Vista Bid Falls Apart: AgStar Taking Both Veblen Dairies

It looks as if AgStar Financial Services will wrest both of Veblen, South Dakota's bankrupt mega-dairies away from serial polluter Richard Millner and his fellow investors. Vista Family Dairies, a front group formed by Richard Millner and other Veblen West dairy partners to keep the dairies in their hands, has declared it will not follow through on the $21.3 million bid it made in September to buy Veblen East.

Veblen East Dairy

According to a motion filed yesterday (U.S. Bankruptcy Court of South Dakota, Case 10-10146, Document 259) by Chapter 11 bankruptcy trustee Lee Ann Pierce, Whetstone Valley Dairy withdrew its backup bid on October 28. That means the the only bidder left at the table is AgStar's Veblen East Dairy Acquisition LLC, which submitted a credit bid for the minimum $16 million for the facility and $800 per cow.

Pierce's motion gives creditors until December 30 to file objections to the sale to AgStar.

Pierce's motion notes that Vista Family Dairy's attempted acquisition was not hampered by regulators. Marshall County granted Vista its conditional use permit on October 19, and the state Department of Environment and Natural Resources granted the manure permit on December 3. The latter is particularly interesting, given that DENR had said on November 10 that it would grant no permit to Vista as long as Richard Millner had anything to do with permit-compliance decisions.

Taking DENR at its word, I assume that Vista Family Dairy had to tell Millner he was out of the power structure. And as I let my speculation run riot, I can imagine that, without Millner the dealmaker able to keep his hands in the pot, whatever investors he'd cobbled together to float Vista's bid fell apart.

Veblen West Dairy

Millner and his gang already lost Veblen West to AgStar after failing to raise enough money for a viable bid on Veblen West last month. Now AgStar appears on its way to closing on both mega-dairies.

If the DENR, the South Dakota economic development honchos, and area farmers are paying attention, we can hope AgStar's acquisitions will mean Rick Millner is done dirtying the South Dakota dairy industry for good.

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Bonus Evidence: In upholding its denial of a permit for the Dairy Dozen's Excel Dairy in Thief River Falls, Minnesota, the Minnesota Pollution Control Agency reiterates Millner's lengthy record of environmental violations at every dairy he's run. For the record, here's what MPCA says about Millner's Veblen dairies:

102. Veblen East Dairy is an 8,176 head dairy facility that consists of six total confinement barns and eight manure storage basins. Veblen West Dairy, previously known as MCC Dairy, is a 5,500 head dairy facility that consists of five total confinement barns and five manure storage basins. Rick Millner is the managing partner for the entity that owns both facilities. On October 23, 2009, the South Dakota Department of Environment and Natural Resources (South Dakota DENR) issued a Notice of Violation, Order, and Settlement Agreement.

103. On July 10, 2008, the South Dakota DENR inspected both Veblen East and Veblen West Dairies. During the inspection, it was noted that the basins at Veblen West were at their maximum operating level, and the basins at Veblen East were below the maximum operating level. On July 18, 2008, the South Dakota DENR approved the transfer of ten million gallons of manure from Veblen West to Veblen East. This manure was to be land applied in the fall of 2008 prior to soil freeze, and the South Dakota DENR was to be notified when this was complete. A notification was not received.

104. In April 2009, the South Dakota DENR received notification from the facilities that the basins at both Veblen East and Veblen West Dairies were above the maximum operating level and into the freeboard of the basins. This was confirmed during a May 6, 2009, site inspection by the South Dakota DENR. On May 20, 2009, Rick Millner contacted the South Dakota DENR to inform them that high winds were causing manure spray to blow over the berms of the north basins and that a line of straw bales was erected to keep the spray from leaving the basins. Various correspondence and inspections in the months of June, July, and August indicated that the basins at both Veblen East and Veblen West were above the maximum operating levels and into the freeboard.

105. The Order, issued October 23, 2009, and amended in March 2010, required both dairies to complete a number of requirements, summarized below, to bring the facilities back into compliance:

1. As soon as possible, remove a sufficient amount of manure to return them to compliance with the freeboard requirements. The Order went on to require the removal of manure from all basins to have no more than one foot of residual material remaining by November 1, 2009. The lowering of the liquid levels in the basins at Veblen West did not happen until December 7, 2009. This lowering of the levels was not sufficient to comply with the October 23, 2009, Order (no more than one foot of manure) but was sufficient to bring the basins back into compliance with the freeboard requirements. Similarly, the lowering of the liquid levels in the basins at Veblen East did not happen until November 23, 2009. This lowering of the levels was not sufficient to comply with the October 23, 2009, Order (no more than one foot of manure) but was sufficient to bring the basins back into compliance with the freeboard requirements.
2. Submit calculations and schedules that demonstrated that the remaining storage capacity within the basins at each facility, after the fall of 2009 pump-down, was sufficient to provide 270 days worth of storage. Sufficient calculations and schedules were never received by the South Dakota DENR. Consequently, the South Dakota DENR concluded that the volume remaining after the fall of 2009 pump-down was not sufficient to provide 270 days of storage.
3. By November 1, 2009, submit an emergency response plan for each of the facilities to identify procedures to be followed in the event of a spill or release. The South Dakota DENR did receive a plan, but it was not sufficient to comply with the specific requirements of the Order. The South Dakota DENR has not yet received sufficient plans.
4. Submit a design report that uses actual water usage and system operation for each facility to assess if the manure management system capacity meets the requirements of the South Dakota General NPDES Permit (270 days of storage). The South Dakota DENR has not received an adequate report to address this issue.

106. On November 17, 2009, the South Dakota DENR performed inspections of Veblen East and Veblen West and also conducted water sampling within the Little Minnesota River (headwaters of the Minnesota River) at areas were there was evidence that discharges had occurred from both dairies. The discharge from Veblen East appeared to reach an unnamed wetland; water sampling confirmed that manure did indeed reach this wetland. Neither of the dairies reported the discharges to the South Dakota DENR as required.

107. Inspections on November 17, 2009, and January 8, 2010, at both facilities revealed that depth markers (designed to clearly identify the maximum operating levels of the ponds) were missing or were broken off.

108. Inspections on July 10, 2008, and January 12, 2010, at Veblen West and December 7, 2009, and January 8, 2010, at Veblen East noted stockpiles of used sand and manure solids in areas not authorized by the permits for the facilities.

109. Inspections on January 8, 2010, and January 12, 2010, at Veblen West and January 8, 2010, at Veblen East indicated that manure application had taken place to fields not identified within the approved manure management plans for the dairies. Also, both dairies had insufficient records of land application dating back to 2008 and including all of 2009.

110. The MPCA has also received complaints about and photos of these facilities, specifically regarding the lack of freeboard, potential for overflow, and pollution resulting from improper land application of manure. The MPCA has received these complaints as the facilities sit at the head of the watershed of Big Stone Lake, located at the border of Minnesota (Big Stone County) and South Dakota.

