Corn growers who faced a legal deadline to repay money from corn sold in 2008 to the bankrupt ethanol producer VeraSun received some good news recently when the company's attorneys dropped their claims for payment, according to the National Corn Growers Association.
Because of bankruptcy law, attorneys representing VeraSun creditors were able to seek repayment from farmers and others who received money from VeraSun within 90 days prior to the bankruptcy filing, says NCGA.
In late August, hundreds of corn farmers received letters from attorneys threatening legal action. The letters offered to settle the matter with a payment equal to 80 percent of what the farmers received for their corn sales to VeraSun. Farmers had until Sept. 30 to respond, and NCGA and several state corn associations provided information to growers, encouraged them to respond and helped them find legal resources.
Sioux Falls-based VeraSun, once the nation's No. 2 ethanol producer, filed for bankruptcy in October 2008 after tightening credit markets erased its lifeline to weather the swings in corn and fuel prices. San Antonio-based traditional refiner Valero Energy Corp. has since bought nine former VeraSun facilities.
Bankruptcy code considers any payment made by a company in the 90 days leading up its Chapter 11 filing a preferential payment. The idea is to prevent a company that knows its days are numbered from choosing to pay certain creditors while stiffing others.
Glover said farmers had a strong defense by showing that the payments were part of an ordinary course of business.
If farmers can show that VeraSun made payments for corn to farmers in the ordinary course of its business before and up through the bankruptcy, then they could be considered exceptions to the preferential-payments rule, he said.
