State, federal officials tight-lipped on millions in loans to failed grain mill

By Rob Port | Watchdog.org North Dakota Bureau

BISMARCK, N.D. — A heavily subsidized grain mill will cost North Dakota taxpayers nearly a million dollars out of a state indemnity fund, but the picture isn’t clear about millions more in taxpayer-backed loans.

Last year the North Dakota Public Service Commission filed insolvency charges against Earth Harvest Mills, a grain mill operation specializing in organic products located near Harvey. Last week, the commission voted on those charges, approving $948,952.69 in payments to grain producers who had more than $2.4 million in unpaid claims.

Payments out of the indemnity fund are 80 percent of claims ruled to be valid, up to a $280,000 cap. The payment to Earth Harvest Mills claimants drew the state indemnity fund balance down to $4.5 million. When the balance dips below $3 million, a tax on grain producers kicks in to replenish the fund.

“It’s been kind of a painful process,” Commissioner Randy Christmann said during the hearing on the payouts.

The situation “underscores the importance of producers … knowing who they’re doing business with,” Commissioner Julie Fedorchak said.

The hit to the state’s indemnity fund isn’t the only pocketbook pain for taxpayers from Earth Harvest Mills. Since 2003, the company has received two federal loans and four state loans totaling nearly $11.4 million, and the agencies that are backing those loans don’t seem eager to talk about them.

Earth Harvest Mills has repaid three loans backed by the North Dakota Development Fund and issued through the National Bank of Harvey:

• A $50,000 loan in 2003
• A $330,000 loan in 2005
• A $209,665 loan in 2007

In 2009, a fourth loan was issued for $2.25 million and according to NDDF CEO Dean Reese, who only returned calls to Watchdog after North Dakota’s open records laws were invoked, approximately $2.1 million is left to pay on that loan. In May 2013, Reese had refused to put a number to the loan’s outstanding balance, citing 10-30.5-07 of the North Dakota Century Code, which allows his organization, a corporation created by the state, to keep the payoff information secret.

“We’re progressing on it,” Reese said of the situation. “Things are moving in a positive direction.”

According to Reese, Earth Harvest Mills is still operating, but not under the previous ownership. He says the NDDF is in negotiations with the new ownership to take over responsibility of the loan, but wouldn’t divulge specifics.

“We hope to have a resolution on this situation in the next 60 days,” he said.

The status of two other taxpayer-backed loans issued through the U. S. Department of Agriculture’s Rural Development Office in North Dakota is unknown. In response to a request for information made last week by Watchdog, Rural Development Director Jasper Schneider emailed a letter indicating the need for a formal decision on the request.

“In accordance with Executive Order 12,600, Rural Development is required to notify submitters of commercial and financial information when it receives a FOIA request for records they have submitted to the Government,” the letter states. “We expect to hear from the business submitters by April 16 2014, and a decision on your request will be forthcoming.”

Such formalities previously weren’t required.

In May 2013, spokeswoman Debra Steinwand, who works under Schneider, confirmed the existence of two outstanding federal-backed loans totaling $8.4 million. When asked at the time about the payoff amounts on those loans, Steinwand directed the question to the National Bank of Harvey, stating the USDA doesn’t maintain that information.

Bob Herrington, CEO of the National Bank of Harvey, declined at the time to provide the payoff amounts or even acknowledge their existence despite the fact the loans had been announced in a USDA press release.

Contact Rob Port at rport@watchdog.org