Postville, IA – Agriprocessors Bankruptcy Court Requests Cattle Producers To Return Payments

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    Postville, IA – 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.

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    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.


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    15 Comments
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    Anonymous
    Anonymous
    14 years ago

    How ironic. Agri gets charged for not paying the cattle companies on time, then those he did pay are asked to return most of it. Am I missing something?

    ..
    ..
    14 years ago

    From a halachic point of view, is SMR responsible for these payments? If the meat was received, and product made and sold, then would that be gezeila?
    Can funds be taken from the pidyon shvuyim fund to pay off these farmers?

    Liepa
    Liepa
    14 years ago

    First the law says you need to pay the livestock supply companies withn 48 hours (1920 law) then the court (law) says, since the livestock companies might have received preferrential treatment when Agriprocessors paid them, they need to return any monies they were paid within 90 days prior to them declaring bankruptcy.
    A meshugana velt.

    Anonymous
    Anonymous
    14 years ago

    This so called “clawback” is routine in a bankruptcy situation….it will be interesting to see if there were any payments that appear to have been made outside of the ordinary course of business during the period prior to bankruptcy filing. Even money SMR gave to tzadakah through the business would be subject to clawback.

    Oh My G-d!
    Oh My G-d!
    14 years ago

    Just comes to show all of us how ridiculous this whole case against Rubashkin is.

    First he gets prosecuted for paying the cattle people late, now the ones that got paid on time get targeted because Rubashkin, ( following the law ) and payed them on time.

    What a joke, except that Rubashkin is sitting in jail because of these zany laws…

    #8 is clueless!
    #8 is clueless!
    14 years ago

    #8 :
    While you might understand bankruptcy law you do not seem to have any familiarity with the charges against SMR.
    Not paying the creditors, at least some of them (in this case the sellers of the cattle), is part of the investigation and 14 charges were brought against SMR for that &#8 211; 5 of which he was acquitted for.
    Stop calling people ignorant when you are certainly the biggest ignoramus around here.

    Shimon
    Shimon
    14 years ago

    Oy, people should settle down and read the article carefully before freaking out.

    I’m not a lawyer, but what I understand is happening is that all creditors (with the noted exceptions of contemporaneous & ordinary course of business) have to give the last 90 days worth of money back. Then, the money from all of these creditors is payed back OUT to creditors in a specific order set out in bankruptcy law (depending on what kind of creditor they are).

    This isn’t in any way saying that Agri shouldn’t have payed these cattle farmers – it is just a procedure for making sure that the people who have the strongest claims under bankruptcy law get as much of the money they are owed as possible (since most bankrupt companies don’t have enough money/assets to pay back everyone).

    Anonymous
    Anonymous
    14 years ago

    The cattlemen will return the money and the state will retroactively charge him with failure to pay within 48 hours and which will be thrown out because of double jeopardy to which congress will pass a special law that Rubashkin can be tried, which be thrown out because it violates the ex post facto clause, which will now make the second law retoractively valid, which will be the first step before trashing the whole constitution because it’soutdated and doesn’t apply to blacks anyway because they were slaves at the time and had no say in the matter. Speak to me during Obama’s fourth term and I’ll explain it you.

    Anonymous
    Anonymous
    14 years ago

    The cattlefeeders that sold their animals to Agriprocessors have the right to demand their cattle back in the same condition as they delivered them.