By CRISTINA JANNEY
Derek Stockman’s farming and ranching operation has been brought to a standstill. He sold 41 heifers at the Plainville Livestock Commission on Feb. 5, but his check for almost $37,000 bounced.
Stockman of Kirwin only recently expanded his farming operation into cattle. He is now unable to make his FSA loan payments, nor is he able to get his operating loan for the coming year guaranteed.
“The bills don’t stop coming in,” Stockman said.
Stockman is one of more than 40 livestock producers in the area that have been caught up in legal action and bankruptcy of Plainville Livestock Commission, operated by Tyler Gillum. This is just the latest in a series of financial problems and federal regulation violations faced by the market agency.
“Everybody says you’ll get your money, but I don’t know. When is that going to happen?” Stockman asked. “Are they going to pay my interest or are they going to give my commission back? I doubt it.”
In the meantime, Stockman is working with FSA to get his loan payments deferred.
Although several producers said they had heard rumors there were problems at Plainville, Stockman said he was blindsided when he received his check back from the bank.
On Feb. 12, Almena Bank froze two of Plainville Livestock Auction’s bank accounts. When the bank froze the accounts, ——-tens of thousands of checks——– Gillum had written to area ranchers who had recently sold cattle at the Plainville Livestock Commission bounced.
In court filings, the bank noted Gillum transferred more than $916,000 from the Plainville Livestock Commission’s custodial account into its general operating account its officers believed to cover overdrafts in the general operating account.
Almena Bank has filed an interpleader case, which is legal action that seeks to determine to whom the money that was transferred out of the custodial account belongs.
When a market agency sells livestock, the money collected from the buyers is supposed to be deposited in a custodial account until the sellers are paid. The funds collected during sale have to be deposited into the account by the next business day.
Regulations prohibit market agencies from using the proceeds from the sale of livestock sold on a commission basis for any purpose other than paying consignors the net proceeds from the sale of their livestock, after deducting the market’s lawful charges.
This is not the first time Gillum’s operation had been caught with insufficient funds in his custodial account.
Plainville Livestock Commission was cited by federal court in 2012 and 2014 for not having sufficient funds in its custodial account.
On July 31, 2017, an analysis Plainville’s custodial account showed Plainville had outstanding checks drawn on its custodial account in the amount of $9,641,594. The custodial account had a balance of $45,928 with proceeds receivable of $46,615, resulting in a custodial account shortage of $9,549,050.
Between March 2018 and May 2018, Gillum issued 33 insufficient funds checks from its custodial account totaling more than $1.25 million. The checks were paid, but were paid up to two weeks late, resulting in $1,500 in overdraft fees and $775 in returned item fees on the custodial account.
The U.S. Attorney filed another case in July 2018 in which it stated Plainville Livestock Commission failed on numerous occasions to maintain funds in its custodial account. Gillum was fined $117,750.
In addition to the interpleader case, Almena bank also attempted to foreclose on Gillum based on default of three loans totaling more than $3.49 million.
The bank alleged in court documents Gillum was trying to dispose of assets that he had designated as collateral on the loans.
The stockyard is still operating in Plainville as Heartland Regional Stockyards under a license held by Ll0yd and Judy Schneider. The Hays Post tried to contact the Schneider, but received no answer at the stockyard.
Plainville Livestock Commission filed for Chapter 11 bankruptcy on March 1. Chapter 11 is usually used to restructure debt and pay creditors off over time.
Gillum’s attorney in the bankruptcy case, Thomas Gilman of the Hinkel Law Firm in Wichita, said Gillum hopes to sell the assets of Plainville Livestock Commission as part of the Chapter 11 bankruptcy debt restructure.
Gilman said Almena Bank’s foreclosure case against Plainville will be stayed until the bankruptcy case is heard in U.S. District Court in Wichita. The hearing on that case is set for April 11.
The Hays Post reached out to the attorneys for the Almena Bank, but a phone call was not returned.
Gilman said he was unsure what the procedures will be for repayment of producers who were owed money from Plainville Livestock Commission’s custodial account. He said he is not representing him in that matter nor any matters pertaining to any potential complaints filed by the U.S. Attorney in regards to violations of USDA Packers and Stockyards regulations.
As a complex legal battle plays out in court, producers like Stockman and others owed money by the operations are trying to hang on.
Larry Dinkel, owner of Jim Mitten Trucking of Oakley, hauled cattle to Plainville Livestock Commission. He has already paid employees, but he can’t go on indefinitely without what he is owed.
In addition to being short of what he was owed from Gillum’s last sale, because of the scandal fewer are taking cattle to the stockyard under the new operators, which means lost business for his trucking company.
“We used to haul several loads in and out of there every week, and now I don’t haul anything in and out of there” he said, “because the customers are not going back.”
Dinkel blames, in part, federal regulators, who allowed Gillum to continue to operate despite repeated financial regulation violations.
“Had they done their job, none of us would be in this mess right now,” he said.
Stockman said he also hoped federal regulators would take action.
“I don’t think anyone should have to go through this,” he said. “We farmers go through enough trouble throughout the year to put in a full year’s work and not get paid for a full year’s work. It is nothing anyone should have to go through.
“It shouldn’t ever happen. Whoever is guilty, I feel they should make an example of him, so this doesn’t happen again.”