Veblen West, Richard Millner, may be pulling out a victory after all, cobbling together just enough investors and financial tricks to keep the dairy and thousands of head of cattle in his hands. But that also means there's time for anyother investors interested in acquiring a giant feedlot and a few thousand head of cattle at rock-bottom prices still have a chance to make AgStar and the court an offer.

South Dakota Dairy Industry Continues to "Grow"

I guess you can call it growth: South Dakota has more dairy cows producing more milk than it did five years ago. However...

The state’s dairy herd currently stands at 94,000 head, up significantly from its low point of 80,000 head in 2005. The state currently has approximately 400 dairy operations. Ten years ago, South Dakota had about 1,200 dairy operations and a dairy herd of nearly 100,000 [Jerry Nelson, "South Dakota's Dairy Industry Continues to Grow," Dairy Star, 2010.10.25].

Even all the fancy equipment and hormone treatment isn't putting out that much more milk: the Nelson article includes a graph that shows South Dakota's annual milk production is just barely higher than it was in 1983. We may be getting more milk per cow, but those cows are also concentrated into much larger facilities, posing more environmental risk than cows given room to roam.

South Dakota's dairy operations are an example of the real redistribution of wealth that should worry us. In just ten years, the wealth of South Dakota's dairy industry has been redistributed from 1200 independent operators to just 400. That's money and power concentrated in fewer hands... and that's not healthy for the economy or for democracy.

Veblen Dairy Operators Dodge $453K in Taxes, Says State

$452,888.40. That's how much the operators of the now-bankrupt Veblen mega-dairies have cheated the State of South Dakota.

This month, the State of South Dakota filed the following tax liens against Prairie Ridge Management, its manager Richard Millner, and Multi-Community Cooperative Dairy, the previous name under which Veblen West Dairy was organized:

Clippings from the Marshall County bank
scandal sheet, listing liens against Prairie
Ridge Management LLC, Richard Millner,
and Multi-community Cooperative Dairy,
October 2010. Click image to enlarge.

• 58608—Notice of Tax Lien—Against Prairie Ridge Management Company LLC, in favor of State of South Dakota, in the amount of $63,004.74, for unpaid Sales Tax for tax period September 2009–August 2010. Dated October 13, 2010.
• 58609—Notice of Tax Lien—Against Richard Millner, in favor of State of South Dakota, in the amount of $63,004.74, for unpaid Sales Tax for tax period September 2009–August 2010. Dated October 13, 2010.
• 58610—Notice of Tax Lien—Against Prairie Ridge Management Company LLC, in favor of State of South Dakota, in the amount of $273,087.48, for unpaid Use Tax for tax period January 2007–October 2009. Dated October 13, 2010.
• 58611—Notice of Tax Lien—Against Richard Millner, in favor of State of South Dakota, in the amount of $273,087.48, for unpaid Use Tax for tax period January 2007–October 2009. Dated October 13, 2010.
• 58612—Notice of Tax Lien—Against Prairie Ridge Management Company LLC, in favor of State of South Dakota, in the amount of $1,932.99, for unpaid Contractors' Excise Tax for tax period January 2007–October 2009. Dated October 13, 2010.
• 58613—Notice of Tax Lien—Against Richard Millner, in favor of State of South Dakota, in the amount of $1,932.99, for unpaid Contractors' Excise Tax for tax period January 2007–October 2009. Dated October 13, 2010.
• 58621—Notice of Tax Lien—Against Multi-community Cooperative Dairy, in favor of State of South Dakota, in the amount of $114,863.19, for unpaid Use Tax for tax period January 2004–December 2009. Dated October 14, 2010.

I'm assuming the identical amounts against Prairie Ridge Management LLC and Richard Millner are simply the state holding both the corporation and its manager accountable for cheating us tax payers of what we are due.

After all the environmental infractions and legal trickery, Richard Millner's machinations and bad business practices may finally be brought to a halt by a state Department of Revenue going Al Capone on the Veblen dairies and citing them for tax evasion. Seems appropriate.

