Turner Grain Merchandising Inc. co-owner Jason Coleman said he was in no condition to run his company in the months leading to its collapse in August 2014.
“I’ve had depression issues even up to years before that,” Coleman said during a deposition taken last month. He was questioned as part of lawsuit filed in Lonoke County Circuit Court by farmers who said they lost millions of dollars dealing with Turner Grain.
His father’s death in late 2013 and stress contributed to his losing some 60 pounds in 30 days, Coleman said under oath. He was offering above-market prices for rice, wiping out profits from other lines of business while continuing to create more financial obligations.
The deposition marked the first time attorneys were able to quiz Coleman about the Brinkley grain business that remains in Chapter 7 bankruptcy liquidation. In the bankruptcy, Turner Grain listed $13.7 million in assets and its list of debts totals $39.7 million — millions of which are owed to farmers who sold crops to Turner Grain.
Up until November, Coleman had asserted his right against self-incrimination and refused to be deposed in bankruptcy proceedings. His attorney, Lisa Ballard of North Little Rock, told Arkansas Business last week that Coleman no longer needs the Fifth Amendment protection because he’s no longer facing a criminal investigation.
More than 20 farmers in Lonoke County hope to recover the $5.5 million they said they lost dealing with Turner Grain. In addition to Turner Grain, the farmers have named 20 defendants including Coleman; Dale Bartlett, the former co-owner of Turner Grain; Coleman’s uncle, Neauman Coleman; several companies related to Turner Grain; and a company that did business with Turner Grain, K.B.X. Inc. of Benton.
If the farmers prove their allegations, the defendants could have joint-and-several liability, meaning that the plaintiffs could collect the total damages from any of the defendants.
That trial is expected to start May 8 and last four weeks in front of Lonoke County Circuit Judge Sandy Huckabee.
K.B.X., Bartlett and Neauman Coleman have asked the judge to dismiss them from the case before the trial begins. Those requests are pending.
Neauman Coleman said in his court filings that he didn’t have anything to do with the purchase or sale of grains.
“The businesses I did have ownership interest in were used by Jason Coleman to prop up Turner Grain and cover some losses, but these entities created no losses and were not involved in any way in the activity that resulted in Turner Grain’s financial collapse,” Neauman Coleman said in a March 24 affidavit filed in the case. “The first I knew that Turner Grain had financial losses and inability to pay its contracts was in August of 2014, when I heard talk in the office about checks that had bounced.”
Meanwhile, Turner Grain’s bankruptcy trustee, M. Randy Rice of Little Rock, has filed more than 40 lawsuits since October alleging that farmers and other entities received improper payments from Turner Grain within 90 days of its bankruptcy filing in October 2014. He is trying to claw back those payments. Those cases are pending.
Rice also sued a number of Turner’s related entities — including Turner Commodities Inc., Ivory Rice LLC, Agribusiness Properties LLC and Brinkley Truck Brokerage LLC — in an attempt to recover $96.8 million that allegedly was transferred from Turner Grain a year before it filed for bankruptcy, according to complaints filed in U.S. Bankruptcy Court in Helena.
Rice has also sued Gavilon Grain LLC of Kearney, Nebraska, for at least $14 million for allegedly failing to pay for corn that Turner Grain delivered. Gavilon has denied allegations of wrongdoing and said the dispute should be sent to arbitration. U.S. Bankruptcy Judge Phyllis M. Jones denied the request and Gavilon appealed in March to U.S. District Court in Helena, where the case is pending.
The Company
In 2002, Turner Grain was founded by Bartlett and Jason Coleman, who named it after an unincorporated community in Phillips County.
Later, Neauman Coleman, a commodity futures broker who operates his futures business from his house in Brinkley, called Neauman Coleman & Co., also became a business partner with his nephew and Bartlett in businesses related to Turner Grain.
Neauman Coleman said in his affidavit that he learned that a piece of property in Brinkley was for sale — he didn’t say when — and suggested that his nephew and Bartlett buy it to put a grain elevator on the site.
The three men bought the property and started Agribusiness Properties LLC in 2004.
“Jason and Dale had a much greater knowledge of grain bins and elevators, while my expertise was with trading futures,” Neauman Coleman said. “Jason and Dale then realized the potential of using the facility as an adjunct to their company, Turner Grain Merchandising Inc.”
Using Agribusiness Properties “would give Turner Grain an opportunity to purchase grain directly from the farm at harvest, before it had been dried in on-farm storage,” Neauman Coleman said. “This aspect allowed Turner Grain another source of grain and ability to expand their operation.”
Still, Neauman Coleman said he didn’t have much to do with the business and said Jason Coleman “did most of the work associated with the operation of the facility.”