[Minnesota Pollution Control Agency, In the Matter of the Request for Denial of Contested Case Hearing Requests and Denial of Reissuance of NPDES/SDS Permit No. MN0068594 for The Dairy Dozen – Thief River Falls, LLP (Doing Business As: Excel Dairy) Concentrated Animal Feedlot Facility, Excel Township,Marshall County, Minnesota, Findings of Fact, Conclusions of Law, and Order, 2010.12.14]

Hasselstrom: Keep Public Land Available for Healthy Grazing

My friend Larry Kurtz says some wild things on his blog Interested Party and in various comment sections around the South Dakota blogosphere. But he also directs us toward a lot of good reading, like this essay on the importance of protecting public grasslands for grazing. Among other points, South Dakota author and rancher Linda Hasselstrom notes the superiority of grass-fed beef to factory-feedlot beef:

E. coli contamination thrives in feedlots, but grass-fed livestock, including beef, pork, chicken, sheep, elk, deer, antelope and other wild meat animals, is free of this dangerous pathogen. Range cattle roam freely, rarely spending more than a day in one spot. They must be branded to prevent theft and vaccinated against disease, but they are herded only briefly into corrals. Since cows live outside in all weather, their wastes are scattered and broken down by elements and insects. Pastured cattle never stand knee-deep in manure, because cows don't like to eat near feces. That's why, in winter, ranchers scatter supplementary feed onto clean grass. Buyers who cram cattle into feedlots for fattening waste resources and in the process make the animals—and those who dine on them—less healthy [Linda Hasselstrom, "Private Stash," Missoula Independent, 2010.11.25].

Mr. Kurtz also directed my attention, via the Goat Blog, to this really cool interactive map that helps you find which states are producing the most unhealthy feedlot beef, dairy, and pork. In 2007, South Dakota ranked 16th nationwide for feedlot livestock units: 8th in cattle, 20th in dairy, 11th in hogs.

Minnesota Seeks Denial of CAFO Permit for Habitual Polluter

The Minnesota Pollution Control Agency has 111 confined animal feeding operation (CAFO) permits pending. Over the next month, after the standard 30-day public comment period, MPCA intends to approve 110 of them. MPCA has announced its intent to deny reissuance of just one of those CAFO permits.

Who gets skunk eye from MPCA? The New Horizon Dairy LLP of Hoffman, Minnesota. MPCA has dealt with this dairy previously, fining New Horizon $17,400 in 2007 for over-application of manure and use of an unpermitted storage basin.

MPCA now looks at the record of New Horizon and the other dairies connected with its ownership and says they won't get fooled again. You see, New Horizon is another dairy managed by serial lawbreaker and polluter Richard Millner of Veblen, South Dakota.

Speculation: One might look at Millner's horrible, no-good, very bad month and conclude that the regulators, courts, and bankers are piling on. Perhaps they are. Millner has shown a willingness to hire lawyers and mount dogged if sometimes absurd

Say, the press loves a good bloodbath. It remains boggling to me that the South Dakota media have said nothing about the spectacular collapse of Millner's extensive dairy fiefdom. defenses to fend off legal challenges to his dirty business practices. Perhaps MPCA, DENR, AgStar, and everyone else to whom Millner has regularly flipped the litigious bird have been waiting for a moment when Millner's legal resources would be stretched to the limit. This year's bankruptcy proceedings appear to be doing that, and the regulators and others with skin in the game are moving in for a long-overdue kill.

Serial lawbreaker and polluter—that's not just blog hyperbole. That's the conclusion that MPCA supports with this summary of the persistent deception and CAFO permit violations committed at every major dairy Rick Millner has been involved with in the tri-state area. Let MPCA explain (with my occasional emphasis):

...In concurrence with its previous action in the Excel Dairy matter and in accordance with Minn. Stat. § 115.076, the MPCA has preliminarily determined that the applicant has a history of non-compliance with Minnesota rules, statues, and permit conditions. The applicant has a history of routinely modifying feedlot facilities without authorization from the MPCA, allowing discharges to waters of the state, violating the state ambient air quality standards, and noncompliance with permit and administrative order requirements. The MPCA is aware of the applicant’s involvement in seven dairy facilities, past and present, all of which have had various non-compliance issues....

New Horizon Dairy, Grant County, Minnesota:

...A subsequent July 28, 2005, site inspection revealed a discharge to a coulee was occurring during the land application of manure. The manure application rate was 20,000 gallons per acre and the same field had received 18,000 gallons per acre three weeks prior, resulting in over-application of manure nutrients.... Also during the inspection, it was observed that manure had been placed in an unpermitted manure storage structure at the facility as a means of storing excess manure....

Excel Dairy, Marshall County, Minnesota

...In January 2010, the Marshall County District Court issued an injunction against Excel Dairy because Excel Dairy had failed to remove the manure from its basin as its permit required. The injunction required Excel Dairy to remove the manure from the basin as soon as field conditions allowed in the spring of 2010. Excel Dairy has failed to comply with that injunction and has been held in contempt of court for that failure to comply with the injunction.

...When Excel Dairy applied for its 2007 permit, Excel Dairy submitted a narrative Air Emission Plan that stated that Excel Dairy would apply straw to the manure basins to establish and maintain a crust on the basins to control air emissions from the basins. When the MPCA called upon Excel Dairy to comply with the Air Emission Plan Excel Dairy had submitted, Excel Dairy indicated that it had submitted the plan “accidentally” and that it had never truly intended to crust its basins despite what the written plan stated.

...Excel Dairy represented to the MPCA that it would either house 1,104 mature dairy cattle over 1,000 pounds or house a hybrid cow that weighed less than 1,000 pounds so that the facility could stock a total of 1,545 cattle.... [Excel Dairy] instead chose to stock 1,545 cattle over 1,000 pounds at the facility. This would equate to 2,163 animal units, significantly more than allowed in any of the previous permits.

...Excel Dairy has violated Minnesota’s hydrogen sulfide standards hundreds of times since May 2008.... Excel Dairy’s violations have been so severe that the families that live near Excel Dairy have been rendered physically ill by the emissions and have been forced to flee their homes on numerous occasions because of the sickening emissions.

Unnamed Dairy, Roseau County, Minnesota

...Rick Millner operated this facility before abandoning it in 1997. In September 1997, the MPCA staff inspected the abandoned facility and observed manure stockpiles still remaining on site as well as two earthen manure storage structures that still contained manure and were not properly closed.

Lone Tree Dairy, Yellow Medicine County, Minnesota

...In August 2006, the MPCA staff inspected the facility and documented the basin manure level above the basin freeboard limit level and determined that unless immediate basin manure removal and land application occurred, the basin manure level was in danger of breaching the basin’s constructed berm. The MPCA staff also observed that loose soil had been dumped and spread on top of the southeast corner of the basin’s constructed berm in an apparent attempt to prevent basin manure from spilling out the basin’s southeast corner. The MPCA did not approve or issue a permit for this modification of the basin....

Five Star Dairy, Sargent County, North Dakota

In November 2006, the North Dakota Department of Health issued a notice of violation (NOV) to the facility and its managing partner Rick Millner. The NOV stated that Five Star Dairy failed to receive approval from the North Dakota Department of Health prior to constructing a new manure storage pond. Also, Five Star Dairy submitted records that indicated that the facility was stocked with more animals than its permitted capacity of 1,400 head prior to gaining the appropriate approvals....

...Five Star Dairy was once more inspected by the North Dakota Department of Health on October 27, 2009, and, during that inspection, it was observed that the manure storage basins did not have adequate freeboard remaining. Follow-up inspections on November 2 and November 10, 2009, found that the manure storage basins were still above the allowable operating level, and no manure had been removed. A November 19, 2009, site inspection did reveal that some manure had been removed, but the level of manure in the basins remained above the allowable operating level... [Minnesota Pollution Control Agency, Fact Sheet and Public Notice of Intent to Deny the Application for Reissuance of NPDES and SDS Permit for a CAFO Permit to New Horizon Dairy LLP, Hoffman, 2010.11.19]

MPCA also documents Millner's persistent violations of South Dakota environmental regulations and endangerment of the Whetstone Valley/Big Stone Lake watershed with his awful Veblen East and Veblen West dairies, as reported frequently here on the Madville Times.

