Jim Mehlhaff from the South Dakota Public Utilities Commission will speak in Redfield on Saturday about proposed laws intended to prevent an Anderson Seed situation from ever happening again.
Anderson Seed went bankrupt earlier this year without paying farmers for $2.6 million in sunflower seeds which had been delivered to its warehouse.
There has been a lot of finger-pointing since the company's grain broker license was pulled in February.
While many farmers blame Anderson Seed owners for deception, others criticize the South Dakota Public Utilities Commission for failing to adequately regulate the company.
PUC officials said after Anderson's collapse that laws needed to be changed to allow the commission to know more quickly a grain buyer's financial status.
Chris Nelson, PUC chairman, led a review committee to suggest proposed changes in the law.
Mehlhaff, the PUC's grain warehouse director, said the proposed legislation focuses on timely disclosure of financial information, modest increases to the bonding requirements and criminal penalties for grain buyers that fail to comply.
Farmers and others who attend the meeting will have an opportunity to give their input.
A main point of contention is the bonding requirement. Anderson Seed, a company that could purchase up to $10 million worth of grain, was required to have only a $100,000 surety bond to pay producers.
Nelson, who won re-election to the PUC board in November by a large margin, campaigned on strengthening disclosure laws rather than creating a large bond fund. A system where farmers pay a few cents per bushel to create a fund, which is done in North Dakota, would take money out of producers' pockets without reducing the chance of a company going bankrupt, he has said.
Under the proposed legislation, the bond for a $10 million company would increase by $50,000 to $150,000.
Ray Martinmaas, an Orient farmer who lost $47,000 when Anderson Seed failed, said, "The bond is a joke. I have said it before, increasing a bond by $50,000 won't do anything. Who wouldn't throw away $150,000 to get $10 million."
While Martinmaas doesn't think the bond means much - pennies on the dollar for the amount of money lost - he said he is entitled to his share.
His claim to the Public Utilities Commission for a percentage of the bond was denied because commission staff ruled he had entered into a voluntary credit agreement with Anderson Seed and therefore was not entitled to bond money.
Approximately $400,000 of the $2.6 million lost by farmers was voluntary credit agreements, Mehlhaff said.
Nine producers did not qualify for all or a portion of their claims because of voluntary credit agreements, Nelson reported in October.
Martinmaas is the only farmer to appeal the decision of PUC staff. His case will be heard by the commission on Dec. 18 in Pierre.
Mehlhaff said that 26 farmers have made staff-approved claims totaling just over $2 million. About $400,000 is not eligible because of voluntary credit agreements and about $200,000 was not claimed.
"Some farmers did not file a claim because they knew it was a voluntary credit agreement, the amount was small or they did not want to go to the trouble of filing," he said.
An internal audit of Anderson Seed showed 39 producers had delivered seed for which they did not receive payment, Nelson said in October.
After a decision is made on Martinmaas' appeal, a final pool of applicants will be determined and money will be distributed to them on a prorated basis, he said. The money, however, will not be released until Circuit Court Judge Tony Portia approves the distribution plan. The distribution will likely take place sometime in the early part of 2013, Mehlhaff said.
Mehlhaff said that increasing the bonding requirement is only a small part of the legislative package. Most of the laws focus on disclosure. For example, when Anderson Seed applied for its grain buyers license in 2010, its financial information was from the end of its previous fiscal year. The information was already nine months old when the PUC reviewed it, he said.
Under the proposed legislation, financial information must be more current, he said.
Anderson Seed may have misled the PUC or broken laws. A criminal investigation is still ongoing, said Sara Rabern, public information officer for the South Dakota Attorney General's Office.
Chris Studer, communication director for the Farmers Union, which is hosting the meeting in Redfield on Saturday, said the meeting is to educate member and the public about about issues in agriculture.
Bonding and grain buying legislation are statewide issues, he said.
"We want to start a conversation among farmers," he said. "We want them to learn about the legislation so they can be protected."
Meeting on Saturday
A meeting on the proposed grain buyer legislation will be 1 p.m. Saturday at Leo's Good Food Restaurant, 603 N. Main St., in Redfield.
Legislative plan
A proposed five-point legislative plan for grain buyers includes the following items:
• 1. Timely financial disclosure at time of application.
• 2. Inclusion of a perjury statement. Applicants caught providing false information are subject to a felony perjury charge.
• 3. Financial disclosure at time of inspections. Records must be provided within five days.
• 4. Increasing surety bond amounts and increasing the number of company size categories. Most bonds increase by $50,000.
• 5. Immediate reports of failure to comply. A company which falls short of licensing requirements at any time must report that to the Public Utilities Commission under criminal penalty.
Source: Jim Mehlhaff, South Dakota Public Utilities Commission grain warehouse director