Prairie Ridge Management Appropriates $453K Subsidy by Not Paying Taxes?

Multiple sources have indicated that the state has filed $452,888.40 of tax liens against Prairie Ridge Management of Veblen, South Dakota. These liens reportedly stem from the Veblen company's failure to pay sales, use, and excise taxes. The story going around Veblen is that Prairie Ridge Management didn't pay sales tax on some portion of the convoluted sales and services between the bankrupt Veblen East and Veblen West dairies and their several subsidiary and partner companies.

If these allegations are true, we taxpayers of South Dakota have been helping PRM exec Richard Millner and his cronies keep their failing dairies afloat with an involuntary, unlegislated tax subsidy. Consider that, according to the court brief filed by lawyers for AgStar* in the Veblen West bankruptcy case (Case 10-10071, Document 441, 2010.10.08), the Veblen West Dairy that PRM has managed reported positive (and, according to the brief, artificially inflated) revenues over the past five months of $240,000. Unpaid taxes of $452,888 from Prairie Ridge Management would slap a large negative sign on the front of that cash flow report.

But maybe such tax-dodging is just the revolution the teabaggers keep modeling. Has anyone seen Prairie Ridge Management staff at any tea party rallies? ;-)

-------------------
correction: I originally incorrectly attributed the brief to bankruptcy trustee Forrest C. Allred. The brief actually came from attorney Roger Damgaard and Sander Moorhead, representing AgStar. I also indicated the missing sales tax came from sales of specific goods, but I have not yet obtained the documentation to verify to which sales or services the taxes were applicable. I regret the errors.

Marshall County Considers Permit for Veblen East Dairy

The Veblen East Dairy in northeastern South Dakota faces another challenge today to its continued operation and pollution of the Whetstone Valley watershed. Included on the Marshall County Commission's agenda this morning is an 11 a.m. hearing to consider a conditional use permit for the "new" owners of the bankrupt Veblen East Dairy.

"New" deserves those "not really" quote marks: Vista "Family" Dairies, which bought Veblen East at less than half its value at bankruptcy auction last month, is made up mostly of the same equity owners who banked on the messy operations of Veblen East and sister dairy Veblen West over the last couple years. Meet the new boss, same as the old boss.

So really, the Marshall County Commission is considering issuing a conditional use permit—i.e., a special favor, an excuse to conduct operations that fall outside the normal zoning rules—to the same bunch who couldn't keep the Veblen East Dairy running properly in the first place.

A county commission acting in the interest of its constituents would use today's hearing to ask some hard questions and allow neighbors from all along the watershed to put their concerns on the public record. Let's see if that's what happens....

Update 2010.10.20 12:51 CDT: From today's Marshall County Journal:

In other business, about 20 people were present when the board approved a conditional use permit to either Vista Family Dairies, LLC or Whetstone Valley Dairy, LLC for the Veblen East Dairy Limited Partnership. The permit was requested by Lee Ann Pierce, Chapter 11 bankruptcy trustee ["Board Hires Deputy Auditor," Marshall County Journal, 2010.10.20].

Veblen West Trustee Skewers Bogus Lease Plan, Calls for Nov. 1 Sale

Trustee Forrest C. Allred lost his bid to liquidate the Veblen West Dairy last week, but he's not done fighting the tricky owners of that polluting dairy. Attorneys for financier AgStar*, which has a big stake in the dairies, filed a blistering brief last week that confirms what readers here have heard: the Veblen West owners' plan to lease their bankrupt dairy back to themselves and their objections to last week's sale are a sham intended to delay court action until Rick Millner can talk enough investors into floating him the capital necessary to keep the "hopelessly insolvent" dairy in his hands.

Extra kudos to attorneys Damgaard and Morehead for banging out this damning 18-page assessment of Millner et al.'s hoodwinkery in less than 24 hours. You guys should blog!

