BY DINA ARÉVALO
STAFF WRITER
One of many Rio Grande Valley’s largest agricultural corporations is going through a possible liquidation that would put native farmers out of thousands and thousands of {dollars}.
Garcia Grain Buying and selling Corp., a Donna-based grain storage and sale firm, filed for Chapter 11 chapter Feb. 17 after the Texas Division of Agriculture, or TDA, pulled its grain storage licenses and shut down its grain elevators.
The TDA yanked the licenses after a third-party audit in late-January revealed an estimated $20 million in lacking stock at grain elevators in Progreso, Donna, Edcouch and Santa Rosa.
The TDA — which had failed to note something amiss throughout its personal audit earlier that month — returned for an additional look within the wake of the one commissioned by StoneX Commodities Options, one among Garcia Grain’s largest collectors.
On their second pass-through, state officers had been capable of substantiate that Garcia Grain had “important deficiencies between the information for warehouse receipts when in comparison with bodily measurements of the grain,” in accordance with the corporate’s chapter filings.
The corporate’s web price can be within the adverse by practically double its belongings.
Garcia Grain claimed in a March 3 submitting to have some $27.63 million in whole belongings in comparison with greater than $50.3 million in liabilities owed to banks, farmers and different agricultural companies.
However the bulk of that debt — roughly $41.1 million in secured claims — belongs to the corporate’s largest collectors, together with StoneX, Falcon Financial institution, Vantage Financial institution, and a McAllen-based provide chain expertise firm known as GrainChain.
The rest, $9.2 million in unsecured debt, belongs to dozens of farmers all through the Valley and elsewhere in Texas, in addition to the Higher Midwest and northern Mexico.
And it’s these collectors who’re unlikely to get better a dime that Garcia Grain owes them, in accordance with a March 23 submitting by the Official Committee of Unsecured Collectors, or UCC.
“(T)he worth of (Garcia Grain’s) disclosed property is clearly far beneath the quantity of money owed and claims towards the property …,” the UCC acknowledged, estimating their probabilities of restoration as “distant.”
HOW GARCIA GRAIN GOT HERE
Garcia Grain began in 1998 as a partnership between 4 individuals — CEO and president, Octavio Garcia, who held a forty five% possession stake within the firm; Rodulfo Plascencia Sr., who owned 35%; Baldemar Salinas Cantu, with 15%; and Octavio’s spouse, Gabriela Garcia, who owned 5%.
The corporate operates by shopping for and storing quite a lot of grain crops, together with corn, sorghum, milo, wheat, soybeans, and sesame and sunflower seeds.
A lot of the grain ultimately makes its method to the corporate’s largest grain elevator in Progreso earlier than being exported to Mexico.
A smaller portion of Garcia Grain’s enterprise is devoted to pinto and black beans grown in Minnesota and North Dakota.
The corporate’s chapter attorneys say Garcia Grain has a historical past of drawing in nine-figure annual revenues.
“It has gross receipts of $100 million over time. Yr-in and year-out,” lawyer David R. Langston defined to Chief U.S. Chapter Choose Eduardo V. Rodriguez throughout a Feb. 24 listening to.
However as for what finally prompted Garcia Grain to go from cashing in on crops to having its silos sitting empty, the lawyer eschewed the query as a matter of incomprehensible quantity.
“Over time, there had been a big deficiency within the stock of the grain however that… deficiency (had) been lined up or not disclosed within the operation just because there was such a lot of grain being funneled via Progreso into Mexico,” Langston stated.
When the corporate’s collectors acquired an opportunity to query the CEO on March 22, Octavio Garcia’s solutions had been equally elusive.
Garcia testified that he didn’t understand how thousands and thousands of {dollars}’ price of stock went lacking.
“When a CEO testifies that he has no thought how this loss may have occurred, that admission alone establishes gross mismanagement and, extra seemingly, fraud by its house owners and/or administration,” the UCC acknowledged.
However the unsecured collectors committee took their issues a step additional, implying that Garcia Grain’s monetary woes could also be because of prison conduct.
To that finish, the UCC has pleaded with the court docket to ban the corporate’s present leaders — together with Garcia — from persevering with to handle Garcia Grain because the chapter case continues.
As a substitute, the committee needs the court docket to nominate a Chapter 11 trustee with expanded powers to deal with administration selections.
The UCC can be firmly against any answer that will contain the liquidation of the corporate’s belongings, which would depart farmers nothing to get better.
PRIOR LEGAL ISSUES
This isn’t the primary time Garcia Grain has confronted monetary troubles.
In October 2017, Rodulfo Plascencia Sr., the corporate’s second-largest share proprietor, filed a lawsuit towards his then-partner.
Plascencia accused Garcia of fraud and breach of fiduciary obligation after the latter tried to forcibly expel Plascencia from Garcia Grain and a handful of subsidiary corporations they co-owned.
On the time, Plascencia claimed the corporate — at Garcia’s route — had stopped making funds on practically $500,000 Plascencia had lent Garcia Grain between January 2012 and November 2013.
Plascencia additionally claimed that Garcia had withdrawn greater than $100,000 from company accounts after which transferred that cash to himself.
In response, Garcia countersued, alleging that Plascencia had obfuscated monetary transactions with the corporate’s Mexican clients in an effort to divert money to himself.
On Aug. 4, 2022, the 2 sides suggested the court docket that that they had reached a settlement.
The next month — on Sept. 30, 2022 — Garcia Grain transferred possession of 10 acres of land in Progreso, in addition to a grain elevator in Alamo, to Plascencia.
The chapter filings record the worth of the switch at $1.1 million. The filings additional state that Plascencia is now not a Garcia Grain accomplice.
ALLEGED INSIDER DEALING
The million-dollar property switch isn’t the one big-ticket merchandise the corporate has offloaded in current months.
Simply two weeks earlier than Garcia Grain declared chapter, it transferred deeds of belief for the Progreso and Edcouch elevators, in addition to two farms, to its third-largest secured creditor, GrainChain.
The property titles are valued at greater than $8.1 million, in accordance with firm’s monetary disclosures.
Nevertheless, it’s these and different transactions which have the unsecured collectors sounding an alarm.
The UCC believes that Garcia Grain has been working with some or all of its 4 secured collectors — which the committee refers to as “insiders” — to funnel cash to “associates or third-party entities” for Octavio Garcia’s and their profit.
In different phrases, the UCC fears Garcia Grain could also be making an attempt to switch belongings out of attain of farmers and different smaller collectors.
“The lenders debt due by (Garcia Grain) are secured by affiliate ensures and belongings,” the UCC acknowledged, including that these belongings needs to be “introduced again into this Property…”
Garcia Grain and its collectors are subsequent due in court docket on Thursday.
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