Seven dairies. Seven dairies. Environmental violations at every one of them.

MPCA counts up the strikes and tells Rick Millner, "You're out!" It's about time. If a state issued a driver's license to a seven-time drunk driver, heads would roll. If a state issued a teaching certificate to a person convicted seven times of child neglect, heads would roll. That a serial offender like Millner has been able to stave off the law this long and pollute his communities for his own profit signals we need tougher enforcement of CAFO rules.

DENR to Vista: No Veblen Dairy Permits with Millner in Charge

The South Dakota Department of Environment and Natural Resources may be about to put one man out of business... permanently.

Richard Millner has managed the giant Veblen West and Veblen East feedlots in northeastern South Dakota for the last couple years. He has also managed dairy operations in North Dakota and Minnesota. His operations have spent most of this year in bankruptcy. His permit to operate Excel Dairy, his confined animal feeding operation near Thief River Falls, Minnesota, was revoked by the Minnesota Pollution Control Agency due to air quality violations so serious that the state advised neighbors of the dairy to evacuate their homes. Last April, the MPCA denied Millner a permit to resume operations at Excel Dairy.

Millner has been battling mightily to cobble together some creative financial plan to reorganize his two Veblen dairies. But operating a dairy with thousands of cows discharging tons of waste each day requires more than capital. It requires a permit from the Department of Environment and Natural Resources. Millner violated the conditions of his permits for both Veblen West and Veblen East in 2009. I checked with DENR and learned that Veblen East met the October 15 deadline for complying with DENR's cleanup order, but that Veblen West did not.

DENR appears to have had enough. In a November 10, 2010, letter, DENR tells Jorden Hill, agent for the "new" company formed by Millner and his partners, that if Millner is involved in any way with management of the reorganized Veblen dairies, they will get no manure permit:

According to legal documentation received from the Minnesota Pollution Control Agency, an NPDES permit issued to Rick Millner for Excel Dairy was revoked by the State of Minnesota because of environmental violations. South Dakota Codified Law 1-40-27 states that an applicant or any officer, director, partner, or resident general manager of a facility for which application has been made is unsuited or unqualified to perform the obligations of a permit holder if the applicant has had any permit revoked under the environmental law of any state or the United States. Therefore, Rick Millner at no point in form or substance can be an applicant, an officer, a director, or resident general manager of Vista Family Dairies and Veblen East Dairy. Rick Millner cannot be the decision maker responsible for compliance with the general permit. The organization chart and the duties and responsibilities of all officers, directors, and managers must reflect this [Jeanne Goodman, Administrator, Surface Water Quality Program, South Dakota Department of Environment and Natural Resources, letter to Jorden Hill, agent, Vista Family Dairies, 2010.11.10; as reproduced in Case 10-10071, Document 474, In re: Veblen West Dairy LLP, U.S. Bankruptcy Court, District of South Dakota, filed 2010.11.12].

The emphasis is in the original. When bureaucrats put things in bold, they mean it.

Millner had a permit revoked in Minnesota. SDCL 1-40-27, a nice little "bad actor" statute, makes the revocation grounds for DENR to deny Millner any environmental permit. As long as DENR believes Millner is the driving force behind the investors trying to retake control of the bankrupt Veblen dairies (and since he signed the disclosure/reorganization plan, that seems logical), DENR can withhold that permit.

Wow. Between DENR and the Department of Revenue, Millner may finally have met his match in South Dakota.
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Read an amended version of the court motion containing the DENR letter cited above.

Today's Farm Report: Messy, Messy, Messy...

Turning to today's agriculture report, here's the news the ag-industrial complex doesn't like to talk about:

• Remember the salmonella outbreak earlier this year caused by Jack DeCoster and his dirty Wright County Egg operation in Iowa? USDA had found all sorts of violations at the Galt, Iowa, facility prior to the outbreak but failed to report them, because "the conditions at the egg plant packing facilities were routine." Filthy, disease-ridden eggs—perfectly normal. Move along.
• Purple water came pouring from the A. J. Bos mega-dairy near Nora, Illinois, in October. Brown I can explain. But purple? An attorney for Bos says EPA has no authority to intervene.
  
• Bos is also opposing further testing of a site for a proposed dairy site near Galena, Illinois.
  
• Meanwhile, the Illinois Livestock Development Group thinks it shouldn't have to follow any regulations: "If I'm operating the way I'm supposed to, what do I need a permit for and why do you need to know who I am?" says ILDG spokesman Nic Anderson. Gee, I don't know, maybe because a single confined animal feeding operation can generate as much sewage as a small city?

The ag-industrial complex seems to think that producing food entitles them to exemption from the rules of civil society. Sorry, fellas: ag is just another business. Every other citizen has to dispose of waste properly: so do you.

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Related: The Independent Local reports that Senators Tester and Hagan are advancing an amendment to the Food Safety Modernization Act to protect small farms and folks who market directly to consumers in farmers markets from legislation that would check the abuses of the ag-industrial complex. Groups who back local food, like the Western Organization of Resource Councils and Dakota Rural Action, as well as the South Dakota Stockgrowers Association, are backing the Tester-Hagan amendment.

Veblen West Dairy Auction Delayed Two More Weeks

In another sign that the bad guys are winning in South Dakota, the bankruptcy auction of the Veblen West Dairy in northeastern South Dakota has been delayed again. Last week Friday, bankruptcy trustee Forrest C. Allred moved and Judge Charles C. Nail agreed to postpone the auction until November 18. Allred moved on behalf of the contending parties, the Veblen West equity owners and financier AgStar, which apparently "have requested and agreed to further time to discuss possible settlement of the matters in question, and consent to this motion" (says Document 461 in the Veblen West bankruptcy case, Allred's motion filed 2010.10.29).

So the main force behind Veblen West, Richard Millner, may be pulling out a victory after all, cobbling together just enough investors and financial tricks to keep the dairy and thousands of head of cattle in his hands. But that also means there's time for anyother investors interested in acquiring a giant feedlot and a few thousand head of cattle at rock-bottom prices still have a chance to make AgStar and the court an offer.

South Dakota Dairy Industry Continues to "Grow"

I guess you can call it growth: South Dakota has more dairy cows producing more milk than it did five years ago. However...

The state’s dairy herd currently stands at 94,000 head, up significantly from its low point of 80,000 head in 2005. The state currently has approximately 400 dairy operations. Ten years ago, South Dakota had about 1,200 dairy operations and a dairy herd of nearly 100,000 [Jerry Nelson, "South Dakota's Dairy Industry Continues to Grow," Dairy Star, 2010.10.25].

Even all the fancy equipment and hormone treatment isn't putting out that much more milk: the Nelson article includes a graph that shows South Dakota's annual milk production is just barely higher than it was in 1983. We may be getting more milk per cow, but those cows are also concentrated into much larger facilities, posing more environmental risk than cows given room to roam.

South Dakota's dairy operations are an example of the real redistribution of wealth that should worry us. In just ten years, the wealth of South Dakota's dairy industry has been redistributed from 1200 independent operators to just 400. That's money and power concentrated in fewer hands... and that's not healthy for the economy or for democracy.

Veblen West Auction May Still Happen Today

I reported yesterday that the bankruptcy liquidation of the Veblen West factory dairy scheduled for today may have been placed on hold by dairy exploiter Rick Millner's latest financial shell game. But new court documents show that today's hearing on the Trustee's motion for liquidation is still on, and the Trustee is arguing for the sale to go forward this afternoon.

