Gavilon Inc., a Nebraska-based grain buyer and distributor, is responsible for at least $14 million worth of Turner Grain Merchandising's money woes and eventual collapse, according to a lawsuit in bankruptcy court.
Randy Rice, the court-appointed trustee for Turner's bankruptcy filing, said in the lawsuit that Gavilon was guilty of "numerous breaches of contracts and unjust enrichment" in how the worldwide commodities manager dealt with Turner and "hundreds of millions of dollars' worth of corn and grain" deliveries in 2013 and 2014.
Rice filed the lawsuit late Friday in the Helena-West Helena division of U.S. Bankruptcy Court, where lawsuits against the Brinkley grain company have been percolating since it filed for bankruptcy in October 2014, listing assets of $13.8 million and liabilities of $24.8 million. Creditors -- mostly farmers who were never paid for their grain -- have filed nearly $40 million in claims.
The lawsuit said Gavilon was Turner's main buyer of corn.
"These contracts included Gavilon's promise to pay freight delivery of the grain at various rates to various destinations," according to the lawsuit. Gavilon was free to choose an alternate place of delivery, presumably because of better prices, but was required to pay for any increased shipping costs incurred by Turner resulting from changes made by Gavilon.
"Throughout the history of contracts between Gavilon Grain and Turner Grain, Gavilon routinely changed the shipping destination for its own benefit and to the detriment of Turner Grain," the lawsuit said.
"Accordingly, when Gavilon changed the shipping destination with Turner Grain, Turner Grain was forced to deliver the grain where Gavilon demanded it to be delivered," according to the lawsuit, placing those unpaid shipping costs at $6 million.
Gavilon also never paid Turner for $2.5 million in corn, the lawsuit said.
As the Brinkley grain company flailed its way toward banktuptcy, Gavilon also "unjustly enriched itself" by not paying on contracts that were more favorable toward Turner, amounting to $3.5 million in damages, and also canceled another $2 million in contracts with Turner as better market conditions arose.
A Turner co-founder, Jason Coleman, sought payment from Gavilon for the extra shipping fees, according to the lawsuit. Gavilon said it would calculate what it owed but instead stopped all payments to a financially struggling Turner Grain, the lawsuit said. "Further, under Turner Grain's contracts with the farmers it acquired the grain from, Turner Grain was responsible for paying the farmers in spite of Gavilon's failure to pay Turner Grain," it said.
Many of the lawsuit's claims appear to be the fruit of periodic meetings over the last several months involving the attorneys for Turner's bankruptcy case, Coleman, his attorneys and FBI agents. Those meetings were noted in a recent court filing by the bankruptcy trustee seeking payment for work done and reimbursement of expenses. The FBI has said it would have no comment on a possible criminal investigation.
"Gavilon and Turner Grain continued this course of business with the consequence that Turner Grain was slipping deeper and deeper into insolvency," the lawsuit said. "Turner Grain's bank accounts were over drafted for weeks at a time. Turner Grain began using funds from other entities controlled by Coleman and the other owners of Turner Grain to balance its accounts. Likewise, Turner Grain's accounts were used by its management to cover for overdrafts in the accounts of other entities controlled by the same management group."
Business on 10/25/2016