Minnesota Agriculture Department urges farmers to file lawsuit over Pipeline Foods LLC bankruptcy

On July 21, 2021, the Minnesota Department of Agriculture held an online meeting with creditors and others to describe how the federal bankruptcy of Pipeline Foods LLC in Delaware could fit into state laws. for the payment of cereals.

Minnesota Agriculture Commissioner Thom Peterson assured dozens of people on the video call that the department sees bankruptcy as a “serious problem that we are looking at from all angles.” Nick Milanowski, the department’s fruit, vegetable and grain programs supervisor, urged people to file now against the company’s $ 500,000 bond, which could partially compensate producers. Milanowski and Minnesota Assistant Attorney General Oliver Larson told farmers they should also consider filing claims against the bond and in federal bankruptcy, but noted that unsecured creditors are paid last.

Olson said that, unfortunately, the money coming from either process is unlikely to make the producers whole and could take months or years.

“Come to Delaware”

Pipeline Foods LLC of 6499 University Ave NE, Fridley, Minn., was formed in 2017. It applied for the reorganization of Chapter 11 in Delaware, where it was incorporated. The estimated pipeline funds “will be available for distribution to unsecured creditors.” They estimated between 200 and 999 creditors. They estimated between $ 100 million and $ 500 million in assets and debts.

The file for bankruptcy online only lists 20 major creditors that the company estimates owe a total of $ 20.7 million. The American creditors on the list are from Minnesota, North Dakota, Wisconsin, Nebraska, Ohio, Indiana and Michigan, as well as companies from the countries of Dubai, India and the United States. China.

Topping the list is Simmons Feed & Supply LLC, of ​​Salem Ohio, with $ 5.2 million in customer advances; Agri Exim DMCC, of ​​Dubai, $ 2.6 million, in commercial debt; and Jim Wolf, Jeffers, Minn., with $ 2.2 million in what the company described as a “contested” bill payable.

Other Minnesota creditors and rounded amounts include Earl Pederson of Bejou, Minnesota, $ 1.5 million; Brushvale Seed Inc. of Breckenridge, Minn., $ 1 million; Richland Grain LLC & State Bank, of New Richland, Minnesota, nearly $ 415,000; Brant Hemingway, Ellendale, Minn., $ 356,000.

North Dakota trucking company Dahl Trucking of Langdon, ND owes nearly $ 474,000; Kevin Motl and Farmers and Merchants State Bank of Blooming Prairie, Minnesota, $ 250,000; and LSM Commodities Ltd. from Saskatoon, Saskatchewan, $ 548,000.

One group, Organic Farmers of Michigan, owes about $ 872,000.

Nested companies

Pipeline Foods, an American supply chain solutions company focused exclusively on non-GMO, organic and "regenerator" food and feed, opened this Bowbells, ND elevator in October 2018. Photo taken September 2020, in Bowbells, ND (Photo courtesy of Pipeline Foods LLC)

Pipeline Foods, a US-based supply chain solutions company focused exclusively on non-GMO, organic and ‘regenerative’ food and feed, opened this Bowbells, ND elevator in October 2018. Photo taken in September 2020, in Bowbells, ND (Photo courtesy Pipeline Foods LLC)

The record lists five nested companies.

First, there is the parent company Pipeline Holdings LLC (“Foods”). Second, there are two wholly owned subsidiaries – Pipeline Foods ULC (“Pipeline Canada”) and Pipeline Foods II LLC (“Foods II”). These three companies in turn “own and / or control directly or indirectly” two other affiliated companies: Pipeline Foods Real Estate Holding Co. LLC (“Pipeline Real Estate”) and Pipeline Foods Southern Cone SRL (“Pipeline Argentina”).

The company has engaged the law firm Saul Ewing Arnstein & Lehr LLP as “general and special bankruptcy adviser for the company”. They also engaged the law firm Bryan Cave Leighton Paisner LLP, as legal counsel to the board of directors.

