We’re bringing you the latest chapter in an Eye on KELOLAND investigation into a failed grain elevator business. Last summer when the state shut down H & I Grain,more than 60 farmers were out an estimated $8 million.
The elevator was required to post a $400,000 bond to protect customers from those kinds of losses.
Now farmers are finding out if they’ll get even a tiny fraction of their money back.
Frank Virchow has been farming his family’s homestead or forty years. He says there were signs of financial problems at H & I Grain over the last few years.
“We just trusted. We called Duane and asked him, ‘Do I dare haul this grain in? How are things? Because we’ve got money we have not paid on that we’ve asked for. Oh I’m doing fine, Frank, we’re solvent.’” Virchow said.
But H & I Grain was far from solvent. The bottom had fallen out for the company back in July of 2016, after Duane’s son, Jared Steffensen, lost somewhere between $6 million to $10 million of H & I Grain’s money hedging commodities.
While H & I Grain’s bond was only $400,000, farmers like Virchow turned in claims for their losses.
“$10,376, $11, 631, $125,820.33, and $77, 285.71, Virchow reads from the bond claimant list.
Angela Kennecke: When you read those numbers out loud, how do you feel about that?
Virchow: I feel like I really got hung out.
Virchow says in all he’s out nearly three-quarters of a million dollars in the whole ordeal.
Angela Kennecke: Can you afford to lose $750,000 or more?
Virchow: Nobody can!
While most of Virchow’s losses are not covered by the bond because he agreed to set a price for his grain at a later date, he figured some would qualify for bond money.
But he was wrong.
“I can show contracts, where we had actual grain contracts that show up on here; that we’re not even getting the chance at the bond on it and I don’t understand why,” Virchow said.
The PUC is proposing four options for farmers who may be eligible to split up the $400,000. In all of them, except for one, Virchow wouldn’t get a dime. The most he’d get $18,000 if commissioners chose the last option.
“Ain’t worth nothing to me the way it looks–worthless”, Virchow said.
“If he feels that his sale is not pursuant to a voluntary credit sale and should be eligible for bond coverage and if anybody else feels that way, then they should submit that information to the commission,” PUC Attorney Kristen Edwards said.
Virchow believes the PUC should have shut down H & I Grain long before it did.
“I feel the PUC has let us down all the way through this whole process. I really do,” Virchow said.
“The PUC did everything within their power to properly audit and evaluate this facility; however certain information was deliberately concealed,” Edwards said.
Farmers around here say it’s time for the Public Utilities Commission to make some changes to better protect them when a grain elevator goes under.
“We’re not being protected by the State of South Dakota and we’re not being protected by the bond,” Virchow said.
On April 3 the Public Utilities Commission will hold a hearing over the proposed options for dispersing the bond money.
Other states have set up a grain insurance fund for when this happens.
It would take legislative action for that in South Dakota.
Meanwhile the 26 farmers suing H & I Grain will be in court next month.
And the Kingsbury County State’s Attorney tells me the investigation continues into owners for possible criminal charges.
The grain elevators are now under new ownership.