I'm poring through a new stack of court documents right now trying to make sense of the situation. Apparently the U.S. Bankruptcy Court of South Dakota got legally spammed yesterday, with a whole batch of nearly identical objections to the auction flooding in. Unfortunately for the objecting parties, they didn't pay attention to the clock. The court's deadline for objections was Thursday noon; all but one of the copycat objections were filed at 2:12 p.m. or later. Trustee Forrest C. Allred thus moves those objections be ruled untimely and thrown out.

Allred also documents shenanigans by the Veblen West equity owners, including Rick Millner, to sabotage the Veblen West auction. Evidently their objection to the sale revolves around the absence of an option for the buyer on silage. Allred says there is an option... or would be if Rick Millner would quit playing games and check his e-mail. The trustee has made concessions to the silage group (Rick Millner and fellow Veblen West owners) and negotiated a silage option, but Millner has persisted in raising the price: he agreed to $35.00 per ton of silage, then hiked his asking price to $45.00, then $49.93. Each time, Allred caved on the price and sent option documents for Millner to sign. Each time, Millner failed to reply. Millner tries to blame his lack of response on not receiving the e-mail attachment on September 13... but he admitted to the trustee yesterday that when he checked his inbox, he found the attachment there after all. Yeah. Right.

Trustee Allred comes to the following conclusion:

The silage group – which is substantially the same as the “Certain Equity Owners” described above, is deliberately refusing to comply with the negotiated option in order to chill bidding, and to delay and block the proposed said. This is particularly inappropriate in light of the fact that one of the Certain Equity Owners’ objections to the sale is that the bidding procedure proposed in the motion will chill bidding [Forrest C. Allred, Trustee, In Re: Veblen West Dairy LLP, Case 10-10071, Document 440, United States Bankruptcy Court, District of South Dakota, 2010.10.07].

The latest tactics from the Veblen West owners smell of obfuscation and obstruction par excellence. Trustee Allred can see through it; let's hope the court does as well.
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Bonus Objection: The untimely objections all include this amusing "come-to-enviro-Jesus" paragraph:

10. The Trustee's Motion to Sell the assets is also inappropriate in that the sale proposes to sell the assets subject to environmental contingencies. This problem should be rememdied prior to the sale in order to maximize the value of the assets.

I want ever so much to look those folks in the eye and say, "No s#!t!"... since really, that's what they're wishing here. Now the creditors realize that Millner's own environmental abuses have wrecked the dairy's sale value and that he ought to be held accountable and forced by DENR to clean up his manure violations.

Update 15:02 CDT: No sale today! An observer in the field reports the silage objection won the day. The trustee will take another swing at Millner's legal armor soon.

Bankrupt Veblen West Owners Plan: Let's Lease It to Ourselves!

The Veblen Dairy shell game continues. Serial dairy wrecker Rick Millner and fourteen partners have filed a 158-page document with bankruptcy court asking for a chance to reorganize his bankrupt Veblen West mega-feedlot. The plan proposes to allow Vista Family Dairies to lease Veblen West Dairy for $140,000 a month for 15 years. It proposes to pay off all secured creditors over time without interest.

The filing also appears to fit Millner's pattern of using legal and financial trickery to squeeze every penny out of his assets and stave off court and state action that would hold him responsible for his bad business practices. Judge Charles L. Nail yesterday ordered a hearing on the Disclosure Statement and Reorganization Plan be held on November 18... which I take it means the filing by Millner and the Veblen West equity holders has successfully put off the bankruptcy liquidation auction, scheduled for tomorrow, for another five weeks.

And it's just a shell game. Compare the members of the petitioning Veblen West Dairy equity holders with the members of Vista Family Dairies, as listed in the Disclosure Statement and Reorganization Plan:

Veblen West Dairy major equity holders	Vista Family Dairy members
Aaron Anderson	Aaron Anderson
Duayne Baldwin
Jay Hill	Jay Hill
Jordan Hill	Jordan Hill
Rick Millner	Rick Millner
Denny Pherson	Dennis Pherson
David Viessman	David Viessman
Doug Viessman	Doug Viessman
Randy Viessman	Randy Viessman
Terry Viessman	Terry Viessman
Wayne Viessman	Wayne Viessman
Mark Wyum	Mark Wyum
Michael Wyum	Michael Wyum
Steve Wyum
Wyum Trust
	Robert Jameson
	Jeff Topp

Comparison of Veblen West Dairy equity owners
with Vista Family Dairies members
(Duayne! Steve! Why hold back?)

Somehow the court is willing to entertain the idea that the major owners of a bankrupt dairy should be able to lease that failed operation back to themselves... and be able to refinance their loans for longer terms and a lower interest rate.

What's this shell game about? Here's my read from the outside:

1. Rick Millner was able to get his buddies together to form Vista Family Dairies and float the capital to buy back Veblen East and its cattle outright for $23.1 million.
2. Millner's pals are now tapped out and can't come up with the additional $8.7 million to make a minimum bid for Veblen West.
3. Millner thus needs to put the bankruptcy auction on hold while he hustles more investors to back his scheme. Thus, the "lease it to ourselves!" plan.

And all this keeps the dairy in Millner's hands and keeps him from paying the price for his literally dirty business practices.

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The Disclosure Statement includes some other howlers:

1. True to form, Millner blames everyone but himself for Veblen West's troubles. He blames the AgStar receiver for cutting business relationships (including some of the convoluted, boundary-blurring dealings with Millner's affiliate operations in the neighborhood). He blames market conditions and the weather. What ever happened to the capitalist ethos of personal resposnibility?
   
2. Rick Millner stepped down as Veblen West managing partner in May 2010 to assuage concerns about conflicts of interest. But Millner's partners appointed Michael Wyum in his place. Wyum kept Millner's Prairie Ridge Management as Veblen West's contract manager. Wyum was also Millner's partner in the still-contested shell game that turned MCC Dairy into Veblen West.
   
3. During an evidentiary hearing in May, Cargill animal nutrition consultant Ian Woods "testified that the conditions at Veblen West are 'excellent.'"
4. The equity owners declare their belief that Veblen West Dairy "is an industry leader, is well-managed, and was operating a clean, orderly and productive dairy operation."
   

Bankruptcy Trustee Moves for Veblen West Dairy Auction

The other shoe drops in the Veblen manure pile: bankruptcy trustee Forrest C. Allred filed a motion for sale of the bankrupt Veblen West Dairy in U.S. Bankruptcy Court yesterday. Judge Charles L. Nail granted the motion to set the auction date for October 8. That's next Friday. Any objections must be filed by next week Thursday and will be heard by Judge Nail the same day right before the proposed auction.

Bankruptcy receiver AgStar and Madville Times readers knew this was coming. So do Veblen East bankruptcy-sale purchasers Vista Family Dairies: that new corporation, formed this month by partners of former Veblen East and West owner Richard Millner, is included in the parties served notice of the motion for sale.

