Lawsuits, conflict with bank complicate Alvo elevator's failure
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By ART HOVEY/Lincoln Journal Star
Financial meltdowns in the grain-handling business often turn into messy and expensive affairs, and Alvo Grain and Feed will apparently not be an exception.
Five months after the family-owned business filed for bankruptcy protection — and three months after the occasion was marked by the physical collapse of one of its grain silos 20 miles east of Lincoln — there are at least three lawsuits pending in Cass County.
Prominent among them is the effort of the American Exchange Bank in Elmwood to collect on $3.6 million in loans.
The bank is suing the Nebraska Public Service Commission, Alvo Grain President Gordon Ganz, and about 40 parties who have claimed an ownership interest in the grain inventory in Alvo and at an Ashland branch.
Virginia Miller of Lincoln is among the unhappy faces. The PSC had approved her family’s claim, but now the money is tied up in what could be a lengthy court battle.
“That is the cash flow for the farmers,” Miller said. It’s the money that typically pays for the next year’s planting costs.
Despite the long list of defendants, bank President Richard Clements said the Public Service Commission is the real target of a civil suit on file in Cass County District Court.
“They’ve pretty much determined that the bank has no claim on any grain,” Clements said Wednesday.
According to him, the state’s regulator of grain elevators “is simply taking the position that warehouse receipts are meaningless in Nebraska.”
John Fecht, grain director for the PSC, offered a different version of recent events. He said the bank has not been able to provide complete documentation of corn and soybeans in storage that had been offered as loan collateral at the two locations.
“I think the bank would have had a legitimate claim if they had provided proper documentation to substantiate that,” Fecht said.
Tensions are running especially high because the various claims against Alvo Grain far exceed the approximately $1.9 million the PSC got from selling its grain assets after the agency assumed ownership in April.
In that and other ways, the situation is similar to what happened after the Atlanta Grain Elevator hit the financial skids in 2002 a few miles southwest of Holdrege.
In that case, the claims added up to about $4.5 million, the assets sold for about $1.1 million, and a local bank was among the aggrieved parties.
“We’ve been down this road before,” Fecht said.
Even though Clements said the Elmwood bank’s focus in Alvo is on the PSC response, he acknowledged potential impact on farmers and other grain owners. “If we would win, there’s the potential that their claims would be reduced.”
No matter how the situation is resolved, others on the list of defendants, including Miller and Marvin Ostransky of Springfield can’t just stand by.
They must also file a formal response. And even though the PSC has agreed that they own grain at the elevator, they won’t get anything until the lawsuits are resolved.
“I think it’s wrong,” Ostransky said of the bank’s behavior in the matter. “From the paperwork I’ve read, they’re trying to say they own the grain, not us. It’s not like they want to share it. They say they own it all.”
It’s impossible to pay bills with money you don’t have, Ostransky said. Improving on that scenario, despite the proof of ownership he can offer for corn at Ashland, could be a long way off.
“I’ve heard it could be upwards of another year on top of the time already.”
Based on the PSC’s interpretation of sworn testimony offered by claimants at the Cass County Fairgrounds in July, those who could show evidence of delivering grain to the elevator appeared to be in the best position to collect on the asset sale.
The outlook for others who never got paid — after they sold grain to the elevator and were told to deliver it directly to livestock feeders, ethanol plants and other grain users — appeared shakier.
Now very little seems solid.
“We will wait to see how the court rules on the three appeals,” the PSC’s Fecht said.
The wait will continue as the agency carries forward with a public input session in Lincoln Sept. 17.
That event, which begins at 9 a.m. in a second-floor conference room in the Atrium in downtown Lincoln, is meant to measure interest in creating what Fecht described as “an insurance fund” that could be built up with fees charged on farmers’ grain sales. That money could then be used for situations in which proceeds from future forced sales of grain-elevator assets don’t cover legitimate claims.
Ostransky is among those with a special interest in seeing that happen. He said Nebraska falls short of what Indiana and other states have in place to deal with such emergencies.
“We’ve got to catch up to where (grain) prices and the economy are going,” he said.
Reach Art Hovey at 473-7223 or at ahovey@journalstar.com.
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