Some highlights from the brief [In Re: Veblen West Dairy, "Brief In Response To Objections Of Certain Equity Owners Of Veblen West Dairy Llp And Hill Grain Farms, Inc., To Trustee’s Motion For Authority To Sell All Or Substantially All Assets Of The Bankruptcy Estate By In Court Auction," U.S. Bankruptcy Court, District of South Dakota, Case 10-10071, Document 441]:

Some of the Equity Owners were apparently able to obtain financing for, and successfully bid at the Veblen East 363 sale. The Veblen East sale featured notice and bidding procedures that were materially-indistinguishable from Trustee Allred’s. In fact, the 363 Motions in East and West are nearly identical in that regard. This begs the question: why are the Equity Owners objecting now, when some of them purchased Veblen East under identical conditions? Clearly, the Equity Owners were unable to secure the necessary financing to purchase Veblen West. They are objecting to buy more time. The plan the Equity Owners have proposed is so deficient in so many ways, that it must be an effort to delay the proceedings [p. 9].

The evidence will show that Vantage Cattle, one of the Debtor’s related insider entities, and a source of replacement heifers for debtor, did not have a claim against the Debtor as of the date of filing. Indeed, Vantage Cattle is not one of the creditors in Debtor’s case. However, the evidence, including Debtor’s aged accounts payable reports, will show that, in August and September 2010, the Debtor purchased approximately 450 head of fresh replacement heifers at a cost of over $680,000. But the Debtor never paid for them.

This evidence will highlight the Debtor’s efforts to show a positive cash flow, while keeping cattle numbers up artificially. During June and July 2010, the Debtor’s cattle herd numbers dropped significantly. (Doc. 253 at 8-22.) The Debtor was then faced with a choice. It could spend the money on cattle and show a negative cash flow, or it could continue to experience a drop in cattle numbers and a drop in milk production. Either result would have been damaging to Debtor’s claim that it could successfully reorganize. The Debtor avoided these two alternatives in part by obtaining hundreds of additional cattle from its insider-owned sister entity, Vantage Cattle. But Debtor but did not pay Vantage for the livestock. If it had, it could not have shown a positive cash flow. In other words, Debtor has covered up its negative cash-flow by playing a shell-game with an insider related entity. It is this type of insider transaction that led to a Trustee being appointed in this case [emphasis mine; pp. 13–14].

The Equity Owner’s plan also comes with projections purporting 8 to support their claim that the plan is feasible. (Doc. 412 at 127 – 156.) However, when even a few of the assumptions made in those projections are tested, it is clear they are simply too optimistic to be believed. The Equity Owners rely on a “pounds of milk given, per cow, per day” assumption starting at 77 lbs/cow/day, quickly escalating to 81/cow/day. During the case Debtor has never achieved that target, and has at times been under 70 lbs/cow/day.

The Equity Owners also assume a combined cull and death loss for the cattle of 2.62% monthly or 31.44% on an annualized basis. Through Sept, 2010, the Debtor’s herd has an annualized cull and death rate of 60.5% and that, during the same period, the Veblen East lactating unit has an annualized rate of 64.8%, showing that the 2010 results West has achieved are not artificially poor by comparison. In other words, the Equity Owners’ projections assume a much lower expense for herd replacement–one of the largest expenses in the projections [footnote, p. 14].

Trustee Forrest C. Allred filed a new motion yesterday requesting a sale free and clear of liens on November 1. The motion notes that certain members of the Veblen West ownership have asserted that the dairy will be in full compliance with the environmental clean-up ordered by DENR of the dairy's manure lagoons. DENR has not confirmed but will be inspecting on Friday, the deadline for compliance. Interested parties have until October 29 to file objections.

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correction: I originally incorrectly attributed the brief to bankruptcy trustee Forrest C. Allred. The brief actually came from attorney Roger Damgaard and Sander Moorhead, representing AgStar. I regret the error.