Buyers beware: if you place the winning bid for this 137-acre, three-site mega-dairy, you will assume full responsibility for fulfilling the obligations set forth in an order from the South Dakota Department of Environment and Natural Resources requiring the reduction of manure levels in the dairy lagoons to legal levels. Here's how Trustee Allred's motion explains the situation:

Debtor is subject to an administrative order requiring it to have 270 days of capacity in its lagoons by October 15. Debtor has been pumping manure in accordance with its normal practice. While Debtor expects to comply with the administrative order, the Trustee cannot and does not guarantee Debtor will achieve compliance, and there is risk of non-compliance. Failure of Debtor to meet this deadline could result in significant curtailment, or even cessation, of Debtor’s normal operating activities. The successful bidder shall be fully responsible and liable for all work, equipment, costs and expenses, including manure removal, required to fully comply with the Compliance Agreement captioned “In re the Matter of Veblen West Dairy, LLP Violating Their General Water Pollution Control Permit for Concentrated Animal Feeding Operations” dated April 1, 2010, as well as any and all other regulatory compliance matters. Prospective buyers may obtain a copy of the Compliance Agreement upon request from the Trustee. The successful bidder assumes, at closing, all responsibility and will be liable for all environmental issues related to the dairy [emphasis mine; Forrest C. Allred, Motion to Sell Free and Clear of Liens by In-Court Auction, In Re: Veblen West Dairy LLP, United States Bankruptcy Court, District of South Dakota, Case 10-10071, Document 392, 2010.09.27].

In other words, if you buy Veblen West on October 8, you have seven days to measure just how much crap Rick Millner has saddled you with and get rid of it, on your dime, over and above the price you pay (minimum bid: $8.7 million) to acquire this operation.

To double your exciting market uncertainty, you also don't find out how many cows you're buying until after the auction. The motion says the Debtor owns 3700 head of cattle, but they constantly move from dairy to dairy, and there's no way to set a firm number before the auction. (Sounds like a convenient way to hide assets from bankruptcy court, don't you think?) You at least get to bid per head (minimum opener: $800), but you don't get a complete inventory until after the sale. You also get to pay for any disease testing on the cattle you buy.

To review: put up $8.7 million, plus $800 per head, and you can take possession of Veblen West Dairy, which may or may not be in compliance with environmental rules, may or may not have a feasible number of cattle in its inventory, and may or may not have sick cattle, none of which you'll be able to find out until you assume liability for the operation.

My dairy experience is limited to milk on my Toasty-O's, but am I wrong in concluding that Veblen West sounds like a really, really bad investment?

If you are considering bidding for the Veblen West Dairy, read the DENR order. Read the history of this environmental and financial mess. Then think long and hard about whether you want to put any money into this financially and morally bankrupt operation.
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Update 2010.09.30: The impending Veblen West Dairy auction gets a little press from North Dakota television. South Dakota press still AWOL....

Press AWOL on Huge Veblen Dairy Bankruptcy Sale

Last week David Newquist said the traditional press just doesn't have the time or motivation to cover agriculture. Here's support for that contention: I'm hearing from my sources that the bankruptcy auction to liquidate the environmental atrocity known as Veblen East went forward last week. The buyer, "Vista Family Dairies LLC," apparently bid $21,300,000: $800 for each of 5000 head of cattle and $17,300,000 for the facility. That's the minimum requested bid for the cattle and $1,300,000 more than the minimum requested bid for the facility. The bid is also less than half the $50 million Veblen East cost to build.

No information for Vista Family Dairies LLC is available online, not even corporate papers or fictitious name registration on the Secretary of State's website... and if I'm reading state statute correctly, Vista Family Dairies LLC needs to have such papers filed before conducting business like bidding in a bankruptcy auction.

Vista Family Dairies is likely not the happy family operation its name implies. I'm betting it's Veblen East owner Rick Millner, who is surely scurrying around northeastern South Dakota and beyond trying to find investors who don't know his history of fleecing business partners, stiffing suppliers, and driving dairy operations into the ground through bad business and environmental practices.

And those potential investors won't know the history of either Millner or Veblen East because the local media haven't covered it. In all my blogging about Richard Millner's troubled dairy operations, I have relied on primary source, court documents, and AgWeek. Emily Arthur-Richardt of the Aberdeen American News did a good job in 2007 on the story of the Veblen East Dairy getting built with money from rich foreigners buying their way to the front of the line for green cards. However, on Millner's environmental violations and bankruptcy, the South Dakota press has been mostly silent. (Readers, you are welcome to submit links and articles to prove my memory faulty!)

By one account, polluting Veblen East and its bankrupt twin dairy Veblen West make up 15% of South Dakota's dairy industry. If a hospital or credit card call center that made up 15% of its industry in this state polluted the neighboring watershed, went broke, and was auctioned off to a mystery LLC, the media would be covering it... wouldn't they?

The Veblen East auction and pending Veblen West bankruptcy activity are big financial and environmental news. On this important story, the professional press are AWOL.

Bankruptcy Trustee Asks to Liquidate Veblen East Dairy

The environmental atrocity known as Veblen East Dairy may be headed for the auction block. In motions filed in South Dakota's federal bankruptcy court last Friday, Chapter 11 Lee Ann Pierce requests authority to put the whole kit and kaboodle up for sale. Pierce's motion describes the property to be liquidated as follows:

Veblen East Dairy is located at 10530 448th Avenue in Veblen, South Dakota. The dairy was constructed during 2007 and 2008 with a capacity for approximately 8,100 cows consisting of both milking cows and transition facilities (calving/freshening) for its own operations and transition capacity for affiliate dairies, which could continue to be used in that manner or be converted into free stall space. It began operation in early 2008. There are two main barns, each with 2528 stalls and 3181 lockups/spaces. The barns are 16 row barns with cross ventilation, cool cells, and sand bedding. There is a milk center that houses two parlors, each parlor a double 30 parallel parlor. This building houses a water system room with filtration and softeners, chemical room, equipment room, milk room, and a milk load out room. The load out room can accommodate six semi tanker trucks in six bays, (three on each side of the building), with three 12X14 overhead doors on each end of the building for drive through capabilities. Attached to the milk center is a 740 stall barn. The fourth barn is a 6 row barn with 657 stalls. In between Barn 2 and Barn 4 is the hospital barn with a double 10 milking parlor (exception parlor) with calf pens, sick pens and birthing pens, and loadout facilities. The manure system includes two sand separating and pumping buildings, manure flumes and reception pits. It utilizes eight earthen manure lagoons, each with a capacity between 14 million gallons to 16 million gallons. Debtor is situated on 200 acres of real property, and there are approximately one million square feet under roof. The herd consists of the following breeds/crossbreeds with approximate percentages as follows: Holstein (2%), Jersey (8%), Montbéliarde (10%), Scandinavian Red (20%) and Holstein-Jersey (“Hojo’s”)(60%). Debtor’s current herd consists of approximately 3,100 lactating cows, 1,300 dry cows, and 600 fresh cows. The dairy employs approximately 74 people [In Re: Veblen East Dairy Limited Partnership, Motion for Order Authorizing Sale..., Case 10-10146, Document 186, United States Bankruptcy Court, District of South Dakota, filed 2010.09.03].

Pierce now pegs Veblen East's debt to AgStar Financial at $42,236,160 and says liquidation of all collateral will bring "substantially less" than that amount.

