Turner case's end seen years off

Bankruptcy files: 2 or 3 more to go

The bankruptcy saga of Turner Grain Merchandising Inc. will continue in federal court for another two or three years, according to court filings this week.

U.S. Bankruptcy Judge Phyllis Jones denied a Hot Springs attorney's request for some $45,000 in fees for the year he was the bankruptcy trustee for Turner Grain. Jones approved Richard Cox's request for $2,923 in reimbursement for expenses but said any fees awarded to Cox will have to wait until the firm's Chapter 7 bankruptcy case is settled.

That might not happen for another two or three years, according to the filings.

Based in Brinkley, Turner Grain was closed in August 2014 after federal inspectors found no grain in bins certified stating otherwise. It filed for bankruptcy a month later, initially listing $13.8 million in assets and $24.8 million in debts. Farmers and agribusiness interests have filed more than $40 million in claims, primarily for grain Turner sold to other buyers but never paid the farmers for.

Cox was appointed to represent the Turner estate in May 2015, but he resigned three days shy of being on the job a full year.

The duty of a Chapter 7 bankruptcy trustee is to collect all the assets possible from a debtor and eventually disburse those assets to creditors. Trustees' payments generally are based on a percentage of what they pay out to both secured and unsecured creditors, with secured creditors being first in line to be paid.

Little Rock attorney M. Randy Rice, who succeeded Cox as trustee, objected to how Cox came up with the fee request of $45,496.

Their filings, along with Jones' order on Tuesday denying Cox's fee request, provide a glimpse at the finances of the tangled case. Jones held a hearing on the matter in February.

Cox became Turner's bankruptcy trustee when the filing was converted from Chapter 11 to Chapter 7, with $619,251 in the estate. Cox also recovered another $550,000 in assets as various issues were resolved in court over the next several months.

During his year as trustee, Cox distributed two checks totaling $844,921 to Rabo AgriFinance Inc., a secured creditor. Cox used a formula in United States bankruptcy code to come up with the $45,496 in fees.

But Rice contested the claim on two counts. He said Cox had done relatively little work on the case and that, on the basis of the little amount of money in the Turner estate, used an incorrect formula in determining how much he was due.

"It is undisputed by the parties that [the Turner estate] does not have sufficient funds on hand to pay all the administrative fees in the case, and that it is too early in the case to determine if the case will be administratively solvent," Jones wrote.

Rice said Cox had filed only one "adversary proceeding" -- an effort to collect from an entity or person owing money to Turner Grain around the time it closed -- whereas he has filed 46 such actions.

Rice's "clawback" attempts have amounted to about $110 million, but some $100 million of that is sought from Turner-related entities that may not have any assets. Dozens of farmers have been sued by the Turner trustee because they received payments from Turner within 90 days of its bankruptcy filing. Such lawsuits are allowed by U.S. bankruptcy law to ensure that a debtor-to-be isn't favoring one creditor over another.

Another lawsuit filed by Rice contends that Gavilon Inc., a major grain distributor based in Nebraska, owes the Turner estate at least $14 million for grain and shipping fees.

Rice, in court filings, said the case will go on for another two or three years because of "the complexities involved and the number of pending adversary proceedings."

In denying Cox's request for fees for now, Jones said that "the circumstance of two trustees serving consecutively in a single case is not the typical way Chapter 7 cases are administered" and that the U.S. Bankruptcy Code doesn't specifically address such situations.

Jones, too, noted that the case won't be settled for a long time and agreed that Rice has done most of the work.

When Rice replaced Cox, the Turner estate had $329,077 on hand.

If Rice used the same formula to determine what fees are due him, he would have to recover about $1.1 million and disburse $1.4 million to creditors to receive the same amount in fees that Cox is seeking, Jones said.

Such a formula would "result in payments that overcompensate the first trustee and undercompensate the second trustee," she wrote. Both trustees will receive fees on a prorated basis at the conclusion of the case, she said.

As various issues have been resolved through the courts, the Turner estate has sometimes collected assets and sometimes has been ordered to pay various fees and debts.

Also pending in Bankruptcy Court is a request for fees of $105,397 by Lain, Faulkner and Co., an accounting firm in Dallas. The company worked from August 2015 through last March on a forensic audit of Turner Grain's finances.

Rice recommended approval of the amount but asked, because of the lack of money in Turner's estate, that he be allowed to pay it installments.

The firm also asked for $2,161 in expenses, including those incurred on two trips to Little Rock. The cost of meals on those trips, $69.07, were for stops at a Chick-fil-A at Love Field in Dallas, a TGI Fridays in Dallas and Little Rock meals at Burger King, Cotham's in the City and Boston's Restaurant. Overnight stays were at a Holiday Inn Express.

Business on 05/26/2017

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