Veblen West Auction May Still Happen Today

I reported yesterday that the bankruptcy liquidation of the Veblen West factory dairy scheduled for today may have been placed on hold by dairy exploiter Rick Millner's latest financial shell game. But new court documents show that today's hearing on the Trustee's motion for liquidation is still on, and the Trustee is arguing for the sale to go forward this afternoon.

I'm poring through a new stack of court documents right now trying to make sense of the situation. Apparently the U.S. Bankruptcy Court of South Dakota got legally spammed yesterday, with a whole batch of nearly identical objections to the auction flooding in. Unfortunately for the objecting parties, they didn't pay attention to the clock. The court's deadline for objections was Thursday noon; all but one of the copycat objections were filed at 2:12 p.m. or later. Trustee Forrest C. Allred thus moves those objections be ruled untimely and thrown out.

Allred also documents shenanigans by the Veblen West equity owners, including Rick Millner, to sabotage the Veblen West auction. Evidently their objection to the sale revolves around the absence of an option for the buyer on silage. Allred says there is an option... or would be if Rick Millner would quit playing games and check his e-mail. The trustee has made concessions to the silage group (Rick Millner and fellow Veblen West owners) and negotiated a silage option, but Millner has persisted in raising the price: he agreed to $35.00 per ton of silage, then hiked his asking price to $45.00, then $49.93. Each time, Allred caved on the price and sent option documents for Millner to sign. Each time, Millner failed to reply. Millner tries to blame his lack of response on not receiving the e-mail attachment on September 13... but he admitted to the trustee yesterday that when he checked his inbox, he found the attachment there after all. Yeah. Right.

Trustee Allred comes to the following conclusion:

The silage group – which is substantially the same as the “Certain Equity Owners” described above, is deliberately refusing to comply with the negotiated option in order to chill bidding, and to delay and block the proposed said. This is particularly inappropriate in light of the fact that one of the Certain Equity Owners’ objections to the sale is that the bidding procedure proposed in the motion will chill bidding [Forrest C. Allred, Trustee, In Re: Veblen West Dairy LLP, Case 10-10071, Document 440, United States Bankruptcy Court, District of South Dakota, 2010.10.07].

The latest tactics from the Veblen West owners smell of obfuscation and obstruction par excellence. Trustee Allred can see through it; let's hope the court does as well.
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Bonus Objection: The untimely objections all include this amusing "come-to-enviro-Jesus" paragraph:

10. The Trustee's Motion to Sell the assets is also inappropriate in that the sale proposes to sell the assets subject to environmental contingencies. This problem should be rememdied prior to the sale in order to maximize the value of the assets.

I want ever so much to look those folks in the eye and say, "No s#!t!"... since really, that's what they're wishing here. Now the creditors realize that Millner's own environmental abuses have wrecked the dairy's sale value and that he ought to be held accountable and forced by DENR to clean up his manure violations.

Update 15:02 CDT: No sale today! An observer in the field reports the silage objection won the day. The trustee will take another swing at Millner's legal armor soon.

Bankrupt Veblen West Owners Plan: Let's Lease It to Ourselves!

The Veblen Dairy shell game continues. Serial dairy wrecker Rick Millner and fourteen partners have filed a 158-page document with bankruptcy court asking for a chance to reorganize his bankrupt Veblen West mega-feedlot. The plan proposes to allow Vista Family Dairies to lease Veblen West Dairy for $140,000 a month for 15 years. It proposes to pay off all secured creditors over time without interest.

The filing also appears to fit Millner's pattern of using legal and financial trickery to squeeze every penny out of his assets and stave off court and state action that would hold him responsible for his bad business practices. Judge Charles L. Nail yesterday ordered a hearing on the Disclosure Statement and Reorganization Plan be held on November 18... which I take it means the filing by Millner and the Veblen West equity holders has successfully put off the bankruptcy liquidation auction, scheduled for tomorrow, for another five weeks.