In the bankruptcy documents, the company signed a letter of understanding on April 14, 2021 between Pipeline’s parent company and an entity called SierraConstellation Partners LLC. They agreed that a man named Winston Mar would become “head of restructuring”. They also hired the “Stretto” company to help with the bankruptcy. Stretto hosts a website where people can get bankruptcy updates without going through the court system, at https://cases.stretto.com/Pipelinefoods, or by calling 855-288-5577.

Board of directors

The court documents list a “management board” including Eric Jackson and Bradly Dietz, listed as an independent manager. Craig Tashjian is listed as Managing Partner and Chief Investment Officer of AMERRA, a New York-based venture capital firm he co-founded in 2009. Tashjian claims 30 years of investing in food, agriculture and resources natural resources, with “expertise spanning global agriculture, aquaculture, natural resources and trade finance markets. He headed the “Societe Generale Ressources Naturelles” business line and was “Global Head of Commodities at Standard Chartered Bank”, managing the multinational commodity finance teams.

Tashjian sits on the boards of Avramar SA (Greece), Aquaship AS, Biomega AS (Norway), Ciclon Trading Corp. (United States), F&S Agrisolutions Industria de Biocombustiveis Ltd.a. (Brazil), Pipeline Foods (United States) and Rio Amambai Agroenergia SA (Brazil)

Anthony “Tony” Sepich, president and CEO of the company, in a statement when filing for bankruptcy, said COVID-19 issues at a time when the company had contracted debt and acquisitions had caused “significant financial distress”. He was considering a “potential sale of the business, parts of the business and some of its assets.”

In recent years, the company has taken a big step into the organic sector, purchasing elevators and facilities, and focusing on the non-GMO and ‘regenerative’ feed and feed markets, according to specialized journals.

In 2019, the company acquired ancient grains and specialty products from Organic Ventures, and the specialty and organic soybean and corn business from SunOpta Inc.

Sepich said the company would ask the court to approve employee payment “without interruption” and sell the grain stocks to be used as “cash collateral.”

The company imported part of its production. The company was known in organic trade groups for its efforts to ensure that products labeled “organic” had been properly certified and were not counterfeit or bogus organic products.

‘Fake’ fighter

The rapidly expanding Pipeline Foods had a reputation for fighting fake organic products. As late as June 30, 2021, the Organic Trade Association mentioned Pipeline’s support for the trade organization’s “Revolutionary Fraud Prevention Program” – Biological Fraud Prevention Solutions.

The OTA has 9,500 members in North America. It includes organic producers, shippers, processors, certifiers, farmer associations, distributors, importers, exporters, consultants, retailers and others.

OTA is gearing up for upcoming US Department of Agriculture rules to strengthen oversight of organic imports and the organic supply chain. The rules will arrive in the spring of 2022. The OTA said 40 organic companies have signed up for its program and 125 are in the process of signing up. This involves “supplier verification” and adherence to a comprehensive guide to preventing organic fraud.

“In addition to the 40 organic businesses enrolled in the Anti-Fraud Program, two companies – Pipeline Foods and Naturepedic Organic Matttresses – have completed the nine-step enrollment process and have submitted their organic fraud prevention plan to their certifier. “said the OTA. .

Gwendolyn Wyard, OTA’s vice president of regulatory affairs, said the program was designed to help businesses comply with USDA’s “Strengthen Enforcement of Organics” final rule, scheduled for spring. 2022. The USDA program was developed with the Michigan State University Food Fraud Initiative. , which includes an academy and online courses, on how to conduct an organic fraud vulnerability assessment and fraud prevention plan.

Some farmers with unpaid bills privately told Agweek they were shocked by the disappearance. In the online focus groups, some hinted at recent slow payments and concerns.

On July 12, 2021, CEO Sepich wrote a letter to “Dear Customer / Producer / Seller / Supplier,” announcing the filing. He said he expected the “pre-petition lender” to consent to the use of cash collateral.

“Unfortunately, federal law does not allow us to make payments to claims accounts for goods and services that occurred before the Chapter 11 filing,” he wrote. “We regret any difficulties this may present to you and hope that we can resolve the issues together without interruption.

A farmer said his operation was established and would survive a significant loss. Another, with 150 acres, said he would try to survive as well, but was owed more than $ 80,000.

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