What exactly would Pierce sell? Everything:

1. all real estate owned by the Debtor and as legally described in this motion. The sale of the real estate includes all land, buildings, land improvements (including, without limitation, any parking lot pavement, parking stops, traffic signs, sidewalks, driveways, fences, gates, exterior lights, tanks, alarm systems and signage structures owned by Debtor), and any and all beneficial easements, rights and licenses which are appurtenant to such real estate.
2. all furniture, fixtures, equipment, machinery, computers, hardware and software, telephones, vehicles, trailers and other tangible personal property owned by the Debtor including but not limited to those items of personal property set forth on Exhibit A. Any assets in which a creditor holds a purchase money security interest will not be sold as part of this transaction. A list of the assets of which the Trustee is aware that there is an issue with a purchase money security interest is included in paragraph 14 of this motion.
3. all milk cows, dry cows, calves and heifers. The Trustee estimates that approximately 5,000 cows will be available to be sold as part of this transaction.
4. all inventory, raw materials and supplies of the dairy, including feed, drugs and hay including any rights the Debtor has to silage located at New Horizon Dairy or Five Star Dairy. Any milk inventory located at the dairy on the date of closing will be included in the sale to the Buyer.
5. all rights of the Debtor under any warranty or guarantee by any manufacturer, supplier or other transferor of the purchased assets of the Debtor.
6. Debtor’s intellectual property rights to technology, licenses, construction or plans, drawings, memos, blueprints, and other work product of consultants or architects, telephone numbers, telecopy numbers and e-mail addresses and listings relating to the dairy.
7. to the extent legally transferable, all permits, licenses and approvals received from any governmental entity for the Debtor;
8. all leasehold improvements, signage and prepaid deposits;
9. all rights, claims and causes of action of Debtor against third parties relative to the purchased assets and the proceeds thereof, excluding avoidance claims, tort claims against Veblen East Dairy Limited Partnership’s current and former officers and directors, partners, and claims giving rise to Debtor’s rights of set off with respect to its creditors. Avoidance claims means any and all claims or causes of action under Chapter 5 of the Bankruptcy Code. The right to prosecute avoidance claims will be retained by the Trustee [Document 186, 2010.09.03].

The motion sets initial bid for the property at $16 million and initial bids for cattle at $800 per cow.

Now if you're just itching to bid on some big manure lagoons, keep in mind that this CAFO has a history of environmental violations. If you buy the dairy, you also buy liability for complying with all environmental clean-up. According to a previous filing in this case, it will be nearly impossible to clean up that mess and satisfy the May 3 Complaince Agreement with the Department of Environment and Natural Resources without shutting down the dairy and removing the cattle from the premises.

As an added bonus, the buyer will have to satisfy the terms of a lawsuit settled by Rick Millner and company with Sunflour Railroad. Apparently when Veblen East took dirt and fill from Sunflour's railbed to build its sewage lagoons and encroached on the railroad's right-of-way. The debtor will still pay the $175,000 settlement to Sunflour, but if you buy the dairy, you will have the pleasure of reworking the lagoons to restore Sunflour's right-of-way, removing contamination from Sunflour's right-of-way, and build and maintain three new manure pipe crossings under the railbed.

Wow—the Sunflour settlement is just more evidence that Rick Millner can't do business without crapping on his neighbors.

Note also that the Veblen East property is subject to more liens than there letters in the alphabet. These liens include unpaid 2009 (due 2010) property taxes of $115,517.34. That doesn't sound like the kind of business venture I'd touch with a ten-foot lawyer. Millner essentially has driven this big dairy dream into the dirt.

Again, the debtor has until noon Monday to file objections. After that, we may see one fast, massive ag auction in bankruptcy court.

Veblen East CAFO Owes $45 Million, Can't Clean up Manure

The latest filing in the bankruptcy proceedings for the Veblen East mega-feedlot show just how badly owner Richard Millner has managed the facility, both financially and environmentally. In a motion filed Thursday, receiver AgStar Financial notes that the Veblen East operation filed for Chapter 11 bankruptcy on July 2, joining Veblen West and two other Millner CAFOs in bankruptcy. AgStar states that the debtor (and in this filing, "debtor" appears to refer just to the Veblen East operation) owes them $45 million.

$45 million. Let's see: If Veblen East has a capacity of 8176 head of dairy cattle, raising $45 million would require selling every one of those cows for over $5000. Anyone have cow prices handy?

Since taking over Veblen East, AgStar has sunk $2 million into keeping the dairy going. AgStar says that effort may be all for naught, given the dire economic and environmental situation at the dairy. AgStar says some parties have expressed an interest in buying the dairy, but "All of the offers indicate that, given the myriad of problems that plague the dairy, there is conclusively no going concern value to be maintained or salvaged by its continued operation and ultimate sale."

But someone has to keep operating the dairy, if for no other reason than to satisfy the state's orders to clean up its massive illegal manure levels, right?

The DENR has issued two notices of violation within the last year. Most importantly, DENR has set October 15, 2010, as the absolute deadline when Debtor’s manure lagoons have to be pumped to a predetermined level. AgStar’s retained experts and individuals in the employ of the state court receiver (VAST), who have worked on the environmental problems for some time, have advised that, it will be a challenge at best and impossible at worst for the Debtor to meet DENR’s lagoon requirements by October 15, 2010, if the cattle remain on the premises [AgStar Financial, Motion for Relief from Automatic Stay, United States Bankruptcy Court, District of South Dakota, Case 10-10146, Document 170, 2010.08.19].

In other words, there is so much cow poop at Veblen East, the owners will have to shut it down to clean it up. Would you buy a dairy in that situation?

The dairy may not last more than a month: AgStar says there's about a month's worth of silage left, and purchasing a year's supply fo silage would cost (by Rick Millner's estimate) $1.6 million, money Veblen East doesn't have.

AgStar is thus moving for relief so it can pursue the only viable business course: liquidate the herd, clean the place up so it's saleable, and turn the place back into a functioning dairy generating revenue and jobs sooner than standard bankruptcy foreclosure would.

Recall that Rick Millner took advantage of government assistance to get foreign investors to sink $13.5 million into the project in return for green cards. Those investors didn't care about the viability of the project; they bought their green cards and forgot all about holding Millner accountable for providing a return on their investment.

And now shoddy management and profiteering leaves Veblen with two bankrupt dairies, a huge chunk of its workforce in peril, a big purchaser of local ag products unable to pay its bills, and a watershed polluted.

If I caused that much damage, I'd be in jail. When will Rick Millner be held accountable for the damage he has done?
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Related: See Robert Reich's discussion of another bad egg in corporate agriculture, Jack DeCoster. This big-money miscreant owns Wright County Egg, the company that has made thousands of Americans sick with salmonella poisoning and now is recalling 380 million eggs. DeCoster is also a major investor in a second egg seller caught in the recall. DeCoster has a long history of illegal business practices... yet he has been allowed to stay in business, abusing immigrant labor and poisoning consumers and the environment. Reich offers a fine blog raison d'être: "Before we can get rid of corporate rotten eggs we need to know about them."

Millner Continues Legal Games, Claims Milk Not Product of Cows

Veblen, South Dakota, dairy operator Richard Millner had one of his polluting mega-feedlots, Veblen East, taken away in March when a Minnesota court placed it in receivership. Millner's Veblen West and his dairies in North Dakota and Minnesota have since declared bankruptcy. (The Minnesota dairy in Thief River Falls was denied a permit to operate due to environmental violations.) The Chapter 11 filings are quite likely part of a shell game, as Millner is likely trying to prevent creditors from getting their hands on any more of his assets.

I just came across two rulings from U.S. Bankruptcy Court Judge Charles L. Nail, Jr., that give some idea of the monkeyshines Millner is willing to resort to in his dairy endgame. The first ruling, dated July 9, deals with the question of whether AgStar, the receiver of Veblen East, has any security claim to milk Millner's cows have produced since AgStar took over the dairy in March. As I understand it, if your property goes into receivership, any products you make from that property after receivership or from other property you put up as security aren't wholly yours to do with as you please. The receiver can claim those products or the proceeds from the sale of those products to pay down the debts you owe.