And it's just a shell game. Compare the members of the petitioning Veblen West Dairy equity holders with the members of Vista Family Dairies, as listed in the Disclosure Statement and Reorganization Plan:

Veblen West Dairy major equity holders	Vista Family Dairy members
Aaron Anderson	Aaron Anderson
Duayne Baldwin
Jay Hill	Jay Hill
Jordan Hill	Jordan Hill
Rick Millner	Rick Millner
Denny Pherson	Dennis Pherson
David Viessman	David Viessman
Doug Viessman	Doug Viessman
Randy Viessman	Randy Viessman
Terry Viessman	Terry Viessman
Wayne Viessman	Wayne Viessman
Mark Wyum	Mark Wyum
Michael Wyum	Michael Wyum
Steve Wyum
Wyum Trust
	Robert Jameson
	Jeff Topp

Comparison of Veblen West Dairy equity owners
with Vista Family Dairies members
(Duayne! Steve! Why hold back?)

Somehow the court is willing to entertain the idea that the major owners of a bankrupt dairy should be able to lease that failed operation back to themselves... and be able to refinance their loans for longer terms and a lower interest rate.

What's this shell game about? Here's my read from the outside:

1. Rick Millner was able to get his buddies together to form Vista Family Dairies and float the capital to buy back Veblen East and its cattle outright for $23.1 million.
2. Millner's pals are now tapped out and can't come up with the additional $8.7 million to make a minimum bid for Veblen West.
3. Millner thus needs to put the bankruptcy auction on hold while he hustles more investors to back his scheme. Thus, the "lease it to ourselves!" plan.

And all this keeps the dairy in Millner's hands and keeps him from paying the price for his literally dirty business practices.

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The Disclosure Statement includes some other howlers:

1. True to form, Millner blames everyone but himself for Veblen West's troubles. He blames the AgStar receiver for cutting business relationships (including some of the convoluted, boundary-blurring dealings with Millner's affiliate operations in the neighborhood). He blames market conditions and the weather. What ever happened to the capitalist ethos of personal resposnibility?
   
2. Rick Millner stepped down as Veblen West managing partner in May 2010 to assuage concerns about conflicts of interest. But Millner's partners appointed Michael Wyum in his place. Wyum kept Millner's Prairie Ridge Management as Veblen West's contract manager. Wyum was also Millner's partner in the still-contested shell game that turned MCC Dairy into Veblen West.
   
3. During an evidentiary hearing in May, Cargill animal nutrition consultant Ian Woods "testified that the conditions at Veblen West are 'excellent.'"
4. The equity owners declare their belief that Veblen West Dairy "is an industry leader, is well-managed, and was operating a clean, orderly and productive dairy operation."
   

Bankruptcy Trustee Moves for Veblen West Dairy Auction

The other shoe drops in the Veblen manure pile: bankruptcy trustee Forrest C. Allred filed a motion for sale of the bankrupt Veblen West Dairy in U.S. Bankruptcy Court yesterday. Judge Charles L. Nail granted the motion to set the auction date for October 8. That's next Friday. Any objections must be filed by next week Thursday and will be heard by Judge Nail the same day right before the proposed auction.

Bankruptcy receiver AgStar and Madville Times readers knew this was coming. So do Veblen East bankruptcy-sale purchasers Vista Family Dairies: that new corporation, formed this month by partners of former Veblen East and West owner Richard Millner, is included in the parties served notice of the motion for sale.

Buyers beware: if you place the winning bid for this 137-acre, three-site mega-dairy, you will assume full responsibility for fulfilling the obligations set forth in an order from the South Dakota Department of Environment and Natural Resources requiring the reduction of manure levels in the dairy lagoons to legal levels. Here's how Trustee Allred's motion explains the situation:

