Turner Grain Merchandising Inc. of Brinkley transferred nearly $100 million to its related companies a year before it filed for bankruptcy protection, according to lawsuits recently filed by its Chapter 7 trustee.
Trustee M. Randy Rice of Little Rock sued those entities, Turner Commodities Inc., Ivory Rice LLC, Agribusiness Properties LLC and Brinkley Truck Brokerage LLC, in an attempt to recover $96.8 million, according to the complaints filed in U.S. Bankruptcy Court in Helena.
Rice didn’t return a call for comment. Those companies closed about the same time as the Brinkley crop broker in August 2014. Turner Grain and its related companies were operated by Jason Coleman and Dale Bartlett. Bartlett also has filed for bankruptcy protection.
Since October, Rice has filed more than 40 suits alleging that farmers and other entities, including the U.S. government, received improper payments from Turner Grain within 90 days of its bankruptcy filing in October 2014.
The trustee sued to recover the $170,000 that farmer Keith Wilkison of Brinkley received from Turner Grain on Aug. 7, 2014, just before the 90-day window opened. The trustee alleged that the money was for crops Wilkison delivered during the 2013-14 crop year. Turner Grain still owes Wilkson $300,000 for crops delivered in 2013, he told Arkansas Business.
Wilkison, who has been farming for about 25 years, said that he hopes he won’t have to close his 3,300-acre farm if he’s forced to repay the $170,000.
“We’re already in tough times,” he said. “The banks are working with me … to try and get over this deal.”
A trustee can pursue money paid to certain creditors within 90 days of a company filing for bankruptcy protection, said Timothy Tarvin, who teaches bankruptcy law at the University of Arkansas School of Law in Fayetteville. The time frame is expanded to a year if payments are made to company insiders, such as family members and business associates.
The law is meant to keep some creditors from being favored over others and receiving “more than they would have otherwise received in the Chapter 7,” Tarvin said. A defendant, however, could raise a number of defenses, or could reach a settlement.
‘Money They Didn’t Have’
In the bankruptcy, Turner listed $13.7 million in assets, and its claims register shows $39.7 million, millions of which is owed to farmers who sold crops to Turner Grain.
Coleman and Bartlett “were paying for grain, and they were losing money somewhere in that process,” said attorney Gregory Bevel of Rochelle McCullough LLP of Dallas, who is working for the trustee. “And because they had multiple businesses and multiple bank accounts, somehow they were floating money that they didn’t have.”
Bevel said he didn’t know what happened to the money the Turner Grain-related entities received because his role in the bankruptcy is limited to two lawsuits.
A group of Lonoke County farmers who lost $5.5 million dealing with Turner Grain alleged that Coleman and Bartlett were operating a Ponzi scheme. Bevel doesn’t agree.
“As far as Turner Grain itself, I don’t think it would be accurate to describe it as a Ponzi scheme,” he said. “They weren’t taking people’s money. They were accepting shipments of corn and shipping them off, and the payments didn’t come in.”
Coleman filed an answer to the farmers’ lawsuit on Nov. 3. Although Coleman denied the allegations of wrongdoing and didn’t provide any details, it was the first time Coleman has publicly answered allegations surrounding the collapse of Turner Grain.
In early 2015, one of Turner Grain’s creditors, Southern Rice & Cotton LLC, wanted to question him about his involvement in the company. Coleman’s attorney, Lisa Ballard of North Little Rock, said in a bankruptcy filing that Coleman asserted his Fifth Amendment right against self-incrimination, and U.S. Bankruptcy Judge Phyllis Jones ruled in April 2015 that Coleman wouldn’t be compelled to talk.
One of Coleman’s attorneys, Jeff Rosenzweig of Little Rock, said in a bankruptcy hearing last year that Coleman would assert the Fifth Amendment because there was a federal criminal investigation going on.
As of last week, no charges had been filed against Coleman.
Ballard, who filed the answer for Coleman, didn’t return a call to Arkansas Business. Rosenzweig was unavailable for comment, and Coleman couldn’t be reached for comment.
Sloppy Record-Keeping
The lawsuits filed by Turner Grain’s trustee show that Turner Grain and the related companies were so intertwined that they shared money and other assets out of the Brinkley office. The related companies “regularly took part in the fulfillment of the same contract transactions with grain sellers and buyers as” Turner Grain, the lawsuit said.
And Turner Grain also would pay the debts of the related companies as if they were Turner’s own debts.
Gerald Loyd, 68, of Dumas was president and the only employee of Turner Commodities, which received $29.7 million from Turner Grain in the year before Turner Grain filed for bankruptcy, according to the trustee’s lawsuit.
Loyd, in an affidavit taken for the Lonoke farmers’ lawsuit and filed in June, spelled out the sloppy bookkeeping he saw.
A helicopter pilot during the Vietnam War, Loyd first became acquainted with Coleman and Bartlett in 2002 or 2003, when Loyd was working as a rice buyer for another company.
But it wasn’t until 2004 that Bartlett and Coleman approached Loyd with the idea that they should form a company that would buy and sell agricultural crops in southeast Arkansas.
“The initial proposal was that Bartlett and Coleman would help get the business started and teach me the business,” Loyd said in the filing. “The initial proposal was that Bartlett and Coleman were also to handle the record keeping, bookkeeping and banking for” Turner Commodities.
Loyd was brought into the deal because the farmers knew and trusted him.
“About a year after the business got started I figured out that Coleman and Bartlett were not real good record keepers,” Loyd said.
The bank account wasn’t being closely monitored, which led to overdrafts.
Turner Commodities operated as a back-to-back dealer, meaning Loyd would contact the potential grain buyers and ask them what crops they needed and what price they were offering to pay. Then he would call farmers and offer to buy those crops for a slightly lower price. The difference might be 5 cents per bushel.
Loyd said that Turner Commodities didn’t have to worry about being short of cash, unless a buyer or seller failed to honor its contract.
Just before the financial trouble was exposed in August 2014, Bartlett had called and, according to Loyd, said, “Jason [Coleman] has done some things that are not right and it looks like he is in bad trouble.”
By then the word had spread that Turner Grain was in financial trouble.
Loyd reviewed Turner Commodities’ bank statements and found that for more than a year Coleman had been using the account in “an unauthorized manner.” He allegedly would pull money out of the account and put it back in, using it almost as if it were a line of credit, Loyd said.
Loyd said that Turner Commodities was overdrawn about $200,000. He also said the company closed its doors after the financial problems were exposed.
Loyd said that Turner Commodities “is just a victim of that mess just like the farmers.”