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Agriprocessors bankruptcy comes back to bite some cattle producers
Producers who received letter from bankruptcy court urged to contact Iowa Cattlemen’s Association
Some Iowa cattle producers that sold livestock to the now-defunct Agriprocessors meatpacking operation in Postville have received an unexpected and unwanted piece of holiday mail from the federal bankruptcy court.
Court officials, in an effort to ensure that none of the company’s accounts payable received preferential treatment, have informed Iowa producers that they have 10 days from the date of the letter to repay 80 percent what the company paid them in the time period before it declared bankruptcy. If the letter is ignored or no answer provided, the court will move to recoup 100 percent of the Agriprocessors payments.
Tom Shipley, director of issues management and policy implementation for the Iowa Cattlemen’s Association, said that his organization has been in contact with roughly eight producers who received the letter, and that the government demands have ranged from $50,000 to $600,000.
“We simply don’t know exactly how many producers or sale barns might have received this letter, but we do want all who did receive it to contact our offices,” Shipley said by telephone Monday.
Attorneys for the ICA have been in contact with the U.S. bankruptcy court and believe they have worked out an extension from the existing Dec. 3 due date to Dec. 15.
The bankruptcy code permits a trustee to recover payments made to a creditor within the 90 day period preceding the bankruptcy petition. The policy behind the rule is to remedy a situation where the debtor gives preferred treatment to creditors just before filing, and allows that particular creditor to receive more on its claim than would have otherwise been received through bankruptcy proceedings.
“We believe that it is not preferential treatment or preferred payment for producers and sale barns to provide livestock to a meatpacking company,” he said.
The letters were sent to individuals and companies that received direct payment from the Agriprocessors kosher meatpacking plant in the 90 days prior to the company declaring bankruptcy, or roughly mid-August through mid-November of 2008. Those producers that used the Packers and Stockyards Act to receive their payment after the bankruptcy filing do not seem to be impacted.
The cattlemen will likely rely on one of two exceptions to the preference rule: Contemporaneous exchange or ordinary course of business. A payment that is made at the same time a product is provided is an example of a “contemporaneous exchange.” Payments for “ordinary course of business” depend on payment practices within the industry and previous payment practices between the creditor and debtor.