Debtor is subject to an administrative order requiring it to have 270 days of capacity in its lagoons by October 15. Debtor has been pumping manure in accordance with its normal practice. While Debtor expects to comply with the administrative order, the Trustee cannot and does not guarantee Debtor will achieve compliance, and there is risk of non-compliance. Failure of Debtor to meet this deadline could result in significant curtailment, or even cessation, of Debtor’s normal operating activities. The successful bidder shall be fully responsible and liable for all work, equipment, costs and expenses, including manure removal, required to fully comply with the Compliance Agreement captioned “In re the Matter of Veblen West Dairy, LLP Violating Their General Water Pollution Control Permit for Concentrated Animal Feeding Operations” dated April 1, 2010, as well as any and all other regulatory compliance matters. Prospective buyers may obtain a copy of the Compliance Agreement upon request from the Trustee. The successful bidder assumes, at closing, all responsibility and will be liable for all environmental issues related to the dairy [emphasis mine; Forrest C. Allred, Motion to Sell Free and Clear of Liens by In-Court Auction, In Re: Veblen West Dairy LLP, United States Bankruptcy Court, District of South Dakota, Case 10-10071, Document 392, 2010.09.27].

In other words, if you buy Veblen West on October 8, you have seven days to measure just how much crap Rick Millner has saddled you with and get rid of it, on your dime, over and above the price you pay (minimum bid: $8.7 million) to acquire this operation.

To double your exciting market uncertainty, you also don't find out how many cows you're buying until after the auction. The motion says the Debtor owns 3700 head of cattle, but they constantly move from dairy to dairy, and there's no way to set a firm number before the auction. (Sounds like a convenient way to hide assets from bankruptcy court, don't you think?) You at least get to bid per head (minimum opener: $800), but you don't get a complete inventory until after the sale. You also get to pay for any disease testing on the cattle you buy.

To review: put up $8.7 million, plus $800 per head, and you can take possession of Veblen West Dairy, which may or may not be in compliance with environmental rules, may or may not have a feasible number of cattle in its inventory, and may or may not have sick cattle, none of which you'll be able to find out until you assume liability for the operation.

My dairy experience is limited to milk on my Toasty-O's, but am I wrong in concluding that Veblen West sounds like a really, really bad investment?

If you are considering bidding for the Veblen West Dairy, read the DENR order. Read the history of this environmental and financial mess. Then think long and hard about whether you want to put any money into this financially and morally bankrupt operation.
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Update 2010.09.30: The impending Veblen West Dairy auction gets a little press from North Dakota television. South Dakota press still AWOL....

Veblen Dairy's Korean Investors Keep Green Cards...

...but probably lose green.

I noted that those attending the bankruptcy auction of the Veblen East Dairy last week included Terry N. Prendergast, representing the Hanul Professional Law Corporation. Hanul is the Korean law outfit that handles EB-5 visa applications for foreign investors participating in South Dakota Regional Center programs. That's the program through which rich foreigners can buy their green cards simply by dumping a half-million dollars or more into American job creation projects. Veblen East Dairy is one of several projects in South Dakota that has benefited from this investment program.

So I got to wondering: could any of those Korean investors be losing their green cards due to the failure of Richard Millner's Veblen operation?

I contacted Joop Bollen, president of the SDRC, to find out what's up with our Korean investors. Mr. Bollen says the Korean may have a fight on their hands to recoup their investment, but their green cards are safe.

All that matters to the EB-5 program is that the investors' money creates jobs within the first two years. Each investor's money needs to generate 10 jobs, direct or indirect. The EB-5 program calculates that one job on a dairy operation translates into 2.66 jobs in the local economy (hire one guy to shovel poop, and he goes to town to buy more beer and lumber, which generates enough economic activity for the bar and the lumberyard to hire 1.66 new people). Thus, if one Korean's $500,000 can be shown to create four actual dairy jobs, the EB-5 number crunchers apply that multiplier, declare 10.64 jobs created, and Uncle Sam erases the word "conditional" from the Korean's green card. Welcome to America!

The Veblen East Dairy satisfied the job creation criterion for all of its Korean investors before it declared bankruptcy. Most of the Korean investors have already received their permanent status. A few investors have applied for but not yet received approval of permanent status from the feds, but the bankruptcy proceedings and change of ownership have no impact on those remaining applications. It doesn't matter who owns the operation, as long as the jobs have been created. And as I understand Mr. Bollen's explanation, it wouldn't even matter if the new owners couldn't keep the dairy going and the whole operation collapsed. Once the EB-5 investors' money creates the necessary jobs (real and statistically assumed), their green cards are secure.