The lawsuits filed by the bankruptcy trustee said Turner Grain and the related companies were so intertwined that they shared money and other assets out of the Brinkley office.
According to Rice, the bankruptcy trustee, Turner Grain bought rice corn, grain and soybeans from producers and then resold them to major grain buyers. For example, Turner Grain might promise to deliver 300,000 bushels to a corn broker, and then Turner Grain would be responsible for finding the corn farmers to fill the order for 300,000 bushels.
The business model generated hundreds of millions of dollars of rice, corn, grain and soybeans on an annual basis, Rice said in his court filings.
By the beginning of 2012, Jason Coleman said, he didn’t exactly know the financial condition of Turner Grain.
“As for receivables out, … I was not aware of them on a day-to-day basis,” he said.
To continue to grow Turner Grain, Coleman said he used the profits from corn or freight contracts, or a combination of the two, to offer better prices to rice farmers. Coleman said he didn’t know what the average was, but in some cases it would go as high was $1 above market price per bushel.
Coleman said that the death of his father, Danny Coleman, who died at age 65 in December 2013, may have been the trigger for his inability to operate Turner Grain, citing “all the stress.”
By the time Danny Coleman’s death, problems were becoming evident at Turner Grain.
On Jan. 2, 2014, Turner Grain took out a $1 million line of credit from Rabo Agrifinance Inc. of St. Louis.
Within days, Turner Grain had received $900,000 from Rabo, Bartlett said in earlier court proceedings. He said the money was supposed to be used for milling equipment, but the equipment was never purchased.
Bartlett said he decided to leave Turner Grain in February 2014. “There were decisions being made that I wasn’t aware of,” he said.
He said Coleman’s management decisions involved “a significant amount of money,” such as spending more than $30,000 on a software package used for tracking grain.
Bartlett said he continued working for Turner Grain while taking no salary. In July 2014, Bartlett said he asked Coleman about a Turner Grain check to a farmer that was returned for insufficient funds.
The next day, Bartlett said, Coleman fired him.
Bartlett asked what was going on and Coleman “said he had been sick and not able to go to the office.”
Coleman said in his deposition that around that time he lost 60 pounds in 30 days.
“I just was overloaded with work,” Coleman said. “My father died and then I was having some health problems and just was headed downhill.”
Still in July 2014, Turner Grain needed more rice to sell.
Coleman offered K&K Farm Service Inc. in Carlisle a price of $7.25 a bushel, which was above market price, resulting in a loss of 65 cents a bushel for Turner Grain. K&K Farm sold 840,000 bushels at a loss to Turner Grain of $546,000.
Little Rock attorney Kendel Grooms, representing K&K, asked how Turner Grain was going to make up for that loss?
“I can’t answer,” he said.
“Is that even possible?” Grooms asked.
“I can’t speculate on what the contracts were and what we were making or losing,” Coleman said.
Collapse
Turner Grain was forced into receivership in September 2014 and then filed for bankruptcy protection a month later. Its bankruptcy attorney, Kevin Keech of Little Rock, discovered that accounts for Turner Grain were intertwined with the other companies that Bartlett and Coleman operated.
In the year before Turner Grain filed for bankruptcy, it transferred nearly $100 million to it related companies, according to Rice’s court documents.
Coleman and Bartlett “were paying for grain, and they were losing money somewhere in that process,” attorney Gregory Bevel of Rochelle McCullough LLP of Dallas, who is working for the trustee, told Arkansas Business in November. “And because they had multiple businesses and multiple bank accounts, somehow they were floating money that they didn’t have.”
In his motion to be dismissed from the civil case, Bartlett said last month that the businesses related to Turner Grain also have suffered.
They “were forced out of business, left with significant debt and the members and shareholder who guaranteed the debt of these entities have filed bankruptcy or may soon file bankruptcy,” according to the filing by Bartlett’s attorney, Sammie P. Strange Jr. of Little Rock.
Strange said that Bartlett, who is a shareholder in the companies, was forced into bankruptcy in 2014 as a result of the loans and lines of credits the companies had outstanding.
“Not only did he lose his value of his investment, but he was left with significant debt as a result of his membership or shareholder interest” in the related companies.
In the deposition, Jason Coleman said he, too, is struggling financially. He said he isn’t working now, but is willing to do so.
“If your yard needs mowed, I’m ready,” he said. “I ain’t got enough money to file bankruptcy, if you want to know the truth.”
He agreed that it was it was wrong that the farmers didn’t get paid.
Coleman said he hasn’t apologized to anybody about what happened with his company.
“I haven’t spoke much of Turner Grain,” he said.