Millner argued in court that milk from his cows is not a "product" of his cows.

Apparently, Millner's lawyers were able to cite some court rulings that support this remarkable conclusion. Fortunately for common sense, Judge Nail was able to cite a majority of rulings that "have reached the opposite conclusion." Let's hear from the judge:

Debtor is correct when it says neither the bankruptcy code nor the South Dakota Codified Laws define the term "products."[ 4 ] However, when a term used in a statute is undefined, courts interpreting that statute must give that term its ordinary meaning. Hamilton v. Lanning, ___ U.S. ___, 2010 WL 2243704, *6 (2010) (citation omitted).

AgStar argues "[o]ne does not have to grow up on a farm to understand that milk is a `product of' a cow." The Court agrees. Thus, the ordinary meaning of "product" includes milk produced by dairy cows. Debtor even admits as much — albeit most likely unintentionally — in its motion, in which it refers to its "dairy production operation" (paragraph 10), its "productive herd" (paragraph 13), its "production numbers" (paragraph 14), the "dairy production industry" (paragraph 14), "dairy products" (paragraph 17), and "dairy producers" (paragraph 18) (emphasis added) [In re: VEBLEN WEST DAIRY LLP , Chapter 11, Debtor. Bankr. No. 10-10071. United States Bankruptcy Court, D. South Dakota. July 9, 2010. CHARLES L. NAIL, Jr., Bankruptcy Judge. Retrieved 2010.07.19 from Leagle.com].

Sometimes it's got to be hard for a judge to keep a straight face.

The second ruling came just last Friday, as Judge Nail granted AgStar's motion to appoint a trustee to manage Veblen West. Apparently appointing a trustee in a Chapter 11 case is a big deal, something that happens only if there's serious concern about "fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management, either before or after the commencement of the case...."

AgStar asked for a trustee based on concerns about Millner's ongoing environmental issues and "numerous substantial transfers of assets and liabilities between and among Debtor and the several related entities."

The Court found the environmental problems "serious" and "ongoing." However, geologist Jeanne Goodman of the South Dakota Department of Environment and Natural Resources testified on Millner's behalf to outline Millner's compliance with DENR orders, and that was enough to convince the judge that Millner's response to his environmental violations is sufficiently "appropriate and reasonable" to avert appointing a trustee.

Worth noting: Judge Nail includes this footnote on the environmental portion of the July 16 ruling (emphasis mine):

The Court is mindful that in its July 8, 2010 motion seeking confirmation the automatic stay is not applicable to its waste water regulatory powers (doc. 261), South Dakota's Department of Environment and Natural Resources alleged:

Debtor has not taken the actions necessary to reduce the level of wastewater in its holding ponds or to ensure that it will reduce those levels within the time necessary in order to mitigate the possibility of a discharge this coming Fall or Winter. Rather, Debtor has increased the number of cattle being milked and water used, resulting in increased stress on the holding ponds and their storage capacity. . . . A failure or overflow of Debtor's wastewater holding ponds would result in an immediate and serious threat to public health.

This is certainly troubling. However, the allegations were made after the hearing on the instant motion. The Department and Debtor have resolved the motion, but not the environmental problems, by stipulation (doc. 277) [Footnote #4, In re: VEBLEN WEST DAIRY LLP, Chapter 11, Debtor. Bankr. No. 10-10071. United States Bankruptcy Court, D. South Dakota. July 16, 2010. CHARLES L. NAIL, Jr., Bankruptcy Judge. Retrieved 2010.07.19 from Leagle.com.]

Judge Nail also ruled that AgStar failed to establish "incompetence or gross mismanagement" in Veblen West's daily operations that would support appointing a trustee.

Judge Nail did find cause to appoint a trustee in what appears to be a lot of shady asset-shifting. The Court cites evidence of Millner moving money around to pay off debts of his other dairy ventures instead of paying creditors:

Debtor acknowledged some of the transfers of assets and liabilities and the changes in equity positions Steiner had questioned, and it did little to ease any of the Court's concern that Debtor's and its management team's pre-petition actions were not evenhanded and were primarily intended to benefit insiders and the several affiliated entities, rather than Debtor's creditors. Significantly, Debtor chose not to offer explanatory testimony from Shan Betzold, Prairie Ridge's controller, the individual Millner testified made the decision whom to pay and whom not to pay and who would therefore be most likely to possess firsthand knowledge of the facts needed to explain Debtor's seemingly aberrant use of its milk proceeds. Millner's own attempts to explain some of the transactions were fruitless, and his testimony raised more red flags than it lowered.

...the record is abundant and alarmingly clear that an independent entity needs to assess the case for possible voidable pre-petition preferences and fraudulent or constructively fraudulent conveyances [IN RE VEBLEN WEST DAIRY LLP, 2010.07.16].

Judge Nail thus appointed the Chapter 11 trustee.

At some point, one would think it would be easier to just admit you've done wrong, clean up the mess, and do honest business from here on out. But these rulings from Judge Nail suggest that's not a route Millner is inclined to take.

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Update 22:10 CDT: Millner isn't alone in bankruptcy: the U.S. Bankruptcy Court reports 1062 bankruptcy cases were filed in the District of South Dakota in the first half of 2010. That's up 11% from the same period in 2009

Grant County Citizens Appeal for Voice in CAFO Zoning

A group of Grant County residents are trying to change their county's rules on how much space concentrated animal feeding operations (CAFOs) have to leave between their putrid, polluting concentrations of livestock manure and neighboring farms and residences. The Grant County Commission has consistently told these citizens to buzz off. These citizens are now taking their case to the South Dakota Supreme Court, saying they should have the right to seek changes in their own zoning ordinances.

The case doesn't fit neatly into the convenient (and mostly wrong) partisan dichotomy of the South Dakota blogosphere. I'm squarely in the Grant County Concerned Citizens' corner, since I see them fighting for sensible regulation of CAFOs and the corporate industrial agriculture that kills family farms, small towns, and the environment. But the Grant County petitioners aren't enviro-whackos: they're multi-generation South Dakota farm families, probably more truly conservative than some of my counterparts in the conservative blogopshere. One writer on Big Stone Lake Area Forums says the group includes some folks who are anti-CAFO and some who are pro-CAFO. They are united behind just one issue: setbacks. And now they're fighting a county government that appears unresponsive to the demands of citizens, a government hauteur that ought to rile up everyone from greens to tea partiers.

Below is the story straight from the Grant County appellants. Keep an eye out for the high court's action.

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Press Release
Grant County Concerned Citizens
Received July 10, 2010

The Grant County Concerned Citizens have decided to appeal to the State Supreme Court, the recent Circuit Court decision, denying the people the right to seek a change in a zoning ordinance.

Kenny Wiese, president of the group, states that "This is no longer just a set back issue, what is at issue is the right of the citizens to vote. We are disappointed that the current County Commissioners have failed three times to recognize the request of many of their constituents to enact the proposed setback increases.

The Commissioners denied the proposal of the Grant County Towns & Townships Group in 2008, In November 2009; they denied the petition of the landowners to increase the setback. The Commissioners third opportunity came when they could have accepted the terms of the citizen's petition and allowed the issue to come to a vote.

"We feel we owe it to the people of Grant County and especially to the 787 landowners and 349 registered voters who signed these petitions to follow this through to the Supreme Court, " states Wiese.