Not so secure are their greenbacks, which are what Mr. Prendergast was in the neighborhood last week to check on. Mr. Bollen's office isn't involved at all with the bankruptcy proceedings, but he says Hanul and the Korean investors are discussing how they might recoup their investment with the new owners' group organized by Richard Millner (that's Vista "Family" Dairies). The investors might well "have to take a haircut," says Bollen. I am encouraged, at least, to see that the Korean investors are still paying attention and trying to hold Millner and partners accountable for their cash.
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Bonus Business: Vista "Family" Dairies has 30 days to get together the $23.1 million it bid for Veblen East. If Millner's minions can't convince their remaining friends to chip in for this latest Millner shell game, VFD loses the bid, and backup bidder Whetstone Valley Dairy gets Veblen East. According to the articles of organization filed last week with the Secretary of State, Whetstone Valley Dairy, LLC, is managed by Steve Myers and Michael Crinion of Brookings.

Vista Family Dairies Exists! Looks Like Millner Buying Bankrupt Dairy Back

Vista Family Dairies, the high bidder in last week's auction of bankrupt and polluting Veblen East mega-dairy, finally exists, as of Tuesday, September 21. The South Dakota Secretary of State has finally received the LLC's Articles of Organization. Vista Family Dairies has the same street address as Prairie Ridge Management, the company headed by Richard Millner that built Veblen East and lobbied the South Dakota Legislature to exempt huge dairies from the Family Farm Act.

Vista's agent is Jorden Hill of Veblen. Its organizers are Robert Jameson of West Fargo, ND; Jeffrey Topp of Grace City, ND; and Wayne Viessman of Gary, SD. Hill and Viessman have been partners with Millner in his previous South Dakota dairy exploits and in lobbying Congress for easier regs on hiring foreign workers.

Millner's name isn't on the Vista "Family" Dairies papers... but how much would you like to bet he's rounding up the investors for what feels like a bankruptcy shell game?

Veblen East Dairy Sold; Veblen West Dairy Next

As reported here (and so far, nowhere else) yesterday, the environmental atrocity known as Veblen East Dairy and its remaining 5000 head of cattle were sold at bankruptcy auction last week for $23,100,000. The Veblen West Dairy, also owned and driven into insolvency by Richard Millner, may be heading the same direction.

The Minnesota Secretary of State's office has posted business organization information for a new company based in Mankato, MN: Veblen West Acquisition, LLC. Nice when a company's name makes clear what it does.

Also organized the same day and at the same address: Veblen East Dairy Acquisition, LLC. I can't say for sure if this LLC is somehow connected with the high bidder in last week's auction, Vista Family Dairies, LLC.

I could pay the State of Minnesota $4 to see the detailed report, but I'm too much of a cheapskate to shell out lunch money for a lousy PDF. So I turn to the South Dakota Secretary of State's website, where our good and decent Secretary Chris Nelson lets me see those pulbic documents for free, the way they should be. Both of the acquisition LLCs have filed organization papers here in South Dakota as well. They are managed by AgStar Financial Services, the group that got Veblen West placed in receivership last March. Members of the Veblen East Dairy Acquisition LLC include FCS Financial of jefferson City, Missouri; GreenStone Farm Credit Services of East Lansing, Michigan; and M & I Regional Properties of Madison, Wisconsin. Veblen West Acquisition members include GreenStone and AgriBank of St. Paul, Minnesota.

There are still no documents in the South Dakota Secretary of State's corporate database authorizing "Vista Family Dairies LLC" to conduct business in South Dakota. So who placed that bid in court last week?

