VeraSun estate lets corn farmers off the hook

By Holly Jessen | September 23, 2010
Posted Sept. 30

More than 1,000 corn producers have reason to celebrate. The money they received from now-bankrupt VeraSun Energy Corp. for corn is now safe.

"Please be advised that we have received sufficient information to determine that the VeraSun estate will not pursue a claim for relief against corn producers and the demands are hereby withdrawn," said Randy Schaefer, a lawyer with SilvermanAcampora LLP, in an email on Sept 30. Schaefer added that a list of corn producers "against whom we are withdrawing our demands" would be forthcoming.

SilvermanAcampora and Kelley Drye & Warren LLP are two New York law firms that sent out letters, asking corn producers to repay money they received from VeraSun. The letters offered producers until Sept. 30 to repay 80 percent of payments received in the 90 days before it filed for Chapter 11 bankruptcy in 2008.

Cedar Rapids, Iowa, lawyer Joe Peiffer said he was feeling "giddy" when he told EPM he finally had some good news to report. "It appears that they will not be pursuing any corn suppliers," he said.

A group of 50 or more attorneys banded together to work on the problem, sharing resources, Peiffer said. They sent letters to the VeraSun estate attorneys, laying out two solid defenses against the argument that corn farmers received preferential treatment. A preference payment is when a creditor is paid before other creditors, allowing them to recover more money than if the bankruptcy estate had distributed the money after the bankruptcy.

Corn producers did not receive preferential treatment because producers were paid in the ordinary course of business, he said, typically delivering corn and getting paid the next week. In addition, a 2005 amendment to the bankruptcy code provides an exception to preferential treatment for those that used forward contracts. It's not clear at this point which argument worked. "It could be either of them," Peiffer said. "Frankly, I don't care. We got where we needed to get."

The VeraSun estate is reserving the right try to collect back payments from other groups, such as elevators or service providers.