New documents from the bankruptcy proceeedings concerning the Veblen East industrial dairy in northeast South Dakota shed light on the machinations Richard Millner and the former owners of Veblen East undertook last fall in their failed attempt to cling to the giant, polluting feedlot.
Vista Family Dairies, the front LLC created by Millner and fellow stakeholders to bid for the dairy they bankrupted, applied to bankruptcy court Friday for reimbursement of $500,000 in administrative expenses. Here's their story, as pieced together from the application and supporting affidavits from Richard Millner and business partner Jeff Topp:
Veblen East bankruptcy trustee Lee Ann Pierce submitted a motion on September 3, 2010, to auction off the dairy. The court set the auction date for September 15 and allowed the following conditions:
In order to bid, a potential bidder must: . . . deliver to the Trustee . . . a certified check or cashier's check in the amount of $500,000.00 as earnest money. . . . In the event Buyer shall not complete the purchase as herein agreed, Buyer shall forfeit the earnest money as liquidated damages, or the Trustee may, at her option, take legal action to assure the performance of the Buyer. The bid of the second highest bidder shall be considered the "back-up bid" and shall be considered irrevocable. The Trustee shall retain the "back-up" bidder's earnest money until the closing. In the event the Trustee is unable to close the sale or in the event the Buyer is unable to obtain proper DENR and county permitting and zoning within the time period permitted for closing the earnest monies shall be returned to the bidder.
Millner says Trustee Pierce alerted him to her intent to auction the dairy in late August. He says he "recognized a business opportunity" and swung into action, forming Vista to bid on the dairy. He also started a big push to build up a silage pile at his other company, Prairie Ridge Management, to feed the cattle if the bid succeeded. Vista partners Jeff Topp and Robert Jameson financed $1.25 million worth of the new silage pile (see Topp's affidavit); Vista partner Wayne Viessman (remember that name) financed another $1.25 million.
Millner says the Vista effort was motivated in part by creditor AgStar's promise not to bid up Veblen East. Millner contends that between the time Trustee Pierce notified him of the intent to auction and her filing of the motion for auction, the minimum bid was raised from $13.5 million to $16 million. To make matters worse for Vista, Millner contends that two days before the auction, Trustee Pierce imposed on Vista a requirement that Prairie Ridge offer a purchase option on the silage pile to the successful bidder, whether it was Vista or a competitor. Millner contends that making this option a precondition for allowing Vista to bid removed the clear business advantage Vista had created for itself with its silage planning.
Auction day came, and Vista prevailed with a bid of $21.3 million: $17.3 million for the real estate, $4 million ($800 per head) for the cows. Then Vista found out that AgStar had backed Whetstone Valley Dairy's second-place bid. Millner also learned that Trustee Pierce let Whetstone withdraw its backup bid and returned its $500K earnest money. Millner says these secret dealings caused Vista's financier, Cargill, to back out of financing the real estate. (Millner does not address whether Cargill's withdrawal might have been influenced by DENR's refusal to issue a manure permit to any operation with Millner involved in management.) Millner says, "Vista was unsuccessful in procuring the alternative financing in the short time available"---i.e., by the December 1 deadline imposed by Trustee Pierce.
Millner thus contends that Vista is entitled to the return of its $500,000 bid deposit and "such other further relief as this Court deems appropriate."
Millner seems to be working far too hard to convince the court that he and his partners should get their half-million back. Accusations of sneaky financial deals, along with an amusing level of pot calling kettle black, seem to skirt the exact legal language in the bid conditions. It seems it would be simpler for Millner to point to DENR's refusal to issue him a permit. Trustee Pierce's conditions appear to make clear that such a denial warrants return of the earnest money to the bidder.
But such are the sworn statements from Millner, Topp, and their shell company Vista. Now for some idle speculation:
I mentioned Wayne Viessman above. He was in for $1.25 million on that silage pile. Did the Veblen East/Vista stakeholders put up $2.5 million worth of silage last September? Or was that $2.5 million simply the total commitment Viessman, Topp, and Jameson were willing to make to build up that pile at Prairie Ridge Management and support the bid?
And if PRM did not top off that silage pile, could any of that remaining financial commitment from Viessman have formed the basis for the acquisition of the Ramona dairy eight miles up the road from my house by Lake County Dairy LLC, which is based at Wayne Viessman's business address in Gary?
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- Vista's application for $500,000 in administrative expenses
- Richard Millner's affidavit (keep your hanky handy; it's a tearjerker!)
- Jeff Topp's affidavit