Press AWOL on Huge Veblen Dairy Bankruptcy Sale

Last week David Newquist said the traditional press just doesn't have the time or motivation to cover agriculture. Here's support for that contention: I'm hearing from my sources that the bankruptcy auction to liquidate the environmental atrocity known as Veblen East went forward last week. The buyer, "Vista Family Dairies LLC," apparently bid $21,300,000: $800 for each of 5000 head of cattle and $17,300,000 for the facility. That's the minimum requested bid for the cattle and $1,300,000 more than the minimum requested bid for the facility. The bid is also less than half the $50 million Veblen East cost to build.

No information for Vista Family Dairies LLC is available online, not even corporate papers or fictitious name registration on the Secretary of State's website... and if I'm reading state statute correctly, Vista Family Dairies LLC needs to have such papers filed before conducting business like bidding in a bankruptcy auction.

Vista Family Dairies is likely not the happy family operation its name implies. I'm betting it's Veblen East owner Rick Millner, who is surely scurrying around northeastern South Dakota and beyond trying to find investors who don't know his history of fleecing business partners, stiffing suppliers, and driving dairy operations into the ground through bad business and environmental practices.

And those potential investors won't know the history of either Millner or Veblen East because the local media haven't covered it. In all my blogging about Richard Millner's troubled dairy operations, I have relied on primary source, court documents, and AgWeek. Emily Arthur-Richardt of the Aberdeen American News did a good job in 2007 on the story of the Veblen East Dairy getting built with money from rich foreigners buying their way to the front of the line for green cards. However, on Millner's environmental violations and bankruptcy, the South Dakota press has been mostly silent. (Readers, you are welcome to submit links and articles to prove my memory faulty!)

By one account, polluting Veblen East and its bankrupt twin dairy Veblen West make up 15% of South Dakota's dairy industry. If a hospital or credit card call center that made up 15% of its industry in this state polluted the neighboring watershed, went broke, and was auctioned off to a mystery LLC, the media would be covering it... wouldn't they?

The Veblen East auction and pending Veblen West bankruptcy activity are big financial and environmental news. On this important story, the professional press are AWOL.

Milk and Tea: Raw Dairy Producers Test Tea Party Principles

Mr. Kelley brings to my attention two alarming articles from Grist. Apparently there is a widespread, federally coordinated effort to raid dairies producing and selling raw milk.

Now you can take sides in the debate over whether raw milk you want raw milk on your kids' Wheaties. Just as important as the health debate is the economic debate, summarized neatly in Grist:

Clearly, we are moving closer to judicial consideration of how far consumer rights extend when it comes to consumers opting out of the factory food system and arranging for private access to the nutritionally-dense foods of their choice [David Gumpert, "Want Raw Milk? Lease a Farm—and Hire a Lawyer," Grist, 2010.07.22].

Monsanto and the other giants of the ag-industrial complex have already driven most independent family farms into bankruptcy or subservience to the corporate will.

But what still gets me is that the professed conservatives and teabaggers among us who rage against the nanny state and government intrusion in our lives don't seem to even notice the real government oppression of independent dairy operators. They were silent about South Dakota's effort to ban raw milk (an effort that failed, although producers had to settle for a compromise with our state Ag Department). Ranch blogger Troy Hadrick even turned on his fellow producers, taking the Big Ag line and supporting restrictions on raw milk even while whining about tighter federal requirements to test for E. coli in slaughterhouses.

Tea Party, the raw milk issue is tailor-made for your movement. You have local, state, and federal officials conducting searches and seizing property and vital computer data from independent farmers. You have bureaucrats taking away the freedom of producers and consumers to engage in commerce. You even have government collusion, with the feds helping smaller agencies do their meddling. This issue is crying out for grassroots activists who want to advocate for pioneer-style self-sufficiency and market freedom. (And I'll bet the Founding Fathers drank raw milk while writing the Constitution.)

Let's add some milk to that tea: conservatives, check out the South Dakota Alliance for Raw Milk, and prove your conservative cred by standing up for independent producers and consumers who don't want to get gobbled up by the big corporate ag machine.