Grant County Concerned Citizens (GCCC) was formed over 2 years ago when a mega dairy planned to build in Kilborn Township. They planned on bringing in thousands of cows and young stock, 3 manure lagoon and building housing for 35 workers on site.

GCCC is a grassroots organization whose members are mostly local farmers. Many of us started searching out all the information we could find about CAFO'S and the regulations about them. We learned quickly that there is hardly an enforcing of the regulations that they are supposed to follow. This isn't just in South Dakota; it is a problem all over the US.

Grant County Concerned Citizens are not against agriculture or livestock. We just don't want our farmers to be forced to have a CAFO too close to their lives and their livelihood. A lot of our farms are generations of people making a living off the land, raising their children, paying taxes, supporting the local towns and schools, and bring a lot of economic benefit to Grant County. Each of the small or midsized farms circulate a quarter million to a million dollars each in the community every year.

When many of the regulations were put into effect, no one could imagine the size or scope of the current large CAFOS. One day there is a bare quarter section of land; the next day there is a small village in the same spot.

This is what brought us to ask for a graduated set back. This graduated setback affects local producers little and forces the larger CAFOS to a reasonable distance.

Our efforts brought a petition before the Commissioners. When they rejected that, we presented another petition asking for the right to put this issue on the local ballot. Their refusal to do this forced us into the court system, where we find that though we followed the law on petitioning, we have been locally denied the right to vote. Citizens of our state should not have their voting rights taken away.

Court Orders Veblen Dairy Books Examined; Millner to Testify in Court

Last week was a very bad week for Richard Millner of Veblen, South Dakota. First the Minnesota Pollution Control Agency upheld its denial of a new license for Millner's stink-bomb Excel Dairy in Thief River Falls. Then on Friday, the bankruptcy court handling Millner's Veblen West Dairy's Chapter 11 proceedings ordered Millner to submit Veblen West's files to a Rule 2004 examination and submit himself to examination in court.

AgStar Financial Services, which holds Millner's Veblen East Dairy in receivership, will conduct the 2004 examination at Prairie Ridge Management's office in Veblen tomorrow, starting at 8:30 a.m. AgStar gets to look at just about every piece of paper in the office concerning Millner's operations in the Dakotas and Minnesota since 2006. The investigation isn't just financial; Prairie Ridge is also ordered to produce any and all correspondence and notices related to environmental issues at its dairies (that could be an unpleasantly large file).

AgStar then gets to grill Millner in court Thursday, May 13, at the Marshall County Courthouse. That hearing starts at 10:00 a.m. and ends when AgStar says it does.

The date may change (lawyers do have golf games), but Veblen neighbors and folks downstream from Millner's overflowing manure mills may want to drop by the Marshall County Courthouse in Britton next Thursday. They may get a chance to hear their neighbor Mr. Millner answer for his unhealthy and apparently unsuccessful business practices.

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Not helping Millner's financial situation: the $1.5 million in damages the U.S. District Court of Minnesota hit him and R&J Dairy partner James Nickeson with last year as a result of Millner's playing shell games with cattle that didn't belong to him. (Don't they call that rustling?)

Excel Dairy Permit Denied; Veblen Dairy Dozen Declaring Bankruptcy in ND, MN

Just one minute ago, the Minnesota Pollution Control Agency unanimously affirmed these findings of fact and upheld the denial of permit to Excel Dairy in Thief River Falls, Minnesota.

This denial comes on top of a month of deep doo-doo for Veblen's Dairy Dozen. The company has filed for Chapter 11 bankruptcy on its Five Star Dairy near Milnor, North Dakota, and on its Excel Dairy near Thief River Falls, Minnesota. Excel Dairy was shuttered due to environmental violations (review the file on that mess at the Minnesota Department of Health and the Minnesota Pollution Control Agency's proposed findings of fact).

These filings come in addition to a Chapter 11 filing for the Veblen West CAFO this month and the placement of the Veblen East CAFO in receivership in March. Dairy Dozen chief Rick Millner says the bankruptcy filings are a legal business strategy to keep the doors open and maintain the possibility of paying creditors:

“We could quit and walk away from it and nobody would be getting paid,” [Millner] said. “Or we can reorganize and get our plans put together with everyone getting paid in full. As long as we are in the fight, we can pay people. As soon as we get knocked out, people are going to go unpaid” [Kevin Bonham and Stephen J. Lee, "Excel Dairy Hearing Set for Tuesday in St. Paul," Grand Forks Herald via Agweek, 2010.04.26].

With Excel dairy's permit denied, Millner has fewer doors to keep open. Let's hope the courts can still hold him accountable for bad environmental and business decisions and make sure the Dairy Dozen's creditors get paid their due.

Legislature to Audit DENR -- Time to Discuss CAFO Enforcement

The South Dakota Legislature Executive Board decided last week not to authorize the usual rounds of summer studies. Total savings: $40K–$60K. These savings seem rather paltry compared to the revenue and budget savings legislators might have been able to come up with by studying our tax system and other issues affecting South Dakotans.

But not all summer work was axed. Two committees will conduct the normal audits of two state departments: the Bureau of Administration and the Department of Environment and Natural Resources. The DENR study should be of particular interest to my neighbors around Veblen and Big Stone Lake who have had to work hard to get the agency to take action against the pollution caused by the giant Veblen feedlots owned by Richard Millner. (With one dairy in receivership and the other in Chapter 11 proceedings, owned by may not be wholly accurate any more.)

The purpose of these audits is to determine to need for and effectiveness of state programs. I would recommend folks affected by the Veblen CAFOs and other sources of pollution in South Dakota keep an eye on the Legislature's summer meeting schedule and make plans to submit letters or even testify to the appropriate committee.

Veblen West Dairy Files Chapter 11 Bankruptcy

Richard Millner's dairy empire continues to crumble. In March, his giant, polluting Veblen East Dairy was placed in receivership under Agstar. Now its sister CAFO, Veblen West Dairy, is filing for Chapter 11 bankruptcy. The papers hit the court the same week that Mayor Lavonne Jacobson claimed that the Veblen Dairy is one of the community's biggest assets.

When your biggest asset is a bankrupt dairy that violates state environmental regulations, you've got trouble. (Mayor Jacobson nonetheless won another two-year term, beating challenger Ralph Parsons 35 votes to 30.)

Of course, Chapter 11 doesn't mean the end of business (that's Chapter 7). Chapter 11 allows the debtor to reorganize and keep control of the business. It may also allow the debtor to dodge litigation... and that concerns me, since action by the courts and government seem to be the only way to make Millner fulfill his obligations to his neighbors and business partners.

I wonder: what if we had not subsidized Millner's Veblen operations by funneling to it money from Korean investors jumping the green card queue? Might domestic shareholders with a sincere market interest in the operation have held the dairy more accountable for operating honestly and legally and turning a profit?

Court Orders Veblen East CAFO Taken over by Financier

Richard Millner has been up to his eyeballs in trouble with his Veblen East mega-dairy. His giant CAFO was supposed to be part of a bold vision of dairy consolidation and rural economic development. Now Millner appears to have lost control of an operation choked with manure and with debt. Farm Forum reports that Veblen East "has been placed into court-ordered receivership." Not that I'd want to be the guy taking the reins from EPA-certified polluter Millner:

The receiver’s primary areas of focus are to maintain production, seek resolutions to environmental issues and establish financial arrangements with vendors [no author cited, "Veblen: Team to Evaluate Dairy," Farm Forum, 2010.03.05].

Let's hope the receivership process can bring about business and environmental changes that will help Veblen and all the folks downstream.